SANTA CRUZ — BC Tech, a 15-year-old, family-owned product development and contract manufacturing company, has laid off about 25 employees, shuttered its doors and filed Chapter 7 bankruptcy.
“It was a cash flow problem,” said Ben Clawson, an engineer who co-founded the company with his wife, Teetle, in their family garage in Soquel. The company specialized in medical and bio tech devices such as laser scopes, a biopsy marker and a vein and artery sealer. In 2008, the company earned more than $7.7 million in revenues and employed about 70 people. This last year, the company reported less than $5 million in revenue from the business.
“The company needed capital to land new projects,” Ben Clawson said, adding that they had a dozen proposals and more leads but not the cash to follow through.
Giving a tour Friday of the once bustling, 25,000 square foot office on Santa Cruz’s Westside, Ben Clawson, flanked by his two dogs, Freckles and Buddy, walked through empty aisles banked by tables of equipment, keyboards piled into plastic trash bins and extension cords in buckets. There was an empty engineering clean room, long, bare manufacturing tables, stacks of project notebooks and a DNA sequencing device created to compare genetics for organ transplants. In one room of empty desks, business development ideas were scrawled on a white board.
“It all happened fairly quickly,” said Teetle Clawson, who served as chief financial officer. “We thought we’d be pulling it through.”
Office furnishings, inventory and equipment, valued in court documents at just less than half-million dollars, will be liquidated in an auction later this summer. The family-owned company owes $312,000 in secured claims and more than $1.36 million in unsecured claims to about 150 creditors, according to bankruptcy documents filed on May 28. The company has about $300,000 in cash and more than $450,000 in accounts receivable.
Bankruptcy trustee John Richardson is scheduled to meet with creditors June 25. All employees received full pay and compensation for accrued vacation time, according to Teetle Clawson.
Before the stock market collapse in fall 2008, the company was in high gear.
“We we’re doing better than we’ve ever done,” Teetle Clawson said. Within a month of the collapse, however, the company’s half-million dollar line of credit was not renewed and some big customers pulled the plug on research. Startups lost investment. “It really hit us hard.”
By the end of the year, the company had downsized to about 40 employees. A 10 percent pay cut was initiated and the company, which had always designed and built products for other companies, used the slow period to focus on designing a device of its own — the Video Scout. Engineers devoted more than a year to the mini camera device but the project ran into patent conflicts. There weren’t funds to aggressively pursue it, Ben Clawson said.
“I know there were a number of employees who disagreed with how we ran the business,” he said. “That has always been the case. It’s not a democracy.”
A series of other factors contributed to the company’s demise, according to the Clawsons, including an ongoing “disruptive” 20-month audit by the California State Board of Equalization that revolved around taxation issues of prototypes. The company also absorbed about $200,000 in losses when four other companies went bankrupt. An aggressive marketing campaign attracted numerous leads but the business climate had changed. Companies without funding were more interested in developing a business plans, rather than coming to BC Tech with funding in hand for product development.
“We had so many leads we couldn’t even answer them all, but the money was just not behind them,” said the Clawsons’ son Cassidy, who worked in marketing for the company. “We pulled thread after thread and there was nothing behind them. They would use us to get a road map of the product for funding.”
BC Tech managed to pay bills last year, but two major contracts with startups fell through earlier this year and they didn’t have the capital to cover the infrastructure.
“We decided we couldn’t wait any longer,” Teetle Clawson said. “Winning a contract can take a long period of time. We couldn’t take the risk of going further into debt.”
The company announced the pending bankruptcy on May 19, giving employees two days to wrap up projects. On May 21, they ordered pizza for the group and took pictures of their “Last Supper.”
“It was kind of a surprise,” said Mark Delinger, materials manager, who picked up the pizza and called it the saddest pizza run ever. Delinger joined the company about four and a half years ago.
“We were just the victim of the economy,” he said. “It was really sad. It was like family.”
Delinger has been looking for work and helping co-workers with their resumes. “It’s pretty stiff competition when you apply for jobs. I just try to take the best attitude possible.”
Kelly Nobriga, who worked in quality and documentation for more than three years, said she knew business had slowed but she had been optimistic that things would get better.
“It we could’ve held on a few months longer,” she said. “It was one of those places you woke up and wanted to go to work.”
Nobriga said Ben Clawson helped her get a new job down the street at Duke Empirical, another medical device developer.
For the Clawsons, it’s a new chapter. Ben Clawson, who calls himself “an executive for hire,” said he’s interested in consulting. Teetle Clawson is interested in developing sustainable cohousing and Cassidy Clawson is fixing up a full-size Chevy van to tour the country.
“We gave it our best shot,” Teetle Clawson said.
This article was first published here.