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Date Certain M&A of Portaero, Inc., its Intellectual Property and Assets by Gerbsman Partners

Posted in "Date Certain M&A Process", Aberdare Ventures, Distressed Intellectual Property, Distressed IP, Emphysema, Inetellectual Property, Medical Device, Novartis Ventures, Uncategorized, Venture Capital, Versant Ventures, tagged , , , , , , on June 10, 2013| Leave a Comment »

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SALE OF PORTAERO, INC.

Gerbsman Partners (www.gerbsmanpartners.com) has been retained by Portaero, Inc. to solicit interest for the acquisition of all, or substantially all, Portaero, Inc.’s (“Portaero”) assets.

Headquartered in Cupertino, California, Portaero is a leader in developing devices for the treatment of homogeneous emphysema.

IMPORTANT LEGAL NOTICE:

The information in this memorandum does not constitute the whole or any part of an offer or a contract.

The information contained in this memorandum relating to the Portaero’s Assets has been supplied by Portaero. It has not been independently investigated or verified by Gerbsman Partners or their respective agents.

Potential purchasers should not rely on any information contained in this memorandum or provided by Gerbsman Partners (or their respective staff, agents, and attorneys) in connection herewith, whether transmitted orally or in writing as a statement, opinion, or representation of fact. Interested parties should satisfy themselves through independent investigations as they or their legal and financial advisors see fit.

Gerbsman Partners, and their respective staff, agents, and attorneys, (i) disclaim any and all implied warranties concerning the truth, accuracy, and completeness of any information provided in connection herewith and (ii) do not accept liability for the information, including that contained in this memorandum, whether that liability arises by reasons of Portaero’s or Gerbsman Partners’ negligence or otherwise.

Any sale of the Portaero Assets will be made on an “as-is,” “where-is,” and “with all faults” basis, without any warranties, representations, or guarantees, either express or implied, of any kind, nature, or type whatsoever from, or on behalf of Portaero and Gerbsman Partners. Without limiting the generality of the foregoing, Portaero and Gerbsman Partners and their respective staff, agents, and attorneys,  hereby expressly disclaim any and all implied warranties concerning the condition of the Portaero Assets and any portions thereof, including, but not limited to, environmental conditions, compliance with any government regulations or requirements, the implied warranties of habitability, merchantability, or fitness for a particular purpose.

This memorandum contains confidential information and is not to be supplied to any person without Gerbsman Partners’ prior consent. This memorandum and the information contained herein are subject to the non-disclosure agreement attached hereto as Exhibit A.

Portaero, Inc. Company Profile

Founded in 2007, Portaero is a private, California-based, clinical stage medical device company. Over the past 6 years, Portaero has raised approximately $20mm in equity and debt from the leading venture capital firms Versant, Aberdare, and Novartis Ventures.

Portaero is a leader in developing innovative, therapeutic devices to treat advanced, homogeneous emphysema. It is the only therapy currently in patients whose primary indication for the FDA pivotal trial will be homogeneous emphysema.

Portaero’s therapy targets patients whose lungs are hyperinflated due to emphysematous destruction and dynamic airway collapse. The Portaero Access Tube System creates a transthoracic pneumostoma which is subsequently managed by the patient with the Portaero Daily Disposable Tube.  When patent, the pneumostoma reduces the amount of trapped gas and the pressure in the diffusely destroyed lung, thus restoring the productivity of the native airways, improving overall lung function, and increasing patient quality of life.  Early experience also suggests pneumostoma patients experience a lower rate of exacerbations.  Exacerbations make these patients among the most expensive in the health care system.

Portaero believes its assets are attractive for a number of reasons:

·     Portaero is the only device in development which has generated data in homogeneous patients that warrants inclusion of those patients in a US PMA trial.

·     6+ years of clinical experience supports the safety and the efficacy of the therapy.

·     Current patients continue to manage their pneumostomas from 1+ years to 6.5 years.

·     Portaero Intellectual Property, comprising 25 issued US patents, 15 pending US patent applications, 10 issued international patents and 10 international pending patent applications, is the earliest and most comprehensive portfolio for    transthoracic bypass. Some of Portaero patents also apply to using the Portaero port for improving drug delivery to the lung.

·     The Portaero Access Tube System is placed by a thoracic surgeon via a mini-thoracotomy.  The 45 minute procedure requires no special skills and has been completed under both local and general anesthesia.

·     The Portaero Daily Disposable Tube has successfully been managed by a wide variety of patients.

·     The Portaero Reopening Device is designed to be used by an Interventional Bronchoscopist or surgeon.  It should be a simple, safe, outpatient procedure that can be quickly done at the end of the bronch list.

·     The Portaero therapy is very accessible to health care capabilities worldwide.

·     The Portaero system fits well with the direction of reimbursement systems that prefer to pay for desired outcomes.  The bulk of the economics is in the disposable which is only used if the patient is receiving benefit.

·     A leading clinician experienced with Portaero and other emphysema therapies believes Portaero patients have a lower exacerbation rate than untreated patients.

·     The Portaero therapy is reversible.  No patient has been worse off for having tried the Portaero treatment.

·     Preliminary BODE data suggest the potential to increase life expectancy with the Portaero therapy.

·     In the long term, the patents allow for development of a percutaneous procedure for interventionalists.

Impact of Technology on the Market

Patients with homogeneous emphysema represent a large, growing market with an unmet clinical need. Accessing Portaero’s intellectual property is critical for any successful endeavor into this very attractive market. Portaero’s therapy is complimentary to other therapies addressing heterogeneous disease (e.g., valves, coils, steam, glue) and could be sold by the same sales force.

Intellectual Property Summary

Portaero has a comprehensive intellectual property portfolio consisting of 35 issued patents: 25 are issued for the US and 10 are issued for International.  Portaero has 25 pending applications: 15 pending for the U.S. and 10 pending for International.  Description of the portfolio can be found in the Appendix B.  The portfolio represents a broad array of strategic variables including:

Methods and devices used by patient to maintain and protect the pneumostoma
Methods and devices for pneumostomy procedures for creating a pneumostoma
Methods and devices for assessment, maintenance, and treatment of a pneumostoma
Portaero’s Assets

Portaero has developed a portfolio of assets critical to the treatment of emphysema via a pneumostoma. These assets fall into a variety of categories, including:

·     Patents and Patent Applications
·     Patient Data Set for Treating Homogeneous Emphysema from 2 different non-randomized clinical studies
·     Design and manufacturing documentation for surgical and patient care products
The assets of Portaero will be sold in whole or in part (collectively, the “Portaero Assets”). The sale of these assets is being conducted with the cooperation of Portaero. Portaero will be available to assist purchasers with due diligence and a prompt, efficient transition to new ownership. Notwithstanding the foregoing, Portaero should not be contacted directly without the prior consent of Gerbsman Partners.

Portaero, Inc. Board of Directors

·       Sami Hamade: Aberdare Ventures – San Francisco, CA

·       Ross Jaffe:  Versant Ventures – Menlo Park, CA

·       Dave Plough: Portaero President & CEO – Cupertino, CA

·       Steve Weinstein: Novartis Ventures – Cambridge, MA

The Bidding Process for Interested Buyers

Interested and qualified parties will be expected to sign a Confidential Disclosure Agreement (attached hereto as Appendix A) to have access to key members of management and intellectual capital teams and the due diligence “war room” documentation (“Due Diligence Access”). Each interested party, as a consequence of the Due Diligence Access granted to it, shall be deemed to acknowledge and represent (i) that it is bound by the bidding procedures described herein; (ii) that it has had an opportunity to inspect and examine the Portaero, Inc. assets and to review all pertinent documents and information with respect thereto; (iii) that it is not relying upon any written or oral statements, representations, or warranties of Gerbsman Partners, or their respective staff, agents, or attorneys; and (iv) all such documents and reports have been provided solely for the convenience of the interested party, and Gerbsman Partners (and their respective staff, agents, or attorneys) do not make any representations as to the accuracy or completeness of the same.

Following an initial round of due diligence, interested parties will be invited to participate with a sealed bid, for the acquisition of the Portaero, Inc. assets. Each sealed bid must be submitted so that it is received by Gerbsman Partners no later than Tuesday, July 16, 2013 at 3:00pm Pacific Daylight Time (the “Bid Deadline”) at Portaero, Inc.’s office, located at 21631 Stevens Creek Blvd., Cupertino, CA 95014.  Please also email steve@gerbsmanpartners.com with any bid.

Any person or other entity making a bid must be prepared to provide independent confirmation that they possess the financial resources to complete the purchase.  All bids must be accompanied by a refundable deposit in the amount of $100,000 (payable to Portaero, Inc.).  The deposit should be wired to Portaero, Inc.’s attorneys (information will be provided).  The winning bidder will be notified within 3 business days of the Bid Deadline. The deposit will be held in trust by Portaero’s counsel.  Unsuccessful bidders will have their deposit returned to them within 3 business days of notification that they are an unsuccessful bidder.

Portaero, Inc. reserves the right to, in its sole discretion, accept or reject any bid, or withdraw any or all assets from sale.  Interested parties should understand that it is expected that the highest and best bid submitted will be chosen as the winning bidder and bidders may not have the opportunity to improve their bids after submission.

Portaero Inc. will require the successful bidder to close within a 7 day period. Any or all of the assets of Portaero, Inc. will be sold on an “as is, where is” basis, with no representation or warranties whatsoever.

All sales, transfer, and recording taxes, stamp taxes, or similar taxes, if any, relating to the sale of the Portaero, Inc. assets shall be the sole responsibility of the successful bidder and shall be paid to Portaero, Inc. at the closing of each transaction.

For additional information, please see below and/or contact:

Steven R. Gerbsman

Gerbsman Partners

steve@gerbsmanpartners.com

Kenneth Hardesty

Gerbsman Partners

ken@gerbsmanpartners.com

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The Advantages of a “Date-Certain M&A Process” over an “Assignment for the Benefit of Creditors – ABC” by Steven R. Gerbsman, Gerbsman Partners

Posted in "Date Certain M&A Process", Assignment for the Benefit of Creditors, Distressed Intellectual Property, Distressed IP, Gerbsman Partners, Inetellectual Property, tagged , , , , on May 16, 2013| Leave a Comment »

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San Francisco, May, 2013
The Advantages of a “Date-Certain M&A Process” over an “Assignment for the Benefit of Creditors – ABC”
Apart from a formal bankruptcy (Chapter 7 or Chapter 11) there are two basic approaches to maximizing enterprise value for under-performing and/or under-capitalized technology, life science and medical device companies and their Intellectual Property: a “date-certain” M&A process and an assignment for the benefit of creditors (ABC).

Both of these processes have significant advantages over a formal bankruptcy in terms of speed, cost and flexibility. Gerbsman Partners’ experience in utilizing a “date certain” M&A process has resulted in numerous transactions that have maximized value anywhere from 2-4 times what a normal M&A process would have generated for distressed asset(s). With a date-certain M&A process, the company’s board of directors hires a crisis management/ private investment banking firm (“advisor”) to wind down business operations in an orderly fashion and maximize value of the IP and tangible assets.

The advisor works with the board and corporate management to:

1.  Focus on the control, preservation and forecasting of CASH.
2.  Develop a strategy/action plan and presentation to maximize value of the assets. Including drafting sales materials, preparing information Ïdue diligence war-roomÓ, assembling a list of all possible interested buyers for the IP and assets of the company and identifying and retaining key employees on a go-forward basis.
3.  Stabilize and provide leadership, motivation and morale to all employees,
4.  Communicate with the Board of Directors, senior management, senior lender, creditors, vendors and all stakeholders in interest.
The company’s attorney prepares very simple “as is, where is” asset-sale documents. (“as is, where is- no reps or warranties” agreements is very important as the board of directors, officers and investors typically do not want any additional exposure on the deal). The advisor then contacts and follows-up systematically with all potentially interested parties (to include customers, competitors, strategic partners, vendors and a proprietary distribution list of equity investors) and coordinates their interactions with company personnel, including arranging on-site visits.

Typical terms for a date certain M&A asset sale include no representations and warranties, a sales date typically three to four weeks from the point that sale materials are ready for distribution (based on available CASH), a significant cash deposit in the $100,000 range to bid and a strong preference for cash consideration and the ability to close the deal in 7 business days. Date certain M&A terms can be varied to suit needs unique to a given situation or corporation. For example, the board of directors may choose not to accept any bid or to allow parties to re-bid if there are multiple competitive bids and/or to accept an early bid.

The typical workflow timeline, from hiring an advisor to transaction close and receipt of consideration is four to six weeks, although such timing may be extended if circumstances warrant. Once the consideration is received, the restructuring/insolvency attorney then distributes the consideration to creditors and shareholders (if there is sufficient consideration to satisfy creditors) and takes all necessary steps to wind down the remaining corporate shell, typically with the CFO, including issuing W-2 and 1099 forms, filing final tax returns, shutting down a 401K program and dissolving the corporation etc.

The advantages of this approach include the following:

Speed – The entire process for a date certain M&A process can be concluded in 3 to 6 weeks. Creditors and investors receive their money quickly. The negative public relations impact on investors and board members of a drawn-out process is eliminated. If circumstances require, this timeline can be reduced to as little as two weeks, although a highly abbreviated response time will often impact the final value received during the asset auction.

Reduced Cash Requirements – Given the date certain M&A process compressed turnaround time, there is a significantly reduced requirement for investors to provide cash to support the company during such a process.

Value Maximized – A company in wind-down mode is a rapidly depreciating asset, with management, technical team, customer and creditor relations increasingly strained by fear, uncertainty and doubt. A quick process minimizes this strain and preserves enterprise value. In addition, the fact that an auction will occur on a specified date usually brings all truly interested and qualified parties to the table and quickly flushes out the tire-kickers. In our experience, this process tends to maximize the final value received.

Cost – Advisor fees consist of a retainer plus 10% or an agreed percentage of the sale proceeds. Legal fees are also minimized by the extremely simple deal terms. Fees, therefore, do not consume the entire value received for corporate assets.

Control – At all times, the board of directors retains complete control over the process. For example, the board of directors can modify the auction terms or even discontinue the auction at any point, thus preserving all options for as long as possible.

Public Relations – As the sale process is private, there is no public disclosure. Once closed, the transaction can be portrayed as a sale of the company with all sales terms kept confidential. Thus, for investors, the company can be listed in their portfolio as sold, not as having gone out of business.

Clean Exit – As the sale process is private, there is no public disclosure. Once closed, the transaction can be portrayed as a sale of the company with all sales terms kept confidential. Thus, for investors, the company can be listed in their portfolio as sold, not as having gone out of business.

To this end the insolvency counsel then takes the lead on all orderly shutdown items. In an assignment for the benefit of creditors (ABC), the company (assignor) enters into a contract whereby it transfers all rights, titles, interests, custody and control of all assets to an independent third-party trustee (assignee). The Assignee acts as a fiduciary for the creditors by liquidating all assets and then distributing the proceeds to the creditors. We feel that an ABC is most appropriate in a situation with one or more highly contentious creditors, as it tends to insulate a board of directors from the process. Nevertheless, we have found that most creditors are rational and will support a quick process designed to maximize the value that they receive. A good advisor will manage relationships with creditors and can often successfully convince them that a non-ABC process is more to their advantage. Apart from its one advantage of insulating the board of directors from the process, an ABC has a number of significant disadvantages, including:

Longer Time to Cash – Creditors and investors will not receive proceeds for at least 7 months (more quickly than in a bankruptcy but far slower than with a “date-certain” auction).

Higher Cost – Ultimately, ABCs tend to be more expensive than a date-certain© auction. It is not uncommon for the entire value received from the sale of company assets to be consumed by fees and/or a transaction for maximizing value may not be consummated in a timely fashion.

Loss of Control – Once the assets are assigned to the independent third-party trustee, the board of directors has no further control over the process. It cannot modify the process in any way or discontinue the process. Thus, it is not possible to explore multiple options in parallel.

Higher Public Relations Profile – The longer time frame for the ABC process and the more formal (and public) legal nature of an ABC make it more difficult to put a positive spin on the final outcome.

Messy Exit – Most independent third-party trustees do not perform the services of cleanly shutting down the remaining corporate shell. Thus, investors must either pay another party to do this job or leave it undone, resulting in increased liability.

About Gerbsman Partners

Gerbsman Partners focuses on maximizing enterprise value for stakeholders and shareholders in under-performing, under-capitalized and under-valued companies and their Intellectual Property. In the past 84 months, Gerbsman Partners has been involved in maximizing value for 76 technology, medical device, life science and solar companies and their Intellectual Property and has restructured/terminated over $810 million of real estate executory contracts and equipment lease/sub-debt obligations. Since inception, Gerbsman Partners has been involved in over $2.3 billion of financings, restructurings and M&A transactions.

Gerbsman Partners has offices and strategic alliances in San Francisco, New York, Virginia/Washington DC, Boston, Europe and Israel.

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Email: Steve@GerbsmanPartners.com
Web: www.gerbsmanpartners.com
BLOG of Intellectual Capital: http://blog.gerbsmanpartners.com

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Gerbsman Partners -Successful “Date Certain M&A” of Medical Device company, its Assets and Intellectual Property

Posted in "Date Certain M&A Process", Board Of Intellectual Capital, Date Certain M&A, Distressed Intellectual Property, Distressed IP, Gerbsman Partners, Inetellectual Property, Intellectual capital, Investments, Medical Device, Uncategorized, Venture Capital, tagged , , , , on March 13, 2013| Leave a Comment »

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San Francisco, March, 2013
Successful “Date Certain M&A” of Medical Device company, its Assets and Intellectual Property
Steven R. Gerbsman, Principal of Gerbsman Partners, Kenneth Hardesty, Philip Taub and  John Andreadis members of Gerbsman Partners Board of Intellectual Capital, announced today their success in maximizing stakeholder value for a venture capital backed medical device company. This company was in the medical device skincare space.

Gerbsman Partners provided Crisis Management and Investment Banking leadership, facilitated the sale of the business unit’s assets and its associated Intellectual Property. Due to market conditions, the board of directors made the strategic decision to maximize the value of the business unit and Intellectual Property. Gerbsman Partners provided leadership to the company with:

1.  Crisis Management and medical device domain expertise in developing the strategic action plans for maximizing value of the business unit, Intellectual Property and assets;
2.  Proven domain expertise in maximizing the value of the business unit and Intellectual Property through a Gerbsman Partners targeted and proprietary “Date Certain M&A Process”;
3.  The ability to “Manage the Process” among potential Acquirers, Lawyers, Creditors Management and Advisors;
4.  The proven ability to “Drive” toward successful closure for all parties at interest.
About Gerbsman Partners

Gerbsman Partners focuses on maximizing enterprise value for stakeholders and shareholders in under-performing, under-capitalized and under-valued companies and their Intellectual Property. Since 2001, Gerbsman Partners has been involved in maximizing value for 76 Technology, Life Science, Medical Device and Solar companies and their Intellectual Property and has restructured/terminated over $810 million of real estate executory contracts and equipment lease/sub-debt obligations. Since inception in 1980, Gerbsman Partners has been involved in over $2.3 billion of financings, restructurings and M&A transactions.

Gerbsman Partners has offices and strategic alliances in San Francisco, Boston, New York, Washington, DC, McLean, VA, Orange County, Europe and Israel.

Steven R. Gerbsman
Principal
Gerbsman Partners
Phone: 415.456.0628
Fax: 415.459.2278
Cell: 415.505.4991
steve@gerbsmanpartners.com
thegerbs@pacbell.net
http://www.gerbsmanpartners.com

BLOG of Intellectual Capital
http://blog.gerbsmanpartners.com
Skype: thegerbs

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“Terminating/Restructuring Prohibitive Real Estate, License and Payable Contingent Liabilities”

Posted in Board Of Intellectual Capital, Gerbsman Partners, Intellectual capital, Marketing, tagged , , , , , , , , , , , , on March 23, 2010| Leave a Comment »

Gerbsman Partners has been involved with numerous national and international equity sponsors, senior/junior lenders, investment banks and equipment lessors in the restructuring or termination of various Balance Sheet issues for their technology, life science, medical device and cleantech portfolio companies. These companies were not necessarily in Crisis, had CASH (in some cases significant CASH) and/or investor groups that were about to provide additional funding. In order stabilize their go forward plan and maximize CASH resources for future growth, there was a specific need to address the Balance Sheet and Contingent Liability issues as soon as possible.

Some of the areas in which Gerbsman Partners has assisted these companies have been in the termination, restructuring and/or reduction of:

  • Prohibitive executory real estate leases, computer and hardware related leases and senior/sub-debt obligations – Gerbsman Partners was the “Innovator” in creating strategies to terminate or restructure prohibitive real estate leases, computer and hardware related leases and senior and sub-debt obligations. To date, Gerbsman Partners has terminated or restructured over $790 million of such obligations. These were a mixture of both public and private companies, and allowed the restructured company to return to a path of financial viability.
  • Accounts/Trade payable obligations – Companies in a crisis, turnaround or restructuring situation typically have accounts and trade payable obligations that become prohibitive for the viability of the company on a go forward basis. Gerbsman Partners has successfully negotiated mutually beneficial restructurings that allowed all parties to maximize enterprise value based on the reality and practicality of the situation.
  • Software and technology related licenses – As per the above, software and technology related licenses need to be restructured/terminated in order for additional capital to be invested in restructured companies. Gerbsman Partners has a significant track record in this area.

Date Certain M&A Process

Gerbsman Partners developed its proprietary “Date Certain M&A Process” in 2002. Since that time, the process has evolved into a 6-8 week time frame vehicle for maximizing enterprise and asset value for under-performing venture capital and senior lender backed medical device, life science and technology Intellectual Property based companies. To date, Gerbsman Partners has maximized enterprise and asset value for over 60 of these companies. A description of this proven process can be reviewed on the Gerbsman Partners website.

About Gerbsman Partners

Gerbsman Partners focuses on maximizing enterprise value for stakeholders and shareholders in under-performing, under-capitalized and under-valued companies and their Intellectual Property. Since 2001, Gerbsman Partners has been involved in maximizing value for 60 Technology, Life Science and Medical Device companies and their Intellectual Property, through its proprietary “Date Certain M&A Process” and has restructured/terminated over $790 million of real estate executory contracts and equipment lease/sub-debt obligations. Since inception, Gerbsman Partners has been involved in over $2.3 billion of financings, restructurings and M&A transactions.

Gerbsman Partners has offices and strategic alliances in Boston, New York, Washington, DC, Alexandria, VA, San Francisco, Europe and Israel.

For additional information please visit www.gerbsmanpartners.com

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“Date Certain M&A” of SiCortex Inc – including its Assets and Intellectual Property (“IP”), in whole or in part (collectively, the “SiCortex Assets”)

Posted in Board Of Intellectual Capital, boic, Distressed Intellectual Property, Distressed IP, Gerbsman Partners, Investments, Technology, Venture Capital, tagged , , , , , , , , , , , , , , , , , , , , , , , , , , on May 28, 2009| Leave a Comment »

Gerbsman Partners has been retained by the Board of Directors of SiCortex, Inc. “SiCortex” or the “Company, to solicit interest for the acquisition of substantially all of SiCortex’s assets, including its intellectual property (“IP”), in whole or in part (collectively, the “SiCortex Assets”)

IMPORTANT LEGAL NOTICE
The information in this memorandum does not constitute the whole or any part of an offer or a contract.

The information contained in this memorandum relating to the SiCortex Assets has been supplied by third parties and obtained from a variety of sources. It has not been independently investigated or verified by Gerbsman Partners or their respective agents.

Potential purchasers should not rely on any information contained in this memorandum or provided by Gerbsman Partners (or their respective staff, agents, and attorneys) in connection herewith, whether transmitted orally or in writing (the “Information”), as a statement, opinion, or representation of fact. Interested parties should satisfy themselves through independent investigations as they or their legal and financial advisors see fit.

Gerbsman Partners, and their respective staff, agents, and attorneys, (i) disclaim any and all implied warranties concerning the truth, accuracy, and completeness of any Information provided in connection herewith and (ii) do not accept liability for the information, including that contained in this memorandum, whether that liability arises by reasons of Gerbsman Partners’ negligence or otherwise.

Any sale of the SiCortex Assets will be made on an “as-is”, “where-is” and “with all faults” basis, without any warranties, representations, or guarantees, either express or implied, of any kind, nature, or type whatsoever from, or on behalf of Gerbsman Partners. Without limiting the generality of the foregoing, Gerbsman Partners, and their respective staff, agents, and attorneys, hereby expressly disclaim any and all implied warranties concerning the condition of the SiCortex Assets and any portions thereof, including, but not limited to, environmental conditions, compliance with any government regulations or requirements, the implied warranties of habitability, merchantability, or fitness for a particular purpose.

This memorandum contains confidential information and is not to be supplied to any person without SiCortex’s or Gerbsman Partners prior consent.

The Company

Founded in 2004, SiCortex is a venture backed High Performance Computer systems company based in Maynard, MA. To date, the company has raised $68.1 million in funding from Flagship Ventures, Polaris Ventures, Prism Ventures, JK&B Capital and Chevron Technology Ventures.

SiCortex’s assets include: patents (granted and pending); proven, energy-efficient computer systems (the company’s core products); sophisticated systems and management software; core engineering team members; advanced simulations; chip design verification; existing and partially complete next generation products such as sub-assemblies, backplanes, racks, fans, cabinets, design tools, testing lab tools and products; software and hardware roadmap; trademarks; customers (including government intelligence agencies); The Pathscale® Compiler Suite, OEM, ISV and reseller relationships; external manufacturing relationships; experienced systems management and sales team; market presence.

Interested parties can acquire SiCortex’s core technology, market presence, sales pipeline, customer base, contacts and vendor lists enabling the purchaser to leverage existing business and customer relationships for future growth. Sales of existing products exceed 50% gross margins.

The sale of SiCortex assets is being conducted with the cooperation of the company SiCortex and its employees and retained consultants will be available to assist purchasers with due diligence and in a prompt, efficient transition. Notwithstanding this offer of assistance, SiCortex should not be contacted directly without the prior consent of Gerbsman Partners or the Board of Directors.

The SiCortex Solution

SiCortex addresses the compelling problem of data center energy constraints head-on, giving it a unique market opportunity in a world where, according to McKinsey & Company, 90% of data centers will run out of power capacity by 2010. SiCortex designs, develops and manufactures the world’s most energy efficient high performance computers (HPC). High Performance computing is typically targeted at academic, research and government agencies looking to run and operate sophisticated science. These organizations are power-constrained in their data centers and are looking for alternative solutions to cut consumption.

The SiCortex solution is a unique family of three computers (Desktop, Department and Division) scaling from 72 to just under 6000 processors in a single, compact machine. The systems consume 60-80% less electricity than comparably capable Intel-based systems (Cray, Dell, HP, IBM, sgi…). SiCortex systems are recognized as a viable alternative to Intel-based systems, and for certain applications, the preferred platform.

SiCortex created the “Green Computing Performance Index” or GCPI that is now used to measure energy efficiency of the world’s top HPC vendors. This objective index is based on industry standard benchmarks and ranks vendors on a performance/watt basis using 18 tests.

The SiCortex software stack comprises optimized Linux, open source libraries, tools and management utilities, all pre-integrated and highly engineered for ease of use and simple system management: a SiCortex system is more like a PC to operate than a typical Linux cluster. “It’s “ready to run”. These machines can be installed and be operational in less than an hour. Competitor systems can take weeks to be operational. All software running on Intel machines is binary compatible and will compile on SiCortex. SiCortex sells its products directly in North America (6 reps, 4 SE’s) and works with resellers in Europe.

Next generation products in development seek to extend SiCortex’s energy-efficiency industry leadership and broaden its market applicability to include financial services, biotech, petroleum, computer aided engineering and digital media. These next generation systems are projected to deliver a 90% energy efficiency advantage to the internet (LAMP) stack, enabling web-based businesses to increase web traffic capacity while slashing energy costs and reducing space, cooling and support costs.

SiCortex Customers and Partners

Customers include: US Government Intelligence agencies, Columbia University, MIT, Purdue, U of Michigan, U of Maine, Cambridge University, University of Colorado, GE, Booz Allen, Lockheed Martin, Argonne National Labs, NASA, and many more. SiCortex has reseller agreements in the United Kingdom with Streamline Computing, France and Nordic region with Clustervision and Germany with MegWare. SiCortex has porting arrangements with a growing number of Independent Software Vendors (ISV’s).

KEY POINTS – Why SiCortex Assets are Attractive

-Proven, delivered technology with an immediate top line revenue and performance improvement for customers looking for multi-core, highly scalable compute power with unparalleled energy efficiency.

-Market segments include Government agencies, Academia, research institutes, manufacturing, aerospace, moving into financial services, biotech, petroleum exploration/reservoir management, CAE, digital media and internet hosting…

-Over 300 codes, libraries, and applications run on the SiCortex platform with an applications engineering team porting more each week.

-Growth rate in Q1 2009 of 30% over previous quarter, 100% over Q1 2008

-75 computers delivered to customers, all running at 99% uptime with no returns and no support problems.

-Unique “system on a chip” design for elegance, efficiency and reliability

-Currently operating with >50% gross margins

-Patents support the unique technology. 1 issued, 12 pending. These patents center around the unique communications architecture built into the machine (no wires or cables) that provides for <1 microsecond access time to over 5800 processors.

-The systems fit right into existing data centers or even your office. Many customers are “tapped out” of power in their data centers; because of the machine’s efficiency, customers are able to operate our computers in small labs, hallways, even a closet (Columbia University). The unique airflow of the machine allows for this flexibility.

-Supports all Linux software, Gigabit Ethernet, Infiniband, multiple files systems (Lustre and NFS), supports a plethora of I/O devices as well as up to 70 PCI express slots. Supports flash memory.

SiCortex Product Assets are Substantial
A SiCortex system embodies numerous assets and IP. Principal assets include:

(1) Node chip: The SiCortex node chip is a proprietary design that incorporates all of the hardware elements needed for a high performance cluster computing node, except for commodity DRAM.

(2) CPU Modules: Node chips are mounted on CPU modules, which are printed circuit boards designed by SiCortex that interconnect the chips and provide power, mechanical support, system monitoring support, and attachment points for standard PCI Express I/O modules.

(3) Processors: the processors on the node chip are derived from the MIPS R5000, with SiCortex designed performance enhancements added.

(4) Level 1 and Level 2 cache: Each processor on the SiCortex node chip has a 256Kbyte Level 2 cache and a 64 Kbyte L1 cache, both designed by SiCortex. The on-chip hardware interconnect and coherency protocol that link the processor caches together was also designed by SiCortex. Both the Level 1 and Level 2 caches contain ECC protection to improve system robustness at large scale.

(5) Interconnect: the Node chips are interconnected by a proprietary fabric based on the Kautz graph topology. The fabric delivers industry-leading throughput and latency, and is implemented by a combination of switching elements on node chip, wiring on the CPU module, and and a proprietary backplane that interconnects the CPU modules.

(6) DMA Engine and microcode: the DMA engine is a custom microprocessor designed by SiCortex and optimized to support standard interprocessor communication protocols. The microcode that runs on the DMA engine supports primitive operations that are used by a wide range of communication libraries (see below).

(7) Communication Libraries: SiCortex has extensively modified and optimized numerous open source interprocessor communication libraries to take advantage of the microcode and hardware support for fast communication that is available in the DMA engine and the hardware interconnect. These include MPI, SHMEM, GASnet (which supports the UPC, coarray FORTRAN, and other parallel languages), the Lustre Network Device, and the Buffered Message interface (which supports PVFS, the Parallel Virtual File system). Outside developers are extending this work to build other libraries such as the Aggregate Remote Copy Interface (ARMCI).

(8) I/O: Every node chip includes an I/O port, compatible with third party interfaces that conform to the PCI Express standard.

(9) System software: The SiCortex system Linux kernel, commands, and libraries provide standard software interfaces that make optimal use of proprietary hardware. In addition to optimizing the Linux software base for SiCortex systems, SiCortex has added documentation, integration, and verification testing that improves the robustness and usability of the open source distribution.

(10) Packaged math libraries: The SiCortex development environment includes numerous widely-used software libraries that have been pre-built and packaged for use by application developers. The current suite of packaged libraries includes PETSc, GOTO BLAS, Atlas BLAS, SPRNG, FFTW-2, LAPACK, FFTW-3, BLACS, ScaLAPACK, GSL, NETCDF, HDF5, and GMP.

(11) SiCortex Optimizing Compiler Suite: The SiCortex optimizing compiler suite is based on intellectual property obtained through the acquisition of Pathscale LLC in 2008 (prior to the acquisition, Pathscale had been developing compiler software under contract to SiCortex). The SiCortex Optimizing Compiler Suite supports C, Fortran, and C++. All of the optimization steps in the compiler have been extensively tuned for the SiCortex architecture.

(12) GCC Tool Chain: SiCortex has adapted the open source GCC tool chain to support its systems, including modifications to the compiler and linker to enhance the performance of compiled code.

(13) Optimized Math Libraries: In addition to the packaged libraries, the SiCortex development environment inlcludes several libraries that have been hand-tuned for optimal performance on SiCortex systems. These include standard libraries for math functions (both scalar and vectorized), string manipulation, and performance-critical functions such as memory copy. These libraries are available to application developers and (where appropriate) used by the GCC tool chain and the SiCortex Optimizing Compiler Suite.

(14) Debugging tools: The SiCortex development environment includes several debugging tools, including the Gnu Debugger (GDB), a stack backtrace tool, and several options for diagnosing memory usage problems.

(15) Performance profiling tools: The SiCortex system supports a powerful set of performance profiling tools that support analysis and correction of problems that affect scalability. These tools are based on facilities inside the node chip that count events such as cache misses, CPU pipeline stalls, interprocessor messages, and IO operations.

(16) Independent Software Vendor (ISV) packages: SiCortex systems support a growing suite of packaged software available from third party developers. Today, packages include the TotalView debugger, the Tau and Vampir performance analysis tool set, and the MOAB resource management system.

(17) System Service Processor (SSP): The system service processor is a commodity X86 server that runs SiCortex-developed software that manages the system. The software includes utilities that control bootstrap, restart, and shutdown, along with software that monitors the system, sends alerts, controls the cooling subsystem, and triggers shutdown under extreme conditions such as room air conditioning failure.

(18) MSPnet: The Management Service Processor network is an Ethernet that links the System Service Processor to all of the hardware elements in the system, including power supplies, fans, temperature sensors, and the CPU Modules. MSPnet includes processors and software that run on each CPU module that monitor and control the Node Chips and on-board power distribution.

(19) Software Distribution: Distribution of system software on SiCortex systems is managed by a set of software utilities that, under the control of the system administrator, automatically fetch and install software updates from a SiCortex-maintained site on the Internet. When necessary, these utilities are also capable of deinstalling software updates.

(20) Cabinet: SiCortex systems come in three different cabinet types, ranging in size from a deskside unit that houses 72 processors to a 5′ X 5′ cabinet that houses 5,832 processors. Each cabinet includes a chassis that holds the CPU modules, one or more fan trays that cool the system, a power supply that converts computer room power to the voltages needed by the components in the cabinet, a system service processor, and other elements that support system management and I/O.

(21) Diagnostics suite: SiCortex systems come with a diagnostics suite that is used in several settings including manufacturing test, burn-in prior to shipment, and isolation of hardware faults in the field.

SiCortex experienced chip development team

SiCortex has been able to compete with teams from Intel, AMD and others 20 times the size of SiCortex by designing its own processor. SiCortex has been able to include everything except the memory. The capabilities are to include the memory controllers, a PCI Express interface, a DMA engine and even a slice of the network switch. The objective is to implement an entire cluster by iterating a single chip plus a couple of DIMMs. This has big cost savings due to size, performance, and power-consumption benefits. Not only does SiCortex believe this is cheaper, the Company is able to earn the gross margin on the CPU chip, instead of paying it to Intel or AMD.

The Company does not do full-custom design. SiCortex focus is on doing ASIC development using standard cell libraries and synthesis tools. In a given technology the clock rate is therefore lower, but the company compensates for that with more cores, and the lower clock rate is the key to low power consumption–2x the clock rate equals about 6x the power consumption… SiCortex only designs logic where the company can add value–the CPU pipeline, the cache coherency hardware, and the communication protocol hardware. Intel and AMD typically do everything in-house.

Less than 20% of the area of one of SiCortex chips is designed by the company. SiCortex’s chip team has the domain expertise to select and integrate commercially-available IP. The SiCortex chip team consists of 2 architects, 8 designers, and 20 verifiers (over half of whom are contractors). Their value is that without this key Intellectual Capital, SiCortex would have a lower-communications-performance, lower-margin, larger, higher-power-consumption product that would be much less well-differentiated from products that rely on purchased x86 CPUs and their supporting chipsets.

In summary, the SiCortex approach is most similar to that of IBM’s Blue Gene family, except oriented to the bottom 50,000 users, not the top 500.

The Bidding Process for Interested Buyers

Interested and qualified parties will be expected to sign a nondisclosure agreement (attached hereto as Exhibit-A) to have access to key members of the management and intellectual capital teams, as well as the due-diligence “war room” documentation (“Due Diligence Access”). Each interested party, as a consequence of the Due Diligence Access granted to it, shall be deemed to acknowledge and represent (i) that it is bound by the bidding procedures described herein; (ii) that it has an opportunity to inspect and examine the SiCortex Assets and to review all pertinent documents and information with respect thereto; (iii) that it is not relying upon any written or oral statements, representations, or warranties of SiCortex, Inc. or Gerbsman Partners, or their respective staff, agents, or attorneys; and (iv) all such documents and reports have been provided solely for the convenience of the interested party, and Gerbsman Partners (and their respective, staff, agents, or attorneys) do not make any representations as to the accuracy or completeness of the same.

Following an initial round of due diligence, interested parties will be invited to participate in a sealed bid process, for the acquisition of the SiCortex Assets. Sealed bids must be submitted so that it is actually received by Gerbsman Partners no later than, Thursday, June 25, 2009 at 2:00 p.m. (Eastern Daylight Time) (the “Bid Deadline”) at SiCortex office, located at Three Clock Tower Place # 210, Maynard, MA 01754. Also, please forward to all bids to steve@gerbsmanpartners.com

Bids should identify those assets being tendered for in a specific and identifiable way. The attached SiCortex fixed asset list may not be complete and Bidders interested in the SiCortex Equipment must submit a separate bid for such assets, Exhibit B. Be specific as to the assets desired.

Any person or other entity making a bid must be prepared to provide independent confirmation that they possess the financial resources to complete the purchase where applicable. All bids must be accompanied by a refundable deposit check in the amount of $200,000 (payable to SiCortex, Inc.). The winning bidder will be notified within 48 hours of the Bid Deadline. Non-successful bidders will have their deposit returned to them.

SiCortex reserves the right to, in its sole discretion, accept or reject any bid, credit bid all or part of its debt, modify bidding procedures, or withdraw any or all assets from sale. SiCortex will require the successful bidder to close within a seven-day period. Any or all of the assets of SiCortex will be sold on an “as is,” “where is,” basis, with no representation or warranties whatsoever. All sales, transfer, and recording taxes, stamp taxes, or similar taxes, if any, relating to the sale of the SiCortex Assets shall be the sole responsibility of the successful bidder and shall be paid to SiCortex at the closing of each transaction…

For additional information, please see below and/or contact:

Steven R. Gerbsman
steve@gerbsmanpartners.com

Other sources in regards to SiCOrtex: Cnet, MassHighTech, WBJournal, Boston Globe, TMCnet, GreenTech Media, NetworkWorld, GigaOm, NewYork Times.

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