Some other big companies that received loans appeared to have enough cash on hand to survive the economic downturn. New York City-based Lindblad Expeditions Holdings, for example, a cruise ship and travel company with 650 workers and a branding deal with National Geographic, got a $6.6 million loan. At the end of March, the business reported having about $137 million in cash on its balance sheet.
“When this crisis hit, we had two business planning cases: 1) substantial layoffs and furloughs or 2) receiving these funds and not impacting our employees,” spokeswoman Audrey Chang wrote in an email. “Lindblad is the very rare travel company that has not imposed any layoffs, furloughs or salary reductions to date.”
Five of the companies that the AP identified were previously under investigation by financial and other regulators, including firms that paid penalties to resolve allegations, records show.
Quantum Corp., the video data storage company based in San Jose with a workforce of 800, paid a $1 million penalty last December over allegations that accounting errors resulted in overstated revenues. Quantum received a maximum $10 million loan.
Without that loan, “we would most certainly be forced to reduce headcount. We owe it to our employees — who’ve stuck with us through a long and difficult turnaround — to do everything we can to save their jobs during this crisis,” company spokesman Bob Wientzen wrote in an email.
Broadwind Energy, a suburban Chicago maker of wind turbines that employs about 520, agreed to pay a $1 million penalty five years ago after the SEC accused it of failing to inform investors that reduced business from two major customers had caused “substantial declines” in its long-term financial prospects. Broadwind, which could not be immediately reached, received $9.5 million from the loan program.
Marrone Bio Innovations, a biopesticide company in Davis, California, that has about 50 workers, similarly agreed to pay $1.8 million in 2016 after the SEC alleged its chief operating officer had inflated financial results to hit projections that it would double revenues during its first year as a public company. Marrone received a loan worth $1.7 million.
Pam Marrone, the chief executive, said the company “shouldn't be punished” for what happened with the SEC because it has had clean audits for years now. She described the investigation as a “body blow" that cost it investors and drove its stock price under $1. She said it has had to take on $40 million in debt and is still digging itself out of the financial hole.
“People don't realize how tough it is to be a small public company like us that's not yet profitable," she said. "We can't just go to investors and say, ‘OK, open up your wallets.' “
The AP analysis found that about 1 in 4 of the companies, in fact, had warned investors months ago that they or their auditors had significant doubts about their ability to remain viable and meet their financial obligations despite the booming economy at the time.
One was Helius Medical Technologies, a company located near Philadelphia that develops technology to help injured brains heal themselves.
The company has 19 employees and received a $323,000 loan amid a tough stretch. Its most recent annual report warned, “We may be unable to continue to operate without the threat of liquidation for the foreseeable future” and did not expect to have enough cash to go beyond May.
In an interview, President and CEO Phil Deschamps said the company was able to raise enough capital earlier this year that, when paired with the loan, it can survive to early summer — when it expects to have filed for U.S. Food and Drug Administration approval for its device. Without the federal money, he said, the company would have lost scientists and attorneys who help prepare regulatory submissions.
Deschamps said his company followed the same rules and applied like any other, and that its device could help thousands of people in the future. But he also understands why some people might question giving money to publicly traded firms.
“If we didn’t qualify for whatever reason, we would have walked away and figured out another way to do it," he said.
Another company that was facing financial doubts before the virus was Enservco Corp., a Denver-based oil and gas firm. In its annual report filed last month, the company said: “We do not generate adequate revenue to fund our current operations, and we incurred significant net operating losses during the years ended December 31, 2019, and 2018, which raise substantial doubt about our ability to continue as a going concern.”