ISE Doubled Sales in 2009, Filed Chapter 11 in 2010

Innovative Solutions for Energy, aka ISE, a corporation that makes hybrid electric drive trains for buses and trucks, was doing well last year as the government had mandated transit agency vehicles to reduce their carbon emissions. As reported by the San Diego Business Journal, however, doubling their sales to $44 million last year, and raising another $20.7 million from Canada through a stock sale, wasn't enough to keep the company afloat.

The Poway Company, ISE Corp., announced that they had filed Chapter 11 reorganization bankruptcy citing both a lack of cash, an unsuccessful search for a buyer, or new capital.

Rick Sander, ISE's chief executive officer said, "It was a combination of not getting enough money in the IPO (initial public offering) and a drop in the backlog of business that created a situation where we ran out of cash quicker than we thought we would."

At the time of the stock offering Sander said they knew the capital alone would not be enough, disclosed it, and then worked to raise more funds to carry them through for the year.

The company gained approximately $16 million after legal, and other expenses associated with the IPO, was paid.  They used about $6.2 million to repay outstanding promissory notes, and then still had bills from suppliers to pay.

Mike Sund, spokesman for Maxwell Technologies Inc., that provided ultracapacitors - advanced energy storage systems - to ISE, were made aware of ISE's financial problems as it was fully disclosed in the proxy statement prior to the stock offering.

Sund stated, "We saw that (securities) filing like everybody else and recognized they were going to have to find more financing, so in that sense (the bankruptcy) wasn't a surprise."

ISE provided all investors with an auditor's report that noted their recurring losses, accumulated deficit of $90 million and lack of financing. 

Sander stated that for the better part of this year ISE has been working on getting a joint venture together with several interested parties, but none came to fruition.  Then attempting to put together a PIPE transaction - Private investment in public equity -  ISE again faced failure. 

ISE claims that city transit agencies had been lessening their orders due to their own tough financial issues.  Debilitating state cuts in the budget, because of a lack of taxes collected from a struggling economy, resulted in the transit agencies delaying their orders from ISE.

ISE continues to operate and service its customers during the bankruptcy reorganization process.  Most likely, existing shareholders will be diluted. 

Sander contends that interest in ISE is firm, and that there are investors that see the business is worthwhile, "There's lots of private equity funding out there that's interested in ISE just as there was before (it filed for bankruptcy).  We believe there's tremendous value here."

ISE has also applied to the federal government for grants ranging between $50 million to $90 million, but, as much of the stimulus dollars for clean-tech has gone to other states, says Sander, California has been left out so far.

In conclusion, Sander believes that ISE's sale to another company, or an equity firm taking a controlling stake, will allow the reorganization to be complete and the company will be able to continue producing its hybrid electric drive trains.

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