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Largo's GeoPharma lays off more workers as cash crunch intensifies

GeoPharma is on an urgent quest to borrow up to $10 million from a bank, hedge fund or other investor as a cash crunch within the 25-year-old Largo drug company intensifies.

Carol Dore-Falcone, senior vice president and chief financial officer, acknowledged Monday that the financial squeeze is taking a toll:

• About 25 more employees will be laid off this week, on top of 60 workers let go over the past two months.

• Some of GeoPharma's 190 employees have been paid sporadically over the past month. Some delayed payroll checks handed out last week covered the week of Dec. 24, and Dore-Falcone was trying to ascertain when she could release checks for the weeks ending Dec. 31 and Jan. 8.

• Without an injection of cash, the company doesn't have money to fully pay quarterly federal payroll taxes due Friday.

• GeoPharma's bank, First Community Bank of America, last month called in the company's equipment loan, which had a balance of about $650,000. At the same time, the bank called in a mortgage loan on a local condo held by the company; plus it froze a $305,000 CD held by the company and another $450,000 personal CD held by GeoPharma chairman Jugal Taneja.

"That had a drastic compounding effect on cash flow," Dore-Falcone said. "We're just continuing to plug on with our business plan as best we can."

Revenue has fallen significantly during the recession, but the company's problems were exacerbated by a soured relationship last year with a key investor, hedge fund Whitebox Pharmaceutical Growth.

GeoPharma blames Whitebox for not meeting its funding obligations to the company totaling about $5 million.

There are a few positive developments. GeoPharma's Web site was back online this week. After being dropped by Aetna, the company secured a new health insurer for its workers starting this month: Naples-based Self Insured Plans.

While not disbursing any funds, hedge fund Whitebox recently agreed to release liens on GeoPharma's building, inventory and accounts receivable. Dore-Falcone estimated the building has a fair market value of $2 million, its inventory about $5 million and its accounts receivable between $500,000 and $750,000.

"Add that together, and that's collateral of $8 or $9 million … to offer a hedge fund or a bank," she said. "I'm hoping someone will give me at least $5 million if not $10 million."

She said a bankruptcy filing was not under consideration at the moment, "but I'll have to evaluate things on a case by case basis."

Shares in GeoPharma fell another 8 percent Monday to close at 35 cents apiece.

Jeff Harrington can be reached at jharrington@sptimes.com or (727) 893-8242.

Largo's GeoPharma lays off more workers as cash crunch intensifies 01/11/10 [Last modified: Monday, January 11, 2010 7:47pm]
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