eCorp’s early struggles continue

MIDDLEBURY — Officials at eCorp English on Monday confirmed the company’s rocky financial start in Middlebury could get rockier before things smooth out as it looks to buy time from lenders, employees and contractors who continue to wait for payment.
Deborah Schwarz, founder and president of the firm that offers English language training to international businesses, said eCorp is asking its major financial backers for a one-year reprieve period as it seeks to stabilize its budget and avert the need to seek court protection from its creditors.
The short-term stabilization, Schwarz said, will come from a $600,000 infusion of funds from eCorp’s board of directors. This money in the short-term will allow eCorp to meet its payroll and operating expenses while affording some time for the firm to reap some anticipated revenues from its new WordFortune software, according to Schwarz. That new software and related support services, Schwarz said, has been released in Asia and French-speaking markets to positive reviews.
But in the meantime, she said times could get a little tougher — perhaps including layoffs — at eCorp, a company that last spring moved into 6,700 square feet of space at 1197 Exchange St. in Middlebury amid high expectations and with the promise of considerable state aid and private investment.
“We are continuing to face challenges,” Schwarz said.
Established by Schwarz in 2006, eCorp offers English language training to corporate officials throughout the world. It accomplishes this, in part, by offering Web-based programs and expert trainers to work directly with clients throughout the world, coaching them on their specific English vocabulary needs.
Originally, eCorp was based in Malta with sales offices in France, Switzerland and Shanghai, China.
When eCorp came to town, company officials conservatively estimated they would employ more than 100 workers in Middlebury by 2013. Schwarz placed eCorp’s current workforce at approximately 35, a dozen of whom are management-level officials. The balance of the workforce consists largely part-time tutors and language trainers, according to Schwarz, who acknowledged that around five staffers have resigned in recent months due in part to late salary payments.
Schwarz was candid in her assessment of eCorp’s current condition. She acknowledged the company’s inability to pay numerous local and regional businesses for services rendered. The Addison Independent has received e-mails in recent weeks from some contractors — wishing to remain anonymous — stating they are still awaiting payment from eCorp on some longstanding bills.
“Everything you have heard is probably all true or has a grain of truth,” Schwarz said on Monday. “We have had late pay. Our payroll was due last Friday; it is still not out.
“We have had to work, with gratitude, with people to whom we owe money, and sometimes not even pay much or anything,” she added. “It has been survival mode. That has created a lot of tensions here, for some people, and appropriately so, because we all need our money to live.”
All of this has prompted eCorp to take stock in its future, Schwarz said, a future she still believes will be bright and rooted in Middlebury.
 But the road to a brighter future for eCorp is strewn with some hurdles, Schwarz warned. The first and largest hurdle is a financial one for an enterprise that Schwarz believes was, in retrospect, under-capitalized for its Middlebury launch.
“We realize that what we need now is a period of calm in which to sell (WordFortune) and to work with the people to whom we owe money to find a solution,” Schwarz said.
That has meant asking major creditors to wait a year for repayment, during which time eCorp officials will focus on keeping the enterprise functioning.
“In this context, they would be fully repaid,” Schwarz said.
Failure to negotiate such a grace period would force eCorp to consider filing for Chapter 11 bankruptcy protection, Schwarz conceded.
“One way or another, we have to restructure our debt,” Schwarz said.
At the same time, Schwarz said eCorp is looking at its costs and areas in which it could reduce expenses to further stabilize the budget. That could mean reducing a workforce that officials had hoped would be on an upward trajectory at this point.
The promise of new jobs was a major reason for the state’s promise of assistance to eCorp back in December of 2010. That assistance package included $175,000 in low-interest loans through the Vermont Economic Development Authority; a $200,000 equity investment through the Vermont Seed Capital Fund; and an offer of more than $200,000 in tax incentives through the Vermont Economic Growth Incentive program, known as VEGI. Those tax credits were contingent on eCorp English reaching certain employment milestones over a five-year period.
It remains unclear how much of the state assistance eCorp will be able to access, given its current troubles.
For example, Schwarz acknowledged it is unlikely eCorp will meet the employment, payroll and capital investment thresholds to qualify for the VEGI assistance. If a company fails to meet the prescribed thresholds for two consecutive years, it is disqualified from the program, according to Vermont Economic Progress Council Executive Director Fred Kenney. But Schwarz said she’s confident eCorp will meet the VEGI contract terms by year two to ensure continued enrollment in the program.
The Addison County Economic Development Corp last May loaned eCorp $100,000, according to ACEDC Executive Director Robin Scheu. The ACEDC is not at liberty to disclose the terms of the loan, Scheu said.
Ultimately, Schwarz hopes eCorp will be able to look upon the past year as a sad chapter in an otherwise bright story.
“We are committed to staying in Vermont; we are committed to staying in Middlebury,” Schwarz said. “We are committed to righting the ship and there is only one option — and that is to succeed, so that we are a good neighbor, a good employer and a good intellectual participant in the community.”
Reporter John Flowers is at [email protected].
Editor’s note: eCorp President Deborah Schwarz provided the following statement on the company’s current struggles:
“These are trying economic times for everyone, particularly start-up companies like ours, and we are experiencing challenging short-term cash-flow issues.
“We are working very hard to restructure the obligations of the company to allow us some needed breathing room. Our board members have recently invested significant new funds in the company, which shows their belief in the prospect of our company. Those same board members have now agreed to lend the company additional operating funds to help us with our short-term needs on certain conditions, including certain interim agreements with our major creditors.
“We are now working with our creditors to meet those conditions so that we can have access to these funds and move forward without the need for any formal court proceedings.
“We are proud of and committed to our operations in Vermont, and look forward to continuing those operations.”

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