The current rumor mill is ripe with goings-on at Atma-Sphere. What follows is an attempted approximation of the situation. It is based on accounts by Ralph Karsten whom I called, and Harry Blazer with whom I exchanged e-mails. It is offered in the hope to allay the rumors and allow the parties to get on with the current reorganization and proposed buy-out. More importantly, it is offered to support the prospects of future success for an Atma-Sphere under new ownership.
Our very short story begins in 2001 when 50% company owner Mike Benyo desires to sell his half of Atma-Sphere in the wake of a personal tragedy. From 1996, Atma-Sphere had been organized as a corporation, with Mike and Ralph Karsten equal shareholders and intellectual property rights assigned to Atma-Sphere. A pending buy-out agreement in December of 2001 involved Atma-Sphere customer Harry Blazer. As Karsten recounts, it fell apart in the very last minute when he and Mike attempted to pay themselves $10,000 each in annually due cash distributions which, according to Karsten, were provided for in the financial report and charter of the corporation and which had taken place consecutively for 5 prior years.
In mid 2003, the buy-out proposal was revisited and consummated. Atma-Sphere was restructured as an LLC, with equal 1/3 ownership assigned to Ralph Karsten, Harry Blazer and Mark Gilmore. The latter two were already partners in Glacier Audio. According to both Blazer and Karsten, the LLC statute includes global non-compete agreements of 2-year duration that were signed by all parties. Karsten claims he remained unaware of the non-compete, having "been buried deep in legalese boiler plate language" until he attempted to introduce the M-60MkIII amplifier. When dealer Audio Kinesis expressed an interest in both purchasing a sample and advertising it in Stereophile, Karsten claims he was then informed of breach of his non-compete. Karsten further reports on a "poisoned letter" that Harry Blazer sent to all of Atma-Sphere's parts vendors, informing them that Ralph Karsten was no longer authorized to place orders which henceforth had to go through Harry Blazer instead. It is this letter which seems to be partially responsible for current bystander impressions of a hostile take-over. However, the facts seem to indicate equal ownership between three parties, two of whom arguably are tied together in Glacier Audio and could thus be mistaken for a de facto 66% majority entity in Atma-Sphere.
After CES 2004 and as Karsten tells it, the strain of producing statement-level display amplifiers for the Las Vegas show and supplying Glacier Audio with inventory purchased by Blazer at lower-than-standard dealer cost had caused a negative cash flow situation. By July 28, Karsten resigned as CEO of Atma-Sphere and Blazer assumed the General Manager position of the LLC. According to Karsten, he and three employees have been fired since, with production halted since August and intermediate issues encountered with the Atma-Sphere website.
As will be obvious even from this most rudimentary sketch, the three current principals in Atma-Sphere LLC all stand to lose a great deal if a mutually agreeable buy-out deal can't be reached. As Ralph Karsten puts it, "My $10,000 development capital compared to their $2,000,000 clearly indicates who will enjoy greater commercial success." He is deeply concerned over the non-compete implications. They prevent him from working for two years in the only field he knows unless Harry Blazer and Mark Gilmore voluntarily release him from this contractual obligation or he remains a working employee/contractor in the reformed company. This general scenario is sadly reminiscent of the Platinum Audio disaster of a few years ago when founder Phil Jones sold his majority shares to investors, was subsequently fired and had to emigrate to China to continue working as a speaker designer without violating his 2-year domestic non-compete. Platinum Audio folded shortly thereafter when key dealers and distributors cancelled large orders upon realizing that the company founder had left.
|6moons sincerely hopes that this history won't repeat itself. The collegial vibe of Atma-Sphere amps handcrafted in Karsten's basement by employees with keys to his home that remained open even in his absence during vacations; with employees who, like Karsten, all played in bands and were actively encouraged to build their own DIY products from parts Ralph freely made available as perks; the renown of multiple Golden Ear Awards and proprietary technology; the nearly religious loyalty of Atma-Sphere amp owners that is mirrored only by Magnepan, Odyssey Audio and nOrh - all of this accumulated reputation and good-will is currently at stake. Will this loyalty transfer to a Blazer/Gilmore-run Atma-Sphere without Ralph Karsten, especially when public perception holds that he got a raw deal? Will Harry Blazer and Mark Gilmore see fit to release Karsten from the non-compete he voluntarily -- though apparently ignorantly -- signed so he regains a means of making a livelihood while Atma-Sphere resumes under new ownership and management? Should public perception|
|belabor the whole issue of the non-compete as though ignorance over what was signed constituted some form of benign fool's excuse? Will Ralph see fit to accept employment under a new Atma-Sphere and relinquish any grudges he may hold? Will he consider fair and equitable the evaluation of the company's present net worth as it pertains to his 1/3 ownership and agree to sell it? Will proceedings over equity evaluations, sales price and associated matters stall things long enough to seriously impede the restructuring and resumed operations of Atma-Sphere and make Ralph Karsten insolvent in the meantime? Does the very down-home 'mom'n'pop' flavor of the original operation even lend itself to a make-over and the kind of growth -- and the changes that come from such growth -- that one assumes the new principals envision as the next step? After all, not every small specialty restaurant where the cook is the owner translates into a national chain.
All of these are questions which must remain cognizant of the fact that principals Ralph Karsten, Harry Blazer and Mark Gilmore signed legally binding documents to become joint business partners. However, sympathetic bystanders -- which includes all of us here on the moons -- will hope that our small industry doesn't lose this unique and uniquely run company to the lawyers of the world and that compassion and common sense and fair play will prevail and lead to a win/win/win for all three parties involved. Seeing how the above version of events is primarily based on Ralph Karsten's account, Harry Blazer has already promised a "rebuttal" of sorts that will represent his perspective and shall be published as soon as we receive it.