Springdale-based NanoMech Inc. has filed for Chapter 11 bankruptcy protection in a Delaware court, and its chief restructuring officer has said the tech company is viable enough to manage if the proper financing is approved.
Attorney Benjamin Waisbren is acting as NanoMech's chief restructuring officer. He noted in court documents filed late Monday that NanoMech was woefully undercapitalized and was on the verge of collapse just days before the company's board of directors opted to seek bankruptcy protection.
In initial filings, NanoMech claimed between 100 and 199 creditors, between $10 million and $50 million in assets with between $10 million and $50 million in debts. Filings showed debts including $8.9 million on Michaelson Capital, $2 million to Waring and Carmen Partridge Foundation of Texas, $1.5 million to Arvest Bank, $1 million to Daniel Carroll, and $1 million in total to the Arkansas Economic Development Commission.
Waisbren said in a recent interview that the company had the support of its major lenders and primary vendors and was working to be as transparent as possible throughout the bankruptcy process. In court filings, he noted debtor-in-possession financing had been secured from creditor Michaelson Capital to keep NanoMech afloat during the bankruptcy process.
"NanoMech's recent progress with key suppliers and customers is encouraging, and is an objective illustration of how, despite its financial and past operational issues, NanoMech's major customers continue to want to use the Debtor's products in manufacturing and in the field," Waisbren wrote in court documents.
"In short, this shows NanoMech's competitive attributes and advantages; it's a tech company that has not been able to exploit fully its valuable intellectual property and product know-how. With appropriate levels of working capital and investment, I now believe it can."
A judge is scheduled to consider NanoMech's request for bankruptcy protection on Thursday.
New York investment firm Michaelson Capital Partners sued NanoMech Inc. in February, contending the technology company owes it $8.9 million in notes, interest and fees. NanoMech has not responded to the suit in the New York Supreme Court.
In late March, Carroll, a resident of Michigan, sued NanoMech in U.S. District Court in the Western District of Arkansas, contending NanoMech defaulted on a $1.06 million promissory note. NanoMech has not responded to that suit.
In March, Jim Phillips, chairman and chief executive officer of Springdale's NanoMech, retired. In a statement, Phillips' attorney indicated Phillips, 67, is stepping away from NanoMech after 10 years of service. He said Phillips is proud of NanoMech's accomplishments. The attorney insisted Phillips' decision to retire had nothing to do with the lawsuit.
NanoMech, founded in 2002 by Phillips, develops nanotechnology for use in machining and manufacturing, lubrication, packaging, biomedical implant coatings, and the development of specialty chemicals. Nanotechnology is the manipulation of matter at the atomic and molecular scale.
According to a filing with the Supreme Court of New York, NanoMech entered into loan agreements with Michaelson Capital Partners in April for $5 million and $2 million and then defaulted on the deals by not making payments. In the filing, Michaelson said it entered into a forbearance agreement with NanoMech but that the company then failed to meet the terms of that deal, which among other things included monthly payments of $100,000 beginning in December.
At the time of the suit, Robbie Wills, a Conway attorney and spokesman for Michaelson Capital Partners, said the firm is committed to rescuing NanoMech and keeping its technology and jobs in Arkansas. The investment group plans to work with other shareholders and investors in NanoMech, including the Arkansas Economic Development Commission, he said.
Michaelson Capital provides financing to entrepreneur-led technology companies, according to its website.
According to information provided by the Arkansas Economic Development Commission, NanoMech received about $7.9 million in state funds in the forms of incentives, credits, grants and loans, all before 2015.
Between 2008 and 2010, NanoMech was awarded $2.8 million in Equity Investment Tax Credits. In 2010, it received $140,000 from the Economic Infrastructure Fund. The company obtained $5 million from the Governor's Quick Action Fund, with a total net of $3.4 million after repayment in 2013, and $1.6 million in grants from the Quick Action Fund to Arkansas Venture Capital Investment to NanoMech in 2014.
Business on 04/17/2019