Aquasearch files Unsecured creditors of bankrupt Big Island firm Aquasearch Inc. would be paid 15 percent of their claims in cash, while a California company would pay roughly $1.8 million for majority ownership of the struggling biotech, under a reorganization blueprint submitted by Aquasearch yesterday in U.S. Bankruptcy Court.
reorganization plan
A California company gets an
ownership stake; unsecured creditors
get 15 cents on the dollarBy Tim Ruel
truel@starbulletin.comA May 20 hearing has been scheduled to approve a preliminary outline of the firm's reorganization plan, which is formally known as a "disclosure statement." After that, the unsecured creditors and current stockholders will be able to vote on the proposal, although ultimate approval would be up to U.S. Bankruptcy Judge Robert Faris.
Under the plan, California firm Aqua RM Co. would acquire a 68 percent stake in Aquasearch, while current shareholders would retain a 32 percent share. An affiliate of Aqua RM, Chardan Ventures, helped Aquasearch stay afloat by providing $500,000 in financing after the struggling biotech entered Chapter 11 reorganization bankruptcy in November.
Chardan Ventures, headed by biotechnology venture capitalist Richard Propper, will receive full payment of the $500,000, plus 12 percent interest, regardless of whether the reorganization plan is approved.
Under the plan, publicly held Aquasearch will be able to boost its authorized number of outstanding shares more than threefold, to 490 million shares from 150 million.
The rest of the financing for the reorganization depends on Aquasearch's revenues, which have been growing and more than doubled in the most recent quarter to $257,818 from $127,771 a year earlier. Still, Aquasearch is not yet profitable and posted a quarterly net loss in January of $473,260, a 61 percent decrease from a year-earlier loss of $1.2 million. The company has lost nearly $21 million since it went public in 1989.
If Aquasearch's bankruptcy case was converted to Chapter 7 liquidation, unsecured creditors would likely be left with nothing, the company said in its reorganization plan.
Unsecured claims against Aquasearch total $5.5 million, meaning the company would pay out about $825,000 in cash. Among the unsecured creditors are several of the five individuals who sued in October to force Aquasearch into involuntary bankruptcy. The group of five had sought the ouster of then-chairman and Chief Executive Mark Huntley, who initially fought the move, but later stepped down to become chief technical officer.
A new management team would be identified when the plan is confirmed.
Huntley said yesterday that Aquasearch is committed to keeping a research and development presence in Hawaii, although it will be necessary to move commercial production outside the United States to cut costs. Aquasearch, which sells pharmaceuticals harvested from microalgae grown in ponds, has been at its current facility on state land in Kona for nearly a decade.
"I'm very upbeat about the future," Huntley said. "I think everybody knows that the United States is a terrific source of innovation and we create the cutting edge for new technologies, but what we're not particularly good at is low-cost labor. That is not the forte of the United States or Hawaii."
Under the proposed plan, most Aquasearch employees will get back all they money they are owed from unpaid wages, an amount that totals just under $80,000. Around the time Aquasearch was sued by the creditors, the company cut its staff nearly in half to 16 from 30.