Irvine-based AtheroNova Inc. is searching for a buyer willing to extend the cash-strapped startup’s existence as it reviews early data on its effort to develop drugs to fight atherosclerosis, or hardening of the arteries.
U.S. Bankruptcy Court Judge Erithe A. Smith approved the startup’s request to employ Mountain View-based Sherwood Partners Inc. to conduct a search for prospective buyers or investors for its clinical programs.
AtheroNova filed for bankruptcy on March 2, a few weeks after its stock price crumbled after the company disclosed that it had defaulted on several loans.
The company’s bankruptcy court filing seeking approval of its relationship with Sherwood indicated it’s working on a tight timeline.
“With [our] current cash balance and ongoing operating expenses, [we] predict that [we] will completely run out of cash and be forced to shut down by around June 30, 2015 unless…[we can] consummate a sale of [our] assets by that date,” the company said in the filing.
AtheroNova’s shares trade on the over-the-counter bulletin board exchange. The prerevenue company, which has four employees, posted a net loss of $8.2 million in the 12-month period ended in September. The company had cash and cash equivalents of $738,547 as of the bankruptcy petition date.
The bankruptcy filing appears to clear the way for AtheroNova to maintain its operations for now, and the company said it intends to continue a process of evaluating data from its recently completed first-phase clinical trial for its AHRO-001 lead compound that took place in Russia.
“As a result of all the foregoing, [we] concluded that it was in the best interest of the [company and its] creditors and shareholders to file for bankruptcy to prevent the secured note holders from exercising any rights against the debtors and to provide the debtors a forum to maximize the value of their assets under the circumstances.”
The company said it could pursue “a feasible reorganization” if a willing funder could be found and “that result would be better for creditors and shareholders than an asset sale.”
“As discussed more fully in the application, [we] are facing a liquidity crisis in two ways,” AtheroNova said in its filing. “[Our] outstanding debt vastly exceeds [our] available cash, and certain holders of secured notes have accelerated the indebtedness under their secured notes.”
Difficulties to Crisis
AtheroNova’s difficulties veered toward crisis in mid-February when its stock fell sharply after the company disclosed that it defaulted on a $427,500 loan after receiving a notice of debt acceleration from lender Europa International Inc. The move triggered defaults on three other loans.
AtheroNova said that if all of its debts were accelerated, it would be required to pay some $4.26 million in principal, “plus accrued and unpaid interest and other costs and expenses” and that it had “no economic means” to make such payments.
It said in its filing that it also was having liquidity issues because it has “a limited amount of cash, no operating revenue, ongoing operating expenses and no realistic way to obtain additional funds—either from new debt or equity.”
AtheroNova could not be reached for comment last week.
