The U.S. Bankruptcy Court for the District of Delaware approved Wednesday (April 8) a $1.7 million settlement agreement in the bankruptcy case of Springdale-based nanotechnology manufacturer NanoMech Inc. that will clear its former CEO of any wrongdoing.
U.S. Bankruptcy Judge John Dorsey approved the agreement between NanoMech, its directors and officers and New York-based lender Michaelson Capital Partners. The directors and officers in the agreement include all existing and former directors and officers of NanoMech, including former chairman and CEO Jim Phillips, Ajay Malshe, Deborah Wince-Smith, Michael Easterly, Arpana Verma, Wyatt Watkins and Ben Waisbren.
NanoMech’s directors and officers will have their insurer pay $1.7 million to NanoMech, and the company will pay $1.68 million to Michaelson, the agreement shows. Also, NanoMech will release all pending claims against Phillips and Conner & Winters LLP, and they will be dismissed with prejudice.
NanoMech filed documents March 18 seeking a settlement in the case. NanoMech is expected to file paperwork to dismiss the bankruptcy case after paying Michaelson. The remaining $20,000 from the $1.7 million payment will be for the benefit of NanoMech’s estate.
NanoMech filed April 15, 2019, for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the District of Delaware. The bankruptcy filing allows for a company to reorganize its debt and came after Michaelson Capital Partners sued NanoMech for not making payments on nearly $7 million in loans. It also came after Phillips retired from the company.
The settlement will resolve and eliminate any issues over why the company when into bankruptcy, according to a news release.
Last year, NanoMech hired a company to investigate the business’s operations and finances, including the eight years that Phillips oversaw the company. The company’s board of directors completed the review and determined that under Phillip’s leadership, NanoMech “appropriately addressed the many challenges it faced as an investment-stage company and that there was no wrongdoing associated with Mr. Phillips’ stewardship, the performance of Mr. Phillips and the other pre-bankruptcy directors and officers or with Mr. Phillips’ retirement from the company.”
NanoMech previously claimed Phillips spent more than $750,000 of the company’s money on personal expenses and overseas trips while he was CEO. Phillips denied the claims of financial wrongdoing and said the trips were work-related.
“During his tenure, Mr. Phillips made significant headway with many key milestones in diligently building the company towards maturity in the early stage nanotechnology manufacturing era,” NanoMech CEO Ben Waisbren said. “Mr. Phillips also conducted NanoMech’s business with honesty, integrity and trustworthiness.” The company’s board of directors retained Waisbren as chief restructuring officer after it was sued twice for not making payments on nearly $10 million in loans.
“I had the opportunity to witness Jim’s entrepreneurial skills and non-stop dedication to building NanoMech from a research entity to a producer of products contending with some of the largest companies in the world, in industries important to America’s competitiveness in science and innovation,” said Wince-Smith, a longtime director.
A subsidiary of Houston-based petrochemical company Vinmar International acquired the operational assets of NanoMech on Aug. 1 after agreeing to bid up to $13.09 million for the company. Following the acquisition, NanoMech was renamed to VinTech Nano Materials LLC.
Phillips is now chairman and CEO of The Covenant Business Group LLC, an internationally focused company involved in bringing new companies and innovations to market in multiple emerging technology platforms.
Phillips on Wednesday said he was relieved to see the updated press release that shows what should have been released a long time ago.
“As I’ve said before, it was incredibly tough on me, my wife, my family to be reading such incredible nonsense in the newspapers with no sources and saying we made incredible exotic trips to places we’ve never been in our lives,” Phillips said. “It was just really tough to read those kinds of things, all of which were false. I’m glad to see a press release come out now that basically exonerates every single thing that was said. I’m really glad that’s behind us.”
Phillips noted a similar press release went out in March, but the one Wednesday also included additional comments from Waisbren regarding how Phillips had operated NanoMech with “honesty, integrity and trustworthiness.” Phillips said the latter was how he’s explained to others the way he’d operated the business, but he read accounts in other publications without sources or facts.
“It is tough to live with when you did it incredibly well — took it from literally no products, as Deborah says, no factory, no invention, no patents to where we have full-scale production, and we’re hitting our best months, best years as I retire.
“I certainly am glad to see that these statements were made by the company to the extent that it clears any of these other things that we read in the papers,” Phillips added. “It was incredibly demeaning, disparaging, vile, literally. Imagine picking up and reading it yourself, and somebody saying something about you that could be so incredibly false. I’m glad to get it behind us.”