BioBased Shareholders Wrangle Over Bankruptcy

Former partners in BioBased Technologies LLC of Fayetteville are at odds with each other over whether the company should have filed for bankruptcy, and allege Johnelle Hunt and another shareholder have been involved in devaluing the company to facilitate a takeover. The company filed for Chapter 11 reorganization on Sept. 1. According to the paperwork, the company has annual revenue of $15 million and had $2.8 million in assets with $13.02 million in liabilities.

In a motion to appoint an interim trustee filed Nov. 6 in the Western District of Arkansas U.S. Bankruptcy Court, Tom Muccio, the founder of BioBased Family of Cos., and his son and former chief operating officer of the company, Mike Muccio, claim they and other shareholders were misled about the company’s financial condition on August 14, which led to the filing.

Tom Muccio was removed as CEO of the company earlier this year under pressure from other shareholders and was replaced by interim CEO Walter Smiley of Little Rock.

Partners in BioBased Technologies include Hunt, Phil and Judy Phillips, Trey Trumbo, Trevor Newbold and the Muccios.

On August 14 shareholders met to discuss the company’s financial condition. The paperwork states that at the meeting Smiley indicated a line of credit through Signature Bank of Arkansas was about to mature and that BioBased could not pay the obligation. As a result of the pending maturation date, BioBased filed Chapter 11. 

On October 9, the company filed a Plan of Reorganization wherein BioBased Holdings LLC would contribute $2.8 million in cash and $1.5 million in credit if 100 percent of the ownership of BioBased was vested in BioBased Holdings. BioBased Holdings was formed on Jan. 14, and Hunt and Trumbo are its officers.

The filing on Nov. 6 states: “… it is very clear now, based on the Plan of Reorganization that has been filed that Mrs. Hunt is planning to buy BBT’s assets at ‘fire-sale values’…”

The filing also alleges that the company’s intellectual property was valued at zero in its liquidation analysis “when intellectual property is by all accounts BBT’s most valuable asset.”

Lawyers for Hunt did not return calls for comment.

“We’re very comfortable with the plan that has been filed and feel like it is a good solution for every one,” said Jennifer Wilson, brand manager for BioBased Technologies.

Wilson would not say if the company was profitable or not and would not comment about valuing the intellectual property.

“We feel like we did everything right the first time,” she said.

Vaughn Knight, the Muccios’ lawyer, declined to comment on the case.

The Nov. 6 filing requests the court appoint a trustee to oversee the bankruptcy case.