Coupled with incoming revenues, these factors were expected to ensure the troubled company's survival through to next year. Instead, Chromos is now teetering on the edge of bankruptcy in the face of a demand for repayment of a C$2.2m bridging loan.
The company, whose main revenue base is the cell-line engineering business built around its ACE (artificial chromosome expression) System, said last week it would make a restructuring proposal to its creditors and temporarily lay off around half of its employees.
Chromos is also looking for alternative sources of financing so that it can complete the restructuring process, failing which it will have to "scale back further or terminate certain or all of its operations." The company's common shares have been suspended from trading on the Toronto Stock Exchange.
Just a few weeks ago Chromos, which could not be reached for comment on its restructuring plans, was talking about signing up further partners for the ACE System and taking on extra staff to support the business expansion. The company's preliminary agreement with an undisclosed US biotechnology company for CHR-1103, together with the prospect of C$4m in gross proceeds from the bought deal private placement, promised a more secure financial footing going forward.
On 3 April, however, Chromos announced that, while due diligence for the co-development deal had proceeded successfully, the US party had "decided that the prospective collaboration would not allow it to meet the timing of its specific funding milestones." Negotiations on the CHR-1103 partnership had then ceased.
Based mainly on this setback and the decline in Chromos' share price, it added, the underwriters for the private placement had informed the company they were withdrawing their financing offer.
On the same day, Chromos revealed that the holders of a convertible secured bridge loan - which the private placement was meant to pay off - had demanded repayment of the principal and interest, totalling C$2,242,000, by 4 April. Noting that it did not have sufficient funds to meet this demand, the company said it was trying to arrange financing and "exploring other strategic alternatives."
The latest development is that Chromos has filed a Notice of Intention to Make a Proposal under the Bankruptcy and Insolvency Act. "This will facilitate an orderly evaluation of strategic alternatives including those designed to strengthen the Company's business model and capital structure," it stated, adding that the Notice of Intention "allows Chromos to maintain scaled-back operations and maintain the integrity of its assets while evaluating its strategic alternatives and developing a restructuring proposal for creditors."
In the meantime, the company has issued temporary lay-off notices to 12 of its 25 employees. Further temporary lay-offs may be implemented "as required."
Chromos put a brave face on what, by all appearances, is a fairly grim prognosis for its future. "The company will continue to operate while we undertake the restructuring process," said president and chief executive officer Alistair Duncan. "Management and the Board of Directors are committed to this process and are confident that it will lead to an outcome to the benefit of all stakeholders."