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This just in:
Tuesday November 3, 10:51 am Eastern Time
Company Press Release
SOURCE: Apparel Technologies, Inc.
APTX Files for Protection Under the Federal Bankruptcy Code;
Litigation Commenced by APTX Against Former Investment Banker and Lender to Recover Damages
LOS ANGELES, Nov. 3 /PRNewswire/ -- Apparel Technologies, Inc. (OTC Bulletin Board: APTX - news) announced today that it has filed for protection under Chapter 7 of the U.S. Bankruptcy Code. This action was taken as a result of the Company's inability to obtain working capital following the termination of its investment banking relationship with First Fidelity Capital, Inc., an unregistered Beverly Hills broker-dealer (''FFC''), in May 1998, based upon, among other things, its failure to honor its $5 million funding commitment to the Company, and the failure of Southridge Capital Partners, through its nominee Thomson Kernaghan & Co., Ltd. to honor its commitment to fund $900,000 to the Company in July and August of 1998.
Under Federal Bankruptcy rules, a Trustee will be appointed by the Bankruptcy Court to administer the affairs of the Company and to liquidate its assets for the benefit of its creditors and shareholders. These assets include pending legal claims discussed below. Although Bankruptcy Court rules also allow a Chapter 7 proceeding to be converted into a reorganization proceeding under Chapter 11 of the Bankruptcy Code with the permission of the Bankruptcy Court, no such action would normally be possible absent a viable source of third party funding, which is not presently available to the Company.
''The Company had laid the foundation to build a world class company utilizing proprietary digital technology in the apparel industry, including a seasoned management team led by Kathryn Van Ness, the Company's former CEO, leading edge technology, and a solid customer base,'' stated Samuel S. Guzik, the Company's acting CEO and Director. ''Unfortunately, the Company could not implement its business plan without the financing which was promised by First Fidelity Capital, Inc. and Thomson Kernaghan & Co., Ltd.''
The Company previously announced that it had been forced to discontinue day-to-day operations in September 1998 due to its inability to obtain working capital. Since such time, it has continued to pursue new funding sources for the Company, and has received a number of proposals from FFC. The proposals from FFC were ultimately rejected by the Company, as FFC insisted upon immediate control of the Company and an immediate and irrevocable dismissal of litigation against its principal, Mads Ulrich, for violations of federal securities laws without any assurances that the FFC funding proposal would be consummated.
''The Company's concern about the bona fide nature of the FFC proposal was heightened by FFC's course of conduct during the negotiations, including personal threats by Mads Ulrich against the former CEO and Director, Kathryn Van Ness, while she was a Director and CEO, demanding that she resign immediately and turn over control of the Company to Ulrich, or face personal ruin. This course of conduct also included two unsuccessful court attempts by FFC and Ulrich to remove the Company's current CEO, Samuel S. Guzik as a Director in September 1998.
Mr. Guzik, the Company's outside legal counsel and sole remaining Director, assumed the role of Acting CEO in September 1998 following the resignation of Kathryn Van Ness as Director and CEO on September 25, 1998. Two of the other four Directors elected by the shareholders in November 1997 resigned in August 1998, as previously reported in the Company's Form 8-K filed with the U.S. Securities and Exchange Commission on September 11, 1998.
The Company's September 11 Form 8-K had reported the commencement of litigation by Thomson Kernaghan against the Company and two of its officers in July 1998 alleging that the Company breached its lending agreement with Thomson Kernaghan by refusing to convert certain convertible notes into Common Stock. In October 1998 the Company filed its Answer in the action denying the claims and asserted claims against Thomson Kernaghan and Mads Ulrich, the CEO and owner of FFC.
The Company's suit against Thomson Kernaghan and Mads Ulrich alleges that Thomson Kernaghan breached its funding agreement with the Company by failing to fund $900,000 under its funding agreement with the Company. The Company's suit also alleges that Thomson Kernaghan attempted to defraud the Company by failing to disclose to the Company that, by reason of acting in concert with Mads Ulrich, it beneficially owned more than 30% of the Company's Common Stock in violation of the terms of the Company's convertible notes.
The October 1998 suit also alleges that Ulrich unlawfully conspired with Thomson Kernaghan to terminate its funding agreement with the Company in order to put the Company out of business or take control of the Company. The suit alleges that Ulrich took these actions for the purpose of extinguishing claims by the Company against Ulrich for violating Section 16(b) of the Federal Securities Exchange Act of 1934, which prohibits an officer, director or 10% owner of a public company from profiting in purchases and sales of its stock within a six month period.
The Company also announced that on October 16 it formally served Mads Ulrich with a second Complaint filed by the Company in Federal Court in July 1998 alleging that Ulrich, through various off-shore entities controlled by him, violated Section 16(b) of the Securities Exchange Act of 1934, by engaging in purchases and sales of the Company's Common Stock. The Complaint was filed in July 1998 following a demand by the Company in June 1998 that it remit to the Company for the benefit of its shareholders and creditors what it believes amounts to more than $1 million of profits wrongfully obtained through open market sales of Common Stock in violation of Section 16(b). The Company believes that all or a substantial portion of the proceeds from the illegal sales were used to purchase a residence for Ulrich in Beverly Hills, California in October 1997 valued at more than $2 million.
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Will the last person left in the APTX thread, please shut off the lights?
Party is officially over.
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