Investors in a promising Chattanooga technological company face the loss of over $30 million after the st3 firm today closed its doors.
The streaming media firm, with headquarters on Amnicola Highway, on Wednesday filed a motion in Bankruptcy Court to convert from a Chapter 11 to a Chapter 7 bankruptcy.
The attorney handling the bankruptcy, Richard Kennedy, said there is some $15 million in notes out on the firm. He said investors who were given shares amounted to "that much or more."
Mr. Kennedy said an attempt will be made to sell off any assets. He said that includes the broadband network the firm was trying to build, but he said that is "a very fragile asset."
He said, "They had a great idea, but they could not quite pull it off. They needed to raise $10 million more in capital. They got to $7 million, but couldn't get the other $3 million."
He said the Sept. 11 terrorist attacks caused a number of potential investors to back away from many projects.
There are a number of Chattanoogans among the investors, including Joe Decosimo, who was chairman of the board.
Officials of the Chattanooga-based streaming media firm recently said the company was close to raising the capital it needed to stay in operation.
st3 in October had filed the Chapter 11 bankruptcy that protected it from creditors while allowing it to keep operating.
In the wake of that filing, st3 slimmed down from 109 employees to 50-60.
Officials earlier said st3 had amassed some $33 million in capital and needed another $9 million to complete its own nationwide fiberoptic system.
They said st3 would be the only streaming media firm with its own fiberoptic pipeline and would connect to 50 major U.S. markets.
st3 in July announced that John C. "Jay" Kern, Jr., had joined the company as chief executive officer (CEO).
Michael Cunnyngham, the founder and chief scientist at st3, said of Mr. Kern at the time, "st3 will further utilize Jay's extensive knowledge in corporate leadership and leverage his strategic abilities to fully capitalize on the enormous opportunity for our dedicated streaming media network."
Prior to joining st3, Mr. Kern served as managing director of Reynolds, DeWitt & Co., an st3 investor. In this role, Mr. Kern was responsible for sourcing, structuring and obtaining requisite financing for investment transactions, ranging from new venture funding to leveraged buy outs. In addition to NextLec, Inc., Mr. Kern also presently serves as chairman of the board at two other companies, both of which have provided a return on investment greater than 100 percent.
Earlier in his career, Mr. Kern was with McKinsey & Company where he advised clients in the financial services and manufacturing industries. He holds a J.D. and M.B.A. from the University of Chicago along with an undergraduate degree from Princeton University.
Mr. Kern replaced acting st3 CEO Bill deKay, who moved into the role of vice chairman in order to focus more on business development and capital investment.
Officials earlier said about st3:
st3, a wholly-owned subsidiary of NextLec, Inc., "provides the industry's most comprehensive and technically advanced streaming media capabilities for developing, encoding, and streaming live events and on-demand content for its customers. st3 customers include broadcasters, event organizers, film studios and video content owners. st3 uses a private fiber optic network of 30,000 route miles to serve every major market in the United States and to circumvent issues that first-generation streaming companies continue to face."