Electronic Sensor Technology Inc (ESNR)

[Fred Kadiddlehopper]

ESNR now officially BK:


DJ Electronic Sensor Technology Floats Bankruptcy-Exit Plan

By Katy Stech

Officials at Electronic Sensor Technology Inc. (ESNR) revealed a scenario for how the Nevada company can get rid of roughly $8 million in debt using bankruptcy, enabling it to focus on selling its zNose machines to health-care professionals to diagnose cancer and other medical problems.
In court papers, Electronic Sensor officials said that reorganizing will give the company a fresh financial start to pursuing new ways to use its zNose machines, which they said can pick up on soft-tissue carcinomas that indicate lung cancer and breast cancer.
The company filed for Chapter 11 protection on Oct. 23 before it could finish switching to focus on the health-care industry, saying it needed a $1.9 million bankruptcy loan to survive.
Under the reorganization scenario filed Friday with the U.S. Bankruptcy Court in Santa Barbara, Calif., the company's 33 creditors could either get repaid 15% of what they are owed or take an ownership stake in the company. The company's current ownership, which is divided among about 45 investors, including Halfmoon Bay Capital Ltd., would be canceled.
Any reorganization plan needs approval from Judge Peter Carroll.
Formed in 1995, Electronic Sensor Technology hasn't made money yet on the sale of chemical-vapor detection instruments, which can pick up on compounds in concentrations as low as parts per trillion in as little as one minute.
The zNose machine's sales have been flat during the last three years after falling 70% from a sales peak of $2.2 million in 2008, according to court papers. The machines can detect toxic contaminants in water and soil. It can also help companies screen incoming raw materials and check the quality of products in the food and pharmaceutical industry. Company officials are also trying to figure out whether its machines can detect a fungus that's infecting palm trees and threatening palm oil exports in countries like Malaysia.
The company has tried to sell the technology to homeland security officials who could use it to detect trace amounts of explosives, nerve agents and chemical weapons, but government agencies have been slow to improve contraband-testing processes, Chief Executive William Wittmeyer said in court papers.
"Congress annually delays the implementation of the screening requirements," said Mr. Wittmeyer, who is one of the company's three employees.
Mr. Wittmeyer added that the company struggled to profit from annual maintenance fees or software licenses because it equipment "was designed to be durable and without a consumable component."
The company said it has struggled to find investors.
"Venture capital investors rejected the investment opportunity because EST was a publicly listed company, trading on the pink sheets," the company's lawyers said in court papers. "Hedge fund and special situation investors were unwilling to invest because the trading volume and valuation were such that their investment would not be liquid."

(Dow Jones Daily Bankruptcy Review covers news about distressed companies and those under bankruptcy protection. Go to http://dbr.dowjones.com)

Write to Katy Stech at [e-mail]

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(END) Dow Jones Newswires
January 12, 2015 15:56 ET (20:56 GMT)
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