Axion International, a publicly traded recycled products company based in Zanesville, Ohio, has filed for Chapter 11 bankruptcy.
Axion, which manufactures construction materials from both post-industrial and post-consumer plastics, filed for Chapter 11 bankruptcy in a Delaware court on Dec. 2, court records show.
The company’s shares are traded in the over-the-counter (OTC) realm, meaning trading occurs without supervision of an exchange.
Product and investor challenges
In an affidavit, Donald W. Fallon, Axion’s chief financial officer and treasurer, wrote the company has been “plagued by a lack of liquidity” for its products, which has led to operational losses and second thoughts from a group of investors.
“In March of 2015, all but one member of this group indicated, in light of the uncertainty they believe existed surrounding [Axion’s] future prospects, that they were unwilling to invest further,” Fallon wrote.
According to the filing, the company as of Sept. 30 had a working capital deficit of more than $10 million, a stockholders deficit of $31.5 million and accumulated losses north of $86 million. Axion reports debts in the range of $10 million to $50 million.
“The actions taken to decrease production activity, liquidate available inventory and to seek additional capital investment from both public and private sources have proved largely unsuccessful,” Fallon wrote.
Marketed as alternatives to wood, steel or concrete products, Axion’s products have been used for a variety of railroad and construction projects. The company says they last longer than wood products and are more affordable than steel and concrete alternatives.
Plans to reorganize
Allen Kronstadt, the lone investor that has remained, has agreed to exchange a minimum of $3.2 million of the $5.2 million he has lent in exchange for the company’s assets, according to the court filings.
Axion is also asking the bankruptcy court in Delaware to approve an additional $2.2 million loan from Plastic Ties Financing, a company Kronstadt manages.
“Th[is] chapter 11 case will allow the debtors to maintain operations and save jobs while providing the necessary time to complete the current sales process for the benefit of stakeholders,” Fallon wrote. “Absent the protections of the bankruptcy code, the debtors will run out of cash, shut down operations, lay off employees and liquidate, all to the detriment of the debtors’ employees, customers, suppliers and creditors.”
The company leases manufacturing sites in Zanesville, Ohio and Waco, Texas. According to Fallon’s filing, Axion employs 70 workers.
Its patented technology was developed by researchers at Rutgers University and makes use of HDPE and PP purchased from post-industrial and post-consumer sources. A promotional video on the company’s website notes Axion products will “hopefully encourage greater recycling activities from both cities and industrial sources.”
At press time, Axion’s share price is listed at half of a penny.