Nanovation: Say it isn't so
July 18, 2001--After a strong showing at last week's NFOEC, and boasting about their recent collaboration with Opthos for next generation metro systems, Nanovation is simply trying to hold the company together.
By Mardi Balgochian Scalise, Lightwave Web Editor
After a strong showing at last week's NFOEC, and boasting about their recent collaboration with Opthos for next generation metro systems, Nanovation is simply trying to hold the company together.
The Northville Michigan-based company, known years ago as U.S. Integrated Optics, recently demonstrated its Nanoshutter switch at NFOEC, showing how they are making integrated optical components smaller, more efficient and more reliable with hybrid silica-on-silicon/MEMS technology.
However, the company's innovative products and this latest technology designed for long haul, metro and local area fiber optic network applications -- and a substantial path on the company's technology roadmap -- is rendered practically helpless without additional funding.
Enter Motorola. According to a statement by Nanovation CEO Bob Chaney, Nanovation was currently undergoing a third round of funding and had secured a $10 million bridge round with Motorola as the lead investor on June 29. Four million of Motorola's total $10 million was in an escrow account for Nanovation's Series C round.
As a result of this round, Nanovation needed shareholder approval for the issuance of additional shares for this offering, which was approved by an overwhelming majority. However, Nanovation's largest common shareholder -- Stamford International Inc. -- blocked the deal for nearly two weeks, causing Motorola enough concern to pull out on July 13 (the weekend after NFOEC), resulting in collapse of the bridge round. With the exit Motorola, Nanovation was left to flounder.
Subsequent to the collapse of the Motorola-led $10 million bridge round, Stamford submitted a proposal to infuse cash into Nanovation in exchange for control of the Board of Directors.
In a statement from the company, Chaney said, "Nanovation had to make a hard decision to significantly downsize our operations on Monday." As a result, Chaney explained, the company will focus only on two Silica Photonic IC products and two Indium Phosphide photonic IC products. He further announced that Nanovation still plans to deliver in August what they claim will be the industry's first true Photonic IC consisting of a switch, splitter and monitoring taps all on a single substrate.
That's great, but what about the employees? Chaney said, "This is a very sad time for us as we know our actions affect the lives of our valued employees and their families. We are currently attempting to hold on to the remaining one-third of our employees." As of July 16, 2001, only 50 of 169 employees remain across the board, including subsidiary Apollo Photonics, a provider of photonic design services.
Apparently, a group of disgruntled employees have ostensibly threatened a class-action lawsuit against the company. Press members received an anonymous and slanderous message regarding the company's actions, accusing Nanovation of spending investors' money without knowing what to do next, then abandoning its employees with plans of shutting down the company.
According to one former employee who expressed grief for the company itself, on Monday, July 16, Nanovation's Chaney met with employees and announced that the company lost their funding and they should simply "go back to their desks." Chaney apparently didn't use the "b-word" (bankruptcy) and didn't announce the company was closing. Half an hour later, the majority of employees were sent packing with no severance, no vacation payoffs and only a few weeks left of the company's insurance coverage. Employees wondered why company management simply couldn't be up-front and tell them before they read about their fate in an industry publication or received calls from acquaintances.
Right now, what's left of Nanovation and its board of directors are meeting to determine the future of the company. Chaney said, "I'll try to give you all of the facts, but unfortunately, I will be tied up in meetings trying to ensure the company has the funds to go forward in the next 48 hours. I'm sure you understand for the sake of our remaining employees that I must remain 100%-focused on making this happen."