A state economic development agency has invested nearly a quarter of a million dollars in a company that according to the firm’s annual report is struggling and may seek bankruptcy.
Urigen Pharmaceuticals Inc. states that it had a deficit of $9.64 million, including a net loss of $4.84 million in that fiscal year, according to the October 2008 filing with the Securities and Exchange Commission.
The report states that the company will need additional financial resources to complete its development plan.
“If we are unable to obtain the required additional financial resources to enable us to fund current development projects or completion of the strategic opportunities that may be available to us, or if we are otherwise unsuccessful in completing any strategic alternative, our business, results of operation and financial condition would be materially adversely affected and we may be required to seek bankruptcy protection,” according to the statement.
The Kansas Technology Enterprise Corp., called KTEC, has invested $240,444 in Urigen, according to KTEC’s annual report. Urigen plans to make products to treat urological problems.
KTEC officials say it is not unusual to invest in a company such as Urigen. They say it is part of what KTEC was set up to do — investing in early-stage technology companies.
In a statement from KTEC, the agency said it assessed Urigen, like all its investment opportunities, through a due diligence process.
“It was deemed that the upside potential was worth the risk with this now, publicly traded company. Investments in early-stage companies take time to come to fruition and are approved by the KTEC Investment committee, in addition to the KTEC board of directors.
“All equity markets are being challenged in this recession; however there are many national thought leaders, who believe these types of companies will lead us out of the economic downturn,” the KTEC statement said.
KTEC’s president and chief executive officer Tracy Taylor also serves as chairman of Urigen’s board of directors. KTEC leaders say that is not unusual and helps protect the investment.
“KTEC has observer and or voting rights on multiple boards of directors for the KTEC portfolio. For the last four years, KTEC requires a minimum of observer rights prior to making an investment," according to KTEC. " “This access to boards allows KTEC to directly assist companies and protect Kansas’ investment. KTEC staff regularly updates the KTEC board of directors on our role with these boards.”
Taylor, according to Urigen financial statements, was compensated $37,500 for his board work, but Taylor and Urigen officials have denied that was the case.
Urigen officials said for accounting purposes the company’s SEC filing included how much compensation was accrued, but that Taylor had made it clear he did not want to be paid. Urigen has conducted trials for drugs in Kansas.
KTEC is in the middle of fierce battle to stay alive. Gov. Kathleen Sebelius vetoed its $12 million state appropriation. She says the agency’s functions could be brought under the Kansas Department of Commerce. But legislative leaders have said they will put KTEC’s funding back in the final budget bill that will be hashed out when lawmakers return for the wrap-up session April 29.