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VM Labs Files For Chapter 11

VM Labs filed for Chapter 11 Bankruptcy protection in December, and will look to sell off its assets and intellectual property to the highest bidder, VM Labs founder Richard Miller told TWICE.

“VM Labs simply ran out of money,” said Miller, who invested seven years in developing the company and its technology. “We conducted a fairly exhaustive search for new financing, and once it was clear we would not be able to attract new financing we looked to find a [mergers and acquisitions] partner, and we approached many companies in this field about a potential acquisition of VM Labs. Unfortunately the M&A market was not everything it could be.”

Miller said that after several months “it became clear we were not going to be able to sell the company, and by that time we had gone about 14 weeks without pay.”

Miller said a company called Paradise IV that had been set up by Genesis Microchip then approached him with an offer of interim financing followed by Debtor-In-Possession (DIP) financing within the provisions of Chapter 11. Paradise IV purchased the secured debt from VM Lab’s prior secured debtors Motorola and TSMC.

“We realized that was the only financing that was available to us and would allow us to go through a court-appointed process for bidding on the assets of the company,” he said. “We are now actively soliciting bids for the intellectual property, patents, trademarks and other assets of VM Labs.”

The hope, said Miller, is that all the assets of VM Labs will be sold to the highest bidder, and “VM Labs at that point will be liquidated, becoming a shell company with no assets that will probably go away.”

Miller said he expects Paradise IV to bid on the assets of VM Labs “at least to the tune of the value of their secured debt and DIP financing, but I anticipate there will be other bidders.”

Current day-to-day operations are being financed and VM Labs is continuing to operate as normal. VM Labs currently has 49 employees, and continues to “drive design wins, build new products and sell chips,” Miller said.

The timing of VM Labs cash crisis “was extremely unfortunate,” Miller said, as the company had just launched a more powerful and more cost-effective next generation NUON media processor – called Aries 3.

“Aries 3, which just started shipping eight-weeks ago, works more favorably with DVD and set-top box solutions,” Miller said.

Miller will be meeting with customers at this week’s International CES.

“VM Labs is now financed and will be continuing to conduct normal operations through Chapter 11,” said Miller. “At CES we will be showing Aries 3 and will be talking to existing and new customers in the DVD market.”