CHATSWORTH, Calif., and NAPLES, Fla. — CHAD Therapeutics announced Oct. 29 that that it has suspended operations due to the inability to raise additional capital. Following the sale of its oxygen business to Inovo in February, the company had been looking for capital to market products it was developing for the sleep disorder market, including its proprietary FloCHANNEL Diagnostic System, which received FDA clearance in July.
But in a statement, the company said current prospects aren't promising and that it may be unable to restart operations. CHAD's board is considering other options, including declaring bankruptcy.
The company said it had recently reached an agreement for a $2 million investment by a private equity group, but among terms of the proposed deal, the investor required that all back salary and severance obligations to officers and former officers be settled for no more than $250,000 in cash plus stock in the company.
Earl Yager, CHAD's CEO, and Thomas Jones, CHAD's chairman, who together are owed $293,750 in back salary, had agreed to settle the obligation, as well as their severance contracts, for stock, and the independent members of the company's board of directors had agreed to defer director fees. Three of the four other officers and former officers agreed to receive pro-rata shares of the $250,000 in cash plus stock, but one former officer would not agree. As a result, the private equity group said it was unwilling to proceed.
Immediately following the announcement, Naples, Fla.-based Inovo, which purchased CHAD's oxygen conserving assets along with the right to maket under the name "CHAD Therapeutics," issued its own statement to clarify that the company "is in no way affiliated with CHAD Therapeutics."
Inovo successfully moved the production of CHAD's oxygen conserving devices to its Naples facility in June of this year.
"We continue to emphasize our commitment ot both the delivery of high-quality, clinically effective oxygen conservers and the growth of our business for many years to come," said George Harris, Inovo CEO.