NuOrtho Surgical Files for Bankruptcy

NuOrtho Surgical Inc., a biotech startup that occupied space in a University of Massachusetts at Dartmouth incubator, has filed for bankruptcy, claiming $4.7 million in debt. Much of the deficit is comprised of former employees’ salaries. 

Nearly half the debt is related to patents, according to court documents. The company also owes an additional $2.7 million to more than a dozen employees – including $351,000 to its former CEO Jeffrey Morrill and $139,000 to its former Chief Operating Officer Chris Heye – as well as to law firms in Massachusetts, Pennsylvania and New Mexico for legal fees, and to other contracted companies for services ranging from tax help to consulting.

The company had been located at the UMass Dartmouth Advanced Technology & Manufacturing Center (ATMC) in Fall River, an incubator to support startups, until 2013, according to Keith Mackenzie, research and facilities manager at the Advanced Technology & Manufacturing Center.

Mackenzie told the Boston Business Journal that NuOrtho “graduated” from the incubator. “Sometimes it’s us telling them there’s nothing (more) we can do for them and we send them on their way. In their case, (NuOrtho) decided to move the company out to California,” Mackenzie reported to the newspaper.

The company still had a postal box at the ATMC worth $200 per month and had listed the location as its current address on its website. Court documents, however, alleged the 6-year-old company owed the incubator $800.

NuOrtho developed three products designed to heal tissues and bones before its bankruptcy filing. Its joint cartilage technology is aimed at removing damaged tissue and contouring the site while protecting normal healthy cartilage surrounding the treatment site while its delivery devices bring therapeutic agents to injured or damaged tissue during orthopedic surgery. The therapy is structured to improve healing and advance the recovery process. NuOrtho’s interfacing agents for bone are designed to join bones together and deliver therapeutic compounds to the treatment site. In many cases, the bone agent can help nix the need for fixation devices, executives claim.

The company’s technological platform, though, wasn’t enticing enough to investors: In 10 new and amended funding rounds that occurred between 2008 and 2013, NuOrtho never raised the full amount requested in either equity or debt financing, the Journal said.

NuOrtho had secured $250,000 in 2010, $1.7 million in 2011, and $10,000 in December 2011. The company previously had collected $573,000 in state tax incentives from the Massachusetts Life Sciences Center in 2010 – for which the company had said it would create 25 new jobs in the following year.

In 2011, the company terminated the award voluntarily, speculating it would not reach the required job creation threshold.

Despite some financial backing, the company hasn’t cleared much in sales lately. In 2015, the company had sold only $2,600 in product, court filings show. The number was drastically down from $41,600 in product sales in 2014 and $91,500 in product sales in 2013.

The company also hadn’t amassed much in savings. In the bankruptcy filing, NuOrtho Surgical only listed $3,171 in its checking account and $1,307 in accounts receivable. In total, the company listed $287,000 in assets, mostly in the form of office supplies located in California.

Among other miscellaneous claim in the bankruptcy filing, NuOrtho also owed creditors for unpaid phone-answering services in California, email services, and digital file storage.