Bankruptcy proceedings will continue for MetaMorphix Inc., the maker of a popular DNA test for dogs, but the company has been allowed to file for Chapter 11 reorganization rather than liquidation bankruptcy as the company had feared.
The Beltsville firm had been forced involuntarily into Chapter 7 bankruptcy by 14 creditors who are owed $1.69 million. The original case was filed Jan. 28, 2010 in U.S. Bankruptcy Court for the District of Delaware.
Martin T. Fletcher, an attorney representing MetaMorphix, with Whiteford, Taylor & Preston LLP, said that on Thursday, the bankruptcy court agreed to convert the case from an involuntary Chapter 7 to a voluntary Chapter 11 case.
Company officials did not return calls for comment.
Unlike traditional bankruptcies, involuntary bankruptcies are filed by the creditors and often used to force a debtor company to address all claims at once or to prevent a company from liquidating its assets before an anticipated bankruptcy filing.
MetaMorphix CEO Dr. Edwin Quattlebaum sent a letter to investors last week outlining the company’s situation heading into the Thursday hearing.
Since the case was filed, he said, the company had been trying to convert it from Chapter 7 liquidation to Chapter 11 reorganization, but he cautioned that the firm was having trouble securing the necessary funding to do so.
A Chapter 11 bankruptcy allows a corporation to reorganize, as opposed to Chapter 7, where the debtor’s nonexempt property is sold and the proceeds are distributed to creditors. A company in Chapter 11 will propose a plan to reorganize, remain in business and repay creditors over time.
MetaMorphix, founded in 1994, specializes in genomic tests for animals. Its most popular product is Canine Heritage XL, a canine DNA test which, at $79.95, will identify up to 100 different breeds through a cheek swab sample. The company also offers genetic tests for cattle to determine the genetic potential of animals for meat tenderness because of marbling.