A Queensland weapons manufacturer has entered voluntary administration after years of financial troubles, when a scheduled funding deal worth nearly $5 million failed to materialise.
But this isn’t the first time Metal Storm has run into trouble – the company’s decline has been occurring for over a decade. Three years ago, it nearly collapsed after suffering capital investment issues.
Although the company’s shares hit a high during the tech and dotcom boom of the early 2000s, it has lost 99% of its value.
In a statement to the Australian Stock Exchange yesterday, Metal Storm said it had been placed in voluntary administration, with Adam Shepard and Adam Farnsworth of Dean-Willcocks Shepard appointed.
Both administrators were contacted this morning, but the company said it had no further information apart from what has already been announced on the ASX.
Metal Storm said it had entered into an agreement with Luxembourg-based Luxinvest Capital Advisors SA in April, in order to eliminate $11.9 million worth of debt. The plan was also designed to provide $2.95 million in working capital.
But Luxinvest didn’t come through, leaving Metal Storm unable to complete the plan by the agreed date of July 18. The next day, Metal Storm terminated the agreement.
It had already warned shareholders earlier this month that voluntary administration was a possibility if a new deal didn’t materialise.
“The board of Metal Storm hope that the company can be successfully restructured though the voluntary administration process or its business sold as a going concern,” it said. “The board will assist the administrators in any way it can.”
The history of the company goes back to 1994, when former grocer Mike O’Dwyer – he operated a Big W supermarket – came up with the idea for an electronic firing mechanism. The idea came to him while toying with different inventions in his backyard, a hobby of his for about 35 years.
O’Dwyer was actually quite a succesful inventor, coming up with an idea for air-cooled running shoes.
He hired military advisors for his new project, and the company eventually floated on the ASX in 1999. It originally claimed the mechanism was so fast it could fire one million rounds per minute.
Although its shares rose from $US3 to $US3.50 on its first day, it never regained such highs again. Yesterday shares were listed at just one cent.
O’Dwyer resigned in 2005, but maintained a stake in the business.
Financial problems struck the company over the next six years, even as it continued to manufacture weapons systems including shotguns and grenade launchers. In 2009, the company had waited two months to receive $2.1 million from Philippines-based company Assure Fast Holding.
“The company has reduced its day-to-day expenditure to remain solvent for as long as possible to allow as much time as possible for this funding to be received,” it said at the time.
And earlier this year, the company reported a $6 million loss for the 2011 calendar year, after reporting an $8.9 million loss for 2010.
During all of this, the company managed to maintain a strong contract base – including winning a $1.48 million deal for Colt Canada earlier this month.