QPC Gets Default Notices

Laser diode maker QPC Lasers, currently limping along with a bare-bones staff as it attempts to avoid bankruptcy, has received default notices from creditors after failing to make October payments totalling more than $65,000.

In an Oct. 24 filing with the US Securities and Exchange Commission (SEC), QPC said it received a written notice of default from Finisar that week. Through its wholly owned subsidiary, Quintessence Photonics Corp., QPC owes Finisar Corp., a maker of fiber optic subsystems and network performance test systems, $5.4 million. QPC was to make an interest payment of nearly $44,000 by Oct. 18.

QPC announced Sept. 5 that it was seeking to raise additional capital. That effort was deemed unsuccessful, and on Oct. 12 the company terminated the majority of its 60 or so employees and suspended most of its operations while it contemplated filing for bankruptcy. Days later it resumed operations on a limited basis, hoping to secure new funding. (See QPC Resumes Limited Ops) According to its filings with the SEC, as of July 31 the company's debt totaled $25.3 million.

"Due to our previously announced difficulties in securing financing, Quintessence failed to make the payment due on that date," QPC reported in the Oct. 24 filing. As a result of the default, interest on the unpaid balance after Aug. 18 will accrue at an annual rate of 18 percent.

Finisar told QPC in the default notice that it will "immediately exercise" all of the remedies described in the agreement between the two companies, which could include demanding an immediate payback of the entire loan or bringing a lawsuit against Quintessence to recover all the collateral used to secure the loan. That collateral, QPC reported, consists of "substantially all" of Quintessence's properties, including deposit accounts, intellectual property, inventory and investment property.

QPC also reported that it received a letter Oct. 16 from Boston Financial & Equity Corp. stating it will terminate the company's master equipment lease due to QPC's failure to make its October payment. The remaining balance on the lease is $263,880, paid in monthly installments of $21,990. Boston Financial is seeking to repossess the leased equipment.

"We are currently considering our responses to the default notices from Finisar and Boston Financial," QPC said in the filing.

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