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headquarters. Some of Abakan’s financial information might be hard to get: The company’s financial reporting processes suffered from “certain material weaknesses” as of May 31, 2015, according to its latest annual report. Seiden said in court documents that he has been on the lookout for suspicious transactions “that may represent improper use of funds by persons associated with Abakan.” Neither Seiden nor Miller re-
sponded to phone messages; all statements come from court document unless otherwise noted.
Back home U.S. District Court Judge Denise Cote put Seiden in charge of MesoCoat in August. A month later, Seiden was put in charge of Abakan after the company was found in contempt of court for the second time. Both times, the company announced equity transactions that
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were prohibited, in the court’s view, because MesoCoat’s assets were supposed to be under the receiver’s protection. Cote said that Abakan had shown “a history of contemptuous conduct,” according to a transcript of a hearing held in New York on Nov. 5. Since Seiden was appointed receiver over MesoCoat, the company has laid off “a handful” of employees related to a suspended product line, as well as CEO Stephen Goss, according to a filing that Abakan made with the SEC in October. Seiden described Goss, who also is an executive at Abakan, as an “extremely ineffective” manager who only visited Ohio periodically. Now, however, MesoCoat is “almost cash flow break even” due to cost cuts and efforts to promote its PcomP metal coating technology, Seiden stated. MesoCoat’s interim CEO, Richard Burns, served as chief operating officer for nine months before being fired in 2013. Miller stated that Burns was fired because he “was unable to grasp the nuances of this business.” The business is still in a tough spot, financially: In total, MesoCoat and Abakan owe the Panamanian companies about $5 million in total. MesoCoat — Abakan’s primary asset — was worth about $3.6 million as of Aug. 31, according to a consulting firm Seiden hired to establish its value.
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Seiden is considering proposals from a few companies that could fund MesoCoat and get it out of receivership; however, he favors a plan that would let the Panamanian companies, George Town Associates and Sonoro Invest, split MesoCoat’s shares evenly. He said that the plan would be better for all creditors than a Chapter 11 bankruptcy reorganization. His argument: The $1.78 million owed to George Town is secured by the assets of MesoCoat. And Abakan owes Sonoro the rest of the $5 million. If Abakan is forced into bankruptcy, Seiden argues that George Town would stop funding MesoCoat and win court permission to fore-
close on the Euclid company’s assets. Then Sonoro would get most of what remains. The creditors behind the socalled “involuntary” Chapter 11 filing disagree. They say MesoCoat is worth a lot more than the consultant’s report suggests. They noted that the report
“With an indicted CFO having served during fiscal year 2015, the Company still refused to allow the Audit Committee to perform its job.” — Raymond Tellini, former Abakan board member
assigned a value of $0 to MesoCoat’s CermaClad technology, which was supposed to give the company a much faster way to clad steel pipe for the oil and gas industry and other sectors. Those efforts have run into technical problems over the years. Miller stated that the laid off employees were developing CermaClad. The creditors also argue that “nothing separates Sonoro from the other unsecured creditors or entitles” the company to half of MesoCoat — “an entity from which it does not even have a claim.” The boards of Abakan and MesoCoat also want the companies to file for Chapter 11 bankruptcy. A resolu-
tion passed by Abakan’s board notes that “there is discontent with the Receiver’s handling of the assets and the business of MesoCoat.”
Accusations fly Miller was more specific. He said Seiden is “significantly harming the company.” Miller described the decision to stop CermaClad development as “short-sighted,” and he accused Seiden of failing to pay health insurance bills on time, as well as other expenses. And he reiterated an argument he made months ago: He said that George Town and Sonoro are controlled by one man from his hometown of Vancouver: John Xinos. A lawyer for Xinos denied that claim in a conversation with Crain’s in August. Miller claims that Xinos pushed Sonoro to use stalling tactics during a lawsuit against Abakan so that the company legally wouldn’t be able to move ahead with a deal to refinance its loan from George Town. Xinos has been fined in the past for making unauthorized trades with offshore corporate accounts, and he previously led a company that invested in TCash Ads Inc. — which was deemed an “illegal virtual currency service” by the federal government. But there are questions about Miller, too, if you believe Raymond Tellini. The former Abakan board member publicly bashed Miller in a resignation letter he filed with the SEC in September. Tellini claimed that Miller would not show him the documents related to one of the equity deals that landed the company in contempt of court. Tellini also says that Miller regularly gave him mere hours’ notice of board meetings, with little documentation to review in advance. Tellini, who was head of the Abakan’s audit committee, also was troubled by the fact that he served on a board with two officials indicted in the FIFA scandal. “With an indicted CFO having served during fiscal year 2015, the Company still refused to allow the Audit Committee to perform its job,” he wrote.
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