Suit Outcome Forces Firm Out of Business

Molecular Systems Inc. of Newport Beach announced Friday that it will go out of business as the result of a lawsuit settlement involving its principal subsidiary.

In a terse announcement, the 3-year-old medical technology investment firm said that because the settlement required it to sell its AlphaHealthCare subsidiary, its only source of cash, the company would cease operations.

“No further business activities are presently under consideration,” the announcement read.

Ronald H. Coelyn, Molecular Systems’ founder and president, could not be reached for comment and the company released no details on how it would handle the termination of its activities and the investments of its shareholders.

However, the company did say that no bankruptcy action is currently contemplated. In addition, because Molecular Systems existed only to invest in other companies and had no operations or staff of its own, the move will not cause any layoffs.

According to the U.S. Securities and Exchange Commission, Molecular Systems’ shareholders may have little recourse if they oppose the company’s plans. Attorneys for the SEC said companies with fewer than 300 shareholders and less than $3 million in assets are not required to seek shareholder approval for a liquidation. However, the attorneys said, companies are required to give shareholders the proceeds from the liquidation after all debts are paid.

Molecular Systems was plagued by financial and legal woes through most of its brief life. In its 1983 fiscal year, the company sustained a $30,000 loss because a customer did not receive an expected $3-million cash infusion from Minneapolis financier Irwin Jacobs and was unable to meet its earlier obligations to Molecular Systems.

In its 1984 fiscal year, Molecular Systems’ first (and apparently last) full year as a public company, the company lost $590,000 on revenues of $1.4 million.

And late last year, Molecular Systems was sued by the founders of AlphaHealthCare, a Eugene, Ore.-based medical software publishing firm that Molecular Systems had acquired in September, 1983.

Out-of-Court Settlement

According to Les Moore, president of AlphaHealthCare, the suit alleged that the Newport Beach company did not live up to the terms of the acquisition agreement. The suit asked the court to return the software publishing company to its original owners.

However, in an out-of-court settlement, Molecular Systems agreed to sell the publishing company back to its original owners for a total future payment of $550,000. Payments are expected to begin in July.

Molecular Systems said it expects to use the payments to “satisfy outstanding obligations to creditors.”