Echo Therapeutics (NSDQ:ECTE) said today that its future may be in jeopardy after getting hit with a restrictive injunction related to a whistleblower case alleging securities violations, theft of trade secrets and more.
The company said it is facing a case in the U.S. District Court for Southern New York related to “various violations of the securities laws, theft of trade secrets, breach of contract and breach of fiduciary duty,” in a regulatory filing posted today.
Echo received Order to Show Cause related to the case, which temporarily restrains the company from taking “certain actions outside of the ordinary course of business,” prohibiting it from entering into agreements with Medical Technologies Innovation Asia, which it inked a 10 year deal with in 2013.
“The Order temporarily restrains and enjoins the company from taking certain actions outside of the ordinary course of business, including entering into any agreement with MTIA, or selling, transferring and/or licensing any of the company’s assets,” the company wrote in an SEC filing.
A hearing related to the case is scheduled for December 8, which the company said it will vigorously defend itself against.
However, Echo Therapeutics said the cost of defending itself along with the restrictive injunction may dry up its coffers and leave it to an uncertain future.
“The company expects that defense of these actions will drain the company’s remaining limited resources and prevent the consummation of any transaction that might allow the company to continue funding its research and development activities. The company is exploring its alternatives, but if the company is unable to overturn the temporary restraining order or otherwise settle these actions, the company will be unable to continue as a going concern,” Echo Therapeutics wrote in an SEC filing.
The company said the case is being brought against it by former VP of operations and product development Thomas Bishop. Echo Therapeutics claims that Bishop “tendered his resignation after admitting to lying to the company’s officers and directors regarding attending a meeting in Florida with one or more of the Plaintiffs that he was instructed not to attend,” according to SEC documents.
Echo Therapeutics said that another plaintiff, LifeTech Capital investment banking managing director Craig Pierson, was also at the mentioned meeting in Florida with Bishop, and that Pierson “introduced certain of the plaintiffs to the company.”