Company tries to reorganize in bankruptcy after founder holds out.
DigitalTown (OTC: DGTW) has filed for Chapter 11 bankruptcy after failing to come to terms with a former CEO.
The company essentially ceased operations last year, intending to clean up its balance sheet and reemerge. It convinced many of its creditors to convert their debt into equity, but the company has struggled to come to terms with founder and former CEO Richard Pomije. Pomije was granted summary judgment in a lawsuit he brought against the company, and Pomije has subsequently filed another lawsuit.
The bankruptcy filing (pdf) states that DigitalTown owes Pomije $1.4 million.
DigitalTown could gain leverage over Pomije by going into reorganization bankruptcy.
Notable creditors in the domain name industry include GMO Registry ($276,000), Whatbox? Holdings ($120,000), Sam Ciacco ($260,000) and Rob Monster ($257,000). Ciacco was brought in to clean up the balance sheet, and Monster, who is CEO of Epik, was previously the CEO of DigitalTown. The filing also notes that DigitalTown stiffed NamesCon for a sponsorship fee.
DigitalTown owes a total of $3.5 million to creditors.
The company has tried many different business models over the years. Its latest initiative was a localized platform backed by a cryptocurrency. The company acquired 13,000 .city domain names to be used in conjunction with the local platform.
It never made much money from the local platform. Much of the cash it generated in recent years was through bizarre “domain marketing development obligations”. Top level domain operators would pay DigitalTown cash up front that would be used to purchase the registry’s domain names at a later date.