State government is trying to cut its losses after loaning nearly $2 million to a pair of companies in Missoula that haven't blossomed as hoped.
Loans from the Montana Science & Technology Alliance were critical in the early development of Ultrafem Inc. and Nurture Inc. Now, one company has filed bankruptcy, and the other is repaying the state with land instead of cash.
Ultrafem, in a Chapter 11 bankruptcy, has listed the Science & Technology Alliance among its largest unsecured creditors.
The company produced Instead, a feminine-protection product that competed against tampons. Ultrafem has closed its factory in Missoula and owes the state $700,000.
Bobbie Pomroy, investment manager for the Science & Technology Alliance, said it's hard to predict whether the state will recover the money it provided to Ultrafem. Creditors are seeking a buyer for Ultrafem, hoping to revitalize the business.
''If they're able to sell the company, and have the patents free and clear, and get up and running again, then we have a chance of getting some of our money back. If not, we don't know what will happen to us," Pomroy said.
Nurture, earlier known as Basic Bio Systems Inc., owed $1.1 million to the Science & Technology Alliance, but it wiped out the debt last week through an unusual real-estate deal. The arrangement has provided the state with 25 acres of development property near Missoula International Airport.
The company was organized to explore possible uses of a component of oats. It opened a plant near the airport in 1993, but soon developed financial problems. It remains in business with a half-dozen employees.
Scott Dumler, chief executive of Nurture, said the company ''is going forward very well," selling nutritional additives and other products. Nurture is hoping to attract new investment, and wanted to clear its debt with the state to improve its financial picture, Dumler said.
Nurture had an option to buy 25 acres from Missoula County for $125,000 - land that once had been envisioned as an expansion site for Nurture manufacturing. Under a deal that was just completed, the land is going to the Science & Technology Alliance to wipe out the debt.
Nurture will make annual payments to the county to buy the acreage. The company will be reimbursed by the Science & Technology Alliance when the state eventually re-sells the land, Pomroy said. The state has yet to develop its plan for marketing the property, she said.
''I think we will get our principal out of it," Pomroy said. The arrangement also will help Nurture ''reorganize and get back on their feet," she said. ''Their convertible debentures were coming due and they didn't have any way to pay them."
Andy Poole, deputy director of the Montana Department of Commerce, said disappointments can be a part of the game when the state tries to help fledgling companies.
''If you're in the venture-capital business, a certain number of projects will not pan out," said Poole, who oversees Commerce Department economic-development programs, including the Science & Technology Alliance.
Poole and others emphasized that the alliance had some winning investments as well. Notably, the alliance helped Spectrum Pool Products, which became one of Missoula's small-business success stories, Pomroy said.
A $400,000 loan to Spectrum was repaid early, Pomroy said. Now, Spectrum is the second-largest U.S. maker of commercial swimming pool deck equipment, and the world's largest manufacturer of swimming pool lifts for the disabled.