ARS Analytical, LLC

UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF NEW MEXICO
In re:
ARS ANALYTICAL, LLC,
Debtor. 	No. 11-10-10373 SA
MEMORANDUM OPINION ON ASSAIGAI
ANALYTICAL LABORATORIES, INC.’S
MOTION TO DISMISS AND MOTION TO CONVERT
This matter came before the Court on June 24, 2010, July 1,
2010 and July 2, 2010 for final hearing on the Motion to Dismiss
(doc 49) and Motion to Convert Case (doc 47) filed by Assaigai
Analytical Laboratories, Inc. (“Assaigai”), and the objections
thereto filed by ARS Analytical, LLC (“Debtor” and sometimes
“Buyer”)(doc 58) and American Radiation Services, Inc.
(“ARSI”)(doc 57). 	Assaigai appeared through its attorneys Thuma
& Walker, P.C. (David T. Thuma) and the Law Office of Marcus
Garcia (Marcus Garcia). 	Debtor appeared through its attorney
Moore, Berkson & Gandarilla, P.C. (Bonnie Gandarilla). 	ARSI
appeared through its attorney Paul M. Kienzle, III. 	This is a
core proceeding concerning administration of the estate. 	28
U.S.C. § 157(b)(2)(A). 	For the reasons set forth below, the
Court finds that the case should be converted to Chapter 7.
FACTS
Pinnacle Laboratories, Inc. (“Pinnacle”) filed a Chapter 11
petition in this Court on January 30, 2008. 	(Case No. 11-08-
10239 SA). 	Pinnacle was a commercial laboratory located at 2709-
D Pan American Freeway, NE, Albuquerque, New Mexico. 	On June 19,
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2008, the Court granted a contested motion to convert Pinnacle to
chapter 7 (doc 111) and Linda S. Bloom was appointed Chapter 7
trustee (doc 112). 	On July 17, 2008 the Trustee, as seller, and
Dr. Mitchell Rubenstein and Phyllis Rubenstein, as proposed
purchasers, filed a Joint Motion to sell assets of the Pinnacle
estate free and clear of liens pursuant to section 363(b)(1).
(Doc 128). 	The Rubensteins were Pinnacle’s shareholders. 	(Id.)
Several objections to the sale were filed. 	At an August 19, 2008
hearing the Court entered an Order authorizing the Trustee to
conduct an auction on September 15, 2008. 	(Doc 155). 	The
Trustee conducted the auction on September 15, 2008 and submitted
a stipulated order approving the sale which was filed on
September 23, 2008. 	(Doc 167). 	ARSI was the successful bidder
at $21,000.00. 	(Id. ¶ 3).
ARSI is a certified government contractor located in Port
Allen, Louisiana with other offices in Knoxville, Tennessee and
White Rock, New Mexico. 	Its website claims:
Since 1993, ARS International has provided technicians,
chemists, safety professionals and field personnel to
the oil and gas industry as well as the federal
government. 	When it comes to radiological testing, we
have one of the most experienced teams in the country.
Our staff is made up of highly trained personnel who
use the world’s most advanced high-performance
analytical instrumentation to provide quality data
quickly and economically. 	Our safety officers and
field personnel are technically skilled and
knowledgeable of all regulatory issues.
http://www.amrad.com/.
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1These facts were also testified to at trial.
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As of June, 2008, ARSI already had an office in White Rock,
New Mexico equipped with new equipment. 	White Rock is near Los
Alamos, the home of Los Alamos National Laboratories (“LANL”).
ARSI purchased the Pinnacle equipment and operated a lab out
of Pinnacle’s premises. 	ARSI’s intent was to bring up the
Albuquerque facility to be like White Rock’s.
ARSI formed Debtor on March 27, 2009 as a New Mexico
domestic limited liability company. 	See
http://www.nmprc.state.nm.us/cii.htm . 	It listed its principal
address as 4301 Masthead NE, Suite A, Albuquerque, New Mexico.
Id. 	Its registered agent was Elvin J. Chavez. 	Id. 1 	ARSI
anticipated Debtor obtaining contracts with LANL.
ARSI owns 80% of the interest in Debtor. 	The other 20% is
owned by Elvin J. Chavez. 	(Doc 4). 	Daryl DeArmand is the Chief
Operating Officer of both Debtor and ARSI. 	Danny Coleman is the
Chief Executive Officer of both Debtor and ARSI. 	Elvin J. Chavez
was President of Debtor until he resigned in March or April,
2010. 	There are no other officers of Debtor. 	Neither DeArmand
or Coleman are paid a salary by Debtor. 	DeArmand lives in Baton
Rouge, Louisiana but travels to Albuquerque about once a month.
Coleman also lives in Louisiana. 	DeArmand thinks that Coleman
has been to Albuquerque, but he is not certain.
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2There is a discrepancy in the evidence on this point.
Debtor’s Chief Operating Officer, Daryl DeArmand, testified that
after Debtor was formed Assaigai approached it to purchase the
lab. 	In contrast, William P. Biava, Assagai’s president,
testified that ARSI approached Assaigai to purchase the lab.
However, the LLC formation documents lists Assaigai’s address as
its principal place of business (it is possible that the place of
business was amended after the initial filing). 	None of these
observations are really material to the issues under
consideration.
3F&A Services do not include C&A Services. 	Exh. 1, ¶
1.1.24.
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After Debtor was formed, Debtor and Assaigai were in contact
regarding the purchase of Assaigai’s state-of-the-art laboratory
located at 4301 Masthead NE, Albuquerque, New Mexico 2 . 	On June
10, 2009 (but effective as of June 15, 2009) Assaigai as “Seller”
and Debtor as “Buyer” entered an Asset Purchase Agreement
(“Agreement”). 	Exh. 1.
The Agreement recites as follows (Exh. 1, pp. 1-2.): 	Seller
owns an analytical laboratory business that is located in leased
premises at the Masthead address. 	ARSI (as parent company to
Debtor) has formed the Debtor/Buyer as a limited liability
company that will perform chemical and analytical services (“C&A
Services”). 	ARSI wishes to become a full service environmental
laboratory, which requires C&A Services. 	ARSI currently performs
C&A Services in Louisiana and performs field and analytical
services (“F&A Services”) 3 in White Rock for certain clients.
Except as specified, Seller acknowledges that the transactions in
the Agreement are between Seller and Buyer, and the Seller
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4Defined as the date and time at which the closing actually
occurs, but not later than June 10, 2009. 	Agreement ¶ 3.1(a).
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acknowledges that ARSI as parent company is not responsible and
does not assume and/or guarantee any of the obligations of the
Buyer. 	In order to provide C&A Services, Buyer needs 1) assets,
2) corporate counseling, 3) non-compete and non-solicitation
agreements, and 4) a real property sub-lease for ARSI’s business
premises. 	In order for Seller to continue providing F&A
Services, it will retain certain assets and needs 1) assets for
it to continue providing F&A Services, 2) non-compete and non-
solicitation agreements, 3) the ability to remain in certain
portions of the Masthead address and/or use of certain lab
facilities and equipment for a period of no more than seven
months following the date of the Agreement in order to have
sufficient time to relocate its business, and 4) in the case of
Buyer’s breach, Seller may reenter the market for C&A Services.
The Agreement’s Article II sets out the terms of the C&A
Asset acquisition. 	Paragraph 2.1 states that on the Closing
Date 4 Seller shall sell and Buyer shall buy all of Seller’s
rights, title and interest in and to certain assets utilized in
providing C&A Services (described elsewhere) but specifically
omitting the “Excluded Assets” (described elsewhere). 	The
purchase price is $2,908,317.00. 	Exh. 1, ¶ 2.2. 	The payment of
the purchase price consists of a promissory note in the amount of
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$750,000 (to be paid pursuant to ¶ 2.6) and the balance of
$2,158,317.00 to be payable over a ten year term pursuant to a
consulting agreement (¶ 2.7). 	Paragraph 2.6 states that Seller
requires an initial lump sum payment of $750,000.00 to enable
Seller to pay off a creditor to release liens on the equipment
being sold. 	Buyer, on the other hand, requires that the initial
lump sum payment of $750,000.00 be financed by Seller over a
period of seven months, with the last instalment payment due
December 15, 2009. 	Upon payment of the $750,000.00 in full,
Seller will obtain releases of liens and transfer all right,
title and interest to Buyer at the Post Closing free of liens. 	A
promissory note was apparently attached to the Agreement as
“Exhibit 3.0", but was not included by the parties as an
attachment to Exhibit 1. 	From the testimony presented the Court
finds that the promissory note called for six monthly payments of
$10,000.00 and a $690,000.00 balloon payment by December 15,
2009. 	Paragraph 2.9 clarifies that at closing the Seller sells
all right, title and interest in the C&A Assets subject to the
claims and liens of a certain creditor; upon payment of the
$750,000.00 Seller will obtain releases of those claims and liens
and will then convey all right, title and interest in the C&A
Assets to Buyer within ten business days free of the claims and
liens.
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5“Post Closing Date” is defined as December 15, 2009. 	Exh.
1, ¶ 1.1.19.
6The Biavas, owners of Assaigai, organized YOME Consulting
Services, Inc. (“YOME”) ostensibly to provide C&A Services to
Buyer for a period of ten years with all payments to be credited
toward the Purchase Price.
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The Agreement’s Article III sets out the terms of what was
expected to occur on the Closing Date and Post Closing Date 5.
Paragraph 3.2 provides that at Closing, Seller, YOME 6 , and the
Biavas will deliver specific items identified in ¶ 7.1.
Paragraph 7.1 lists the following: (a) non-compete agreements for
the Biavas and Seller, (b) Seller’s corporate resolution, (c)
sub-lease assignment, (d) motor vehicle certificates of title for
any motor vehicles included in the C&A Assets and a Bill of Sale
for each vehicle (unsigned; to be signed at Post Closing), (e)
the Promissory Note, (f) YOME Corporate Consulting Agreement, and
(g) such other instruments and documents as Buyer may reasonably
deem necessary. 	Paragraph 3.3 provides that at Post Closing,
Seller will deliver specific items identified in ¶ 7.2.
Paragraph 7.2 lists the following: (a) a Bill of Sale and
Assignment conveying all C&A Assets, (b) an Affidavit of Title,
(c) any novated/assigned contracts, (d) signed motor vehicle
certificates of title and Bills of Sale and (e) such other
instruments and documents as Buyer may reasonably deem necessary.
Paragraph 3.4 provides that at Closing, Buyer, ARSI and
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7Designated as Elvin Chavez and Danny Coleman in Agreement ¶
2.5(e).
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Buyer/ARSI’s “Key Employees” 7 will deliver specific items
identified in ¶ 7.3. 	Paragraph 7.3 lists the following: (a) the
purchase price as provided in ¶ 2.3, (b) non-compete agreements
from Buyer, ARSI, and the Key Employees, (c) sub-lease agreement,
(d) Promissory Note, (e) Corporate Consulting Agreement, (f)
Buyer’s corporate resolution and (g) such other instruments and
documents as Seller may reasonably deem necessary. 	Paragraph 3.5
provides that at Post Closing, Buyer will deliver specific items
identified in ¶ 7.4. 	Paragraph 7.4 lists the following: (a) any
novated/assigned contracts and (b) such other instruments and
documents as Seller may reasonably deem necessary.
The Agreement’s Article VI sets out the terms for the
conduct of business from the pre-effective date of the Agreement
to Post Closing. 	Paragraph 6.1 deals with the pre-effective
period and is not relevant. 	Paragraph 6.2 describes how the
parties will conduct their businesses in the shared premises
using shared assets from Closing until the Post Closing date.
Subparagraph (a) lists employees to be retained by Seller and
allows Buyer to hire any employee not retained. 	Subparagraph (b)
states that Buyer is responsible for all expenses arising from
use of the C&A Assets and the business premises after the
Effective Date. 	Seller will also invoice Buyer by the fifth day
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of the following month for any charges Buyer has incurred.
Subparagraph (c) requires Buyer to account to Seller for all
revenue invoiced and received from use of the C&A Assets by the
fifth day of the following month. 	Subparagraph (d) states that
Seller retains legal title to the C&A Assets pending payment in
full of the $750,000.00 down payment but that Buyer has
possession and use of those assets. 	Subparagraph (e) states that
Seller allows Buyer to use the assets pending Post Closing.
Subparagraph (f) governs Buyer’s business during the interim
period. 	Buyer will conduct its business in a normal and regular
manner and may enter into any contracts without the consent of
Seller. 	Buyer will use its best efforts to preserve all existing
business relationships with Seller’s suppliers, subcontractors,
and others having business relationships with Seller. 	Buyer will
use its best efforts to obtain customers and preserve existing
customer relationships. 	Agreement ¶ 6.3 provides that the
parties will cooperate by delivering necessary documents and in
furnishing information, evidence, testimony or other assistance
in connection with any actions or disputes of any nature for
periods preceding Closing.
Other relevant provisions of the Agreement are as follows:
Paragraph 11.5 provides that neither party shall have the right
to terminate the Agreement, Promissory Note, the Sublease, or the
Corporate Consulting Agreement after Closing. 	Paragraph 12.1 has
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8The Court finds that Debtor’s bankruptcy and specifically
the Motion to Convert or Dismiss are not disputes arising out of
or relating to the Agreement, the Sublease, the Promissory Note,
the Corporate Consulting Agreement, and the Non-compete
Agreements.
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an integration clause. 	Paragraph 12.7 states that the Agreement
will be governed by New Mexico law. 	Paragraph 12.11 provides for
prevailing party attorney’s fees, costs and expenses. 	Paragraph
12.17 states that time is of the essence in the performance of
all obligations in the Agreement. 	Paragraph 12.9 requires
arbitration of all disputes arising out of or relating to the
Agreement, the Sublease, the Promissory Note, the Corporate
Consulting Agreement, and the Non-compete Agreements 8 .
On June 12, 2009 Debtor executed a Promissory Note to ARSI
in the principal amount of up to $1.2 million to evidence a
revolving line of credit. 	Interest accrues at 6% on a 365/360
basis. 	The Promissory Note is due upon demand, but otherwise to
be paid in monthly payments of interest only until June 11, 2010,
when the entire principal plus interest is due. 	There is no
penalty for prepayment. 	A late fee of 5.00% of the unpaid
portion of any regularly scheduled payment or $50.00, whichever
is greater, is assessed if any payment is not paid within 15 days
of its due date. 	The Promissory Note calls for different rates
of interest depending on the outstanding balance in the event of
default. 	It also calls for attorney’s fees and costs in an
amount not to exceed 20.00% of the principal balance. 	(Debtor’s
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9This filing was within 90 days of the bankruptcy petition.
Assagai claims that this was a preferential transfer. 	Debtor has
not made any attempts to get this lien released or explain why it
has not done so.
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Exh. B). 	The evidence before the Court did not show the amount
advanced on this line of credit.
On June 12, 2009 Debtor also executed a Security Agreement
in favor of ARSI to secure the line of credit. 	The collateral is
described as: 1) all accounts receivable owed to or belonging to
Debtor, and 2) all laboratory equipment and business furniture,
fixtures and equipment owned or subsequently acquired by the
Debtor. (Debtor’s Exh. A). 	ARSI filed a financing statement
regarding the transactions in Exhibits A and B with the New
Mexico Secretary of State on November 25, 2009 9. 	(Debtor’s Exh.
C).
The Purchase Agreement closed and work commenced on June 15,
2009. 	Debtor made four of the six required $10,000.00 payments
as required by the Promissory Note then made no further payments.
Debtor also failed to commence monthly payments on December 15,
2009, on the consulting agreement. 	Therefore, $710,000 of the
down payment is due Assaigai and the balance of the purchase
price of $2,158,317 is due YOME.
Things did not go well for Debtor during its first six
months in business. 	Debtor had $1,206,000 in total revenues,
direct costs were $705,000 (58% of revenues), overhead was
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$237,000, and general and administrative expenses were $595,000
resulting in a net loss of $331,000 for the period. 	Exh. 9.
January was worse. 	Debtor had $64,000 in total revenues,
direct costs were $62,000 (96% of revenues), overhead was
$11,000, and general and administrative expenses were $79,000
resulting in a net loss of $88,000 for the period. 	Exh. 9.
On January 12, 2010 Assaigai sent Debtor a notice of
default. 	(Objection to Debtor’s Motion to Reject Equipment Lease
Agreement with American Radiation Services, Inc., Doc 55, exh.
C.) 	Debtor filed a Chapter 11 proceeding on January 29, 2010.
Debtor remained as a debtor-in-possession. 	11 U.S.C. § 1107(a).
Debtor’s Initial Report, exh. 9, disclosed $5,000 in bank
deposits and accounts receivable of $647,854. 	On February 17,
2010, Debtor filed a Motion for Approval of Agreement for DIP
secured financing, for use of cash collateral, providing adequate
protection, for modification of stay, and to assume executory
contract with ARSI. 	Both Assaigai and creditor First Community
Bank filed objections. 	Debtor never pursued the motion any
further and no order has been entered approving or denying the
motion.
Debtor had 29 employees at the beginning of this case. 	Exh.
6, p. 6. 	DeArmand testified that the Debtor was currently
operating, but only to finish up work that was on hand in May.
Currently Debtor has 4 employees. 	Exhibit 5 is a letter Debtor
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10 DeArmand claimed that he did not know because Assagai had
locked Debtor out of its accounting system. 	This subject is
discussed in greater detail below.
11 Debtor’s liability under the Asset Purchase Agreement is
not on the bankruptcy schedules. 	Exh. 10. 	Assagai is listed
only as an unsecured creditor in the amount of $125,000 with no
explanation of the nature of the debt or the date incurred.
Assaigai, YOME and the Biavas are listed on Schedule G as
executory contracts. 	DeArmand stated that the debt was not
listed because 1) it was disputed, 2) the balance due was for the
consulting agreement but no services had yet been performed, and
3) he did not see a way to account for it on the books. 	However,
other testimony presented explained that the consulting agreement
was basically a cover by which the bulk of the purchase price
would be paid, that no services were ever to be performed, and
(continued...)
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sent to all its customers on or about April 15, 2010 informing
them that Debtor was not taking any new work after May 1, 2010.
DeArmand testified that the current budget was $-0- for revenues,
and costs of about $20,000 per month for wages (including tax
burden), $5,000 to $6,000 per month utilities, and whatever the
attorneys were charging. 	His testimony omitted rent of about
$20,000 and $3,000 common area charges. 	This projection admits a
net projected loss of $48,000 per month plus attorney’s fees.
DeArmand testified about the extent of Debtor’s assets.
Accounts receivable as of the end of June were about $514,000.
He did not know how much of them were collectible 10 . 	He thought
some of the $514,000 had been paid to Assagai prepetition. 	He
admitted that Debtor owed Assagai money, but did not know how
much. 	He admitted the existence of the Asset Purchase Agreement
and its $2.9 million price 11 . 	When asked if Debtor owed $2.86
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11 (...continued)
that the overall agreement was structured this way for tax
reasons (consulting services could be expensed). 	The Court finds
this to be a serious, material omission.
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million to Assagai DeArmand responded that it was disputable, but
“yes.” 	He also admitted that Debtor paid only a few months of
the down payment installment note.
DeArmand testified that Debtor owned very little other
property. 	Some lab equipment came with the Agreement, exh. 1,
and is still subject to liens in the approximate amount of
$570,000. 	The rest was leased from ARSI. 	But, Debtor filed a
motion to reject this lease on May 10, 2010. 	Doc. 45. 	Debtor
owns nothing else.
DeArmand testified that during the Chapter 11, Debtor had
borrowed funds from ARSI. 	He did not know the amounts or the
dates of the loans.
Debtor was past due on rent payments and common area charges
for the business space in the amount of $92,000.00 when the
bankruptcy was filed. 	From the filing to the end of June, 2010,
Debtor missed five more rent payments of $20,000.00 per month
plus approximately $3,000.00 per month of common area charges.
Before the bankruptcy and, to some extent, after the
bankruptcy, checks paying for work done by Debtor on contracts
entered into by Assaigai were made payable to Assaigai. 	This was
contemplated by the Agreement. 	The parties had intended to
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12 Three Biavas own Assaigai and YOME: William P. Biava, the
CEO of Assaigai; his brother John A. Biava; and John’s son John
W. Biava, who is essentially the information technology manager
for Assaigai. 	William Biava and John W. Biava testified at
trial.
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account to each other on a regular basis but that never really
happened. 	Consequently, as time passed, Debtor lost track of its
accounting. 	In fact, late in 2009, Elvin Chavez asked Assagai’s
president William P. Biava 12 to show him how to operate the
accounting system.
The operating reports on file show that Debtor is not
profitable. 	Exhibit A, attached hereto, is a compilation of the
Debtor’s monthly operating reports (“MOR”) for February, 2008 to
May, 2008 (Exh. 6-8 and 22) rounded to the nearest $100.
The top portion of Exhibit A is a monthly income statement
with the rightmost column a cumulative income statement for the
Chapter 11. 	The Court has adjusted the figures reported on the
MOR to reflect the testimony that Debtor has not been accruing
rent or common area space. 	No months were profitable. 	The
cumulative loss for the Chapter 11 period is $(319,500). 	The
Exhibit shows that direct costs were 73% of revenues. 	General
and administrative costs were 55% of revenues.
The middle portion of Exhibit A shows the accounts
receivable at the end of each month. 	They dropped every month.
During the Chapter 11 they dropped a total of $107,600.
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Accounts payable increased every month. 	This means that
Debtor was incurring more expenses every month than it paid. 	The
bottom portion of Exhibit A shows the amount that the accounts
payable increased every month. 	The opening figure for January
31, 2010 accounts payable ($691,400) appears on Exh. 9, the
Initial Report. 	Again, because Debtor was not accruing rent or
common area charges of $23,000 per month, this amount was added.
Exhibit A shows that payables increased $333,700 during the
Chapter 11.
In summary, Exhibit A shows a substantial and continuing
loss to and diminution of the estate. 	The Debtor is losing money
and funding the losses by living off the accounts receivable and
incurring debts beyond its ability to pay on a monthly basis.
Debtor did not offer an accountant or other expert to contradict
these findings.
Debtor presented an outline of a plan in an attempt to
demonstrate that it could rehabilitate itself. 	See Debtor’s Exh.
I (Reorganization Plan Outline) and J (Reorganization
Projections).
To begin with, DeArmand testified that stock will be
retained by the owners under the plan; that is, ARSI would retain
80% and Chavez would retain 20%.
The Plan anticipates three phases. 	During phase 1, Debtor
would start accepting samples again and ship them to outside labs
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for processing and then report the results to customers. 	Debtor
would also process some samples with existing equipment. 	This
phase lasts six to nine months, but the projection on Exh. J is
for nine months.
During phase 1, Debtor starts with no equipment to process
its own samples. 	Therefore, Debtor has to obtain equipment;
hence the $49,500 equipment note. 	The Court suspects that Debtor
is rejecting the equipment lease with ARSI with the intent of
leasing it again later. 	Otherwise, there was no testimony that
Debtor could obtain financing or that the amount borrowed would
be adequate to equip a laboratory. 	Second, William Biava
testified credibly that this business model for a laboratory –
brokering the testing work – is simply not profitable because the
gross profit margins on testing are barely enough to pay costs.
The plan projection for phase 1, which lasts nine months, bears
this out. 	Phase 1 anticipates $600,000 of revenue and expenses
of $594,628, for a net profit of $5,372. 	However, the budget for
phase 1 includes nothing for insurance, nothing for lab equipment
repair or maintenance, and nothing to pay for disposal of lab
waste. 	It also does not mention that Debtor will incur costs for
moving its premises. 	The Plan later states that Debtor will
retain key staff members, yet it budgets only $125,000 for
salaries and $25,000 for payroll taxes for nine months. 	DeArmand
testified that the current budget (when little or no work going
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13 Debtor had accumulated net operating losses (“NOL”s) of
$393,000 by the time it filed for Chapter 11 relief. 	While
bankruptcy generally does not result in forgiveness of debt
income, it does result in reductions of certain tax attributes
including NOLs. 	26 U.S.C. § 108(b). 	Therefore, confirmation of
Debtor’s plan would likely wipe out the NOL carryforward.
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on) was $20,000 per month for wages (including tax burden).
$125,000 for nine months combined with an increase in business
activities seems unrealistic. 	Next, Debtor’s projection for
subcontract analytical services and freight and delivery are
$300,000 and $10,000 respectively. 	If these are the only direct
costs, they are only 51% of revenues. 	Debtor has never had such
a low direct cost figure. 	For Debtor’s 2009 operations it had a
58% direct cost and for January, 2010 it had a 96% direct cost.
Exhibit A, which consists of a period where Debtor was doing its
own work and not shipping out, had direct costs of 73%. 	If the
projections are correct, Debtor would be better off shipping
everything out instead of trying to get back into doing its own
work.
During phase 2, Debtor would bring its equipment online and
begin operations providing a limited number of tests to customers
and continuing to ship other samples to outside labs and process
samples with existing equipment. 	This phase lasts six to nine
months but the projection is for nine months. 	Phase 2 projects
revenue of $750,000, expenses of $684,500 and net profit of
$65,600. 	There is no provision for income taxes 13 . 	Revenues
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14 Phase 2 was only 9 months long. 	Phase 2 revenues of
$750,000 annualize to $1,000,000. 	Phase 3 is therefore a 20%
rise.
Page -19-
jump by 25%, which seems high without any further explanation.
Subcontract services drop to $200,000. 	The direct costs seem to
be unrealistically low: subcontract of $200,000, freight of
$15,000, lab supplies of $20,000 and perhaps some wages. 	The net
profit margin is 8.73%.
During phase 3, Debtor would regain its status as a full
service chemistry laboratory and return to processing samples in
its own laboratory. 	Some samples will be shipped to outside labs
for tests not able to be run on existing equipment. 	This final
phase is supposed to return Debtor to its former position in the
market place. 	The associated projection is for one year. 	Phase
3 projects revenue of $1,200,000, expenses of $1,138,000 and net
profit of $62,000. 	There is no provision for income taxes. 	The
plan anticipates Debtor moving into a much larger facility during
this time, but provides no expense for the move or tenant
improvements (if any). 	Revenues jump by 20%, 14 which seems high
without any further explanation. 	The net profit margin drops to
5.16%.
Under the Debtor’s projections, Debtor will profit (before
tax) a total of $132,872 in 30 months of operation. 	While the
Court realizes this proceeding is not a confirmation hearing, the
draft Plan presented by Debtor seems to be total gossamer based
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15 	[P]rojections of the income necessary to
finance a plan of reorganization must be
based on concrete evidence of financial
progress and must not be speculative,
conjectural or unrealistic.
Canpartners Realty Holding Co. IV, L.L.C. v. Vallambrosa
Holdings, L.L.C. (In re Vallambrosa Holdings, L.L.C.), 419 B.R.
81, 90 (Bankr. S.D. Ga. 2009)(citing In re Fort Knox Mini
Warehouse. Inc., 2002 WL 1842452, at *6 (Bankr. N.D. Iowa 2002)).
16 Debtor’s insistence that Assaigai finance the initial down
payment of $750,000 suggests that Debtor was trying to leverage
itself as much as possible while risking the least amount
possible.
17 Witnesses discussed a potential valuable contract that
LANL was about to let out for bidding. 	The contract was not
opened for bidding until a year later than expected and then LANL
did not accept any bids.
Page -20-
only on hopes of what might be. 	This Debtor has never been
profitable. 	Doing a projection that suddenly shows a drastic
turnaround without any convincing evidence that it is possible
does not translate into actual profitability in the real world 15 .
The bottom line is that Debtor started up its business with
insufficient capital 16 , then did not get a lucrative government
contract that it hoped for 17 , and then the economy went down.
The Court finds the plan not feasible and, as discussed below in
the Conclusions of Law section, unconfirmable.
When Debtor did not pay the $750,000 down payment, Assaigai
was unable to and did not deliver the release of liens under the
Agreement. 	Nor did Assaigai move from the premises it had been
sharing with Debtor. 	To this date both Assaigai and Debtor share
the building, a phone system and a networked computer system.
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Page -21-
All mail goes to one reception area. 	Assaigai has computer
access to view all of Debtor’s transactions. 	It is unclear to
the Court if Debtor has reciprocal access and if it does, whether
anyone at Debtor has the knowledge to do so. 	And, they are both
very angry.
Debtor attempted to establish “unusual circumstances” that
would justify denial of a motion to dismiss or convert. 	First,
DeArmand suggested the possibility that mail had been
intercepted. 	There was no proof of this. 	DeArmand also
suggested the possibility of Assaigai agents listening into
Debtor’s phone calls or answering calls meant for Debtor. 	Again,
there was no proof offered on this issue. 	Finally, DeArmand
tried to prove that Assaigai interfered with Debtor’s access to
the computer network post-petition. 	When questioned, however, he
testified that he only knew about the interference from the
accounting manager and that when they checked the problem they
determined it was not caused by Debtor’s computers. 	He assumed
it was Assaigai’s fault. 	He never told Assaigai of the problem
and did not know if anyone else told Assaigai either. 	He finally
testified that he really just did not know the cause.
John W. Biava, an engineer and vice president at Assaigai,
is responsible for the computer systems at Assaigai, including
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18 “VPN” is an acronym for “virtual private network”, which
is “a network that uses a public telecommunication
infrastructure, such as the Internet, to provide remote offices
or individual users with secure access to their organization's
network [as if the user were accessing the database on site]”.
SearchEnterpriseWAN.com, last accessed July 20, 2010 at 4.49 pm
(MDT). 	Debtor’s accounting was mostly done at ARSI’s facilities
in Louisiana. 	This was possible through the VPN link to the
Albuquerque servers.
19 After Assaigai made the demand on Debtor the tenor of
their relationship changed for the worse. 	The unrebutted
testimony of William Biava was that there was good reason to
believe that Debtor was about to abscond with the backup server
and probably other equipment as well. 	Police were called;
landlord liens were filed. 	The server and other equipment remain
at the site.
Page -22-
remote access through a VPN 18 . 	The computers keep security logs,
which William Biava reviewed and testified about at the trial.
In January, Assaigai became concerned with the security of its
data 19 so it turned off the VPN until it could be reassured that
Debtor would not tamper with the data. 	This was resolved and the
new VPN user account password was given back to Debtor. 	There
had been a 3 to 7 day lapse in allowing outsiders (i.e., the
Louisiana personnel) into the system. 	Local access was not
impacted. 	And, as far as John Biava knew Debtor had continuous
access after that time with one exception. 	On May 27, 2010, one
R. Burford, employee of ARSI, was online through the VPN deleting
the accounts for all the employees that were no longer at Debtor.
Unfortunately, Burford apparently deleted many other accounts as
well. 	No one at Assaigai knew of this, nor did anyone tell them
until it came out at this trial on June 24, 2010 at which point
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20§ 1104. Appointment of trustee or examiner
(a) At any time after the commencement of the case but before
confirmation of a plan, on request of a party in interest or the
United States trustee, and after notice and a hearing, the court
shall order the appointment of a trustee--
(3) if grounds exist to convert or dismiss the case under
section 1112, but the court determines that the appointment
of a trustee or an examiner is in the best interests of
creditors and the estate.
Page -23-
it was promptly remedied by Assaigai. 	Other than this, John
Biava believed Debtor had continuous access from January to June.
The Court finds Assaigai’s version of the events to be more
credible than Debtor’s version which is mostly based on
unverified assumptions.
CONCLUSIONS OF LAW
Assaigai filed its Motion to Convert under 11 U.S.C. §
1112(b) citing a) substantial and continuing losses to or
diminution of the estate and the absence of a reasonable
likelihood of rehabilitation, b) gross mismanagement of the
estate, and c) failure to pay post-petition taxes. 	Assaigai
abandoned the third ground at trial, conceding that Debtor had
paid its taxes. 	Section 1112, Conversion or dismissal, provides
in relevant part:
(b)(1) 	Except as provided in paragraph (2) of this
subsection, subsection (c) of this section, and section
1104(a)(3) 20 , on request of a party in interest, and
after notice and a hearing, absent unusual
circumstances specifically identified by the court that
establish that the requested conversion or dismissal is
not in the best interests of creditors and the estate,
the court shall convert a case under this chapter to a
case under chapter 7 or dismiss a case under this
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Page -24-
chapter, whichever is in the best interests of
creditors and the estate, if the movant establishes
cause.
(2) The relief provided in paragraph (1) shall not be
granted absent unusual circumstances specifically
identified by the court that establish that such relief
is not in the best interests of creditors and the
estate, if the debtor or another party in interest
objects and establishes that--
(A) there is a reasonable likelihood that a plan
will be confirmed within the timeframes
established in sections 1121(e) and 1129(e) of
this title, or if such sections do not apply,
within a reasonable period of time; and
(B) the grounds for granting such relief include
an act or omission of the debtor other than under
paragraph (4)(A)--
(I) for which there exists a reasonable
justification for the act or omission; and
(ii) that will be cured within a reasonable
period of time fixed by the court.
(4) 	For purposes of this subsection, the term ‘cause’
includes--
(A) substantial or continuing loss to or
diminution of the estate and the absence of a
reasonable likelihood of rehabilitation;
(B) gross mismanagement of the estate; ...
In In re Modanlo the Bankruptcy Court for the District of
Maryland described the process for a court to decide a motion to
convert under the current version of Bankruptcy Code § 1112:
The mechanics of determining whether a
court should convert or dismiss a case under
the post-BAPCPA version of 11 U.S.C. §
1112(b) appear to be as follows: First, the
movant must demonstrate that cause exists by
a preponderance of the evidence. 	At this
point, if cause has been demonstrated, the
court must ascertain whether unusual
circumstances exist to prevent conversion or
dismissal. 	If no such unusual circumstances
exist, the court must convert or dismiss.
The non-moving party is able to try to defeat
a motion to convert or dismiss the bankruptcy
case by showing that unusual circumstances
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Page -25-
exist to prevent dismissal or that factors
specifically set out in § 1112(b)(2)(A) and
(B) exist (e.g., reasonable likelihood of
timely confirmation, reasonable excuse for an
omission by the debtor). 	If these exist, the
opponent to the motion to convert or dismiss
prevails, unless the court determines that
the best interests of the estate are
otherwise. 	And, the court must make this
best interests assessment even if the
opponent does not carry its burden or even
make a defense. 	Thus, if cause has been
demonstrated (and whether or not the motion
is opposed), the court must ascertain whether
the best interests of creditors and the
estate are served by granting or denying the
motion. 	In re Hook, 397 B.R. 544, 2008 WL
3906794, at *4 (10th Cir. BAP Aug. 26, 2008)
(“[ Section 1112(b)(1) ] allows the court to
deny the motion if doing so would be in
furtherance of the best interests of the
creditors or the estate.”)(unpublished); In
re Orbit Petroleum, Inc., 395 B.R. 145,
148-49 (Bankr. D. N.M. 2008) (“In this case,
because a plan has been filed which purports
to pay all creditors in full as of the
effective date ... neither conversion nor
dismissal is in the best interest of the
creditors of the estate.”).
In re Modanlo, 413 B.R. 262, 271 (Bankr. D. Md. 2009)(footnote
omitted).
The Court finds cause to convert the case under both §
1112(b)(4)(A) and (B).
SECTION 1112(b)(4)(A): SUBSTANTIAL OR CONTINUING LOSS TO OR
DIMINUTION OF THE ESTATE AND THE ABSENCE OF A REASONABLE
LIKELIHOOD OF REHABILITATION.
To obtain relief under 11 U.S.C. § 1112(b)(4)(A), movant
must show both a continuing loss or diminution and absence of a
reasonable likelihood of rehabilitation. 	In re Fall, 405 B.R.
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Page -26-
863, 867 (Bankr. N.D. Ohio 2008), aff’d, 2009 WL 974538 (N.D.
Ohio 2009); Vallambrosa Holdings, 419 B.R. at 88.
Rehabilitation is more than reorganization. 	Fall, 405 B.R.
at 867-68. 	It signifies something more, such as “to put back in
good condition” or “to re-establish on a firm, sound basis.” 	Id.
(citing In re The V Companies, 274 B.R. 721, 725 (Bankr. N.D.
Ohio 2002)). 	It contemplates the successful maintenance or re-
establishment of the debtor’s business operations. 	Vallambrosa
Holdings, 419 B.R. at 89. 	Rehabilitation in Chapter 11 starts
with a confirmable plan. 	Id.
As demonstrated above, Debtor lost $319,500 in the first
four months after bankruptcy. 	Exh. A. 	DeArmand testified that
no new work was coming in after May 1, 2010. 	Projected future
revenues were $-0- for some indefinite future. 	Projected
expenses going forward would be $48,000 per month plus attorney
and reorganization fees. 	These all demonstrate a “continuing
loss.”
Debtor’s accounts receivable have declined $107,600 during
the Chapter 11. 	This demonstrates a “diminution”.
Debtor cannot rehabilitate. 	As discussed above, Debtor’s
plan is not feasible. 	It also violates the rule that
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21 11 U.S.C. § 1129 provides, in relevant part:
(a) 	The court shall confirm a plan only if all of the
following requirements are met:
(9) Except to the extent that the holder of a
particular claim has agreed to a different treatment of
such claim, the plan provides that--
(A) with respect to a claim of a kind specified in
section 507(a)(2) or 507(a)(3) of this title, on
the effective date of the plan, the holder of such
claim will receive on account of such claim cash
equal to the allowed amount of such claim;
22 11 U.S.C. § 1129(b) provides in relevant part:
(b)(1) 	Notwithstanding section 510(a) of this title,
if all of the applicable requirements of subsection (a)
of this section other than paragraph (8) are met with
respect to a plan, the court, on request of the
proponent of the plan, shall confirm the plan
notwithstanding the requirements of such paragraph if
the plan does not discriminate unfairly, and is fair
and equitable, with respect to each class of claims or
interests that is impaired under, and has not accepted,
the plan.
(2) For the purpose of this subsection, the condition
that a plan be fair and equitable with respect to a
class includes the following requirements:...
(B) With respect to a class of unsecured claims--
(i) the plan provides that each holder of a claim
of such class receive or retain on account of such
claim property of a value, as of the effective
date of the plan, equal to the allowed amount of
such claim; or
(ii) the holder of any claim or interest that is
junior to the claims of such class will not
receive or retain under the plan on account of
such junior claim or interest any property, except
that in a case in which the debtor is an
individual, the debtor may retain property
included in the estate under section 1115, subject
to the requirements of subsection (a)(14) of this
section.
Page -27-
administrative claims must be paid in full upon confirmation 21
and the absolute priority rule 22 .
Administrative Claims.
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Page -28-
Section 507(a)(2) grants priority to “administrative
expenses allowed under section 503(b) of this title.”
Section 503(b)(1)(A) defines “the actual, necessary
costs and expenses of preserving the estate” as
administrative expenses. 	The Tenth Circuit Court of
Appeals (“Tenth Circuit”) has held that in order to be
treated as an administrative expense, “the expense
must: (1) arise out of a transaction between the
creditor and the bankrupt's trustee or debtor-in-
possession; and (2) benefit the debtor-in-possession in
the operation of the business.” 	In re Mid Region
Petroleum, Inc., 1 F.3d 1130, 1133 (10th Cir.1993)
(citing In re Amarex, 853 F.2d 1526, 1530 (10th
Cir.1988)).
Peters v. Enterasys Networks, Inc. (In re Native American
Systems, Inc.), 351 B.R. 135, 138 (10th Cir. BAP 2006). 	“Such
costs and expenses encompass, without limitation, post-petition
professional fees, salaries, wages, supplies, rent, utilities and
other trade payables-all those ongoing operating and case
administration expenses that would not likely be supplied on
credit to a chapter 11 debtor without the protection of Section
507(a)'s priority scheme....” 	In re Digital Impact, Inc., 223
B.R. 1, 6 (Bankr. N.D. Okla. 1998). 	And, lessors are entitled to
post-petition rent under this provision in the amounts required
under their leases without proof of value or benefit to the
estate. 	El Paso Properties Corp. v. Gonzales (In re Furr’s
Supermarkets, Inc.), 283 B.R. 60, 65 (10th Cir. BAP 2002).
Debtor’s accounts payables increased postpetition by
$241,700 (Exhibit A) and rent and common area expenses due under
Debtor’s lease amounts to at least $92,000. 	Together, this
$333,700 must be paid as an administrative expense under 11
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Page -29-
U.S.C. 1129(a)(9)(A) in cash upon confirmation. 	The Debtor’s
plan makes no reference to this and is unconfirmable on its face.
Digital Impact, 223 B.R. at 6. 	Furthermore, the projections
accompanying the plan show that the reorganized Debtor would
profit only $132,872 in 30 months of operation (pre-tax), more
evidence that Debtor cannot meet this requirement.
Absolute Priority Rule.
The absolute priority rule requires that certain
classes of claimants be paid in full before any member
of a subordinate class is paid. 	Under this rule,
unsecured creditors stand ahead of investors in the
receiving line and their claims must be satisfied
before any investment loss is compensated. 	11 U.S.C. §
1129(b)(2)(B)(ii); Unruh v. Rushville State Bank, 987
F.2d 1506, 1508 (10th Cir. 1993). 	The rule reflects
the different degree to which each class assumes the
risk of the debtor's insolvency. 	See [In re] Granite
Partners [L.P.], 208 B.R. [332] at 337, 344 [(Bankr.
S.D. N.Y. 1997)].
Allen v. Geneva Steel Co. (In re Geneva Steel Co.), 281 F.3d
1173, 1180 n. 4 (10th Cir. 2002). 	DeArmand testified that
shareholders would retain their interests in Debtor. 	Debtor’s
plan is not feasible and cannot pay unsecured creditors in full.
It violates the absolute priority rule.
SECTION 1112(b)(4)(B): GROSS MISMANAGEMENT OF THE ESTATE.
The Court also finds many examples of mismanagement of the
estate. 	Each individual one may not be significant, but, when
taken together, they amount to a gross mismanagement.
For example, DeArmand is the Chief Operating Officer. 	He
appeared at the office maybe one day per month. 	Danny Coleman is
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Page -30-
the Chief Executive Officer. 	DeArmand was not sure Coleman ever
even came to New Mexico. 	Elvin J. Chavez was President of Debtor
until he resigned in March or April, 2010. 	There are no other
officers of Debtor. 	Compare Nester v. Gateway Access Solutions,
Inc. (In re Gateway Access Solutions, Inc.), 374 B.R. 556, 564-65
(Bankr. M.D. Pa. 2007)(“Failure to maintain an effective
corporate management team has been held to constitute gross
mismanagement.”)(Citations omitted.)
In his testimony, DeArmand did not have a good grasp of
daily activities at the Debtor or the operation of the Debtor’s
bankruptcy estate. 	Many duties were delegated and not followed
up on. 	For example, DeArmand did not prepare the MOR, seemed
unfamiliar with their requirements, and delegated the duty to
fill them out to someone in Louisiana. 	He could not state for a
fact that they were accurate, and he did not know when they were
filed, or why they were filed late, or when the next ones would
be filed. 	See id. at 565. (“The Court believes that accurate
reporting and financial transparency are important requirements
in the management of a debtor-in-possession.”)
DeArmand did not know the amount of the accounts receivable
that were collectible. 	The Court therefore deduces that no one
is working the collectibles. 	Evidence at trial established that
Debtor has not invoiced LANL for work it did on an Assaigai
contract since October in an amount probably over $200,000. 	See
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Page -31-
Fall, 405 B.R. at 869 (failure to pursue accounts receivable is
mismanagement). 	He did not know the amounts of receivables that
had been collected by Assaigai or recite any attempts he had made
since the bankruptcy filing to reconcile the amounts other than
an adversary proceeding that Debtor filed but appears presently
stalled.
DeArmand knew that a Motion to Borrow was filed to
legitimize transfers between Debtor and ARSI, but did not follow
up on whether any order was actually entered allowing it. 	He saw
no problem with borrowing as needed from ARSI. 	He knew loans
were made, but did not know when or how much, but “maybe” over
$100,000. 	See Gateway Access Solutions, 374 B.R. at 566
(Unapproved, unauthorized corporate borrowings on oral terms is
evidence of gross mismanagement.)
After the bankruptcy DeArmand “or someone else” authorized
an offset of $91,371 of debts with ARSI without notice to
creditors or Court approval. 	Exh. 8, p.8. 	He did not know if
the offsets involved pre- or post-petition transactions and did
not believe it was improper. 	The offset was done to “clean up”
the books. 	The Debtor has made no disclosure of any actions that
will or will not be taken regarding the allegedly preferential
transfer to ARSI in December, 2009. 	It would be in the
creditors’ best interests to have all of these transactions
reviewed by a trustee. 	This may be sufficient cause in itself to
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23 DeArmand testified that he did not know if Debtor’s
Schedule B was accurate. 	He stated that no leased assets
appeared on Schedule B then said he was not sure. 	He knew some
assets had liens but did not know the amount owed or the
creditor.
24 On its original schedules, Debtor listed ownership of
various assets that appear on the Debtor’s Motion to Reject Lease
with ARSI.
Page -32-
convert or appoint a trustee. 	See Oklahoma Refining Co. v. Blaik
(In re Oklahoma Refining Co.), 838 F.2d 1133, 1136 (10 th Cir.
1988).
At trial, DeArmand accused Assaigai of interfering with
their computer systems to such an extent that Debtor could not
determine its financial status and claimed that Debtor’s
employees were “locked out.” 	As discussed above, the Court finds
that this simply did not happen. 	It is Debtor’s own fault that
it cannot determine its financial condition.
Other examples of mismanagement include the Debtor’s failure
to account for post-petition rent, failure to list the liability
for the Consulting Agreement on its books or bankruptcy
schedules, and Debtor’s apparent lack of understanding 23 of what
assets it owned 24 , leased, or used. 	Debtor has no IT department.
Finally, after six months in bankruptcy, the Court and
creditors do not have a clear picture of Debtor’s financial
affairs. 	This is a ground to convert the case. 	Fall, 405 B.R.
at 869 (citing Gateway Access Solutions, 374 B.R. at 565.) 	See
also In re Vaughan, 429 B.R. 14, 29-30 (Bankr. D. N.M.
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25 This section of the opinion is addressed only to the
finding of mismanagement. 	The “unusual circumstances” exception
does not apply to cases involving continuing loss or diminution
of the estate coupled with a lack of reasonable likelihood of
rehabilitation. 	See 11 U.S.C. § 1129(b)(2)(B) (“the grounds for
granting such relief include an act or omission of the debtor
other than under paragraph (4)(A).”)(Emphasis added.)
Page -33-
2010)(collecting cases that find that accurate disclosure is a
fundamental duty of a debtor-in-possession.)
Therefore, Assaigai has met its burden of proof of showing
cause to convert the case under both 11 U.S.C. § 1112(b)(4)(A)
and (B).
Once “cause” has been demonstrated, the Court must
convert or dismiss, unless the Court specifically
identifies “unusual circumstances ... that establish
that such relief is not in the best interest of
creditors and the estate.” 	11 U.S.C. § 1112(b)(1).
However, absent unusual circumstances, the Court must
not convert or dismiss a case if (1) there is a
reasonable likelihood that a plan will be confirmed
within a reasonable time, (2) the “cause” for dismissal
or conversion is something other than a continuing loss
or diminution of the estate coupled with a lack of
reasonable likelihood of rehabilitation; and (3) there
is reasonable justification or excuse for a debtor's
act or omission and the act or omission will be cured
within a reasonable time. 	11 U.S.C. § 1112(b)(2); 7
Collier on Bankruptcy ¶ 1112.04 [1] (Alan N. Resnick
and Henry J. Sommer, eds., 15th ed. rev. 2008).
In re Orbit Petroleum, Inc., 395 B.R. 145, 148 (Bankr. D. N.M.
2008)(footnote omitted.)
The Courts finds no unusual circumstances that establish
that the requested conversion or dismissal is not in the best
interests of creditors and the estate 25 . 	Debtor attempted to
prove that all of its problems were caused by Assaigai but failed
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Page -34-
to prove anything other than a contract dispute (subject to
arbitration). 	This is not unusual. 	Therefore, under 11 U.S.C. §
1112(b)(1) the Court “shall” convert or dismiss the case unless §
1112(b)(2) applies.
The conditions set out in Section 1112(b)(2) are not
present. 	There is no likelihood that a plan will be confirmed
with a reasonable period of time. 	This takes Section
1112(b)(2)(A) out of the picture. 	Section 1112(b)(2)(B) requires
both a reasonable justification for the act or omission and a
cure of the act or omission within a reasonable period of time
fixed by the court. 	Debtor did not offer any remedial measures
to cure the management failures or lack of information. 	Thus the
standard of Section 1112(b)(2)(B) is also not met. 	Therefore
Section 1112(b)(2) does not prevent the Court from converting the
case.
Finally, the Court finds that conversion as opposed to
dismissal is in the best interests of the creditors. 	The record
shows that there are accounts receivable to be collected. 	If
Assaigai is correct in asserting that ARSI’s lien was
preferential, a Chapter 7 trustee could avoid that lien, preserve
it for the benefit of the estate and pursue collecting the
receivables. 	The case would also benefit from a Chapter 7
trustee reviewing the transactions that have taken place with
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Page -35-
ARSI since the Debtor was formed, particularly the post-petition
offset. 	Therefore, the Motion to Dismiss will be denied.
Orders consistent with this Memorandum Opinion will be
entered separately.
Honorable James S. Starzynski
United States Bankruptcy Judge
Date Entered on Docket: 	July 21, 2010
Copies to:
George M Moore
Moore, Berkson & Gandarilla, P.C.
PO Box 7459
Albuquerque, NM 87194
Bonnie Gandarilla
Moore, Berkson & Gandarilla, P.C.
PO Box 7459
Albuquerque, NM 87194
Alice Nystel Page
PO Box 608
Albuquerque, NM 87103-0608
Paul M Kienzle, III
PO Box 587
Albuquerque, NM 87103-0587
Marcus E. Garcia
Garcia Law Firm, P.C.
20 First Plaza Ctr. NW, Suite 717
Albuquerque, NM 87102
David T Thuma
500 Marquette Ave NW Ste 650
Albuquerque, NM 87102-5309
Case 10-10373-s7 Doc 81 Filed 07/21/10 Entered 07/21/10 13:50:38 Page 35 of 35