Dippin' Dots filed for Chapter 11 bankcruptcy. (Creative Commons/Flickr)

Dippin' Dots filed for Chapter 11 bankruptcy on Thursday in an attempt to avoid foreclosure, permitting reorganization under U.S. bankruptcy laws.

Dippin' Dots, known for flash freezing small beads of ice cream using liquid nitrogen, owes nearly $11 million in debt, mostly to a unit of Regions Bank, which moved to foreclose on the loan this week.

Dippin' Dots' downfall began during a legal battle that they ultimately lost over whether founder and microbiologist Curt Jones properly filed the patents to protect his special freezing process.  The patent was ruled enforceable in February 2007 because Jones was found commercially selling the goods before applying for the patent.

On top of that, the company fell behind on loan payments and customers simply weren't willing to spend a few dollars on a cup of ice cream.

"All of it his us at the same time," said Steve Heisner, the company's director of administration, customer service and information systems.

Dippin' Dots goes hand in hand with fairs, amusement parks and sports games.  They sell at 142 retial locations and 9,952 small vendors.  They were featured on the Oprah Winfrey Show, as well as on Food TV.

The company said its assests are valued at $20.2 million and that sales are slowly recovering.  As of Thursday, the company had $27.2 million in revenue, well above last year's $26.7 million. Jones, who founded the company in 1988, said the company of 170 workers does not expect to sell its operations.

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