On February 26, 2020 (the “Petition Date“), Suitable Technologies, Inc. (the “Debtor” or “Company”) filed a voluntary petition for relief under chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware.
The Debtor is represented by Young Conaway Stargatt & Taylor. The case has been assigned to the Honorable Mary F. Walrath. A hearing on the Debtors’ first day motions was held on February 27, 2020. A final hearing has been set for March 26, 2020. A formation meeting has not yet been scheduled.
Founded in 2011 and headquartered in Palo Alto, California, the Debtor is a developer, manufacturer, and seller of a telepresence system and technology platforms in both domestic and international markets. The Debtor also maintains an intellectual property portfolio, which includes a number of different patents associated with, among other things, wireless connectivity, as well as trademarks in the U.S. and other foreign jurisdictions. The Debtor’s primary product is the “Beam”, a telepresence device designed to promote remote collaboration, provide individuals with the ability to communicate remotely with others on both a visual and audio basis via the Company’s devices and companion software. Prior to terminating its sales operations, the Debtor sold or leased over 7,000 Beams to customers directly and through its authorized distributors. This was generally done through a one- or three-year subscription service.
Beam was invented to allow employees to move freely through the workplace without the cost and inconvenience of extensive travel. But unfortunately, the Debtor states that remote collaboration, whether within companies or customer-facing, did not evolve as it anticipated, and the demand for a telepresence system was slow to materialize. As a result, the Debtor has never been profitable and has always relied on its founder/CEO to fund its operations and affairs. The Company suffered operating losses exceeding $50 million between 2013 and 2018. In December 2018, the Company determined to wind down its operations and attempted to find a third-party buyer. In connection with the wind-down, all remaining employees of the Company were terminated, though certain services are still provided by a small number of independent contractors.
Between December 2018 and May 2019, the Debtor initiated numerous discussions with over a dozen prospective purchasers whom it believed had the capability to, among other things, sustain the servers. In August 2019, the Company entered into a purchase agreement with Blue Ocean Robotics ApS, a Denmark based Beam distributor. However, the sale was complicated by a preliminary injunction sought by the founder’s spouse to enjoin the sale and ultimately, it did not close. As a consequence, the Company and its founder determined to turn control of the Company over to an independent restructuring officer and other professionals to lead a process to maximize the value of all the Company’s assets. The chapter 11 case was initiated to effectuate a transparent, orderly, and efficient process to sell substantially all of the Company’s assets for the benefit of all stakeholders (See Charles C. Reardon Affidavit in Support).
Since the Debtor’s formation, its founder has been its sole source of funding. Through certain entities owned and controlled by him, the founder has provided almost $92 million pursuant to promissory notes. Of this amount, $5.93 million was through secured notes with MagicHeart Investments, LLC (“MagicHeart”), an entity owned and controlled by the founder, $8 million was through an unsecured note with MagicHeart, and the remainder was through unsecured notes with Greenheart Investments, LLC, another entity affiliated with the Company’s founder. Aside from these obligations, the Debtor has no bank debt, less than $1 million in unsecured (liquidated) trade debt, and contingent liabilities arising from subscription service, warranty and repair obligations tied to its products.
The Debtor seeks authorization to obtain senior secured post-petition financing from MagicHeart in the aggregate amount of $5.956 million, $3.801 million of which will consist of new money loans, with an interim borrowing limit of $2.713 million. The Debtor states that DIP financing and access to cash collateral will provide the liquidity necessary to administer the case and conduct the contemplated sale process, preserving the value of its estate for the benefit of all stakeholders until the sale can be completed. No later than 145 days after the Petition Date, the Debtor will conduct an auction for the assets; no later than 150 days after the Petition Date, the Debtor will obtain entry of an order approving a sale; no later than 160 days after the Petition Date, the Debtor will have consummated a sale.
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| $5.93 million in notes from MagicHeart. | |
| Total unspecified, but $86,070,000 in unsecured notes between MagicHeart and Greenheart Investments, LLC, and under $1 million in trade debt. | |
| FIRST DAY RELIEF FOR AUTHORIZATION TO PAY AND PAYMENTS | |
| Interim Relief An amount not to exceed $10,000 in the aggregate. | Final Relief An amount not to exceed $76,500 in the aggregate. |