StemTech -- from $52 million in revenue to $8.5 million in debts.
CEO Ray C Carter files Chapter 11 Bankruptcy proceedings
Founded in 2005, StemTech Health Sciences has filed for Chapter 11 Bankruptcy citing secured and unsecured debts of over $8.5 million.
Looking at the web traffic graph from Alexa, it seems the decline into financial oblivion started in mid 2014.
StemTech is the direct and indirect owner of over 47 subsidiaries. Twenty-seven of these subsidiaries are operating. Four (4) of the subsidiaries operate within the United States: (a) Stemtech HealthSciences, Inc., (b) Stemtech HealthSciences Corp., (c) Stemtech Taiwan Holding, Inc., and (c) Stemtech Japan Holding, Inc. The remaining subsidiaries operate internationally.
StemTech works with over 200,000 independent distributors and customers in over 50 countries on 6 continents. In order to facilitate domestic and international distribution, StemTech is organized into 6 divisions each headed by a regional executive. These 6 divisions are (a) North America, (b) Asian/Pacific, (c) African, (d) New Zealand/Australia, (e) Europe, and (f) Latin America.
In 2008, StemTech was sued for copyright infringement by a photographer for alleged unauthorized use of photographic images. In 2013, a jury returned a verdict in favor of the photographer in the amount of $1.6 million.
StemTech and its subsidiaries record total assets in the amount of $7,469,733.00 consisting of cash, accounts receivable, inventory, long-term deposits, property and equipment, as of September 30, 2016.
The total amount owed by StemTech is $8,627,969.21 (including disputed/contingent claims)
The two largest secure amounts owed to creditors are:
- Opus Bank $3,338,082.67 (as of January 23, 2017) Collateral: all assets of Debtor, including, without limitation, patents and equity interests held in all subsidiaries except foreign subsidiaries.
- Ray Carter, Jr. and Kasey L. Carter $100,000.00 Collateral: equity interests in certain foreign subsidiaries.
- Andrew Paul Leonard (amount disputed) $1.6 million
- Wilhelm Keller (loan) $772,000
- Cerule LLC (raw materials supplier, amount disputed) $685,838
- Marinova PTY LTD (raw materials supplier, amount disputed) $554,000
- Nixon Peabody (legal services) $163,183
- Chelsea Investments (rent) $151,450
- Hollins & Schechter (legal services) $150,605
- Federal Express (shipping) $148,537
- American Express (credit card fees) $135,348
- Andrew Goodwin (loan) $100,000
- Hutcheson Bowers (legal services) $84,851
- Berkowitz Pollack (accounting services) $94,407
- Energy Tools International (inventory) $90,173
- United Data Technologies (IT consulting) $58,690
- Lozeau Drury (legal services) $58,000
- Fusion Packaging (raw material supplier) $38,208
- Environmental Research Center (settlement) $36,792
- AIDP Inc. (raw materials supplier) $32,440
- Broad and Cassel (legal services) $29,973
- California EPA (settlement) $21,000
If a company is successful in chapter 11, it will typically be expected to continue operating in an efficient manner with its newly structured debt. If it is not successful, then it will file for chapter 7 and liquidate. In both instances, common shareholders will most likely see little (if any) return on their investments.'
Roughly 50% of all companies that file Chapter 11 (reorganization) are converted to Chapter 7 (liquidation), so it remains to be seen just what happens with StemTech in the future.
'Chapter 7 bankruptcy is sometimes also called liquidation bankruptcy. Firms experiencing this form of bankruptcy are past the stage of reorganization and must sell off any un-exempt assets to pay creditors. In chapter 7, the creditors collect their debts according to how they loaned out the money to the firm (also referred to as the "absolute priority"). A trustee is appointed, who ensures that any assets that are secured are sold and that the proceeds are paid to the specific creditors.
For example, secured debt would be loans issued by banks or institutions based upon the value of a specific asset. Whatever assets and residual cash remain after all secured creditors are paid are pooled together to be paid to any outstanding creditors with unsecured loans: e.g. bondholders and preferred shareholders.'
It's interesting to note that the Attorney for the bankruptcy proceedings received '$5,000.00 as an initial retainer, received into trust on September 8, 2016.' This leads to the question, why wasn't it disclosed earlier?
The Attorney for StemTech does not hold a Chapter 11 retainer; however, the Debtor's lender, Opus Bank consents to payment of fees/costs from cash collateral.' They've been paid a total of $54,017 to date.
Not surprisingly, many of the companies distributors are on edge about the news and whether or not the business will continue to be viable.
A meeting of creditors will be held on March 6, 2017 in Miami.
More updates to come.