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StemTech -- from $52 million in revenue to $8.5 million in debts.
CEO Ray C Carter files Chapter 11 Bankruptcy proceedings

February 2nd, 2017: Pembroke Pines, FL

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.com web traffic decline

Ray C Carter
Led by CEO, Ray C Carter, StemTech never really achieved the potential it deserved, and now inevitable questions are being raised about his ability to run the company.

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.
The twenty largest unsecured amounts owed to creditors are:
  • 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
For those unfamiliar, Chapter 11 bankruptcy can also be called rehabilitation bankruptcy. It's much more involved than chapter 7 as it allows the firm the opportunity to reorganize its debt and to try to re-emerge as a healthy organization. What this means is that the firm will contact its creditors in an attempt to change the terms on loans such as the interest rate and dollar value of payments. Like its cousin, chapter 11 requires that a trustee be appointed; however, rather than selling off all assets to pay back creditors, the trustee supervises the assets of the debtor and allows business to continue. It's important to note that debt is not absolved in chapter 11: the restructuring only changes the terms of the debt, and the firm must continue to pay it back through future earnings.

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.

美商健新公司申請破產,直銷商震驚不已

以研發「淡水藍綠藻」營養食品聞名的美商健新健康事業公司,驚傳2月2日向佛羅里達州法庭申請破產。

美商健新公司2005年成立,業務擴及全球6大洲50多個國家,2008年進軍台灣,是該公司在亞洲開拓的第一個據點。

其全球營業額2015年為5200萬美元,2016年降為4300萬美元,曾經連續3年被美國Inc.雜誌列為美國成長最快的公司。

據了解,美商健新申請破產的主要原因,是和幹細胞供應商之間的長期訴訟敗訴,需付出鉅額賠償金,於2月2日,由創辦人兼CEO雷˙卡特(Ray Carter)向佛羅里達法庭申請破產,但公司並未對外說明實際狀況及後續處理情形,置數千名直銷商的利益於不顧,令長期支持的直銷夥伴震驚不已。

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