April 1, 2020 – The Debtors filed a motion requesting each of a bidding procedures order and a sale order. The bidding procedures order would (i) proposed bidding procedures for an anticipated section 363 auction/sale process in respect of substantially all of the Debtors assets (the “Sale”) and (ii) a proposed auction/sale schedule culminating in a sale hearing on July 23, 2020. The sale order would (i) approve an asset purchase agreement (a "form" of which is attached to the motion) and (ii) authorize the Sale [Docket No. 91]. The motion details what appear to be rather early stage and most postpetition marketing efforts to date as well as the Debtors' more interesting, and ultimately fruitless, prepetition efforts.
The motion states, “In January 2020, control of the Debtor was turned over to an independent chief restructuring officer, independent director, and professionals to lead a transparent, orderly and efficient process to maximize the value of the Debtor’s assets, including its inventory, raw materials, patents, and trademarks, for the benefit of all stakeholders. As part of the Debtor’s efforts to find a value-maximizing transaction for its assets, the Debtor retained Stout Risius Ross Advisors, LLC (“Stout”)…to canvass the market for interested buyers. This Chapter 11 Case was then initiated to effectuate the Sale Process, consistent with the milestones (collectively, the 'DIP Financing Milestones') established by the Debtor’s debtor-in possession financing facility, which was approved by the Court [Docket No. 74] (the 'DIP Order') on a final basis on March 24, 2020.
A hearing on the motion is scheduled for April 27, 2020, with objections due by April 15, 2020.
Postpetition Marketing Efforts
The motion provides: "On March 18, 2020, Stout commenced the formal post-petition marketing process for the Debtor’s assets by circulating a 'teaser' to nearly 150 prospective strategic, financial and hybrid buyers, across numerous diverse industries. The teaser included a brief description of the Debtor’s assets and the Sale Process, and was accompanied by a form non-disclosure agreement (an ‘NDA’). In addition, prior to filing this Motion, consistent with the DIP Financing Milestones, Stout finalized a confidential information memorandum for the Debtor’s assets, and populated an electronic data room with related diligence information. Although the marketing process has only recently begun, Stout has received strong interest to date, as a number of parties have executed or are negotiating an NDA and had informational calls with Stout."
Prepetition Marketing Efforts
The Debtors' prepetition marketing efforts give a bit more flavor in respect of what is an unusual bankruptcy filing, combining elements of what may be the first ever "vanity Chapter 11" filing (the Debtors' founder, billionaire Scott Hassan who has also provided DIP financing, apparently most interested in finding a way to make sure that the purchasers/licensors of his Beam products are not left without support and his reputation as a "technology visionary" damaged) and a divorce trial.
The motion continues: "Prior to the Petition Date, after experiencing financial difficulties, the Debtor determined to wind down its operations and find a third party buyer. In doing so, between December 2018 and May 2019, the Debtor initiated numerous discussions with over a dozen prospective purchasers that the Debtor believed maintained the capacity and industry wherewithal to, among other things, sustain the Beam servers. In August 2019, at the conclusion of those efforts, the Debtor entered into an asset purchase agreement (the ‘Prepetition APA’) with a distributor interested in maintaining its customer relationships (and thus certain of the Debtor’s relationships) in the telepresence market, for the sale of substantially all of the Debtor’s assets (the ‘Prepetition Sale’).
Although the Prepetition APA, in the Debtor’s business judgment, presented the only viable offer for its assets under the circumstances, in November 2019, the spouse of the Debtor’s controlling shareholder, in her alleged capacity as a minority shareholder (as a result of certain community property shares), commenced a civil action in the Court of Chancery of the State of Delaware, seeking, among other things, a preliminary injunction to enjoin the Prepetition Sale. On December 13, 2019, the Court of Chancery denied the preliminary injunction request.
Although the Prepetition APA constituted an arms-length, third-party transaction, the Prepetition Sale ultimately did not close."
Proposed Key Dates
- Stalking Horse Bid Deadline: June 4, 2020
- Auction: July 16, 2020
- Sale Objection Deadline: July 16, 2020
- Sale Hearing: July 23, 2020
- Sale Closing: No later than July 31, 2020
About the Debtors
The Debtors' declaration in support of first day motions provides:
"The Debtor, founded in 2011 by Scott Hassan, is a privately held Delaware corporation headquartered in Palo Alto, California, which historically focused on the development, manufacturing, and sale 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 United States and other foreign jurisdictions. Prior to resigning as a director of the Debtor on February 13, 2020, and as an officer of the Debtor on February 18, 2020, Mr. Hassan was the Company’s Chief Executive Officer, as well as the sole member of its Board of Directors (the 'Board'). In connection with Mr. Hassan resigning from the Board, Ronald Barliant, a former United States Bankruptcy Judge for the Northern District of Illinois, was appointed as the Company’s sole (independent) director.
The Debtor’s primary product is called '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, and move freely through a workplace using the Company’s manufactured devices and companion software. The “Beam” has two product lines: (a) the Beam for the consumer market; and (b) the BeamPro for the enterprise market. Prior to terminating its direct sales operations in December 2018, which is discussed below, the Debtor sold or leased over 7,000 Beams to customers directly and through its authorized distributors. The Debtor generally sold and leased its Beams using a subscription service model, with customers registering for a one- or three-year subscription service, and in connection with their purchase, customers also received a limited warranty. The Debtor also maintains servers that support the Beam’s operation. As of the Petition Date, although the Debtor is continuing to wind down its operations and affairs, it continues to maintain the servers."
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