Texas Tech Start-Up Company Files Chapter 7 Bankruptcy

Written by CFB Blogger. Posted in Blog

OptiSense Network, a Plano, Texas-based startup, has recently filed Chapter 7 bankruptcy in U.S. Bankruptcy Court of the Eastern District of Texas when its main investor, Andrew W. Byrd, who holds 39.15% of the company’s equity, withdrew financial support. Byrd is the company’s largest investor and the key secured creditor in the bankruptcy. The startup firm’s bankruptcy documents list $5,166,343 in assets, the majority of it in machinery, equipment and inventory, as well as a value of $876,732 assessed for the patents it holds, which stem from technology developed at the Department of Energy’s Idaho National Laboratory. OptiSense reported revenues of $2.2 million in 2012 and $3.9 million in 2013. The company lists liabilities of $25,601,668 in both secured and unsecured claims, mainly consisting of a series of convertible promissory notes held by Byrd, which add up to over $13 million. Other convertible promissory notes make up a significant remainder of the liabilities. Stephen Prince, CEO of OptiSense, had sent an email to Greentech Media in March, stating that the company’s “technology and market are sound” and that it was seeking new investors to “do a warm restart with the necessary short-term capital”. OptiSense’s bankruptcy states that Prince has resigned as CEO. According to an article on www.greentechmedia.com by Jeff St. John, the bankruptcy ostensibly came out of the blue since, as of January, the company had “30 utility pilot project partners, its early-stage work with grid vendors like ABB, and $16 million in funding as proof of plans to take its technology to the next stage of commercialization”. Prince had averred that Byrd, the company’s “single, largest and majority shareholder experienced some significant personal financial losses, above and beyond his investment in OptiSense, and as a result put the company into bankruptcy with almost zero notice.” Byrd has denied that Optisense’s bankruptcy was a result of his personal financial difficulties but that he stopped funding the company when “the cost of bringing the technology to market was too high.” OptiSense, which was founded in 2003, procured its first partner “to test a patented voltage- and current-sensing optics systems in 2005. That partner, Southern Co. Utility Alabama Power, has since been joined by dozens of utilities testing its patented technology in one form or another, including EDF and E.ON in Europe; Baltimore Gas & Electric, Pepco, Duke Energy, Excel and San Diego Gas & Electric in North America and Eletrobras in Brazil…” The news article states that the bankruptcy filing also showed that two main utility partners have been returning OptiSense’s equipment, demanding reimbursement or repairs. Items include a $3,566,800 claim from Alabama Power, citing a date of “approximately May 2013,” and a description of a “customer warranty claim — customer returned all product purchased for repair or replacement, which will not be possible.” The bankruptcy filing also notes that Alabama Power had returned equipment prior to its repair in February. A claim from Baltimore Gas & Electric from November 2013 is described as a “customer demand letter for return of product payment due to faulty product,” adding that OptiSense “disputes the request because no opportunity was given to remedy the problem as required by contract.” Beyond the $16 million invested in 2013, OptiSense co-founders David Welch and Joseph Harlev invested $1.1 million in their company, with the state of Texas granting the company $1.5 million in 2007. An article in the Dallas Business Journal from last August stated that OptiSense had invested $1.9 million in its facility as well as $2.5 million in engineering and R&D, and employed 60 people at its manufacturing plant. The Client First Bankruptcy attorneys are among the most knowledgeable consumer bankruptcy attorneys in the U.S., representing thousands of clients in Chapter 13 and Chapter 7 bankruptcy cases. Client First Bankruptcy attorneys answer their phones Monday thru Friday from 8:30 a.m. – 6:00 p.m. (Central Time) so you can get your initial complimentary consultation at a time that is convenient for you. Our aggressive representation and extensive experience have earned Client First Bankruptcy a national reputation for excellence in the representation of debtors in financial distress. Call us toll-free at 800-383-6004 and log onto our easy-to-navigate, interactive website at www.clientfirstbankruptcy.com for timely and vital information on filing your Chapter 13 or Chapter 7 bankruptcy.