Creditors of StrongRoom AI will get a chance to stare at the financial entrails of the drugs management startup next week, when administrators for the business hold its first creditors meeting on 8 April.
A battle for whatever funds remain in the Melbourne startup, just weeks after it raised $17 million, will unfold in the Federal Court on Thursday, 3 April.
It comes after investor EVP launched legal action on Monday, temporarily freezing the assets of StrongRoom as well as property held by 13 defendants — including the voluntary administrator, a receiver appointed by the startup’s lender, and five directors including cofounders Max Mito and Christopher Durre.
EVP’s Opportunities Fund boss Misha Saul invested nearly a quarter of the $41 million fund in StrongRoom in February.
But less than a month after Saul joined the board, EVP was demanding its money back, alleging a “potentially serious issue” , and calling in police and financial investigators 10 days ago, after the request was denied.
The dispute and the rapid demise of StrongRoom also sparked a war of words from some investors.
Lender Paddington Street Finance engaged receivers to secure the startup’s banking assets last Friday, as the board called in voluntary administrators, accountancy firm HLB Mann Judd.
HLB will hold the first meeting of StrongRoom creditors in its Sydney office on Tuesday, 8 April.
The administrator is also hoping someone is crazy-brave enough to acquire the startup, founded in 2017, or its assets amid the firestorm, assuming it can get permission to sell.
“The administrators intend to seek further clarification from the Court and/or agreement with the interested parties about the extent to which funds held in the bank account of [StrongRoom] can be used in the [voluntary administration,” HLB said in a statement.
While Justice Roger Derrington gave HLB a $200,000 allowance from StrongRoom’s funds to continue its work, the administrator is hoping to find a buyer by Monday, although the sale may not go ahead depending on how the Federal Court case unfolds.
In the meantime, the software platform, which claimed to have around $13 million in annual sales in the UK and Australia, will continue trading.
How it happened
A glimpse into the collapse of the startup unfolded has emerged in documents filed with regulator ASIC by the administrators.
A representative of Bridges Lawyers, who represent EVP and Misha Saul in the Federal Court action, first contacted the administrators on 24 March in a scoping mission.
The concerns of Saul and EVP have yet to be made public, but were likely outlined in an affidavit presented to the Federal Court on Monday, leading Justice Derrington to agree to the temporary asset freeze.
Following the initial approach, Saul, the lawyer and two members of the administration team subsequently met “to discuss the position of StrongRoom and director concerns”.
HLB’s Todd Gammel and Matthew John Levesque-Hocking “were provided with limited financial information to assess the financial position of StrongRoom” and sounded out about taking on the role.
They agreed after reviewing the documents.
Over the next few days, Gammel was contacted by Ashurst, StrongRoom’s legal firm, and given updated financial information for review and consideration.
“There were discussions with Ashurst about potential assessment/advice around the financial position, options available and funding requirements the StrongRoom board of directors was exploring,” Gammel wrote.
He was invited to the StrongRoom board meeting on Friday 28 March, giving a presentation on voluntary administration, followed by discussions around the process.
By the afternoon, in a separate meeting, the board voted to put the company into administration.
Investors including Artesian Venture Partners, Boab AI, Kalytix, and InterValley Ventures, as well as UK-based Tyson & Blake, tipped in a combined $32 million in venture funding, including $10.44 million from EVP.
Following February’s raise, StrongRoom was valued at $70 million.
How much anyone believes it’s now worth will be known by the administrators by 5pm Monday.
This article is republished with permission from Startup Daily. You can read the original here.
