The High Court has appointed an interim examiner to Dublin-registered medical technology firm HealthBeacon after hearing it has “run out of cash” and requires external funding to meet its payroll commitments today.
The petition for examinership came in “most unusual” circumstances as “literally there is no more gas in the tank” for the company to financially support itself even during the 100-day period of court protection, said senior counsel Kelley Smith on behalf of HealthBeacon’s directors.
The firm, which specialises in digital therapeutics, has made “persistent losses” since it floated as a publicly listed company in 2021, raising €25 million. It made after-tax losses of €8 million in 2021, rising to €13 million in 2022. Similar losses are expected this year, said Ms Smith.
US distributor Hamilton Beach, which manages HealthBeacon’s US supply chain, will provide a loan of up to €1.85 million, fully repayable in 120 days, she said, adding that €250,000 will be drawn down immediately.
Its availability was predicated on an interim examiner being appointed and will be repaid ahead of all other secured and unsecured debts in the event the examinership fails, and the firm needs to be liquidated, Ms Smith told the court, adding that the debts are largely unsecured.
At this, Mr Justice Rory Mulcahy questioned whether Hamilton, through its proposal, was “trying to make a one-way bet” in guaranteeing it receives its money back while other creditors are at risk.
Ms Smith said the arrangement limits but does not eliminate risk for Hamilton, which would only see return from the company’s realisable assets in the event of a liquidation. The support from Hamilton is “significant”, she added, as it is an entity that knows the firm and the market.
Urging the judge to appoint insolvency practitioner Shane McCarthy, of KPMG, as interim examiner, Ms Smith, appearing with Eithne Corry BL, said the step is “critical” to securing funding.
Contributing to the company’s recent current financial woes, said Ms Smith, instructed by A&L Goodbody's Mark Traynor, is the unsuccessful attempt to channel products directly to consumers, an increased staff headcount, the building of new infrastructure and the heavy focus on research and development. She said the company has been focused on building its own patented technology.
It was hoped the firm was “turning a corner” and would produce better results in 2023, but there have been significant delays of nine to 12 months in getting its products to speciality markets and it made losses of just under €10 million up to September, she said.
Redundancies
HealthBeacon has 75 employees, of which 50 are based in Ireland. It is expected that about 20 staff members will be made redundant, Ms Smith said.
Independent expert Nicholas O’Dwyer, of Grant Thornton, determined that the company has a “reasonable prospect of survival” as a going concern if a successful rescue plan is put together. Among the factors supporting this contention was that HealthBeacon has projected growth of 387 per cent from 2024 to 2026, the court heard.
Unsecured creditors would receive 19 per cent of what they are owed if the company was to be liquidated, and it is anticipated they would do better under a restructuring, he said in a report.
Before appointing the interim examiner, Mr Justice Mulcahy asked about the type of creditors who could be prejudiced by the arrangement if the rescue attempt fails. Ms Smith said it can be assumed that unsecured creditors would be the most likely category to be adversely affected in such a scenario.
The court heard HealthBeacon has a net asset position of €10 million, with liabilities of €6.3 million primarily due to trade creditors and general unsecured creditors. Taoglas, a Co Wexford firm, is the largest creditor, the court heard.
The Revenue Commissioner, which is usually treated as a preferential creditor in insolvency situations, is owed just under €62,000.
Mr Justice Mulcahy was satisfied the statutory requirements were met and that it was appropriate for him to exercise his discretion to make the appointment.
He noted the application came before him while only the company was represented in court and notified. He adjourned the case until a date next month.
