NS8 Inc. – Court Issues Pair of Orders Approving Sales of Intellectual Property ($85k) and Substantially All Other Assets ($250k)

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December 16, 2020 – Further to the November 20th bidding procedures order [Docket No. 105] and the December 10th auction cancellation, the Court hearing the NS8 case issued a pair of orders approving a sale of (i) certain of the Debtor's intellectual property to Deduce, Inc. (the “IP Purchaser”) and (ii) substantially all of the Debtor's assets other than that intellectual property to Codium Software, LLC (the “All Assets Purchaser”) [Docket Nos. 169 and 170, respectively]. The APA’s are included in the respective orders.

The Debtor, which filed Chapter 11 with an estimated $50.0mn to $100.0mn in liabilities in the hopes of monetizing its assets in a transaction that "preserves as much of its business as a going concern as possible" in the wake of a "liquidity crisis," will receive a total of $335k total in cash from the sale of substantially all of its assets ($250k) and intellectual property ($85k), respectively.

Codium APA:

  • Seller: NS8 Inc.
  • Buyer: Codium Software, LLC
  • Assets Being Sold: Substantially all Debtor assets, excluding certain intellectual property
  • Purchase Price: (a) The aggregate consideration (the “Purchase Price”) for the sale, transfer and delivery of the Purchased Assets, at the Closing, shall be an amount equal to the sum of: (i) the assumption of the Assumed Liabilities; and (ii) the Cash Payment Amount, which is $250,000.

Deduce APA:

  • Seller: NS8 Inc.
  • Buyer: Deduce, Inc.
  • Assets Being Sold: Certain of the Debtor's intellectual property
  • Purchase Price: The aggregate consideration (the “Purchase Price”) for the sale, transfer and delivery of the Purchased Assets, at the Closing, shall be an amount equal to the Cash Payment Amount, which is $85,000

Background

The bidding procedures motion [Docket No. 50] notes, “The Debtor was co-founded in 2016 by Adam Rogas (‘Rogas’) and five others with the guidance and assistance of Mach37, a Tysons, Virginia based start-up accelerator designed to facilitate the creation of the next generation of cyber product companies…in August 2020, it became apparent that throughout the Debtor’s history, Rogas had intentionally and grossly misstated its revenue, gross margin, and the extent and profitability of the Debtor’s operations.

In the immediate aftermath of this discovery, a liquidity crisis ensued that necessitated, inter alia, the commencement of this Case to monetize the Debtor’s assets in a value maximizing transaction that preserves as much of its business as a going concern as possible while simultaneously pursuing litigation and asset recovery actions against Rogas and others to maximize recoveries for all stakeholders.

To assist in these efforts, the Debtor retained Cooley LLP (‘Cooley’) and FTI Consulting, Inc. (‘FTI’) to evaluate the Debtor’s short-term financial condition, the state of its cash flows and the viability of various strategic alternatives. Contemporaneously with those services, FTI and members of the Debtor’s Board of Directors sought to maximize the value of the Assets through a marketing process targeted at potential acquirers…The Debtor files this Motion to proceed with a bidding and auction process to consummate the Sale and generate maximum value for the Assets.”

About the Debtor

According to the Debtor: “Our end-to-end protection platform combines advanced data analytics with real-time scoring to outsmart threats and approve more orders so you can focus on growing your business without the fear of fraud.”

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