June 3, 2024
Applied UV Files for Chapter 11 Bankruptcy Protection
Founder of PURO Lighting, LED Supply Co. claims $4.6 million owed, contested by Applied UV
January 2023 saw the founders of PURO Lighting and LED Supply Co. celebrating the successful sale of their companies to Applied UV, a deal that, on paper, seemed very rewarding and presented new opportunities. Fast forward to today, and the scene has drastically changed. Applied UV's bankruptcy filing has caused the entrepreneurs to recently depart the company, with at least one of them seemingly facing the grim possibility of not receiving their full payout, as $4.56 million is cited as a contested amount in the company’s recent bankruptcy filings. Simultaneously, the stock price of Applied UV hovers close to $0.00.
On May 24, Applied UV, Inc. and its subsidiary, Sterilumen, Inc., filed for Chapter 11 bankruptcy in the Southern District of New York, citing significant financial struggles. The company might be best known in lighting industry circles for acquiring Denver-based PURO Lighting and LED Supply Co. in 2023.
Applied UV, a publicly traded holding firm, owns four total subsidiaries: Sterilumen, Munn Works, PURO Lighting, and LED Supply Co. These subsidiaries focus on air and surface disinfection technology, specialty LED lighting, luxury mirrors, and commercial furnishings. In 2022, the year before the PURO and LED Supply acquisitions, Applied UV recorded $20.1 million in sales and a net loss of $8.1 million.
The reported cause of bankruptcy
A declaration filed by CEO Max Munn indicates that Applied UV relies heavily on revenue from its subsidiaries, which are currently incurring losses, severely impacting the parent company’s financial health. The company faces cash flow shortages and substantial costs associated with maintaining its status as a public entity. These financial burdens have led to an inability to meet its obligations, prompting the Chapter 11 filing to protect and reorganize the business.
The bankruptcy petition reveals Applied UV's struggles, listing its assets and liabilities, which indicate significant financial distress. The company reported total assets in the range of $1 million to $10 million and total liabilities between $10 million and $50 million. The filing follows a series of financial challenges and acquisition-related debts that have compounded over recent years.
Entreprenuer sold the businesses in 2023, but is cited as the largest creditor
The top five creditors in Applied UV’s Chapter 11 bankruptcy filing highlight the significant financial obligations the company faces. Brian Stern of Stern Lawrence Holdings LLC, with a disputed claim of $4,562,500, emerges as the largest creditor.
This claim likely stems from unresolved financial agreements related to the acquisitions of PURO Lighting and LED Supply Co., where Brian Stern and Webb Lawrence were co-founders. Jim Colantoni was also among the founders of PURO Lighting.
Above [L to R]: February 2023: AHR Expo | Al Uszynski of Inside Lighting with Webb Lawrence, Brian Stern and Jim Colantoni of Puro Lighting
Acquisition Background and Financial Details
Applied UV's acquisitions of PURO Lighting and LED Supply Co. have played a significant role in its strategy. These acquisitions, producing approximately $20 million in revenue combined at the time of the 2023 acquisition, were part of an aggressive expansion strategy.
PURO Lighting, co-founded by Brian Stern, Webb Lawrence, and Jim Colantoni, gained prominence during the COVID-19 pandemic for its UV disinfection lighting solutions used in high-profile locations such as airports, hotels, and the NYC subway system.
Applied UV’s acquisition of PURO Lighting involved a payment of $1.7 million to cover specific debts and transaction costs. The deal also included the issuance of 2,497,220 shares of common stock and 251,108 shares of preferred stock to PURO’s equity holders, along with additional earnout payments. Simultaneously, Applied UV entered into a Note Purchase and Cancellation Agreement with Acuity Brands, cancelling a $5 million promissory note in exchange for $2.5 million in cash and 1,250,000 shares of Applied UV’s preferred stock.
The acquisition of LED Supply Co., also co-founded by Stern and Lawrence, entailed a payment of $3.18 million to cover debts and transaction costs, along with the issuance of 1,377,777 shares of common stock and 148,888 shares of preferred stock. Stern and Lawrence played pivotal roles in these transactions, with Stern becoming a Director at Applied UV and continuing as CEO of PURO Lighting and LED Supply Co.
Shares of Applied UV (Nasdaq: AUVI) opened the year trading at $2.36 but closed on Friday under $0.04 per share.
Our messages to Brian Stern and Webb Lawrence were not immediately returned before press time.
Applied UV Financials and Plans
Other large creditors of Applied UV include Alliant Insurance Services, Inc. with an insurance-related claim of $197,909.02. Carmel Milazzo & Feil LLP, a legal services provider, has a claim amounting to $314,045.50. Cedar Advance LLC holds a loan claim of $1,032,973.00, while Perkins Coie LLP, another legal services firm, has a claim of $250,000. These substantial claims from various sectors underscore the multifaceted financial pressures leading to the bankruptcy filing.
As part of the restructuring plan, Applied UV intends to secure Debtor-in-Possession (DIP) financing through Pinnacle Bank to maintain normal business operations during the bankruptcy proceedings. The DIP financing is essential for ensuring liquidity and preventing business disruption. The company plans to sell off unprofitable parts of the business while reorganizing the remaining assets to improve financial stability.
Future Prospects
Brian Stern ,Webb Lawrence and Jim Colantoni, key figures in both PURO Lighting and LED Supply Co., have publicly reflected on their entrepreneurial journeys and the challenges they faced. Their recent LinkedIn posts highlight the emotional and professional impacts of recent events as they express gratitude for their teams and hint at future endeavors beyond Applied UV.
As Applied UV navigates bankruptcy proceedings, the future of PURO Lighting and LED Supply Co. remains uncertain. The Chapter 11 filing aims to restructure the company's debts and operations to achieve financial stability. However, the outcome will depend on the company's ability to manage its liabilities and potentially attract new investment or acquisition interest.
