RipeTime was founded in 2016 and aimed to revolutionise quality control of the global fruit supply chain. Photo / 123rf
RipeTime was founded in 2016 and aimed to revolutionise quality control of the global fruit supply chain. Photo / 123rf
The New Zealand taxpayer is the biggest loser in the liquidation of technology startup RipeTime, which has collapsed in a welter of infighting between directors, founders and shareholders.
The produce ripeness analytics company was not yet trading when an administrator, now liquidator, McGrathNicol was called in.
Government innovation agencyCallaghan Innovation said it was claiming $1.02 million from grants to the company.
RipeTime co-founder, director and creditor Jon Lowy believes taxpayers are owed between $2 million and $3m between Callaghan grants and IRD clawbacks.
The liquidator is conducting a sale process for the assets which, as at July 21, were reported by McGarthNicol to be net $2.45m with liabilities of $1.29m. However, the value of the realisable assets had yet to be determined.
Callaghan Innovation's website shows in 2016 RipeTime was awarded a growth grant capped at $5m, which was due to expire in June last year.
The company also received a project grant of $152,098 excluding GST in 2015.
RipeTime was awarded a Callaghan growth grant capped at $5m, which was due to expire in June last year
The liquidator's first report, after a meeting with creditors on August 25, lists 18 creditors, including Callaghan and some substantial shareholders. Creditors have until September 29 to file their claims.
The report said there had been a breakdown in the relationship between board members, shareholders and with a contracting engineering firm.
There was also a dispute with a key founder of the business involved in the IP development. Lowy said that was him. His employment with the company was terminated last year.
The report said the board had become "fractious".
"Management and decision making at the company had become gridlocked and as such, governance was obstructed."
Legal action between some directors was in progress when administrators were appointed in July.
The disputes had severely impacted the company's ability to secure required funding to complete development and commercialisation of its technology, said the report.
Directors on July 15 resolved the company was insolvent, or would become insolvent, and should be placed into voluntary administration. An investigation determined there was no viable option for the company to keep trading.
Lowy, a serial entrepreneur, who with RipeTime co-founder and fellow director, Grant Sargent, heads tech development incubator Salvo, said he and Sargent were the directors embroiled in legal action with other directors.
He told the Herald the litigation was over governance issues and RipeTime's constitution and shareholders agreement.
Lowy said RipeTime was founded in 2016, "a side branch" of his masters degree at AUT in 2003. It aimed to revolutionise quality control of the global fruit supply chain.
"It took a long time to undertake R&D and protect the IP, and the board pivoted to a different target market following the 2016-2017 product trials," Lowy said.
"The technology was validated in March-April 2019 and was ready for market. A marketing team had been engaged, a sales process was started. A number of international organisations had expressed interest in becoming customers or channel partners with large market opportunities. Initial production devices had been ordered.
"That's about where things started to unravel. We're still piecing the parts of the story together."
Lowy said there were two directors on the board at this stage, Kevin McFall and Ross Shannon as chairman.
Ross Shannon and family interests is the largest shareholder with 27.8 per cent. A member of his family, Sydney-based Jonny Shannon, holds 20.05 per cent.
Lowy's Mokoia Investment Group holds 4.7 per cent. His company Salvo is a creditor. It was contracted to produce a small production run of devices and provide premises and resources for RipeTime, Lowy said.
Salvo was not paid on its invoices, he said. He believes it is owed between $200,000 and $600,000.
In May last year, founders Lowy and Sargent appointed themselves directors as was their right, he said. Lowy had previously been a director from 2015 to March 2018.
Company records show RipeTime's directors today as Lowy, Sargent, Jonny (Jonathan) Shannon, Ross Shannon and Michael Van Tinteren, who owns 6.68 per cent of the company.
Ross Shannon has been approached for comment. Kevin McFall declined to talk.
Herald inquiries show that in April last year a company called Ripetime Pty Ltd was registered in NSW with the Australian Securities and Investments Commission (ASIC).
In February this year it was renamed Post Harvest Learning Pty Ltd.
ASIC records show its principals as Ross Shannon, Jonny (Jonathan) Shannon, Van Tinteren and Mitch Denton. Denton is among creditors of RipeTime.
US Patent records show Lowy filed a patent for "apparatus and method for measuring a gas" in July 2017.
The liquidator's report notes "Post Harvest Learning Pty, formerly Ripetime Pty, is an Australian company, ultimately owned by Jonathan Shannon, a director of RipeTime (in New Zealand)".
"Post Harvest applied for a patent on 10 February 2020 for "a gas monitor and method of detecting gas, including a ripening monitor".
"Post Harvest has advised that the patent application relates to a technology that is different from, and does not infringe upon, the US patent held by Ripetime. We are continuing to investigate the applicant of the Australian patent and its impact on the US patent and expect to include further information in relation to this patent in the liquidator's sale process."
Lowy said he had no access to company accounting or records since being reappointed a director in May 2019, but to the best of his knowledge, the company had raised between $7m and $8m in its time. It had received IRD R&D tax credits and seed funding from the NZ Venture Investment Fund, he said.
"What I am owed personally is not significant compared to NZ Inc and other shareholders. The value of the lost IP and opportunity for NZ Inc is greater, as is the opportunity to reduce the million tonnes a day of food waste."
Lowy said the experience was an "appalling travesty that has been a life-changing horror for Grant and myself, as well as for the investors who entrusted us to deliver".
