Metigy, the artificial intelligence marketing platform started in 2015 and now in voluntary administration, relied almost entirely on capital injections to run its business, according to an investigation.
The administrators, Simon Cathro and Andrew Blundell of Cathro Partners, found that the startup apparently didn’t lodge business activity statements, didn’t create formal financial statements and nor did it appear to lodge tax returns.
The investigation report: “Metigy does not appear to have earned any revenue since its inception.”
Staff are owed millions, including superannuation payments.
Part of a $20 million capital raise last year -- led by Cygnet Capital and including Regal Funds Management, OC Funds and Five V Venture Capital -- to expand the business then became a loan used to buy personal property.
Overall the company said that it had raised $27.1 million since inception.
The startup, targeting small businesses, was greeted with enthusiasm by investors. One funds manager told AdNews at the time of the big capital raise that Metigy, according to the numbers, was growing month by month.
He said: “Over a period of time, they continued to outperform our expectations and their own internal budgets, which meant that it was growing at an extremely rapid pace."
The funds manager then spoke of the people involved, especially founder David Fairfull, a former We Are Social managing partner: “The biggest thing in early stage investing is the person, the guy or girl, that you are backing.
"David has had previous success in his other businesses, but he's also just very passionate and clearly driven to make Metigy as big a success as possible."
The administrators, in their report, say Metigy is insolvent.
Corporate regulator ASIC is investigating: “ASIC has commenced an investigation into the circumstances of the collapse of Metigy and the matters identified by the administrators in their report. ASIC will not comment further regarding its investigation.”
The report to creditors from Cathro & Partners: “From our investigations to date, it appears as though the Metigy Group didn’t ever reach a cash flow positive trading position.
“During the year prior to our appointment, Metigy raised capital of more than $20 million from various investors which appears to have been used to service the day-to-day trading requirements of the group entities and a loan to the director which was used to purchase personal property assets.”
Seventy-five staff lost their jobs when the company went into voluntary administration late last month.
Many have since been offered new roles elsewhere. The staff created a spreadsheet listing those looking for a role. It can be accessed HERE.
The administrators have so far been unable to find a buyer for Metigy’s assets despite 20 parties signing non disclosure agreements.
The report to creditors puts the estimated realisable value of the company's assets between $46,840 and $351,950.
A possible asset is a $4.76 million loan repayable to the company by Metigy’s founder Fairfull.
This was originally a $7.7 million loan, used by Fairfull to buy a Sydney house and a rural retreat.
The administrators have placed two caveats over two properties, one in Mosman in Sydney’s Lower North Shore and one in the Wattamolla area of Kangaroo Valley, south of Sydney. The mortgages are currently in default.
On the other side, creditors are owed more than $15.86 million, according to the report to creditors.
The administrators currently see no returns for creditors.
An estimate of known priority employee entitlements: $2,565,899.38.
The administrators have so far received proof of debt from former employees totalling $2,300,887.
And there could be a tax bill: “We note that Metigy does not appear to have lodged any tax returns or business activity statements during its existence.
“Should those returns be lodged, it is likely that there would be a substantial amount owed to the ATO with respect to outstanding goods and services tax in this regard.”
The Australian Taxation Office has lodged a claim for superannuation guarantee payments of $656,360.98.
Metigy Pty Ltd didn’t generate any sales but Metigy Administration, a company set up to service the group, reported total 2022 financial year sales of $61,120.
This revenue was dwarfed by expenses including wages and superannuation ($6,969,216 for the 2022 financial year), advertising and marketing ($623,392), recruitment costs ($435,640) and rent ($335,284).
The admninistrators recommend Metigy be wound up.
They say the company “has been insolvent for a significant period of time” and that liquidation will allow the pusuit of “various legal claims against various parties”.
A proposal will be put to a meeting of creditors on Friday.
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