Photizo Acquired by Virtulytix, as Kentucky Commonwealth Files Lawsuit on Behalf of Unpaid Employees
In a deal announced earlier this week, Photizo Group’s assets were repossessed by primary secured creditor Meritus Ventures, a U.S.-based venture-capital firm that Photizo of Lexington, Kentucky, owed over $4 million in loans to. Yesterday, Virtulytix – a new “advanced analytics firm” also based in Lexington, Kentucky, and staffed by several former Photizo employees – also announced that it had acquired Photizo. Today, Wirth Consulting also received a copy of a complaint filed on August 16th in the Fayette Circuit Court by the Commonwealth of Kentucky’s Labor Cabinet on behalf of employees with unpaid salaries and wages that combined, total almost $100,000.
Overall, the owners of Lyra Research are said to be set to lose $1.3 million. (Photizo acquired U.S.-based Lyra Research In 2012; Lyra Researcher published the well-known Hardcopy Observer, which covered the print and digital-imaging industry.)
Alleged Non-Payment of Employees
Along with reviewing court papers filed on behalf of Photizo employees, Wirth Consulting spoke with a source familiar with the matter who said that former and current Photizo employees have been unpaid in the amount of some $500,000. The source also stated that, in addition to the Commonwealth of Kentucky, the U.S. federal government is also becoming involved in legal action involving the unpaid employees.
Photizo Letter to Creditors
Wirth Consulting reviewed a copy of a letter from counsel for Meritus Ventures to Photizo’s junior creditors. The letter states that Photizo owes Meritus some $4 million in defaulted loans, with the last payment made in 2015, and that Meritus is the senior creditor. It states that: “The unsecured creditors and junior creditors of Photizo will not be paid any part of the proceeds received from the liquidation of Photizo assets because those assets are not worth more than the outstanding balance of the Photizo debt to Meritus.” The letter continued: “The Photizo assets will be sold to Virtulytix, Inc. (the “Buyer”) in exchange for the agreement of the Buyer to assume the outstanding deb of Photizo to Meritus (approximately $4,000,000)…. The Buyer’s debt to Virtulytix will be secured by a first security interest in all assets of the Buyer, the personal guarantees of Ed Crowley (editor: CEO of Photizo) and his wife and other collateral.”
The letter also states that Meritus invested $1,230,000 in Photizo “preferred stock,” and that “Unless the Buyer (editor: Virtulytix) is successful, Meritus stands to lose more than all of the Photizo unsecured creditors put together.”
With the sale of Photizo’s assets to Virtulytix, which opened its doors this month, now complete, Virtulytix expects to be able to “leverage the significant investment and intellectual property development that Photizo Group Inc. made into predictive analytics, including the patent-pending model for dramatically reducing wasted toner due to early replacement in managed imaging fleets.”
Virtulytix’s management team includes former Photizo Group employees Scott Hornbuckle (president), Mario Diaz (vice president of consulting), and Ron Iversen (vice president of market intelligence services).
Virtulytix says it will continue to support Photizo Group’s imaging-industry clients with consulting and market-intelligence services and “expects to make the transition as seamless as possible for Photizo Group clients.,” as the services provided by Photizo Group will continue to be provided under Virtulytix.
Although Photizo will continue as an ongoing concern, it appears to come at a substantial cost to many, having discharged millions of dollars of debt – including $1.3 million owed to the former owners of Lyra Research, and some $500,000 to former and current employees.