Technology-products distributor Wynit, which closed its Greenville headquarters unexpectedly Aug. 25, has filed for bankruptcy, citing more than $106 million in outstanding debts, according to court documents.
Top among the now Minnesota-based company's creditors is Fitbit Inc., at $31 million.
This is Wynit's first bankruptcy. It is a Chapter 11 filing, which generally means the company plans to reorganize and pay creditors over time.
Chief Operating Officer Pete Richichi filed the paperwork in Minnesota bankruptcy court on Sept. 8. He and Wynit's president and founder, Geoffrey Lewis, are listed as 50-50 owners of the enterprise.
In a declaration to the court, Richichi said Wynit generated $1.1 billion in gross revenue last year and profits of about $18 million. He told the court the company intends to sell $90.5 million of inventory currently in its warehouses and collect about $108 million in outstanding accounts receivable. Wynit also plans to sell its Encore Software division.
Much of the company's technology-based inventory has a short "shelf-life", Richichi wrote, adding "it will be critically important to liquidate WYNIT's inventory as quickly as possible" that is, before Christmas of 2017.
Richichi attributed the company's downturn to slower than expected 2016 holiday sales, including a 30 percent shortfall in sales by its largest unnamed supplier.
"The retail sector is undergoing significant changes and experiencing financial stress, and the market relating to technology-related products is particularly volatile given competitive pressures and the rapid rate at which such products develop and evolve," Richichi wrote.
Richichi said other factors "slowing the cash conversion cycle" at Wynit were its headquarters move to Greenville in 2015, including accounting and finance functions, and its new chief financial officer, who had to be brought up to speed. After the slow holiday season, Wynit tried to keep up its cash flow through credit extensions but was ultimately unsuccessful, according to Richichi's declaration, and ceased operations at 1 p.m. Aug. 24.
Wynit's closure immediately left 140 people in Greenville out of work and another 60 at other locations. Most of the 140 had been doing sales, IT, accounting and logistics work out of the company's headquarters in the downtown Greenville ONE building at 2 Washington St.
"Due to a number of unexpected financial issues combined with a disappointing holiday selling season, Wynit Distribution LLC announced a reorganization today that will close its Wholesale Distribution Division based locally," a statement from the company said at the time.
As of the Sept. 8 bankruptcy petition date, according to court documents, Wynit owed employees for unpaid gross wages, commissions, benefits, salaries, payroll taxes, reimbursements and 401(k) contributions. Wynit owes $181,554 in payroll taxes alone, according to court documents.
In his bankruptcy declaration, Richichi asked for permission to use a post-bankruptcy loan to continue paying its remaining 145 employees and to pay wages owed to those who were laid off, up to a maximum of $12,850 each.
"These people should not be made to suffer further by waiting to receive one of their final (or in many cases, their final) pay checks," Richichi wrote.
Meanwhile, Richichi did not state the company's plan regarding its lease on 57,330 square feet of space at the Greenville ONE building. The lease goes through January 2026, and the company was paying $127,565 per month, an amount that the property's landlord considers "below market," Richichi wrote.
Wynit Distribution was a marketing, distribution and logistics company that launched in 1987 in Syracuse, New York. With operations in South Carolina, Arkansas, Minnesota, Tennessee, Nevada and Ontario, the company delivered high-tech goods such as 3-D printers, drones and software to thousands of resellers around the country. Wynit’s business model was that of a "middle man," purchasing inventory from manufacturers and storing it before reselling it to large retailers such as Staples, Best Buy and Amazon.
According to the court documents, Wynit shipped millions of dollars worth of product under 300 "well-known brands" every day.
Deidre MacVicar, marketing manager for a software firm in Pleasanton, Calif., said she learned of Wynit’s closure on Aug. 25 but could not get in touch with anyone from the company for several days. Her company, Nolo, a divison of Internet Brands, distributed boxed software through Wynit.
“The moment they closed down, we lost access to their portal,” MacVicar said.
MacVicar said she received a general email from Richichi, on Aug. 29 that was addressed to all of the company's suppliers. In the email, Richichi apologized for the closure of its wholesale distribution centers, citing unanticipated financial issues. Richichi also acknowledged the seriousness of the situation and promised to reach out again as the company determined its next steps.
MacVicar said Wynit had gotten further and further behind recently on payments to her company, so the distribution company’s closure did not come as a surprise. She said her company had been trying to meet with Wynit officials to sort out the distribution company’s past-due bills. The majority of value in her product, software, does not lie in the boxed CDs that Wynit collected from her firm.
“I feel fortunate in that sense,” she said.
In the meantime, MacVicar said, she is trying to find a new distributor. Wynit purchased Nolo’s previous distributor, Minnesota-based Navarre, back in 2015.
Wynit's bankruptcy papers, filed last week in Minnesota, indicate the company has between 5,001 and 10,000 debtors and assets worth between $100 and $500 million. Its liabilities, meanwhile, are between $10 and $50 million.
The company's top 20 creditors with unsecured claims are:
- Fitbit Inc. $31,524,143
- Daymen Asia Limited $12,862,091
- SZ DJI Tech Co. $9,927,354
- Symantec Corp. $9,301,217
- Yuneec USA Inc. $7,163,459
- Canon USA Inc. $6,424,326
- McAfee, LLC $3,480,045
- Nuance Communications Inc. $3,097,706
- Asian Express Holdings $2,927,536
- Orbotix Inc. $2,423,359
- Western Digital Technologies $2,363,462
- Lifeprint Products Inc. $2,061,517
- Wacom Technology Corp. $2,044,712
- Harman Technology Limited $1,822,714
- HID Global Corp. $1,741,958
- Amazon Fulfillment Services $1,704,572
- Square Inc. $1,578,737
- Quicken Inc. $1,488,863
- Evollve Inc. $1,383,184
- HID Fargo $1,344,556