KKCG's entry into the Israeli startup ended in court, the group is demanding CZK 120 million
KKCG managed to win the first trial with the startup Bio-Nexus, the next will be in the summer.
JAN SEDLÁK April 28, 2020
The first entry of the Czech investment group KKCG , backed by billionaire Karel Komárek , into the startup scene in Israel was infamous. Fund springtide Ventures , which is wholly KKCG owner and which acts as a vehicle for investment in startups (Geewa, Techloop, ThreatMark and others), sued the Israeli company Bio-Nexus . Among other things, it demands compensation for over 120 million crowns.
Springtide joined Bio-Nexus as an investor in 2016 and blames its CEO, Ztiki Fuchs, for falsifying financial results, invoices and audit reports. If the situation is not yet disrupted by a coronavirus, a hearing in Tel Aviv District Court is expected in June. But Fuchs tries to counterattack and tries to get a lawsuit in court. He argues in it as to the Czech company Cleerio, which also belonged to the Springtide portfolio and which will be discussed later.
Bio-Nexus was created in 2010 for first responders. They created software for mobile smart devices that recorded the process of what happened to the injured person during the work of the rescue service, with the data then immediately available to doctors. The tool then expanded into other areas and was used to digitize processes, such as aviation.
KKCG's original investment in Bio-Nexus was in the order of millions of dollars, thanks to which the Czechs gained a fifth share. Over the next two years, the group gradually increased its stake in the Israeli startup. It gave a cash injection into the share capital and then sold a 100% stake in Cleerio in exchange for acquiring an additional stake in the share capital of Bio-Nexus. Overall, KKCG acquired a 40 percent stake and became the largest shareholder. According to court documents, the total investment was to be 35 million Israeli shekels, ie over 252 million crowns.
The Czech company Cleerio , formerly known as Geosense, plays a significant role in the whole story. Cleerio dealt with the so-called GIS area, so it offered professionals various map materials and related data and functions. Springtide joined Cleeria as an investor in 2016 in exchange for a lower million dollars. In the summer of 2017, Bio-Nexus and Cleeria merged, with the combination of the two products making commercial sense.
At the turn of 2018 and 2019, however, the situation was different. The Czech company TopGis acquired the Cleerio application from Bio-Nexus, which also took over customer contracts. The data was transferred to the GisOnline.cz service under TopGis.
Insolvency and the first strange signals
In April 2019, an insolvency proceeding was opened for Bio-Nexus, of which Cleerio was already a part, stating that the company owed its employees wages. Insolvency is still in progress, the last record of development was entered into the insolvency register on the sixth of April this year .
TopGis said on the website that "after the company failed to spread the cost by expanding its services to the United States, it changed its strategy with an Israeli partner. Bio-Nexus sought new revenue in applications that digitize processes, increase efficiency, and help with asset management and crisis situations. ”
Representatives of KKCG and Springtide Ventures, respectively, state for Lupa that signals that everything in Bio-Nexus will probably not be right began in 2018. According to Czech investors, the executive director of the Israeli startup Ztiki Fuchs has repeatedly failed to present regular financial results. To date, the audited results for 2017 have not been submitted, the promised financial strengthening of Cleerio has not taken place and the employees have stopped receiving salaries.
Springtide tried to solve the problems by offering Dum Spiro, which was controlled by CEO Fuchs and which held 38.61 percent in Bio-Nexus, its 40 percent stake. In the end, the deal did not take place - allegedly because Fuchs did not sign the negotiated sales contract.
"In the spring of 2019, it was already clear that Bio-Nexus was in a very poor financial situation. Among other things, Israeli employees turned to us and warned that if they are not paid their wages of more than six months, they will be forced to file an insolvency petition with Bio-Nexus, "describes Springtide manager David Marek for Lupa. As described above, insolvency eventually occurred.
Springtide then tried to take control of Bio-Nexus and get detailed information about its operation. The board had four members, with Springtide having two, as did Dum Spiro. With reference to the shareholder agreement, the Czechs wanted to appoint a fifth member of the Board of Directors. Dum Spiro attacked the move, causing a stalemate. Springtide took the case to court. It decided that the board of directors should remain four-member, but further determined that Bio-Nexus must provide the required information to its Czech shareholder.
On this basis, Springtide agreed that Dum Spiro would provide a loan to Bio-Nexus in order to repay the liabilities in order to avert the insolvency petition by the employees. However, this loan was not provided.
Fraudulent results, invoices and audit reports
KKCG / Springtide Ventures reports that there has been fraud on the part of Bio-Nexus and its boss, Ztiki Fuchs. The investor thus filed a lawsuit against Fuchs for damages and the imposition of an interim measure prohibiting the use of personal property. In January 2020, the court held on the issuance of this interim measure. Fuchs' appeal was dismissed. This summer, the court should decide on possible damages. Philippe Metoudi, chairman of the board of Bio-Nexus, also filed a lawsuit for two million shekels.
"In June 2019, after a series of obstructions by CEO [Fuchs], a review of Bio-Nexus' accounts took place. Among other things, the original audit reports from 2015 and 2016 were obtained during it. These reports proved that Bio-Nexus had almost zero sales and a permanent loss for both periods. During its due diligence before joining Bio-Nexus and during the investment, KKCG / Springtide received audit reports that were demonstrably forged, as well as invoices issued to customers that were part of the due diligence. The falsified financial results were also attached to the investment agreement between Bio-Nexus and KKCG. Through Mr. Fuchs, Bio-Nexus provided a statement in the investment agreement and a guarantee that the financial results attached to the agreement provide a true and fair view of the company's performance, ”KKCG now describes.
Although Fuchs has already lost the first trial, he presents a different picture of the whole case. In a statement sent by his representatives to Lupa, he states that it is the KKCG behind the fall of Bio-Nexus. He blames two managers of Springtide Ventures, namely Marek Jablonský and Michal Tománek. It is said that Jablonský demanded Fuchs to give numbers on the functioning of Bio-Nexus, which could be presented internally in KKCG as a successful startup investment. Fuchs further claims that this fraudulent information was subsequently misused against him in court.
According to Fuchs, the sale of Cleerio was also problematic. "Komárek, Jablonský and Tománek deceived Bio-Nexus by claiming that Cleerio has an annual turnover of one million euros, but in retrospect it turned out that this was not true. The only intention was to sell Cleerio to Bio-Nexus in order to avoid a loss of 2.5 million euros for Springtide, which was the amount the fund invested in Cleeria, "says Fuchs. According to the head of Bio-Nexus, Komárek should have sold a loss-making company so that he would not be presented as a man with a bad investment, who had to lay off people.
"This is an unfounded proposal with no factual or legal basis. This is another desperate move by defendants who are suing 17 million shekels for fraud and misrepresentation. The district court [in Tel Aviv] has already considered it appropriate to seize the defendant's property, "add Springtide's lawyers.