On Monday, Symbiont told the bankruptcy court that an agreement was pending to provide interim funding of $6 million for the blockchain startup while it seeks additional equity funding. The company filed for Chapter 11 bankruptcy in early December 2022 after it failed to pay $2.3 million related to a guaranteed loan from LM Funding.

In the past, Symbiont has raised $56 million in funding from companies including Citi, Nasdaq Ventures and Broadridge, with high-profile clients including Vanguard, Nasdaq, SWIFT and State Street.

Planned merger and financing

There is a non-binding letter of intent from Morse Labs, whose goal is to merge with Symbiont and inject $6 million as bridge financing to acquire or settle LM Funding’s debt and pay off other creditors, adding another $2.3 million. Dollars. It also aims to reinstate and pay the 30 employees currently on leave.

The merged company will be called Symbiont and will then seek an equity financing round to raise $12-$15 million at a valuation of $75 million.

Meanwhile, the funding will remove Symbiont’s common shareholders from the initial round, leaving the “sole Morse shareholder” with two-thirds of the capital with the remainder going to Symbiont’s preferred shareholders of its Series A and B.

Based on our research, this likely means that an organization controlled by current Symbiont chairman Shivan Govindan will own two-thirds of the merged company.

The white knight is the president of Symbiont

In the bankruptcy filing, Symbiont’s lawyer described Morse Labs as a Symbiont client for two years.

“Morse Labs is an existing licensee of Symbiont and has a technical team that has been working with the Symbiont team for approximately two (2) years,” the lawyers wrote in a letter to the court. “They know the technology and applications well. As such, Morse brings with them technical expertise, access to their own customer base and a suite of complementary products, making them an ideal strategic partner in growing Debtor (Symbiont) following the conclusion of these proceedings.”

There is little record of Morse Labs on the Internet. A Symbiont member told Ledger Insights that there was a project called Morse, which is developing a blockchain payment system for credit unions in Colorado. The company behind the project already provides a payment system to credit unions and blockchain is being used to update it.

The Morse Payments project partnered with Helios Companies, which provides compliance software solutions to community banks and is led by Symbiont President Shivan Govindan.

The Helios connection is bolstered by Morse’s Letter of Intent to merge with Symbiont, signed by an executive who is also a board member of Helios Companies and Helios Holdings. Last year, Helios Holdings raised $8.4 million in funds, according to an SEC filing.

Meanwhile, in late December 2021, Symbiont settled a court case with IHS Markit’s IPREO in which it was awarded $53 million. The LM Funding guaranteed loan was just before the deal. However, much of the settlement went to litigation funding, leaving just $25 million, which was spent on operations through 2022.