Ontario’s Superior Court has granted semiconductor developer Peraso Technologies creditor protection after it accused one of its clients, the $15-billion New York-based tech company Ubiquiti, of holding it “hostage.”
Toronto-based Peraso — which has raised about US$116 million from a number of high-profile investors including Inovia Capital, Roadmap Capital and the Ontario Capital Growth Corporation—employs 78 people. According to court documents, Peraso claims Ubiquiti owes it $10 million, while Ubiquiti maintains it owes Peraso nothing and has sought over US$5 million in damages in multiple lawsuits. The Ontario Superior Court has ordered that all litigation cease until July 3.
Peraso is the second Canadian tech company to be granted protection under the Companies’ Creditors Arrangement Act (CCAA) — a federal law allowing firms that owe over $5 million to restructure — since the pandemic began. Thirty firms have been given CCAA protection so far this year, ahead of the 17 firms that had received it by this time in 2019.
If Peraso goes under, two Toronto investment firms — Roadmap Capital and Polar Asset Management Partners — could be out $7.7 million. All in, Peraso owes $8.7 million to 31 creditors. Peraso says it could pay those creditors, but in documents filed with the court, it claims it’s been waiting since January 2019 for Ubiquiti to pay for an order of semiconductors. Ubiquiti, which has exclusive rights to purchase some of Peraso’s semiconductors, says the products it was sent were not delivered on time, and therefore it is not obligated to pay for them.
“Peraso understood Ubiquiti to be holding the financial stability of Peraso hostage in exchange for acquiring the intellectual property rights owned by Peraso under the Licence Agreement,” reads an affidavit from Peraso CEO Ronald Glibbery. Glibbery declined to answer The Logic’s questions. Ubiquiti, which unsuccessfully challenged the creditor protection attempt, did not respond to The Logic’s request for comment.
In February 2019, Peraso raised US$42 million with the goal of challenging Qualcomm and Intel’s dominance of the chip market. At the time, TheGlobe and Mail reported it was one of only three companies making a chip that’s key for 5G networks; at least one of its investors was hoping it would go public, while its then-CEO Bill McLean told TheGlobe an acquisition by a foreign buyer was likely.
The company’s position has since deteriorated. In 2019, Peraso generated $506,000 in gross revenue with a net loss of over $26 million, court documents reveal. It’s eliminated 24 staff positions since December 2019 in an effort to cut costs, and has repeatedly tried to sell the company or secure new funding. In January, the company attempted to terminate the licence agreement with Ubiquiti; shortly thereafter, Ubiquiti began legal proceedings to challenge the termination. According to court documents, talks with a potential buyer fell apart in February and three directors resigned amid concerns over personal liability; Ubiquiti is seeking damages from individual directors as well as the company.
In the court documents, Peraso claims multiple companies have expressed interest in its technology. The firm has been granted about 25 patents, many related to next-generation wireless technology, and has about 45 patent applications.
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However, the Glibbery affidavit reads, “Peraso is, quite simply, too risky for an investor or acquiror,” adding that at least seven of its existing shareholders and lenders turned down requests for additional financing and that the firm tried unsuccessfully to secure government grants. “All applications and discussions regarding such grants made enquiries about Peraso’s on-going litigation with Ubiquiti. At this time, I do not believe Peraso will be able to obtain any government assistance in the short term, if ever.”
In October 2019, Peraso asked a group including Ubiquiti to provide additional financing. It did obtain $1.7 million in financing from entities affiliated with Roadmap and Polar Asset Management, which it used for payroll, among other expenses.
By February, it was on track to run out of money again and secured additional financing from Roadmap Capital. As of June 12, Peraso owes $3.9 million to Roadmap because of it. Ubiquiti is challenging this financing in one of its lawsuits, stating that the transaction “destroyed the preferred status of all of Peraso’s remaining preferred shareholders (including Ubiquiti) and gave Roadmap preferred and secured interests in Peraso in exchange for interim financing,” according to its court filings. Roadmap principal Imed Zine did not directly reply to questions from The Logic. “We are currently working through the courts system,” said Zine.
Peraso has been trying to maintain its regular business operations and is currently trying to secure interim financing before the court-ordered stay expires on July 3, according to the court documents. The company is also scheduled to return to U.S. court on July 8 for a hearing as part of its application for bankruptcy protection in that country.