Wave Computing Inc.

April 27, 2020

California-based Wave Computing Inc. and six affiliates (the “debtors”) are independent tech companies that (a) develop cutting edge AI solutions and (b) license IP for microprocessors used in a variety of tech apps. Traditionally, their AI tech was used for voice recognition software for mobile and desktop devices, document analysis, chat bots and vehicle safety and navigation. The second focus — the IP for microprocessors — was a later development emanating out of a June 2018 transaction premised upon theoretical benefits from combining the AI tech with the microprocessor tech. That premise didn’t come to fruition. The debtors launch of a new commercial dataflow microprocessing unit flopped, requiring re-engineering. Said another way, this failure cost the debtors a lot of time and money to figure out a solution.

Making matters worse, the debtors “became embroiled in a dispute relating to a Series E preferred equity offering.” Consequently, the debtors’ liquidity became strained and they needed to borrow new funds from equity sponsor Tallwood Technology Partners LLC.

That wasn’t enough. The debtors required additional capital but the timing was awful: COVID-19’s impact on lending foreclosed the possibility of tapping new liquidity sources — particularly with a litigation overhang in the mix. By this point, creditors and a Series E investor filed lawsuits against the debtors.

The filing is meant to avail the debtors of a much needed breathing spell; it will also provide them with much needed liquidity in the form of a DIP from Tallwood. The $27.9mm DIP includes a $14.5mm new money revolver and a full term loan rollup of the pre-petition debt. As a condition to the DIP, the debtors have also agreed to waive any and all claims they might have against Tallwood (subject to a review period by creditors).

• Jurisdiction: N.D. of California (Judge Hammond)

• Capital Structure: $13.4mm secured note (Tallwood Technology Partners LLC), $2.1mm unsecured convertible notes

• Professionals:

  • Legal: Sidley Austin LLP (Sam Newman, Julia Philips Roth, Charles Persons, Juliana Hoffman, Jeri Leigh Miller)

  • Financial Advisor/CRO: SierraConstellation Partners LLC (Lawrence Perkins, Miles Staglik, Bill Partridge, David Bitterman)

  • Claims Agent: Donlin Recano & Co. (*click on the link above for free docket access)

• Other Parties in Interest:

  • Prepetition & DIP Lender ($27.9mm): Tallwood Technology Partners LLC