A subsidiary of an Australian tech and media start-up that had $12 million worth of investment poured into it has collapsed.
Last month, E-Mersion Media (Aust) Pty Ltd went into administration, with all its operations ceasing and staff stood down immediately.
E-Mersion Media, based in Melbourne and with offices also in the UK, captured investors’ interest with its “innovative” idea of digitising traditional print magazines, and had landed big deals with FIFA and F1 to produce their programmes.
But in the last year, the company was the subject of a news.com.au investigation after its staff quit en masse while investors raised concerns about how their money was being spent.
E-Mersion Media Pty Ltd continues to operate as the parent company to the employing entity E-Mersion Media (Aust) Pty Ltd, which is now under external administration.
According to the first meeting of creditors, the company owes more than $13 million to creditors but some amounts are disputed.
The Commissioner of State Revenue started winding up proceedings against E-Mersion Media (Aust) Pty Ltd in March.
The appointed administrator, Mathew Gollant of restructuring firm CJG Advisory, sent an initial report to creditors obtained by news.com.au, which said this was a contributing factor to the firm’s demise.
The document stated that the commissioner of state revenue debt, coupled with another debt owed to the Australian Taxation office, tipped the company over the edge and led to the decision to call in external administrators.
Mr Gollant also wrote “the potential insolvency of the company” was another reason the company was put under his control.
The tax debt stands at $1.1 million while the company’s accountants are owed $23,000. Meanwhile, the parent company, E-Mersion Media, claims it is owed $11.4 million, which makes up the bulk of the debt.
Five staff members have also submitted claims for unpaid entitlements ranging from $2000 to $23,000.
The administrator also pointed out in the meeting there were some disputed debts. Four additional staff members claim they are owed money ranging from $17,000 to over $100,000.
Another business also claims to be owed $179,000.
These are all in dispute.
The administrator recognised each of these debts for just $1 at the meeting, so that the creditors could still attend, but said he needed additional proof of the debts.
The case brought by the Commissioner of State Revenue is still ongoing and the company is due in court later this month.
In response to the fact that the employing arm has gone bust, the company’s sole director, John Iliopoulos, told news.com.au: “No one has more to lose in this than the parent company, the shareholders which obviously includes my family interest.
“I have and will continue to fight to try and save.”
Just months ago, Mr Iliopoulos told news.com.au that E-Mersion Media was solvent and that all wages had been paid up to date. He acknowledged the business had a revenue problem.
About half of E-Mersion Media’s workforce had quit by June last year amid claims staff were owed wages, which has been denied by the company. The number of staff had dwindled from 16 employees to just eight midway through last year.
The business also copped criticism after an internal report claimed E-Mersion Media spent more than $1 million on travel expenses over the past three years, including more than $100,000 for a year-long stay at a luxury villa in Doha.
more than $1 million has been spent on travel expenses over the past three years, including “businesses (sic) class airfares, luxury accommodation, fine dining, alcohol, spas and balinese (sic) massages”.
In response, at the time, Mr Iliopoulos said: “It’s just part of our business. We’re an Australian company, all our contracts are based overseas.
“It would have been way more expensive to book individual hotels for a month. It did work out cheaper to book it (the villa) for the year. We continued to negotiate deals in Qatar, I don’t think it was a waste of money.”
“The parent entity E-Mersion Media Pty Ltd, has raised millions of dollars, much of which has been used to support the operations of the voluntary administration company, E-Mersion Media (Aust) Pty Ltd,” the administrator told news.com.au in a statement.
Indeed, E-Mersion Media had attracted about $12 million from about 50 investors but several were concerned the company was on the brink of liquidation.
In an open letter to investors sent in September last year, one person described themselves as a “concerned shareholder” and said they were concerned the company might go into liquidation.
Basil Stathoulis, who invested $68,000 into E-Mersion Media, fears that with the company’s collapse “my money is lost”.
Last year, several staff claimed E-Mersion Media held crisis meetings on some occasions when the pay run was due as wages arrived late and at times not at all, leaving some employees struggling to pay rent and other living expenses, which the company denied.
Mr Iliopoulos had said the company has ensured all wages were up to date with the exception of three employees who were accused of misconduct.
Several employees said they were accused of misconduct and were suspended without pay but were not provided with any detail or information relating to the allegation.
Mr Iliopoulos said the Fair Work Ombudsman (FWO) had contacted E-Mersion Media about one case of non-payment but said the matter had been dismissed.
Despite this, the Fair Work Ombudsman (FWO) confirmed to news.com.au that an investigation was underway at the time.