skully-ar-1-helmet

Skully on Friday finally acknowledged what has already been known in the motorcycling community: the company was going out of business. The news comes after a last-minute effort by the remaining management to secure a new round of funding.

With $15 million down the drain, work still to do before the Skully AR-1 would be ready to ship, and a growing group of disgruntled early adopters, Skully’s resurrection was not to be.

Instead in a letter to backers and customers, Skully announced that it would be filing for Chapter 7 bankruptcy, the bankruptcy procedure for companies that are going out of business. This news, of course, directly impacts the thousands of motorcyclists who were expecting to receive a Skully AR-1 helmet.

Under a Chapter 7 bankruptcy filing, all of the company’s assets (inventory, equipment, intellectual property, etc) will be liquidated by a court-appointed trustee. The trustee will then use the sale of these assets to pay back debts owed to the company’s creditors.

Once those debts have been paid off – there is a very important pecking order that dictates which creditors get paid first – the remaining funds, if any, will be used to refund customers.

That caveat in the middle is an important one because for Skully the term “creditor” will likely apply to anyone who “purchased” a helmet from the record-breaking Indiegogo campaign.

I am using quotes here because what is about to happen in this story involves a bit of legal and finance mumbo jumbo, and these terms don’t technically apply, in the eyes of the law.

This is because technically users of the Indiegogo website aren’t buying anything, and aren’t protected by traditional consumer laws (you could probably make an argument in court counter to this, but I wouldn’t see it as a winner). Instead, they are investing their money, and thus considered investors.

This is because on Indieogo you are giving a company money, and in return your consideration is worth some sort of perk – in this case, Skully gets your hard-earned dollars, and in exchange promises one day to send you a helmet.

This makes someone who participated in Skully’s Indiegogo campaign not a customer or buyer, but instead an unsecured creditor. Unfortunately, when it comes to a Chapter 7 bankruptcy proceedings, unsecured creditors are the low man on the totem pole, and often last to get paid.

Secured debt (debt from loans that were secured by using a company’s asset as collateral) will be the first debt to be repaid (after the court-appointed trustee gets paid, of course), which could include any banks, suppliers, credit card issuers, or investors who made loans or convertible notes to Skully.

Once these secured creditors are paid back in full (assuming there is enough money/assets available actually to pay them back in full) then the trustee will begin reimbursing unsecured creditors.

It should be noted that often unsecured creditors have to register their claim with the trustee – it sounds like this will be the case with Skully’s bankruptcy procedure.

For would-be Skully owners, who didn’t go through the Indiegogo crowdsourcing campaign, the chance for a refund is even more slim. The trustee will likely only issue cash refunds to AR-1 buyers once the secured and unsecured creditors have been made whole again.

I wouldn’t give good odds for the Indiegogo backers getting their money back, even in part, which means that actual Skully “buyers” have only the faintest of hopes in getting reimbursed.

All of this is subject to what the court-appointed trustee deems fit, of course, which will largely be dictated by what kind of assets Skully still has, and how many claims there are from creditors.

If you paid Skully money, for any reason, we highly recommend you get in touch with the trustee, and file any paperwork they require. For your reference, below is the letter sent by Skully to its backers and customers:

SKULLY Ceases Operations

It is with great regret we must announce that SKULLY will formally cease operations, effective immediately. Over the past several weeks our management team has worked feverishly to raise additional capital but unforeseen challenges and circumstances, beyond our control, made this effort impossible. What this means now is that SKULLY will no longer be able to ship AR-1 Units or process refunds directly.

Substantially all of the assets of SKULLY are now subject to liens held by a secured creditor. The management team does not know if there will be any value above the amount of the secured debt. In addition, at this time, we are not aware whether there will be any distribution amounts available to unsecured creditors. SKULLY now plans to file a Chapter 7 Bankruptcy case within the next several weeks. You will receive notice from the Bankruptcy Court and instructions on how to file a claim.

Our team is devastated and deeply saddened that our valued partners, vendors, employees and customers have been negatively affected by what has transpired. We realize there are many unanswered questions and that this is a very upsetting situation. We are truly sorry.

-SKULLY

Source: Skully

  • WOLF

    A lesson to be learnt for all those wishing to give money on a scheme early, I’m order to save s few bucks.
    Not all will agre,, but I bet the people burnt on this will think twice.
    All the best to those trying to get a refund.

  • not-a-fanboi-honest

    Not handled very well, the website appears to be “taking orders” as I type and claiming “shipping in November 2016”. They should at least have taken the date off and closed the ordering system as soon as they were aware of not being able to deliver.

  • Kalan

    Jensen, your pro-govt regulation bias shows through in these articles… especially the SKULLY ones. I’m sure you paid a lot for a university degree and you bought plenty of borrowed wisdom. I also assume your blog has zero employees, and that you don’t make anything, you just write about the amazing products other people create. I believe that if you created physical things and had employees your perspective would change very quickly. The reason why your opinion doesn’t matter much to me is because you don’t create the things people want/need, I can’t ride your blog through the canyons can I? I care more about the opinions of people who create things that make people’s lives better in the long term, the creator is infinity more valuable than the critic. So let’s build a society that rewards creators not critics.

    Bottom line is: No risk = no reward. If you wanted a SKULLY helmet first and for a discount then you took a risk. If you think some startup with no capital can build the magical helmet that none of the major helmet or electronics manufactures could then you aren’t living in reality from the start. Experience always costs you something. If losing < a thousand dollars is going to bankrupt your estate, then investing in futures is not for you. People that "bought" SKULLY (which I did not) probably needed to learn this lesson, but big picture it was a pretty cheap lesson and they got some first hand wisdom. Smooth Seas never made skilled sailors and no preemptive govt regulations (that I'm sure you would favor) ever contributed to a savvy public. People have to touch the stove to learn it's hot, this is why round-abouts are safer that stop lights, people have to pay attention. So let's encourage everyone (founders of SKULLY included) to experiment and fail and learn and we'll all grow wiser. Sometimes you get Apple, sometimes you get SKULLY but if you roast companies that try and fail, fewer will try and you may get neither. And if you tax the ones that succeed to the point that the risk isn't worth the reward then you'll get soviet grocery stores with one brand of ketchup, not 43. I personally like to choose from 43 brands of ketchup, so let's encourage the making of the 44th and if it's the best I'll buy it. When the person that makes it earns a tidy profit from creating value from the risk they took I'm perfectly fine with that. But Ketchup has a lot of sugar and contributes to diabetes so since we all have to pay for each other's Obamacare now maybe all 44 ketchups should be outlawed anyway…

    But thanks for making the blog, I enjoy it.

  • Inquiry

    Interesting, their website is still operational.

    What I would like to know is; were purchases cash only? If you were to have purchased by credit card then you would have simply been refunded by your cc issuer.

  • Andre Capitao Melo

    wow…

  • EyalN

    15 million? let a Chinese helmet company to come out with something like this it will take them a week to do it and they will spend $1000 on developing it.
    like the Bluetooth for your helmet. brand name $200, Chinese $20

  • If Kalan is a troll, he’s a troll extraordinaire. Unfortunately, because I can’t ride his post, it doesn’t mean much to me.

  • Mitchel Durnell

    The yardstick for worth of anything created by humans, is if it can be ridden down the road.

  • Pete

    That was an impressive leap. A basic explanation of how bankruptcy works is pro govt regulation.

    I don’t really know what political stance Jensen takes after perusing his site daily for 2 years, and I like it that way.

  • TheSeaward

    There’s a mom joke in there somewhere, but I’m too lazy to flesh it out.

  • Angris

    So is Weller still gonna get the Lambo he was planning on?

  • irksome

    What’s that word I’m looking for… oh yeah, presumptuous.
    As in “what a presumptuous jackhole you are”.

    “But thanks for making” an ass of yourself. I enjoyed it.

  • Mitchel Durnell

    If nothing else; look how gigantic that helmet shell is on that woman’s head. As someone who usually wears a small – no thanks!

  • spamtasticus
  • spamtasticus

    Does the opinion of a capitalist, minarchist who makes software count? I mean, is software really a “thing” in your mind? Does the fact that I use contractors instead of employees devalue my oppinion on the subject? Lastly, did you read the article, and if so, have you double checked the shrooms against a list of safe botanical consumables?

  • Tyson Witte

    Excellent rebuttal. This is for those who benefit immensely from the fruits of capitalism, but preach the benefits of socialism.

  • darren636

    Oh my God!!!!!!

  • darren636

    I got a feeling that just want money and don’t in fact, give a damn.

  • Dustin Nisbet-Jones

    Sometimes you get Apple, sometimes you get Kalan

  • Dustin Nisbet-Jones

    I’m sure he’s laughing all the way to the bank

  • Darren B

    Feel bad for anyone who fell for this, even though anyone with a basic knowledge of finance should know crowd-funding is a stupid conjob endeavor, as the last 5-6 years of this retard phenomenon have conclusively shown.

    Plus the helmet design and its goals were stupid and the “creator” looked like a complete douchebag. So much funding gone to waste, oh to have witnessed some of their board meetings…. Half of it went up their noses no doubt.

  • Christopher Ring

    I have a legal curiosity, since the existing Skully helmets were never DOT certified and can now never be DOT certified, can those handful of tech bloggers who got a pre-production model actually wear them without violating the helmet laws?

    Before I get a storm of people saying it was DOT certified you need to know in the US you can’t certify a helmet till after it enters the market in sufficient numbers that the NTSB can buy them from a retailer for testing. So it couldn’t have been DOT certified.

  • Christopher Ring

    There have been a handful of successful crowd-funded endeavors but to my knowledge all them have either been software or entertainment products that don’t require production facilities. If you have to actually build something physical its going to require far more capital investment than crowd-funding is going to provide.

  • Ayabe

    Retrograde libertarian screeds from ITT tech grads make the world go ’round.

  • That’s a really good question.

    The way the DOT works does make a weird grey area in situations like these…I would say it’s not DOT legal, but I don’t really know.

    My experience with police officers is that if the helmet has the DOT sticker, they’re satisfied.

  • Greg Kinsman

    I bought the skully through their website on May 30, 2016 and upon the news immediately contacted my bank. I managed to get my money back. Don’t know if it was because it wasn’t though indiegogo or if it was because it was recently purchased. Either way I’m happy, I hope anyone else that ordered can do the same and get a refund.

  • I would expect bank/credit card remedies to work for those who purchased outside of the Indiegogo campaign, since Skully failed to deliver the product, you should be protect by your card terms.

    Technically though, I would see the banks seeing the Indiegogo transaction as completed, since you technically aren’t buying anything there.

    Your mileage may vary, of course.

  • paulus

    Occum’s razor – it seems that the bro’s may have been (extensively) dipping into the pot

  • irksome

    Unless one is a borderline sociopath, most Ayn Rand-ian masturbatory fantasies dissipate following exposure to the real world.

  • fzrider

    EyalN, Chinese companies are known throughout the world for rapidly developing products just days and weeks after recieving their purchase of said product. You should have said, “…and they will spend $1000 copying it.”

  • Ronald Fox

    glad i canceled my order after stuff kept getting delayed and delayed.

  • Travis Gemoets

    One thing this article fails to mention is that customers who purchased an AR-1 via credit card should simply call their credit card company and cancel the transaction, since the vendor (Skully) has confirmed they will not be delivering the helmet. The credit card company sits as a secured creditor so they will refund your money within 7 days.

  • That’s true if you bought the helmet through Skully’s website. It will not work if you used your credit card on the Indiegogo campaign.

  • A. D

    Who is the scully trustee and how can I get in contact with them? I purchased a helmet and never received a letter instead I was told via email once my date to receive my helmet had passed. I would like to know if I can get either my helmet or money?

  • EyalN

    https://www.buzzfeed.com/nitashatiku/skully-bankruptcy-lawsuit?utm_term=.bnWZJVZMw9#.vwed0JdoAw you can see all the details in the link.
    next time don’t buy anything from indigogo