James Khatiblou, the landlord and CEO of Onyx Motorbikes, was once looking at his e-bike startup fall aside.
Onyx was once being evicted from its storage in El Segundo, Los Angeles. The corporate’s unpaid expenses have been stacking up. His eminent running officer had rapidly resigned. A cargo of round 100 CTY2 filth motorcycles from Chinese language provider Suzhou Jindao was once not on time, and consumers have been inauguration to call for refunds – a significant illness bearing in mind Khatiblou already owed each lenders and shareholders a batch of cash.
Khatiblou, recognized for his heat and outgoing character, was once apprehensive and wired, consistent with interviews with folk who labored along him. Within the waning months of 2023, he was once so unstable through the startup’s expanding debt and prison issues, he was once not able to practice via on unsophisticated duties. On the identical date, his condition was once deteriorating, consistent with his mom, Diane Khatiblou. The colourful and lively guy with the toothy smile was once having bother respiring or even strolling, she stated.
Next Onyx’s issues escalated in some way no one anticipated.
At 37 years timeless, Khatiblou – who cherished driving the halfpipe on the corporate storage and touring the sector – died abruptly. The Los Angeles County Coroner’s Place of job aspiring Khatiblou suffered a pulmonary embolism, checklist deep vein thrombosis as a secondary reason.
His demise on December 12, 2023 added a unused layer of suspicion to the while of Onyx and its resources.
Khatiblou left at the back of negative will and negative succession plan — simplest hundreds of thousands of greenbacks in debt and questions from group of workers, collectors and consumers about travel when the only real proprietor of an organization dies.
Lately, nobody owns Onyx Motorbikes, which means that all operations – buyer deliveries, bills to providers and collectors – have garden to a halt. Oxygen Investment, an Orange County-based creditor to which Onyx owes round $2.2 million, is petitioning the Los Angeles County probate courtroom to develop into the administrator of Khatiblou’s property.
“[Onyx] had such good prospects. It had such a loyal fan base and such a good product, and it was all just basically put in limbo the day James passed away,” Adam Lomax, eminent govt officer of Oxygen Investment, instructed TechCrunch. “And it has remained in limbo all the way up to the point where we are now.”
As administrator, Oxygen may support put some items in combination. However diverse prison wrinkles threaten to derail the ones plans.
A struggle between Oxygen Investment, two former shareholders and Onyx’s Chinese language portions provider is now raging over who controls Onyx’s excess resources – motorcycles, chargers and batteries – and who will get to be made entire first.
In accordance with interviews with collectors, legal professionals and a couple of former staff at Onyx, the corporate’s tale highlights how sophisticated issues can develop into if the only real proprietor of a trade doesn’t produce a plan for what occurs once they die.
A month modified through $1
Khatiblou didn’t assemble Onyx Motorbikes. Its founder is Tim Seward, who’s now VP of product and design at e-bike corporate Ubco, and who to begin with simply sought after to produce a groovy electrical moped to provoke his buddies.
“I grew up loving Volkswagens and vintage cars and motorcycles,” Seward instructed TechCrunch. “I loved that style and wanted to make an electric moped version of that.”
Seward began construction out what would develop into the prototype for Onyx’s common RCR electric dirt bike in 2016 time a fashion designer at LG Electronics, the place he labored along Khatiblou.
“The look of the bike is actually an eagle with its wings folded together as it dive bombs,” Seward instructed TechCrunch. “The two side panels are the wings. The wood part is kind of the body or the torso, and the seat would be the tail of the eagle.”
As Seward drove his motorcycle round San Francisco, folk stored preventing him to invite the place they might get one. Later pronouncing, ‘It’s no longer on the market,’ plethora instances, Seward in the end made up our minds that perhaps it must be.
He introduced an Indiegogo campaign for Onyx Motorbikes in 2018, elevating just about $1 million. Onyx promised in order American-made motorcycles, which Seward stated would support the corporate uphold higher constituent keep an eye on, assemble native jobs, and steer clear of import price lists.
The motorcycles have been an quick accident. Society cherished the Seventies and Eighties enchantment of the design, the wood frame, the made-in-the-USA-style. And, most significantly, the motorcycles may shred.
Seward leased out a crew of technicians to support him satisfy his rising form depend. Khatiblou, who lived alike Onyx’s San Francisco store, would frequently are available in later his unused future task at Amazon to deplete off steam. He even constructed his personal Onyx motorcycle later purchasing one on Indiegogo, stated Seward, who shared a video that confirmed Khatiblou’s pleasure for his unused toy.
Through early 2019, Seward was once getting burned out with the duties of operating a trade. He sought after to concentrate on designing and construction motorcycles, no longer offer with buying commitments and payroll. He began searching for a merger.
What he ended up getting was once an acqui-hire offer from Fowl, the struggling shared e-scooter company. In lieu of obtaining Onyx and its resources, Fowl paid Seward a mass sum within the loads of hundreds to come back and paintings for them complete date. As a part of the offer, Seward needed to discover a substitute for himself at Onyx. He ended up touchdown on Khatiblou, who had introduced to abandon his Amazon task and step up into the CEO position.
Keen to dump the trade duties of Onyx, Seward offered Khatiblou his corporate in Would possibly 2019 for $1.
“My tax advisor had said to do that to avoid paying taxes, or something like that, but also James didn’t have a lot of money at the time,” stated Seward. “Mainly, it was because of what Bird was offering me, which more than supplemented what I thought I should have been paid for the company.”
Khatiblou stumbled a little bit when he took over the trade, says Seward. Later all, he had by no means run an organization or handled e-commerce earlier than. But it surely was once sunlit he was once devoted to operating Onyx and getting cool motorcycles into the palms of dependable consumers.
“He lived and breathed Onyx,” Diane Khatiblou instructed TechCrunch. “It was everything to him, and he put everything into it.”
Month Seward had negative respectable ties or claims to Onyx at this level, he persisted to advise Khatiblou as a chum and to construct content material for Onyx’s social media. That courting persisted till the 2 fell out over a dispute referring to unused shareholders Khatiblou took on.
In keeping with Seward’s retelling, Khatiblou had made up our minds in order on backers who would make investments hundreds of thousands within the trade. Regardless of the prospective monetary upside of the association, Khatiblou wouldn’t ban complaining about how the offer would drop his possession in Onyx. Seward – pissed off through his buddy’s doubts – took a step again from Khatiblou and Onyx, doubling i’m sick on his paintings at Fowl construction unused e-scooter and e-bike fashions.
A internet of prison and monetary troubles
As a first-time trade proprietor navigating the all of sudden scorching e-bike dimension, Khatiblou made some errors. He signed himself as the non-public guarantor for lending commitments; and he overspent on provide and accounting prices. Or even towards the tip, because the trade spiraled, Khatiblou grew to become i’m sick what will have been a lifeline: a buyout deal from a competitor.
He additionally mismanaged the connection along with his two shareholders, who purchased into the trade and would ultimately sue him: Kenneth Ames, a former engineering and sourcing executive within the LED lights trade founded in Simi Valley, and Troy Smith, a self-employed accountant founded in Carlsbad.
In September 2019, via a “shareholders agreement,” Ames bought 2.2 million stocks of familiar accumulation in Onyx Corp., and Smith purchased 800,000, resignation Khatiblou the excess 5 million stocks. TechCrunch was once not able to be informed the untouched buck quantity of those fairness investments. Beneath an “operating agreement,” Ames and Smith additionally jointly held a 37.5% proportion passion in Onyx LLC.
Onyx filed as an organization in California and Delaware in 2018. The distant LLC entity was once arrange in California a yr after, when Ames and Smith got here aboard. Usually, an organization will arrange an organization along with an LLC to isolate liabilities, for extra versatile tax making plans, to customise possession construction, or to give protection to resources indexed underneath the LLC.
TechCrunch was once not able to procure a album of Onyx LLC’s running commitments with Ames and Smith, which would possibly have given the shareholders the authority to take part in daily control and operation of the trade.
The 2 didn’t reply to repeated requests from TechCrunch for more info, however apparently they did have a hand in corporate affairs — no less than, at first. Seward instructed TechCrunch that, time he wasn’t conscious about Smith on the date, he had met Ames and idea he was once “a good guy.”
“He was smart and knew business and that’s what Onyx needed,” stated Seward, noting that Ames helped strengthen the producing procedure he had began. “From my perspective, he was making Onyx healthy.”
A time later signing the running commitment, Khatiblou signed a trademark assignment agreement, shifting possession of Onyx’s branding from Onyx Corp. to Onyx LLC.
Khatiblou couldn’t shake his distrust of his unused trade companions, on the other hand, consistent with the accounts of folk near to him on the date. Lower than a yr later Ames and Smith had develop into shareholders, Khatiblou took motion to remove their decision-making powers. In August 2020 and December 2020, Khatiblou unilaterally got rid of Ames and Smith, respectively, as officials, administrators and bosses of the Onyx corporations.
Round the similar date, Oxygen Investment, an bill factoring corporate that gives money flows to small- and medium-size companies, entered the image. Khatiblou and Oxygen signed a business payables commitment in December 2020. Beneath the commitment, which TechCrunch has seen, Oxygen purchases motorcycles and portions immediately from providers and distributors by and for the e-bike corporate, and Onyx will pay it again plus diverse charges.
In keeping with the phrases of the commitment, Onyx’s provides and resources can be held as collateral. Khatiblou was once for my part liable if Onyx did not produce bills.
Will Drewery, founder and CEO of Diagon.ai, a startup construction a platform for apparatus financing, instructed TechCrunch that collectors’ charges are lovely usual within the business. Signing on as a private guarantor, on the other hand, isn’t.
“It’s legal to do it, but it’s dumb,” Drewery instructed TechCrunch. “And places like Y Combinator, Techstars, any advisor or investor will tell you, like, ‘Are you an idiot? Why would you sign a personal guarantee? Don’t ever do that.’”
Clara Brenner, co-founder and managing spouse of VC company City Innovation Charity, had a matching sentiment.
“Personal liability… is something you actively run from,” Brenner instructed TechCrunch. “It’s something we strongly dissuade our founders from doing because most of the time they’re not super sophisticated about these mechanisms, and it’s just really risky.”
Oxygen Investment’s Lomax, for his section, stated making the borrower a private guarantor is usual protocol when a trade doesn’t have plethora resources to again up the credit score layout.
However now that Khatiblou has kicked the bucket, all Oxygen and alternative collectors can fall again on is no matter e-bike provide remainder. Oxygen and Ames, along with Smith, are actually duking it out for get right of entry to to these resources.
The CEO was once slipping
Days earlier than Khatiblou died, Mig Cernicky, Onyx’s buying director, stated his CEO was once slipping.
“Several of us were working closely with James to try to get him on the ball…and take care of these eviction notices,” Cernicky instructed TechCrunch. “At that point, his mental capacity had declined to the point that he was having a hard time even carrying on a simple conversation.”
Diane Khatiblou instructed TechCrunch that along with rigidity, her son was once additionally out and in of the sanatorium and was once “very ill for a couple of months before he died.” He was once to begin with identified with pneumonia. It seems that it was once a blood clot that led to Khatiblou bother respiring and problem strolling to the purpose that he began the use of a cane, consistent with Diane Khatiblou.
“I didn’t realize how much pain he was in because, of course, he was trying to pull himself up and not complain,” she stated.
Knowing that Khatiblou wasn’t in a have compatibility condition to take care of the urgent issues handy, Cernicky stated he began pressuring Onyx’s COO, Tay McDaniel, to step up – to which she answered with a departure letter.
At a loss for what to do and determined to struggle to avoid wasting Onyx, Cernicky drafted a record on December 8 naming himself as president and COO of Onyx Motorbikes for Khatiblou to signal.
“It is the last document that James signed,” stated Cernicky.
Khatiblou died 4 days after, and Cernicky stepped in as performing CEO to struggle to accumulation Onyx alive.
Khatiblou was once single and had negative youngsters when he kicked the bucket, so his mom, Diane Khatiblou, changed into his sole inheritor.
That didn’t heartless she was once mechanically in control of Khatiblou’s resources, which contains Onyx — simplest that she had first rights to them. In step with the California Probate Code, in circumstances like this, the courtroom must appoint an administrator to make a decision what to do with the corporate. Later to begin with petitioning a Los Angeles probate courtroom in March 2024 to step in as administrator of her son’s property, Khatiblou’s mom reversed direction and withdrew her petition.
Now, Oxygen Investment is petitioning the courtroom to develop into the administrator, its eminent govt Lomax instructed TechCrunch. That’s a method for the creditor to assure that it will get its a reimbursement. Lomax wouldn’t ascertain whether or not Oxygen would promote corporate resources to pay itself and alternative collectors again or to find somebody else to pick out up the items and accumulation the corporate alive.
Collectors develop into tie collectors once they document a Uniform Industrial Code (UCC) method. Oxygen filed this type of with Delaware’s Secretary of Atmosphere in December 2020, which the creditor says makes it first in layout to be paid again its $2.2 million. There are alternative collectors ready in layout too. JP Morgan Chase claims to be owed $43,323.29, consistent with probate courtroom paperwork. In mid-Would possibly, a buyer who had bought an RCR filth motorcycle and a few equipment again in November 2023 additionally filed as a creditor in probate courtroom to get his $6,019.97 again. Resources say Shopify, the platform underneath which Onyx made its gross sales, could also be owed cash however has but to document a declare.
Ames and Smith also are claiming to be collectors. The pair filed UCC methods in California for each Onyx Motorbikes Inc. and Onyx Motorbikes International Holdings LLC on Would possibly 26, 2021 – the future later Khatiblou signed a agreement commitment that will see him purchasing again their stocks for some $10,000 in keeping with time over the span of 80 months.
Through submitting the ones UCC methods, Ames and Smith necessarily grew to become a percentage buyback right into a mortgage commitment – and they’re preserving Onyx’s resources, “tangible and intangible,” as collateral towards their safety pursuits.
Recommend for Ames and Smith instructed TechCrunch that Onyx had breached its compensation commitment when Khatiblou kicked the bucket and may not proceed purchasing again stocks.
“Accordingly, Mr. Ames and Mr. Smith, as secured creditors, are taking steps to foreclose on Onyx LLC’s assets,” reads a observation from the attorney.
The 2 shareholders previous this time gave realize of a lien sale to Khatiblou’s property and performing CEO Cernicky, consistent with a number of folk usual with the subject.
The awareness advises that Ames and Smith plan to promote Onyx LLC’s collateral someday on or later Would possibly 21. Within the realize, collateral is outlined as a basic all-assets description. On the date of newsletter, none of Onyx’s disputed resources have been offered.
Along with Ames and Smith, their suggest didn’t reply to TechCrunch’s requests for more info, like what resources they have got of their ownership and plan to promote.
E-bikes caught in cupboard
Since there’s negative cash in Onyx’s coffers, the one means for Oxygen or any person else to be made entire is to promote no matter resources and provides stay. Oxygen posits that because it paid for Onyx’s provide and because the e-bike corporate defaulted on its bills, it’s the rightful proprietor of any excess resources.
There’s only one illness. The ones resources are being held crack between no less than two events.
Oxygen is in ownership of about 100 batteries and chargers in addition to 25 CTY motorcycles, showed Lomax. The excess 74 motorcycles are in a storage old through Suzhou Jindao, the e-bike meeting producer in Suzhou that was once Onyx’s provider. Suzhou Jindao is looking forward to a courtroom form that directs the place the stock must exit.
The Chinese language provider has additionally been confused through Ames and Smith to keep onto the motorcycles and assure they don’t produce it into Oxygen’s palms. In an e mail that TechCrunch has seen, suggest for the 2 traders requested the provider to keep off on handing over the motorcycles “in light of the liens held by Troy Smith and Ken Ames.”
With resources crack between two events and a internet of prison claims, it’s hazy precisely who would be the victor — or if Onyx will ever exist once more.
There are so many chances. Ames and Smith may utility the trademark task to prevent Oxygen and others from promoting Onyx-branded equipment. The pair may utility the strategy not to simplest wrest keep an eye on of the resources however as a technique in order the Onyx emblem again.
To produce issues extra tough, Ames and Smith – who declare to be collectors in keeping with the percentage buyback commitment – now seem to have regained complete possession in their stocks, making them lively shareholders. It is because their stocks have been being held in escrow time Onyx was once paying them again; when Khatiblou died and Onyx defaulted on bills, the ones stocks moved out of escrow, which Smith has showed to TechCrunch.
“Either you’re an owner or you’re not an owner,” stated Lomax. “Which is it? Because if you’re an owner, then we need to talk to you about how Oxygen Funding gets repaid.”
