Chimani, the Yarmouth-based company that has developed a mobile app-based travel guide for U.S. national parks, had raised nearly $86,000 from more than 400 individual investors when the equity crowdfunding platform it was using pulled the plug on the company’s campaign after a judge ruled against the company in a lawsuit with its former chief technology officer. The campaign, which had an original goal of raising just $25,000, was scheduled to end on Sat., Aug. 17.
Republic, the equity crowdfunding platform that was hosting Chimani’s campaign, sent an email to investors on the evening of Aug. 11 announcing that their investment had been refunded and the campaign cancelled. It did not provide specifics.
Kerry Gallivan, Chimani’s founder and CEO, followed up soon after with an email to those who had chosen to participate in the crowdfunding campaign to provide an explanation.
“Republic felt that Chimani was too risky due to the recent ruling in our litigation and canceled the campaign. Unfortunately, we did not have a choice in the decision,” he wrote. “Although we don’t have an alternative fundraising campaign, if you’d like to support Chimani, you can do so by becoming a subscriber here: chimani.com/about_perks”
Maine Startups Insider contacted Gallivan to learn more. He provided a statement similar to the one he emailed to investors, but declined to provide further comment.
The lawsuit in question was filed on Nov. 4, 2016, in Maine Superior Court by Infobridge LLC, a company wholly owned and managed by Shaun Meredith, who previously served as Chimani’s chief technology officer. The complaint stems from a contract dispute over royalty payments. In its complaint, Infobridge claims it is owed roughly $149,000 in royalty payments from Chimani. Chimani claims Infobridge has no claim against the company, according to the company’s Form C it filed with the U.S. Securities and Exchange Commission. Chimani’s legal bills had already reached more than $100,000 by April 17, 2019, the date it filed its Form C with the SEC.
The recent ruling that precipitated the cancellation was a judge’s decision to rule in favor of Infobridge in response to the plaintiff’s motion for partial summary judgement.
Gallivan plans to appeal the decision, according to comments he made in response to investor questions in the forum section of his crowdfunding campaign page.
“There was a recent ruling that went against Chimani as a result we’ve beginning the appeal process,” he wrote in response to one investor. “The appeal process is approximately 9 months before a ruling is issued. We have a strategy to generate the revenue required to cover a negative ruling on the appeal – which as this stage we are assuming will be the case. We are focused on getting the funds required to address this lawsuit so that we can put this behind us and focus on growing the product.”
In response to another question, he wrote: “As with many legal cases, it is a long, slow process and this latest ruling is by no means the final step,” he wrote. “While this case has always been a distraction, our primary focus remains on building an excellent product and continuing to drive the revenue/growth. I remain confident that this will only be a bump in the road and Chimani will ultimately be stronger as a result of everything.”
Gallivan wouldn’t comment on how the loss of the equity crowdfunding dollars would affect the company’s financial plans, but in an article MSI previously published about Chimani’s crowdfunding campaign, Gallivan shared a prescient piece of advice: “founders should use it as just one piece of an overall fundraising strategy.”
