Once in the NFC Vanguard, a Struggling ViVOtech Heads for Liquidation

Financially struggling contactless card technology provider ViVOtech Inc. insisted just over a month ago when it sold its hardware business that it was staying in operation and focusing on software. But now the company appears to be headed toward liquidation.

A document sent to creditors and others with a financial interest in ViVOtech and obtained by Digital Transactions News indicates that the Mountain View, Calif.-based firm is in the midst of an out-of-court process under California law that is similar to bankruptcy. The document viewed by Digital Transactions News is dated Sept. 4 and gives notice that anyone with claims against ViVOtech must submit them by Feb. 1, 2013.

Under the process, known as assignment for the benefit of creditors, ViVOtech Inc. has assigned its assets to a new company, Vivotech LLC, the “assignee.” Despite the similarity in name, Vivotech LLC has no affiliation with the original firm with the exception of the relationship created by the assignment. Vivotech LLC’s job is quite clear, according to the document.

“Assignee shall liquidate the assets, wind down ViVOtech and distribute the net liquidation proceeds to creditors of ViVOtech who timely submit claims as instructed below,” the document says. It does not list ViVOtech’s assets, liabilities, or other financial information.

Supervising the process is a Mountain View-based corporate restructuring firm, Sherwood Partners LLC, which controls Vivotech LLC. Digital Transactions News left messages with two ViVOtech executives as well as the Sherwood manager in charge of the case. None returned the call.

Sherwood’s Web site has a page outlining the assignment for the benefit of creditors process. Its advantages, according to Sherwood, include a “cost-effective” process that is less formal and usually quicker than bankruptcy, with “few or no court hearings.” In addition, “There is usually less notoriety than with a bankruptcy,” the posting says.

Media reports in early August said ViVOtech was laying off employees, and one report said the company was going out of business. On Aug. 6, ViVOtech said it sold its card-reader business for an undisclosed price to ID Tech, a manufacturer of smart card readers and point-of-sale hardware and identity-verification products, but it planned to continue developing its payments-related software applications.

Founded in 2002, ViVOtech made a name for itself with technology for accepting contactless card payments, including transactions based on near-field communication (NFC), a technology that many payments executives hope will find its way into smart phones for mobile transactions. Larger POS hardware providers such as VeriFone Systems Inc. and Ingenico S.A. incorporated ViVOtech contactless technology into some of their offerings, but ViVOtech apparently couldn’t make a financial go of it as the U.S. slowly moves away from the old magnetic-stripe payment card.

“It’s too bad, these guys had a great shot,” says one payments industry executive familiar with ViVOtech who asked not to be identified. The executive has no inside knowledge of ViVOtech’s liquidation process, but says the firm’s remaining software business might survive in some form.

“I think they’re trying to get this whatever shell of a company in a new company with the assets and the IP [intellectual property],” the executive says. “I think it’s a way of getting rid of the debt, getting rid of the equity, and starting anew with whoever the new investors are. I don’t think we’re going to see the end of the [ViVOtech] people.”