Florida Based Manufacturer Files for Bankruptcy Amid $3.4 Million in Debts

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Clarity Diagnostics LLC, a Boca Raton-based manufacturer of medical diagnostic equipment, has filed for Chapter 11 bankruptcy, citing more than $3 million in unsecured debts. The company, known for producing diagnostic tests for pregnancy, glucose levels, drugs, Covid-19, and other diseases, filed the petition on August 30, 2024, in the U.S. Bankruptcy Court in West Palm Beach.

Bankruptcy Details

Clarity Diagnostics reported $3.4 million in unsecured debts along with eight U.S. Uniform Commercial Code (UCC) claims in its bankruptcy filing. The company listed between $1 million to $10 million in assets, although the specific value of these assets was not outlined in the filing. A UCC claim allows creditors to secure certain assets of a debtor as collateral to ensure repayment if the debtor defaults.

The largest unsecured claim against Clarity Diagnostics is a nearly $1 million debt to T&D Diagnostics Canada Pvt. Ltd.. Other significant creditors include Medline Industries LP ($797,000), Teco Diagnostics ($382,000), Healgen Scientific LLC ($275,000), and VWR International ($211,000). All liabilities listed in the petition are unsecured.

Use of Cash Collateral and Business Operations

Clarity Diagnostics has requested permission from the court to use its cash collateral in order to evaluate the validity of the UCC claims against it, determine the priority of repayment, and assess the total amount owed. However, the court’s order does not currently allow the company to use its cash collateral without the approval of secured creditors or the court itself.

Despite the bankruptcy filing, the court has authorized Clarity Diagnostics to continue operating as a debtor-in-possession. The company anticipates generating $590,000 in revenue during the first four weeks following the filing and expects $563,000 in expenditures, resulting in a net cash flow of $27,000 during that period.

Company Structure and Ownership

The bankruptcy petition was filed by Richard Simpson, the president and majority stakeholder of Clarity Diagnostics, who holds a 65% interest in the company. The other equity holders are Warren Wright (20%) and Tom Rolfes(15%). Clarity Diagnostics was founded in 2013 and is located at 1060 Holland Drive, Suite H, in Boca Raton.

While Clarity Diagnostics continues to operate, the outcome of the bankruptcy proceedings will determine the company’s future financial stability and whether it can resolve its significant debts.

As Clarity Diagnostics navigates the Chapter 11 process, it remains to be seen how the UCC claims and creditor negotiations will unfold. The company’s attorney, Bradley S. Shraiberg, was not immediately available for comment regarding the ongoing case.