Systematic Audio is in the opening days of a Chapter 11 case centered on cash-collateral access, litigation-driven creditor pressure, and a contested governance backdrop, with first-day relief set for expedited consideration on June 17, 2026. The debtor filed its Voluntary PetitionDkt. 1 in the Western District of North Carolina after adverse state-court verdicts in litigation brought by Blue Building, Krubim/WoofersEtc, and the Soleymani parties; the debtor’s case statement says the filing was meant to stabilize the business, preserve the Newton facility from judgment-lien pressure, and create breathing room to address roughly $21.5 million of asserted litigation exposure alongside secured and trade debt in the Debtor’s Case StatementDkt. 29.
The capital structure is led by KeyBank as first-lien lender, with about $12.7 million outstanding on a revolver and $6.25 million on a term loan, both secured by substantially all assets; Medallion Capital holds a subordinated secured note behind KeyBank. The debtor is not seeking a new-money DIP loan at this stage. Its liquidity path is cash-collateral-only: it asks to use secured lenders’ cash collateral under a 13-week budget, provide replacement liens and superpriority adequate-protection claims, comply with weekly variance reporting, and operate within a 20% permitted variance framework under the Cash Collateral MotionDkt. 27.
The case has already drawn direct opposition from the litigation plaintiffs. They filed an objection tied to the cash-collateral request and, according to the filing summary, seek appointment of a Chapter 11 trustee while challenging Scottie Johnson’s continued operational or financial control, relying on the recent jury verdicts and alleged ownership and valuation disputes in the . The debtor also opened an adversary proceeding against those parties seeking declaratory and injunctive relief to extend or obtain stay protection for litigation against Johnson, arguing that indemnification obligations, management distraction, and estate prejudice make that litigation central to the reorganization effort in the .
Near term, the restructuring is a liquidity-and-control fight rather than a filed plan process. The court granted shortened notice for first-day pleadings in the Order Shortening NoticeDkt. 44, and the debtor noticed the first-day hearing for June 17, 2026 at 9:30 a.m. to address cash collateral and core operating relief in the Notice of HearingDkt. 48. A July 10, 2026 hearing is scheduled on the objectors’ challenge, making the immediate path dependent on whether the debtor obtains cash-collateral authority while retaining control of the business.
