BSG Corp.

UNITED STATES BANKRUPTCY COURT

SOUTHERN DISTRICT OF NEW YORK

In re: NOT FOR PUBLICATION

BSG Corp. f/k/a Bio-Signal Group Corp., Chapter 11 (Subchapter V)

Debtor. Case No. 25-12755 (JPM)

MEMORANDUM OPINION AND ORDER GRANTING THE DEBTOR’S

MOTION FOR AUTHORIZATION TO OBTAIN POST-PETITION

FINANCING AND OVERRULING THE OBJECTIONS OF CREDITORS

NEW ENTERPRISES LTD. AND SUBRAMANIAN SUBBIAH

JOHN P. MASTANDO III

UNITED STATES BANKRUPTCY JUDGE

I. INTRODUCTION

This matter arises from the Chapter 11 case of BSG Corp. f/k/a Bio-Signal Group Corp.

(the “Debtor”). Before the Court is the Debtor’s Motion for Authorization to Obtain Post-Petition

Financing, dated March 10, 2026 (the “DIP Motion”). (Dkt. No. 65). On March 29, 2026,

unsecured creditors New Enterprises Ltd. (“New Enterprises”) and Subramaniam Subbiah

(“Subbiah” and together with New Enterprises, the “Creditors”) filed an objection to the DIP

Motion (the “Objection”). (Dkt. No. 68). For the reasons set forth below, the DIP Motion is

GRANTED, and the Objection is OVERRULED.

II. BACKGROUND

The Debtor is a Delaware corporation engaged in the development and sale of FDA-cleared

medical devices used in brain imaging, with its principal place of business in New York. (See

Declaration of Andre Fenton, Dkt. No. 2). On December 8, 2025, the Debtor filed a voluntary

petition for relief under Chapter 11, Subchapter V, in this District. (Dkt. No. 1).

According to the Debtor’s schedules, the Debtor has total assets of $1,135,679.65 and total

liabilities of $2,677,645.56. (See Official Form 206, Dkt. No. 32). New Enterprises, a privately-

held family investment trust based in Singapore, asserts an unsecured claim in the amount of

$151,011.38. (See Proof of Claim No. 6-1). Subbiah, a former member of the Debtor’s board of

directors, asserts an unsecured claim in the amount of $4,813,046.37. (See Proof of Claim No. 11-

1). The Debtor’s amended schedules, however, list New Enterprises as holding a disputed claim

of up to $205,000.00 and do not list Subbiah as a creditor. (See Amended Schedule E/F, Dkt. No.

48).

On December 19, 2025, the Debtor commenced an adversary proceeding against the

Creditors. See BSG Corp. v. New Enterprises Ltd. et al., No. 25-01159 (Bankr. S.D.N.Y. filed Dec.

19, 2025) (the “Adversary Proceeding”). In that proceeding, the Debtor alleges that New

Enterprises engaged in a series of improper actions, including what the Debtor characterizes as a

“sham UCC sale” of the Debtor’s assets in January 2023. (Adv. Proc. Dkt. No. 1, ¶ 32). The

Debtor asserts that, in anticipation of the Debtor’s financial distress, New Enterprises filed a

financing statement with the Delaware Department of State purporting to perfect a security interest

in “all of [the Debtor’s] assets,” despite the absence of an executed security agreement. (Id. ¶¶ 32-

44). New Enterprises also allegedly recorded an assignment of the Debtor’s patents with the

United States Patent and Trademark Office, purporting to record a security interest in all of the

Debtor’s then-valid patents. (Id. ¶ 45).

According to the Debtor, following an alleged event of default, New Enterprises conducted

a private sale of the Debtor’s assets and purchased those assets in exchange for a $1,000,000.00

reduction of debt purportedly owed to New Enterprises. (Id. ¶¶ 41-43). The Debtor alleges that

no authorized representatives of the Debtor—other than Subbiah, who was then serving as interim

CEO—participated in or approved the transaction. (Id.). Based on these allegations, the Debtor

contends in the Adversary Proceeding that Subbiah colluded with New Enterprises in orchestrating

the “sham UCC sale,” in breach of his fiduciary duties. (Id. ¶ 47). The Debtor asserts, among

other claims, that these transactions constitute avoidable fraudulent transfers under 11 U.S.C. §

544(b), and seeks, inter alia, disgorgement of the transferred assets.

On March 10, 2026, the Debtor filed the DIP Motion, seeking the Court’s approval to obtain

post-petition financing of up to $100,000.00 (“DIP Loan”) from several of the Debtor’s

directors—specifically, the Debtor’s president and chairman Andre Fenton, and board members

John Gridley and Kuljinder Chase. (Dkt. No. 65). Under the proposed DIP agreement, the DIP

loan would be afforded administrative expense priority pursuant to 11 U.S.C. §§ 503(b) and

507(a)(2), and secured by all post-petition assets acquired by the Debtor under § 364(c). (Id.

Exhibit B).

The DIP Motion noticed a hearing scheduled for March 30, 2026, and established March

26, 2026 as the deadline to file objections. (Id.). A certificate of service reflecting proper service

on all parties in interest was filed with the Court. (Id.). On March 28, 2026, after no timely

objections were filed, a Certificate of No Objection was docketed pursuant to Local Rule 9013-3

(the “CNO”). (Dkt. No. 67). In light of the absence of any timely objection, the Court cancelled

the scheduled hearing.

On Sunday, March 29, 2026—two days after the objection deadline and one day before the

originally-scheduled hearing—the Creditors filed the Objection. (Dkt. No. 68). The Creditors

contend that the DIP Motion should be denied because the proposed financing “is unnecessary”

and allegedly benefits “only the insiders,” given that the DIP lenders are the Debtor’s president

and two board members. (Id.). The Creditors further argue that the DIP Motion is improper

because the Debtor has previously filed a civil action in the U.S. District Court for the Southern

District of New York (the “District Court”) asserting claims they characterize as “identical” to

those raised in the Adversary Proceeding, and that the District Court denied the Debtor’s request

for preliminary injunction in that action. (Id.). According to the Creditors, the Debtor is now

attempting, through the DIP Motion, to obtain relief that was denied by the District Court. (Id.).

On April 1, 2026, the Debtor filed a reply (the “Reply”). (Dkt. No. 69). The Debtor asserts

that the Objection is untimely given the proper notice of the DIP Motion, and that the Creditors

have offered no “reasonable justification for [their] delay.” (Id.). The Debtor further contends

that, even if considered on the merits, the Objection lacks any legal or factual basis. According to

the Debtor, the “directors’ willingness to provide up to $100,000 in additional funding for ongoing

operations” is modest relative to the Debtor’s total liabilities and does not prejudice the Creditors’

rights in any way. (Id.). Further, the Debtor asserts that the Creditors’ reference to the preliminary

injunction in a separate civil action pending before the District Court is irrelevant to this Motion,

because the relief sought in the District Court is distinct from the Adversary Proceeding and does

not impact the administration of this Chapter 11 case. (Id.).

III. LEGAL ANALYSIS

A. TIMELINESS OF OBJECTIONS UNDER LOCAL RULES

Bankruptcy courts have the authority to adopt “local rules of practice and procedure.” In

re Paula Saker & Co., Inc., 37 B.R. 802, 809 (Bankr. S.D.N.Y. 1984); see also Sears, Roebuck &

Co. v. Spivey, 265 B.R. 357, 372 (E.D.N.Y. 2001) (citing Somlyo v. J. Lu–Rob Enters., Inc., 932

F.2d 1043, 1046 (2d Cir. 1991)) (noting that “[b]ankruptcy courts have the power to enact local

rules governing the practice, procedure, and conduct” of cases before them). These local rules

“have the force of law to the extent they do not conflict with higher authority.” Sears, 265 B.R. at

357; see also Puerner v. Hudson Spine & Pain Med., P.C., No. 17-CV-03590 (ALC), 2019 WL

2548134, at *3 (S.D.N.Y. June 19, 2019) (recognizing that “local rules [carry] the force of law”).

Local Rule 9006-1 authorizes this Court to reject untimely filed papers. See S.D.N.Y. Local

Bankr. R. 9006-1. Although bankruptcy courts retain discretion to consider late filings, courts

routinely decline to consider untimely objections absent a showing of unusual circumstances or

good cause. See, e.g., In re 12 Byfield, LLC, No. 10-22740 (RDD), 2011 WL 3739406, at *1

(Bankr. S.D.N.Y. May 12, 2011) (noting that “[l]ate objections may not be considered by the

Court”); In re Maidan, No. 8-19-77027-LAS, 2024 WL 386826, at *1 (Bankr. E.D.N.Y. Feb. 1,

2024) (noting that the “Court has discretion to consider untimely filings”); Concord Boat Corp. v.

Brunswick Corp., 169 F.R.D. 44, 48 (S.D.N.Y. 1996) (noting that a court may consider untimely

filings upon a showing of “unusual circumstances” and “good cause”).

Here, the Court agrees with the Debtor that the Objection is untimely. The record reflects

that the Debtor properly noticed the DIP Motion and served it upon all parties in interest. (Dkt.

No. 65). The notice set a hearing for March 30, 2026, at 9:30 a.m., and required that any objections

be filed and served by March 26, 2026, at 4:00 p.m. (Id.). The parties were afforded at least

fourteen days’ notice in accordance with Local Rule 9006-1 and Federal Rule of Bankruptcy

Procedure 9006. See Fed. R. Bankr. P. 9006; see also S.D.N.Y. Local Bankr. R. 9006-1(b). After

the objection deadline expired without any filing by the Creditors, the Debtor properly filed the

CNO pursuant to Local Rule 9013-3. (Dkt. No. 67).

Despite adequate notice and the clear objection deadline, the Creditors did not file a

response until Sunday, March 29, 2026—two days after the deadline and on the eve of the

scheduled hearing. (Dkt. No. 68). The Objection was filed after the CNO had been entered and

after the hearing had been cancelled. The Creditors have offered no explanation—let alone a

showing of “unusual circumstance or good cause”—for their delay. Under these circumstances,

the Court finds that the Objection was untimely and that there is no basis to excuse the late filing.

The Objection is therefore overruled.

B. APPROVAL OF POST-PETITION FINANCING UNDER §§ 364(B)-(C)

Even if the Court considers the merits of the Objection despite the late filing, the Court

agrees with the Debtor that the Objection should be overruled.

Section 364(b) authorizes the trustee or debtor-in-possession, “after notice and a hearing,”

to obtain unsecured credit or incur unsecured debt outside the ordinary course of business. 11

U.S.C. § 364(b); see also In re Sobiech, 125 B.R. 110, 115 (Bankr. S.D.N.Y. 1991), aff’d, Mulligan

v. Sobiech, 131 B.R. 917 (S.D.N.Y. 1991). A court may allow such credit as an administrative

expense under § 503(b)(1), which grants priority to the “actual, necessary costs and expenses of

preserving the estate.” In re Klein Sleep Prods., Inc., 78 F.3d 18, 22 (2d Cir. 1996) (citing 11

U.S.C. § 503(b)(1)(A)).

If unsecured credit allowable under § 503(b)(1) as an administrative expense cannot be

obtained, § 364(c) permits the trustee or debtor-in-possession to obtain credit or incur debt: (i) with

superpriority administrative expense status under § 364(c)(1); (ii) “secured by a lien on property

of the estate that is not otherwise subject to a lien” under § 364(c)(2); or (iii) “secured by a junior

lien on property of the estate that is subject to a lien” under § 364(c)(3). In re YL W. 87th Holdings

I LLC, 423 B.R. 421, 441 (Bankr. S.D.N.Y. 2010) (citing 11 U.S.C. § 364(c)); see also In re Photo

Promotion Assocs., Inc., 881 F.2d 6, 8 (2d Cir. 1989) (explaining that § 364(c) authorizes a trustee

or debtor-in-possession to obtain superpriority or secured credit upon a showing that unsecured

administrative-expense financing is unavailable under § 364(b)).

“[I]n evaluating the merits of a proposed post-petition financing, courts will defer to a

debtor’s business judgment provided that the financing does not unduly benefit a party in interest

at the expense of the estate.” In re SPAC Recovery Co., 676 B.R. 260, 269 (Bankr. S.D.N.Y. 2026)

(citing In re Latam Airlines Group S.A., 620 B.R. 722, 768 (Bankr. S.D.N.Y. 2020)). The business

judgment rule “is a presumption that in making a business decision the directors of a corporation

acted on an informed basis, in good faith and in the honest belief that the action taken was in the

best interests of the company.” SPAC Recovery, 676 B.R. at 269 (citing In re Integrated Resources,

Inc., 147 B.R. 650, 656 (S.D.N.Y. 1992)).

Where the proposed financing involves insiders, however, courts do not simply defer to the

debtor’s business judgment. See In re Wythe Berry Fee Owner LLC, No. 22-11340 (MG), 2024

WL 2767121, at *17 (Bankr. S.D.N.Y. May 29, 2024) (holding that “business judgment” deference

is “not applicable to transactions [between] a debtor and an insider of the debtor”). Instead, “courts

apply a ‘heightened scrutiny’ test in assessing the bona fides of a transaction [between] a debtor

and an insider of the debtor.” In re LATAM Airlines Group S.A., No. 20-11254 (JLG), 2022 WL

272167, at *14 (Bankr. S.D.N.Y. Jan. 28, 2022). Under that standard, courts evaluate “the integrity

and entire fairness of the transaction at issue, typically examining whether the process and price

of a proposed transaction not only appear fair but are fair and whether fiduciary duties were

properly taken into consideration.” In re Innkeepers USA Trust, 442 B.R. 227, 231 (Bankr.

S.D.N.Y. 2010) (emphasis added).

Here, although the proposed DIP lenders are insiders—namely, the Debtor’s president and

two board members—the Court finds that the transaction satisfies the entire fairness standard.

The record reflects that the process was transparent and procedurally sound. In assessing

procedural fairness, courts examine “when the transaction was timed, how it was initiated,

structured, negotiated, disclosed to the directors, and how the approvals of the directors … were

obtained.” SPAC Recovery, 676 B.R. at 274 (citing In re Transcare Corp., No. 16-10407 (SMB),

2020 WL 8021060, at *19 (Bankr. S.D.N.Y. July 6, 2020)). The DIP Motion was properly noticed

to all parties in interest and fully disclosed the terms of the proposed financing. (Dkt. No. 65).

There is no evidence of concealment, coercion, or self-dealing. (Id.). The Creditors do not contend

that the Debtor failed to explore alternative funding or that comparable financing was available on

more favorable terms.

The terms and substance of the transaction are likewise fair. In evaluating substantive

fairness, courts consider “whether the transaction was one ‘that a reasonable seller, under all of the

circumstances, would regard as within a range of fair value; one that such a seller could reasonably

accept.” SPAC Recovery, 676 B.R. at 276 (quoting Transcare, 2020 WL 8021060, at *19). The

DIP Loan is capped at $100,000, a modest amount relative to the Debtor’s total liabilities of more

than $2.6 million. (Dkt. No. 65). The Debtor has demonstrated that, without this financing, “it

will be unable to meet ongoing operating obligations, including payroll, rent, utilities, and

payments to critical vendors necessary to preserve the going-concern value of the business.” (See

Declaration of Andre Fenton, Dkt. No. 65, Exhibit A, ¶ 9). The financing affords administrative

expense priority under § 503(b)(1) and is secured by post-petition assets acquired by the Debtor

under § 364(c)(2). (Id.; see also DIP Financing Term Sheet, Dkt. No. 65, Exhibit B). The lenders

are not receiving priming liens, roll-ups of prepetition debt, superpriority claims beyond those

permitted by statute, control rights, or other extraordinary protections. Nothing in the record

suggests that the insiders are receiving preferential treatment beyond what the Bankruptcy Code

expressly allows for post-petition lenders.

The Creditors cite no legal authority and raise no substantive challenge to the fairness of

the DIP Loan. They do not argue that the financing is unnecessary to preserve operations, that the

amount is excessive, that the priority sought is improper, or that the transaction was procedurally

flawed. Their objection rests solely on the fact that the DIP lenders are insiders. (Dkt. No. 68).

While insider status can trigger heightened scrutiny, that does not compel rejection. See, e.g.,

SPAC Recovery, 676 B.R. at 277 (approving post-petition secured financing under § 364(c) after

subjecting it to entire fairness scrutiny); Latam Airlines, 620 B.R. at 731 (finding that the debtors

“have met their burden of proving that the DIP Financing satisfies the ‘entire fairness’ test”).

To the extent the Creditors argue that the DIP Motion constitutes an attempt to obtain

duplicative relief in light of parallel litigation in the District Court, that argument lacks merit. The

DIP Motion merely seeks authorization to obtain post-petition financing pursuant to §§ 364(b)-(c).

It does not request injunctive relief, adjudication of claims pending in the Adversary Proceeding,

or any relief that would interfere with the parallel proceeding in the District Court. The existence

of separate litigation does not impair the Debtor’s statutory right to seek financing necessary to

preserve estate value during this Chapter 11 case.

Accordingly, even under heightened scrutiny, the Court finds that the proposed DIP Loan

is fair, necessary, and in the best interests of the estate. The Objection fails on the merits.

IV. CONCLUSION

For the foregoing reasons, the Court concludes that the Creditors’ Objection is untimely

and provides no basis to excuse the late filing. The Court further finds that the Debtor has satisfied

its burden of demonstrating that the proposed DIP Loan is fair, necessary, and appropriate under

11 U.S.C. §§ 364(b)-(c).

Accordingly, it is hereby ORDERED that:

1. The Debtor’s DIP Motion (Dkt. No. 65) is GRANTED.

2. The Creditors’ Objection (Dkt. No. 68) is OVERRULED.

The Court will enter a separate order approving the specific terms of the DIP Loan

consistent with this Memorandum Opinion and Order.

IT IS SO ORDERED.

Dated: April 9, 2026

New York, New York

/s/ John P. Mastando III .

HONORABLE JOHN P. MASTANDO III

UNITED STATES BANKRUPTCY JUDGE