Item 2.01 Completion of Disposition of Assets.
As previously reported, on May 19, 2022, the Debtors entered into a "stalking
horse" Asset Purchase Agreement (the "Asset Purchase Agreement") with Circles
MVNE Pte. LTD. ("Circles") and Channel Ventures Group, LLC (together with
Circles, the "Purchasers") pursuant to which the Purchasers agreed to purchase
substantially all of the assets of the Company (such assets, the "Purchased
Assets" and such transaction, the "Asset Sale") for a purchase price of
approximately $60 million (comprised substantially of the assumption of debt and
certain limited cash consideration), subject to certain post-closing
adjustments, and assume the Assumed Liabilities (as defined in the Asset
Purchase Agreement).
In connection with the sale process, the Asset Purchase Agreement was subject to
the Debtors' solicitation of higher and better offers pursuant to bidding
procedures and an auction process conducted under the supervision of the
Bankruptcy Court. On May 31, 2022, the Bankruptcy Court entered an order
approving the bidding procedures and auction process (the "Bidding Procedures")
in accordance with Section 363 of the Bankruptcy Code. However, the Debtors
received no competing qualifying offers during the marketing and sale process.
In accordance with the Bidding Procedures, on June 14, 2022, the auction was
cancelled, and the Purchasers were designated as the successful bidders.
On June 20, 2022, the official committee of unsecured creditors in the Debtors'
Chapter 11 cases (the "Committee") filed a limited objection and reservation of
rights (the "Limited Objection") relating to the Asset Sale. On June 30, 2022,
the Debtors, Purchasers and the Committee entered into a Global Settlement and
Release Agreement (the "Settlement Agreement") to resolve the concerns set forth
in the Limited Objection. Pursuant to the Settlement Agreement, the Debtors, the
Purchasers and Committee agreed to, among other things, (i) settlement payments
to be made by each of the Purchasers (ii) a wind down amount contribution to the
liquidating trust, and (iii) the sale and assignment of certain claims to the
Purchasers (the "Settlement"). On July 8, 2022, the Bankruptcy Court entered an
order approving the Settlement pursuant to the terms of the Settlement
Agreement.
On June 30, 2022, the Bankruptcy Court entered an order (the "Sale Order")
authorizing the Asset Sale pursuant to the terms of the Asset Purchase
Agreement. On July 11, 2022, the Asset Sale closed, thereby completing the
disposition of substantially all of the Company's assets. The Company
anticipates that there will be no proceeds from the Asset Sale available for
distribution to the Company's common stockholders.
In connection with the consummation of the Asset Sale, on July 11, 2022, the
Debtors and Purchasers entered into an Amendment to the Asset Purchase Agreement
(the "First Amendment"), which amended certain provisions of the Asset Purchase
Agreement to, among other things, (i) clarify which claims and causes of action
held by the Debtors would be included in the Purchased Assets, and (ii) permit
the Debtors and their representatives reasonable access to certain records
related to the Purchased Assets and Assumed Liabilities for the purpose of
responding to discovery requests by any counterparty to pending litigation
against or government investigations related to the Debtors.
On July 11, 2022, proceeds from the Asset Sale were used to repay the Company's
obligations under the Senior Secured Priming and Superpriority
Debtor-In-Possession Credit Agreement, dated as of May 19, 2022, by and among
the Company, certain of the Company's subsidiaries and Circles, as lender and
administrative agent (the "DIP Credit Agreement"). Following such repayment, the
DIP Credit Agreement was terminated.
On July 25, 2022, the Debtors and Purchasers entered into a Second Amendment to
the Asset Purchase Agreement (the "Second Amendment" and, together with the
First Amendment, the "APA Amendments"), which amended certain provisions of the
Asset Purchase Agreement to, among other things, allow the Purchasers to assign
certain executory contracts and unexpired leases specified in the Asset Purchase
Agreement to the Debtors for a period of fourteen (14) calendar days following
the Closing Date (as defined in the Asset Purchase Agreement).
The above description of the APA Amendments is not complete and is qualified in
its entirety by reference to the APA Amendments, which are filed as Exhibits 2.1
and 2.2 hereto, respectively, and incorporated by reference herein. The above
description of the APA Amendments does not purport to be complete and is
qualified in its entirety by reference to the full text of the Sale Order which
is available on the docket of the Chapter 11 Cases, which can be accessed via
PACER at https://www.pacer.gov. Additional information about the Chapter 11
Cases, including the APA Amendments, the Sale Order and other motions, orders
and other court filings relating to the Chapter 11 are available for free on the
website maintained by the Debtors' claims agent, Kurtzman Carson Consultants
LLC, at https://kccllc.net/Pareteum.
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Item 5.02 Departure of Directors or Principal Officers; Election of Directors;
Appointment of Principal Officers.
As a result of the sale closing, on July 11, 2022, Bart Weijermars resigned from
his position as Interim Chief Executive Officer of the Company and from all
other positions he holds with the Company, effective upon the closing of the
Asset Sale. The resignation of Mr. Weijermars was not the result of a
disagreement with the Company or on any matter relating to the Company's
operations, policies or practices.
As a result of the sale closing, on July 11, 2022, Laura W. Thomas resigned from
her position as Interim Chief Financial Officer of the Company and from all
other positions she holds with the Company and each of its subsidiaries,
effective upon the closing of the Asset Sale. The resignation of Ms. Thomas was
not the result of a disagreement with the Company or on any matter relating to
the Company's operations, policies or practices.
As a result of the sale closing, on July 11, 2022, Mary Beth Vitale, Robert L.
Lippert, Luis Jimenez-Tuñon and Robert H. Turner resigned from their positions
as independent directors of the Board, in each case, effective immediately. The
resignations of Ms. Vitale, Mr. Lippert, Mr. Jimenez-Tuñon and Mr. Turner were
not the result of a disagreement with the Company or on any matter relating to
the Company's operations, policies or practices.
On July 5, 2022, the Board appointed Anthony Saccullo to serve as a director of
the Company and as the Company's Wind Down Officer, effective as of July 12,
2022. Since May 2010, Mr. Saccullo, 45, has served as founder and managing
member of A.M. Saccullo Legal, LLC, a Delaware-based law firm rendering services
in commercial bankruptcy, corporate and commercial litigation, and corporation
transactions and formation. Mr. Saccullo is also the founding member of Saccullo
Business Consulting, a business consulting firm that offers non-legal bankruptcy
services to companies and commercial bankruptcy estates, a position he has held
since May 2010. Mr. Saccullo has also previously served as liquidating trustee
in the wind numerous other retail cases and Saccullo Business Consulting has
served, and currently serves, in a number of other retail bankruptcy cases of
similar size and complexity to the Chapter 11 Cases.
In connection with the appointment of Mr. Saccullo as Wind Down Officer, the
Company entered into an engagement letter with Mr. Saccullo, effective as of
July 12, 2022 (the "Engagement Letter"), to provide for, among other things,
(i) a monthly fee of $20,000 and (ii) hourly compensation for certain employees
of Saccullo Business Consulting providing wind-down services to the Company. The
Engagement Letter also provides for customary indemnification provisions. On
July 21, 2022, the Bankruptcy Court entered an order authorizing Mr. Saccullo's
appointment as Wind Down Officer.
The foregoing summary of the Engagement Letter for Mr. Saccullo is qualified in
its entirety by the full text of the Engagement Letter. A copy of the Engagement
Letter is filed as Exhibit 10.1 to this Current Report on Form 8-K and
incorporated by reference herein.
Except as described above, there are no arrangements or understandings between
Mr. Saccullo and any other person pursuant to which Mr. Saccullo was appointed
as Wind Down Officer and there are no transactions between the Company and
Mr. Saccullo that would require disclosure under Item 404(a) of Regulation S-K.
No family relationship exists between Mr. Saccullo and any director or other
executive officer of the Company.
Item 8.01. Other Events.
In connection with the disposition of substantially all of its assets pursuant
to the Asset Sale, the Company no longer intends to make filings with the
Securities and Exchange Commission.
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Press Release
On July 12, 2022, the Company issued a press release announcing the closing of
the Asset Sale, a copy of which is attached as Exhibit 99.1 hereto and is
incorporated by reference herein.
Cautionary Note Regarding Forward Looking Statements
Certain statements contained in this Current Report on Form 8-K constitute
"forward-looking statements" as defined by the Private Securities Litigation
Reform Act of 1995. With the exception of historical matters, the matters
discussed in this report are forward-looking statements. We have based these
forward-looking statements on our current expectations and projections about
future events. Forward-looking statements are generally identified by words such
as "believe," "expect," "anticipate," "intend," "estimate," "plan," "project,"
"should," "will," "would" and other similar expressions. In addition, any
statements that refer to expectations or other characterizations of future
events or circumstances are forward-looking statements. However, our actual
results may differ materially from those contained in, or implied by, these
forward-looking statements. Factors that could cause actual results to differ
materially from those in the forward-looking statements include, but are not
limited to: risks and uncertainties associated with the integration of the
assets and operations we have acquired and may acquire in the future; our
possible inability to raise additional capital that will be necessary to expand
our operations; the substantial doubt about our ability to continue as a going
concern expressed in the most recent report on our audited financial statements;
our potential lack of revenue growth; the length of our sales cycle; pending
investigations by the federal government and other lawsuits; the outbreak and
impact of the novel coronavirus (COVID-19) and Russia's invasion of Ukraine on
the global economy and our business; our potential inability to add new products
and services that will be necessary to generate increased sales; our potential
inability to develop and successfully market platforms or services or our
inability to obtain adequate funding to implement or develop our business; our
ability to successfully remediate the material weakness in our internal control
over financial reporting within the time periods and in the manner currently
anticipated; the effectiveness of our internal control over financial reporting,
including the identification of additional control deficiencies; risks related
to restrictions and covenants in our convertible debt facility that may
adversely affect our business; risks related to our current noncompliance with
certain terms under our senior secured convertible indebtedness; our potential
loss of key personnel and our ability to find qualified personnel;
international, national regional and local economic political changes, political
risks, and risks related to global tariffs and import/export regulations;
fluctuations in foreign currency exchange rates; our potential inability to use
and protect our intellectual property; risks related to our continued investment
in research and development, product defects or software errors, or
cybersecurity threats; general economic and market conditions; regulatory risks
and the potential consequences of non-compliance with applicable laws and
regulations; increases in operating expenses associated with the growth of our
operations; risks related to our capital stock, including the potentially
dilutive effect of issuing additional shares and the fact that shares eligible
for future sale may adversely affect the market for our common stock; the
possibility of telecommunications rate changes and technological changes;
disruptions in our networks and infrastructure; the potential for increased
competition and risks related to competing with major competitors who are larger
than we are; our positioning in the marketplace as a smaller provider; risks
resulting from the restatement of certain of our financial statements; and the
other risks discussed in our Form 10-K for the year ended December 31, 2020.
Except to the extent required by applicable laws or rules, we undertake no
obligation to publicly update or revise any forward-looking statement, whether
as a result of new information, future events or otherwise.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
Exhibit
Number Description
2.1 Amendment to Asset Purchase Agreement, dated as of July 11, 2022, by
and among the Company, certain of the Company's subsidiaries, Circles
MVNE Pte. LTD. and Channel Ventures Group, LLC
2.2 Second Amendment to Asset Purchase Agreement, dated as of July 25,
2022, by and among the Company, certain of the Company's subsidiaries,
Circles MVNE Pte. LTD. and Channel Ventures Group, LLC
10.1 Engagement Letter, dated as of July 5, 2022, by and among the
Company and Anthony Saccullo
99.1 Press Release, dated July 12, 2022, issued by the Company
104 Cover page Interactive data file (embedded within the inline XBRL
document)
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