Item 1.01 Entry into a Material Definitive Agreement.
On April 25, 2022, Pareteum Corporation (the "Company") entered into a series of
related transactions whereby it (i) agreed to the transfer of its previously
issued senior secured convertible notes due 2025 (the "First Lien Notes") from
High Trail Investments SA LLC ("High Trail") and Channel Ventures Group, LLC
("Channel Ventures Group") to a new holder, Circles MVNE Pte. Ltd., an Asian
digital telecommunications and consumer company based in Singapore ("Circles")
and (ii) issued and sold a new series of senior secured bridge notes due 2022
(the "Bridge Notes") to Circles.
Notes Transfer
As previously disclosed, the Company had previously issued and sold $22.5
million initial principal amount of First Lien Notes pursuant to its previously
disclosed Securities Purchase Agreement, dated as of June 8, 2020 (as amended to
date, the "First Lien Purchase Agreement," and collectively with certain other
agreements, instruments, certificates and documents entered into, contemplated
by or delivered in connection with each of the foregoing, as amended the "First
Lien Transaction Documents), among the Company, High Trail and Channel Ventures
Group. As of April 25, 2022, an aggregate of $21,469,123.59 of principal and
accrued interest was outstanding under the First Lien Notes. In connection with
the sale of the First Lien Notes by High Trail and Channel Ventures Group to
Circles, High Trail, Channel Ventures Group, Circles and the Company entered
into that certain Note Sale Contract, dated as of April 25, 2022 (the "Note Sale
Contract"). Under the Note Sale Contract, the Company reaffirmed its secured
obligations under the First Lien Transaction Documents, agreed to take all such
actions reasonably requested to replace High Trail and Channel Ventures Group as
collateral and administrative agents and appoint Circles as the successor
collateral and administrative agent under the First Lien Transaction Document
and to agree to amendments to certain arrangements among the various creditors
of the Company. Also, in connection with the sale of First Lien Notes under the
Note Sale Contract, the Company (i) agreed to amendments to the First Lien Notes
to reflect that the holder thereof, and therefore payee of the First Lien Notes,
is now Circles, (ii) agreed that all conversion features of the First Lien Notes
had expired and would no longer have any force or effect and (iii) entered into
that Second Omnibus Agreement, dated as of April 25, 2022, among the Company,
certain subsidiaries of the Company, Circles and High Trail (the "Second Omnibus
Agreement"). Under the Second Omnibus Agreement, the parties thereto provided
for the appointment of Circles, and the removal of High Trail, as administrative
and collateral agent under the First Lien Transaction Documents, and made
certain other changes to the First Lien Transaction Documents. The Company did
not receive any proceeds from the sale of the First Lien Notes under the Note
Sale Contract, and the First Lien Notes remain outstanding.
Bridge Financing
On April 25, 2022, the Company entered into the Securities Purchase Agreement,
dated as of April 25, 2022 (the "Bridge Notes SPA"), with Circles under which it
agreed to issue and sell $6.00 million of Bridge Notes to Circles for an
aggregate purchase price of $6.00 million. The closing of the sale of the Bridge
Notes occurred on April 25, 2022. The Bridge Notes SPA contains several
affirmative and negative covenants, including covenants requiring it to: (i)
timely make all filings and reports relating to the sale of the Bridge Notes
under appliable state and federal securities laws, (ii) pay the legal fees and
expenses incurred by Circles in connection with the issue and sale of the Bridge
Notes , (iii) refrain from issuing any other convertible indebtedness, warrants
or other series of bridge notes and (iv) maintain its corporate existence.
The Bridge Notes are senior, secured obligations of the Company, and interest is
payable, in cash, on the maturity date at a rate of 8% per annum or, if an Event
of Default has occurred and is continuing under the Bridge Notes, at a rate of
18% per annum. The outstanding principal is due and payable in full on the
maturity date. Events of Default have occurred and are continuing under the
First Lien Notes, and as a result, Circles has the right to accelerate the
maturity of the Bridge Notes under the cross-default provision of the Bridge
Notes. The Bridge Notes are secured by a first lien on substantially all assets
of the Company and substantially all assets of its material U.S.-organized
subsidiaries, the assets of Pareteum Europe BV, a subsidiary organized in the
Netherlands, and the assets of Artilium Group Limited, a subsidiary organized in
England, and rank senior to the First Lien Notes and certain other indebtedness
of the Company. The maturity date of the Bridge Notes is October 31, 2022.The
holder of the Bridge Notes or the Company may also elect for the Company to
redeem the Bridge Notes for cash at a price equal to 120% of the
then-outstanding principal, plus accrued and unpaid interest, if the Company
undergoes a fundamental change. The Bridge Notes rank senior to the First Lien
Notes and to all other indebtedness of the Company.
The Bridge Notes impose certain customary affirmative and negative covenants
upon the Company, as well as covenants requiring that (i) payments under the
Bridge Notes rank senior to all other indebtedness of the Company, (ii) restrict
the Company and its subsidiaries from incurring any additional indebtedness or
suffering any liens, subject to specified exceptions, and (iii) restrict the
declaration of any dividends or other distributions. The Bridge Notes contain
customary events of default, including certain cross-default provisions.
Consistent with covenants contained in the Bridge Notes SPA, the Company intends
to use the net proceeds from the offering of the Bridge Notes to facilitate the
Company's undertaking of one or more strategic alternatives in accordance with a
budget agreed upon with Circles.
***
There is no material relationship between the Company or its affiliates, on the
one hand, and Circles, on the other hand, except that Circles currently holds
all of the Bridge Notes and the First Lien Notes. There is no material
relationship between the Company or its affiliates, on the one hand, and High
Trail and Channel Ventures, on the other hand, except that High Trail and
Channel Ventures held the First Lien Notes previously issued under the First
Lien Transaction Documents and each of High Trail and Channel Ventures Group is
party to other previously disclosed agreements with the Company. The foregoing
description is qualified in its entirety by the terms of the Second Omnibus
Agreement, the Allonges to the First Lien Notes, the Bridge Notes SPA and the
Bridge Notes, which are attached hereto as Exhibits 10.1 through and 10.11 and
incorporated herein by reference.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
The information set forth in Item 1.01 hereof is incorporated by reference into
this Item 2.03.
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
10.1* Second Omnibus Agreement, dated as of April 25, 2022, by and among
High Trail Investments SA LLC, Circles MVNE Pte. Ltd., Pareteum
Corporation and certain subsidiaries of Pareteum Corporation.
10.2 Allonge to Senior Secured Convertible Note due 2025, Certificate A-1,
dated June 8, 2020
10.3 Allonge to Senior Secured Convertible Note due 2025, Certificate B-1,
dated October 1, 2021
10.4 Allonge to Senior Secured Convertible Note due 2025, Certificate B-2,
dated October 7, 2021
10.5 Allonge to Senior Secured Convertible Note due 2025, Certificate B-3,
dated October 15, 2021
10.6 Allonge to Senior Secured Convertible Note due 2025, Certificate B-4,
dated October 25, 2021
10.7 Allonge to Senior Secured Convertible Note due 2025, Certificate B-5,
dated November 15, 2021
10.8 Allonge to Senior Secured Convertible Note due 2025, Certificate B-6,
dated November 26, 2021
10.9 Allonge to Senior Secured Convertible Note due 2025, Certificate B-7,
dated December 17, 2021
10.10* Securities Purchase Agreement, dated as of April 25, 2022, between
Pareteum Corporation and Circles
10.11 Senior Secured Bridge Note due 2022, issued April 25, 2022, by
Pareteum Corporation
104 Cover Page Interactive Data File (formatted as Inline XBRL)
* Exhibits and schedules have been omitted pursuant to Item 601(a)(5) of
Regulation S-K and will be supplementally provided to the Securities and
Exchange Commission upon request.
© Edgar Online, source Glimpses