Item 8.01 Other Events.
On December 10, 2019, Mr. Zohar Levy, on behalf of Eroll Grow Tech Ltd., a
wholly owned subsidiary of the registrant, incorporated in Israel ("Eroll"),
filed a petition (the "Petition") for a debt settlement in the Nazareth District
Court (the "Court"), in accordance with Section 321 of Chapter A of Part G of
the Israeli Insolvency and Economic Rehabilitation Law, seeking a debt
settlement and a stay of proceedings in order to protect Eroll's creditors from
economic damages and other future damages, and to allow Eroll to maintain its
business while seeking a proposal of an acquisition of Eroll and/or its
activities and assets.
On December 11, 2019, Eroll received an offer to acquire Eroll and/or its assets
and business from a potential buyer (the "Acquisition Offer" and the "Potential
Buyer," respectively). As part of the Acquisition Offer, the Potential Buyer
agreed to provide a bridge loan to Eroll in the amount of $400,000 (the "Bridge
Loan") to be repaid within 20 days, which Eroll will use for payroll, payment of
debt to a certain Chinese manufacturer, and certain other enumerated urgent
payments necessary to keep Eroll's assets active.
On December 17, 2019, the Court approved Erolls' entering into the Acquisition
Offer subject to several conditions. Additionally, the Court issued an order of
stay of all legal proceedings against Eroll, and on December 19, 2019, the Court
appointed a debt settlement manager (the "Settlement Manager") with authority to
execute actions in accordance with the Israeli Insolvency and Economic
Rehabilitation Law.
Due to the fact that Eroll was not able to secure the Bridge Loan under the
conditions determined by the Court, on January 2, 2020, the Settlement Manager
filed a request to the Court for entering into an interim funding agreement with
the Potential Buyer (the "Interim Funding Agreement"). As part of the Interim
Funding Agreement, the Potential Buyer agreed to provide a loan in the amount of
$294,000 (the "Loan"), which the Eroll will use for payroll, and certain other
enumerated urgent payments necessary to keep Eroll's assets active, until a
creditors meeting is convened in order to approve a debt settlement based on a
final acquisition offer from the Potential Buyer. To ensure the repayment of the
Loan, the Potential Buyer will receive a lien over certain intellectual property
of Eroll, future payments to Eroll from PayPal and Eroll's property.
On January 5, 2020, the Court approved the Settlement Managers' request to enter
into the Interim Funding Agreement.
Additionally, on January 8, 2020, the Court issued an order of stay of all legal
proceedings against Eroll, and an order prohibiting any disposition of the
Eroll's property. Any transfer of any of Eroll's property and rights, including
patents, shall be done subject to the Courts approval. In addition, the Court
ordered that Eroll will continue its activities temporarily, and appointed the
Settlement Manager as Eroll's trustee, who will, among others, convene a
creditors meeting to approve a debt settlement based on a final acquisition
offer from the Potential Buyer, to be convened no later than January 19, 2020.
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