JERSEY CITY, N.J. -- (Business Wire)
TAR SITO LendCo LLC (“TAR”), SITO Mobile Ltd.’s (NASDAQ:SITO) senior
secured lender announces it has filed a complaint against SITO
indicating it has defaulted on its loan documents as the result of,
among other things, various breaches.
On July 11, 2017, TAR became the secured lender and successor collateral
agent under certain security and loan agreements previously entered into
between Fortress Credit Co LLC and SITO. Under the terms of such
agreements, SITO is required to, among other things, use their best
efforts to pursue the monetization of SITO’s patent portfolio — which
serves as collateral for the secured loan — as well as provide detailed
information relating thereto. Such loan documents further provide that
TAR, as secured lender and collateral agent, can declare the balance of
the patent revenue stream to be immediately due and payable, upon a
default, in the amount of $5 million if the payment occurs prior to
March 31, 2018, and $7.5 million thereafter (in each case less any
amounts previously paid out).
TAR has tried repeatedly to obtain information regarding SITO’s best
efforts, if any, to monetize the patent portfolio, and other information
required to be provided by SITO under the loan documents. Rather than
acting in accordance with the terms of the loan documents, SITO’s board
has proceeded in a reckless manner that has left TAR no option but to
place SITO in default on its loan.
SITO Stockholders should wonder why, rather than provide basic
information (including the company’s cash position), SITO’s board is
prepared to accumulate legal fees and create distraction for the company
by defaulting on their loan. As long as the loan agreement is in place,
the company is unable to incur debt or otherwise access a working
capital facility, and it is obligated to spend significant time and
effort to monetize its patent portfolio, rather than advance the
business of the company. It makes no sense that SITO has refused to
engage with TAR in an attempt to settle this matter amicably.
SITO has failed to meet or has breached, and therefore defaulted on its
obligations under the loan documents by:
-
Failing to comply with its obligations to use best efforts to monetize
the patents that are collateral under the loan documents.
-
Failing to provide monthly (and on demand) certifications on
information relating to the patent portfolio, including among other
things, the company’s efforts with respect to the monetization of such
patents.
-
Failing to provide reports to TAR calculating patent monetization
revenues by the 15th of every month.
-
Having incurred indebtedness outside of the ordinary course of the
company’s business by paying the legal fees of a SITO stockholder.
-
Failing to provide monthly certifications regarding the company’s
amount of cash and cash equivalents on hand.
Additionally, the company has failed to hold an annual meeting in 2017
as required by Nasdaq listing requirements.
While TAR has accommodated SITO’s failure to comply with the loan
documents reasonably and has been willing to entertain reasonable
proposals from the company to settle this dispute in an amicable
fashion, stockholders should be asking serious questions about the
board’s willingness to default on the loan:
-
As the licensing of these patents would provide significant additional
revenue to the company, which would presumably have a positive effect
on SITO’s stock price performance, how can the board claim to be
acting in the best interests of shareholders by failing to execute on
these opportunities?
-
Is it possible that the board — blinded by their animosity for a
former large investor which has continuously pushed the company to
enhance stockholder value — is putting thwarting said investor above
their responsibility to stockholders?
-
Is it possible that the company is in even more dire financial straits
than they have indicated?
TAR encourages the board to act in accordance with their fiduciary
duties and resolve this matter quickly.
View source version on businesswire.com: http://www.businesswire.com/news/home/20171120005750/en/
Contacts:
Media contact:
Ian Robertson
Executive Vice President
Communication
Strategy, Kingsdale Advisors
(646) 651-1640
irobertson@kingsdaleadvisors.com
Source: TAR SITO LendCo LLC
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