teum-20210331

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM 10-Q


x			Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2021


o			Transition report under Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from ______ to ______

001-35360

(Commission file No.)

PARETEUM CORPORATION

(Exact name of registrant as specified in its charter)


Delaware			95-4557538
(State or other jurisdiction of incorporation or organization)			(I.R.S. employer identification no.)

1185 Avenue of the Americas, 2nd Floor, New York, NY 10036

(Address of principal executive offices) (Zip Code)

(646) 975-0400

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $0.00001 par value per share

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ¨ No ☑

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ☑

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large Accelerated filer

Accelerated filer

Non-Accelerated filer

☑

Smaller reporting company

☑

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No ☑

As of August 20, 2021, there were 142,697,197 shares of the Company’s common stock outstanding.

Table of Contents

PARETEUM CORPORATION AND SUBSIDIARIES

TABLE OF CONTENTS

QUARTERLY REPORT ON FORM 10-Q

For the Period Ended March 31, 2021


PART I - FINANCIAL INFORMATION			3

Item 1. Financial Statements			3
Unaudited Condensed Consolidated Balance Sheets			3
Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss			5
Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Deficit			6
Unaudited Condensed Consolidated Statements of Cash Flows			7
Notes to Unaudited Condensed Consolidated Financial Statements			8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			28
Item 3. Quantitative and Qualitative Disclosures About Market Risk			36
Item 4. Controls and Procedures			36

PART II - OTHER INFORMATION			38

Item 1. Legal Proceedings			38
Item 1A. Risk Factors			38
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			38
Item 3. Defaults upon Senior Securities			38
Item 4. Mine Safety Disclosures			39
Item 5. Other Information			40
Item 6. Exhibits			41

SIGNATURES			42

Table of Contents

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

PARETEUM CORPORATION AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

Table of Contents


(In thousands, except share and par values)	March 31, 2021		December 31, 2020 As revised
ASSETS
Current assets:
Cash and cash equivalents	$	2,098	$	8,275
Restricted cash	6,459		6,479
Accounts receivable, net of allowance for doubtful accounts of $2,213 and $2,077 as of March 31, 2021 and December 31, 2020, respectively	12,379		11,608
Note receivable, net	300		300
Prepaid expenses and other current assets	2,443		3,672
Total current assets	23,679		30,334
Right-of-use assets, net	754		1,044
Property, equipment, and software development, net	4,139		5,090
Intangible assets, net	12,187		12,998
Goodwill	10,560		11,043
Other assets	724		749
TOTAL ASSETS	$	52,043	$	61,258

LIABILITIES, REDEEMABLE PREFERRED STOCK, AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable and customer deposits	$	33,218	$	36,034
Net billings in excess of revenues	3,521		3,634
Accrued expenses and other payables	14,797		13,044
Term loan	241		242
Current portion of promissory notes	481		604
Related party loan	311		337
Current portion of lease liabilities	312		524
Derivative liabilities	3,601		6,163
Senior Convertible Note, net	7,521		6,655
Total current liabilities	64,003		67,237
Junior Convertible Note, net	54		—
Lease liabilities, net of current portion	512		601
Promissory notes, net of current portion	228		330
Paycheck Protection Program loan	826		824
Warrant liability	5,850		7,768

TOTAL LIABILITIES	71,473		76,760

Commitments and contingencies

Redeemable Preferred Stock, $23,138 redemption value as of March 31, 2021 and December 31, 2020	25,541		24,899

Stockholders’ deficit:
Preferred stock, $0.00001 par value: 49,995,966 shares authorized, 217.67 and 217.67 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively	—		—
Common stock and additional paid-in capital, $0.00001 par value: 500,000,000 shares authorized, 142,206,226 and 140,268,725 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively	555,491		552,852
Accumulated other comprehensive loss	(9,318)		(8,660)
Accumulated deficit	(591,144)		(584,593)
TOTAL STOCKHOLDERS’ DEFICIT	(44,971)		(40,401)
TOTAL LIABILITIES, REDEEMABLE PREFERRED STOCK, AND STOCKHOLDERS’ DEFICIT	$	52,043	$	61,258

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

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PARETEUM CORPORATION AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS


	Three Months Ended March 31,
(In thousands, except share and per share values)	2021		2020
Revenue	$	15,466	$	20,055
Costs and operating expenses:
Cost of revenue, excluding depreciation and amortization	10,247		14,445
Product development	1,999		2,991
Sales and marketing	1,277		1,922
General and administrative	9,721		7,048
Depreciation and amortization	2,393		2,645
Total costs and operating expenses	25,637		29,051
Operating loss	(10,171)		(8,996)
Nonoperating expenses (income), net	(3,572)		525
Loss before income taxes	(6,599)		(9,521)
Income tax benefit	(48)		(97)
Net loss	(6,551)		(9,424)
Dividends and accretion of redemption premium on Redeemable Preferred Stock	647		—
Net loss attributable to common equity	$	(7,198)	$	(9,424)

Loss per common share:
Net loss per share - basic and diluted	$	(0.05)	$	(0.07)
Weighted average shares outstanding during the period – basic and diluted	141,095,174		138,257,442

Net loss	$	(6,551)	$	(9,424)
Other comprehensive loss:
Foreign currency translation loss	(658)		—
Comprehensive loss	$	(7,209)	$	(9,424)

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

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PARETEUM CORPORATION AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED

STATEMENTS OF CHANGES IN REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT


	Three Months Ended March 31,
(In thousands)	2021		2020
Redeemable Preferred Stock
Balance, beginning of period	$	24,899	$	—
Dividends and accretion of redemption premium on Redeemable Preferred Stock	647		—
Payment of dividends	(5)		—
Balance, end of period	$	25,541	$	—
Common stock and additional paid-in capital
Balance, beginning of period	$	552,852	$	547,948
Share-based compensation	770		2,395
Warrants issued for settlement agreement	—		653
Shares issued for Senior Convertible Note interest	788		—
Junior Convertible Note conversion feature	923		—
BMF warrant	805		—


Dividends and accretion of redemption premium on Redeemable Preferred Stock	(647)		—
Balance, end of period	555,491		550,996
Accumulated other comprehensive loss
Balance, beginning of period	(8,660)		(10,017)
Foreign currency translation loss, net of tax	(658)		—
Balance, end of period	(9,318)		(10,017)
Accumulated deficit
Balance, beginning of period	(584,593)		(539,493)
Net loss	(6,551)		(9,424)
Balance, end of period	(591,144)		(548,917)
Total stockholders’ deficit	$	(44,971)	$	(7,938)

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

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PARETEUM CORPORATION AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


	Three Months Ended March 31,
(In thousands)	2021		2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(6,551)	$	(9,424)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	2,393		2,645
Provision for doubtful accounts	364		251
Share-based compensation	770		2,395
Change in fair value of warrant and derivative liabilities	(4,698)		—
Amortization of deferred financing costs	97		113
Interest expense related to debt discount accretion and conversion feature	921		1,466
Warrants issued for settlement agreement	—		653
Gain on settlement of rental agreement	—		(469)
Changes in operating assets and liabilities:
Accounts receivable, net	(1,536)		421
Prepaid expenses and other current assets	1,449		2,553
Accounts payable and customer deposits	(2,571)		(920)
Net billings in excess of revenues and deferred revenue	(37)		(193)
Accrued expenses and other payables	2,521		(2,537)
Net cash used in operating activities	(6,878)		(3,046)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, equipment, and software development

SEC Form 10-Q filed by Pareteum Corporation