Case 20-32554-sgj11 Doc 397 Filed 10/04/21 Entered 10/04/21 16:14:58 Page 1 of 26 Charles B. Hendricks Texas Bar No. 09451050 Christopher J. Volkmer State Bar No. 20607800 CAVAZOS HENDRICKS POIROT, P.C. Suite 570, Founders Square 900 Jackson Street Dallas, TX 75202 Phone: (214) 573-7322 Fax: (214) 573-7399 Email: [email protected] Email: [email protected] Attorneys for Debtor IN THE UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF TEXAS DALLAS DIVISION In Re: VIZIV TECHNOLOGIES, LLC, Debtor. § § § § § § § Case No. 20-32554-sgj-11 DEBTOR’S DISCLOSURE STATEMENT FOR THE PLANS OF REORGANIZATION OF 3:10 CAPITAL WPF VII LLC AND KBST INVESTMENTS, LLC Disclosure Statement dated October 4, 2021. Disclosure Statement Page 1 of 26 Case 20-32554-sgj11 Doc 397 Filed 10/04/21 Entered 10/04/21 16:14:58 Page 2 of 26 Table of Contents INTRODUCTION .......................................................................................................................... 2 Purpose of this Document ................................................................................................. 3 Deadlines for Voting and Objecting; Date of Confirmation Hearing ........................... 4 Disclaimers .......................................................................................................................... 5 PART I. VIZIV’S BUSINESS, ASSETS AND LIABILITIES, AND SIGNIFICANT EVENTS IN THE BANKRUPTCY CASE ................................................................. 6 A. Organization of Viziv’s Business .......................................................................... 6 B. Capital Investments in and Liabilities of Viziv ................................................... 7 C. Assets of Viziv ....................................................................................................... 9 D. The Technology of Viziv ...................................................................................... 11 E. Assessment of Other Competitive Wireless Technologies ................................ 12 F. Commercialization Pathways for Viziv’s Technology ...................................... 12 G. Events Leading to Chapter 11 Filing ................................................................. 14 H. Significant Events During the Bankruptcy Case .............................................. 15 I. Current and Historical Financial Condition ..................................................... 17 PART II: SUMMARY OF GENERAL TERMS THAT APPLY TO THE PLANS OF REORGANIZATION .......................................................................................... 18 A. Plan Purpose and Requirements ........................................................................ 18 B. Voting on the Plans .............................................................................................. 20 C. Confirmation Hearing for the Plans .................................................................. 21 D. Certain Matters Relating to Plan Implementation ........................................... 22 ****************************************************************************** INTRODUCTION This is the disclosure statement (the “Disclosure Statement”) in the Chapter 11 case of Viziv Technologies, LLC (the “Debtor” or “Viziv”). This Disclosure Statement provides information about the Debtor, the Bankruptcy Case, and the two Plans of Reorganization (each a “Plan” and collectively, the “Plans”) that have been proposed by two different Plan proponents. For each Plan, there is an addendum that describes (i) the treatment of claims and interests, (ii) means for and implementation of the Plan, (iii) the tax treatment of claims and interests, (iv) releases, settlements and injunctions included as part of the Plan, and (v) all other matters relevant to the particular Plan (each a “Plan Addendum” and collectively the “Addenda”). This Disclosure Statement is divided into two parts: Part I: Part I describes Viziv’s business, Viziv’s assets, liabilities, the events leading to bankruptcy, and actions that have occurred during this bankruptcy case (the “Bankruptcy Case”). Disclosure Statement Page 2 of 26 Case 20-32554-sgj11 Doc 397 Filed 10/04/21 Entered 10/04/21 16:14:58 Page 3 of 26 Part II: Part II describes the general provisions regarding confirmation requirements that are applicable to the Plans under the law governing bankruptcy cases (the “Bankruptcy Code”). The Debtor is responsible for the drafting of the Disclosure Statement. This Disclosure Statement also includes two addenda: 3:10 Addendum: The 3:10 Capital Plan Addendum describes the Plan proposed by the Plan proponent 3:10 Capital WPF VII LLC and related parties (collectively “3:10 Capital”). KBST Addendum: The KBST Plan Addendum describes the Plan proposed by Plan proponent KBST Investments, LLC (“KBST”). In this Disclosure Statement, 3:10 Capital and KBST are each a “Plan Proponent” and may be collectively referred to as the “Plan Proponents.” The Plan Proponents are responsible for the drafting of their respective Plan Addendum. Generally speaking, you may vote to accept or reject either Plan if you are eligible to vote under that Plan (eligibility is discussed below). In other words, you can cast a separate ballot for each Plan, and voting to accept or to reject one Plan does not preclude you from voting to accept or to reject the other Plan, as long as you are eligible to vote under that Plan. If you vote to accept both Plans, you may indicate a preference for the Plan you prefer to be confirmed. As discussed below, each Plan must meet the requirements of the Bankruptcy Code for confirmation. If each Plan meets the requirements for confirmation, there may be more than one confirmable Plan. In that event, the Bankruptcy Judge shall consider the preferences of creditors and equity security holders in determining which Plan to confirm. More details on voting are set forth in Part II below. Your rights may be affected. The Plan that is confirmed may affect your economic rights. You may wish to consult an attorney about your rights and your treatment under the Plans. Purpose of this Document The purpose of this Disclosure Statement is to provide you with adequate information about the Bankruptcy Case, the Debtor and its business, and the proposed Plans so that you can vote on each of the Plans. There are some matters that the two Plans have in common: ▪ Both of the Plans provide that all administrative and priority claims will be paid in full. ▪ Both of the Plans provide that all allowed unsecured claims of employees and trade creditors will be paid in full. ▪ Both of the Plans provide for some ability of the current unitholders1 to retain an interest in the reorganized or successor company. ▪ Both of the Plans contemplate a continuation of the business that Viziv is conducting today. --- 1 The Bankruptcy Code uses the terms “equity security holders” and “interest holders” to describe persons holding an ownership interest in a debtor. In this Disclosure Statement, these terms and “unitholders” are used interchangeably. Disclosure Statement Page 3 of 26 Case 20-32554-sgj11 Doc 397 Filed 10/04/21 Entered 10/04/21 16:14:58 Page 4 of 26 The differences in the Plans are in the treatment of the claims and interest of the Founders (defined below), the treatment of the unitholders, and the manner in which each Plan is implemented. Be sure to read all of the parts of this Disclosure Statement and the Addenda. This Disclosure Statement describes the Plans, but it is the Plan that is confirmed by the Bankruptcy Court for this Bankruptcy Case (the “Bankruptcy Court” or the “Court”) that will establish your rights. Deadlines for Voting and Objecting; Date of Confirmation Hearing The Court has not yet confirmed either of the Plans described in this Disclosure Statement and the Addenda. With this Disclosure Statement you are receiving a notice (the “Confirmation Hearing Notice”) that will inform you of: ▪ The time and place of the hearing for the Court to consider the confirmation of the Plans. ▪ The deadline for voting to accept or reject the Plans. ▪ Instructions on how to complete and return a ballot for each Plan. ▪ The deadline for objecting to the confirmation of any of the Plans. Please see Part II for more information regarding confirmation and voting. If you want additional information about the Bankruptcy Case or the voting procedure, you should contact: Charles B. Hendricks Christopher J. Volkmer Cavazos Hendricks Poirot P.C. Suite 570 Jackson Square 900 Jackson Street Dallas, Texas 75201 (214) 573-7300 [email protected] [email protected] If you want additional information about either of the Plans, you should contact: For the 3:10 Capital Plan: J. Mark Chevallier McGuire, Craddock & Strother P.C. 2200 Ross Tower 500 N. Akard Street Dallas, Texas 75202-2790 (214) 954-6807 [email protected] For the KBST Plan: Kenneth Stohner, Jr. Jackson Walker L.L.P. 2323 Ross Avenue Suite 600 Dallas, Texas 75201 (214) 953-6000 [email protected] Disclosure Statement Page 4 of 26 Case 20-32554-sgj11 Doc 397 Filed 10/04/21 Entered 10/04/21 16:14:58 Page 5 of 26 Disclaimers The Court has approved this Disclosure Statement as containing adequate information to enable parties affected by the Plans to make an informed judgment about their terms. The Court has not yet determined whether either of the Plans meets the legal requirements for confirmation, and the fact that the Court has approved this Disclosure Statement does not constitute an endorsement by the Court of any Plan, or a recommendation that any Plan be accepted. The information contained in this Disclosure Statement is included for purposes of soliciting votes for the acceptances and confirmation of the Plans and may not be relied upon for any other purpose. This Disclosure Statement has been prepared in accordance with Section 1125 of the Bankruptcy Code and Bankruptcy Rule 3016(b) and is not necessarily prepared in accordance with federal or state securities laws or other similar laws. This Disclosure Statement has not been approved or disapproved by the United States Securities and Exchange Commission (the “SEC”) or any similar federal, state, local or foreign regulatory agency, nor has the SEC or other agency passed upon the accuracy or adequacy of the statements contained in this Disclosure Statement. Any representation to the contrary is a criminal offense. Summaries of the Plans and statements made in this Disclosure Statement and in the Addenda are qualified in their entirety by reference to the Plans. The Debtor believes the statements made in the Disclosure Statement and the Plan Proponents believe the statements made in their respective Addenda, are fair and accurate. However, these statements are qualified in their entirety to the extent they do not set forth the entire text of such documents or statutory provisions or every detail of such anticipated events. The Debtor and the Plan Proponents do not represent or warrant that the information contained herein or attached hereto is without any material inaccuracy or omission. The Debtor and Plan Proponents have sought to ensure the accuracy of the financial information provided in this Disclosure Statement and the Addenda by each of them; however, the financial information contained in this Disclosure Statement or incorporated herein by reference has not been, and will not be, reviewed by the Debtor’s independent auditors or the auditors of the Plan Proponents unless explicitly provided otherwise. The statements made in this Disclosure Statement and the Addenda are made only as of the date of this Disclosure Statement, and there is no assurance that the statements contained herein will be correct at any time after such date. Except as provided in the Plans or in accordance with applicable law, neither the Debtor nor the Plan Proponents are under a duty to update or supplement this Disclosure Statement or the Addenda. This Disclosure Statement and the Addenda do not constitute, and may not be construed as, an admission of fact, liability, stipulation, or waiver. The Debtor, Plan Proponents, or any other authorized party may seek to investigate, file, and prosecute claims and may object to claims after the confirmation or effective date of a Plan irrespective of whether this Disclosure Statement or the Addenda identifies any such claims or objections to claims. Disclosure Statement Page 5 of 26 Case 20-32554-sgj11 Doc 397 Filed 10/04/21 Entered 10/04/21 16:14:58 Page 6 of 26 Additional disclaimers are included in Part II below. ****************************************************************************** PART I. VIZIV’S BUSINESS, ASSETS AND LIABILITIES, AND SIGNIFICANT EVENTS IN THE BANKRUPTCY CASE A. Organization of Viziv’s Business Viziv Technologies, LLC (“Viziv” or “Company” or the “Debtor”), is a Texas limited liability company formed on August 29, 2013, under the name of Texzon Technologies, LLC. The Viziv name and the Viziv brand were introduced on April 20, 2018. Viziv was formed to commercialize, domestically and internationally, the technology acquired, developed and patented by Viziv. Stated simply, this technology would enable the reliable and efficient delivery of electric power without transmission lines, wires, or cables. The delivery of wireless electric power would be accomplished through electromagnetic wave propagation referred to as Zenneck surface waves. The ability to deliver electric power without the use of wires or other physical means would be revolutionary, and the application of the technology would have the potential for global-scale applications in many industries. However, as explained in greater detail below, the technology is not yet proven, and there are significant research initiatives, system designs, and experiments that must be successfully addressed to demonstrate commercial viability of the technology. In addition, large additional capital investments are required. Viziv was founded by four individuals: James “Jim” Corum, Kenneth Corum, David Griffith, and Basil Pinzone (collectively, the “Founders”). Prior to the organization of the Debtor, the Founders formed CPG Technologies, LLC, a Nevada limited liability company (“CPG”). At the time of the formation of Viziv, CPG held title to all material intellectual property related to the technology. CPG was acquired by Viziv and became a wholly-owned subsidiary in February of 2016 to create a more efficient operating structure and improve the ability to obtain capital. Through the acquisition of CPG, accounted for as a transaction between entities under common control, Viziv acquired the then-existing material patents and other intellectual property (the “Intellectual Property”). Since that time, Viziv has funded the ongoing development of the technology and the associated Intellectual Property that is expected to support Viziv’s prospective operations. Viziv organized several subsidiaries all of which (except for CPG) are organized under the laws of the State of Texas. The names of the material subsidiaries (the “Subsidiaries”) and their function are explained in the following chart. | Name of Subsidiary | Function | | --- | --- | | Viziv Properties, LLC | Holds real estate assets | | Viziv Labs, LLC | Holds research and development equipment and other assets | | Viziv Management, LLC | Manages employment contracts and payroll | | Viziv Management Holdings, Inc. | Sole manager of Viziv Management, LLC | | CPG Technologies, LLC | Holds intellectual property assets | Disclosure Statement Page 6 of 26 Case 20-32554-sgj11 Doc 397 Filed 10/04/21 Entered 10/04/21 16:14:58 Page 7 of 26 In addition, there are certain indirect subsidiaries of Viziv under CPG that were organized to address foreign patents and licensing. A chart showing the relationship of Viziv and its Subsidiaries is attached hereto as Exhibit B. For avoidance of doubt, only Viziv Technologies, LLC is the Debtor in this Bankruptcy Case. The Subsidiaries are not debtors in bankruptcy. B. Capital Investments in and Liabilities of Viziv 1. Investments of Capital As a pre-revenue company, Viziv had no income from operations to support its research and development activities. Accordingly, Viziv began to raise capital by the issuance of Class A-3 units of Viziv. For the period from October 5, 2016 to October 23, 2019, Viziv issued 8,254,346 Class A-3 units of which 7,644,346 units remain outstanding. The total amount of funds raised through these activities totaled $79,055,895. The funds obtained from the fundraising activities were used to acquire the real estate, buildings and improvements, equipment, and to pay for the fees and filing expenses of prosecuting and maintaining the Intellectual Property. These assets are described in greater detail in the “Assets” section below. Funds raised from investors were also used to pay operating expenses, including salaries and benefits, leases, professional fees, auditing fees, foreign agents and similar items. 2. Convertible Notes In addition to the sale of equity units to investors, Viziv raised funds through convertible promissory notes. The first note was issued in March of 2016 to Kingdom Wireless Power, LLC and its terms were modified later in 2016 and 2019. The note gave the holder a right to convert the note into Class A-3 Units of Viziv. During calendar year 2019, the principal amount of the note of $1,063,971 and the accrued interest thereon of $233,416 were converted on five different dates for a total of 122,007 Class A-3 Units. A second unsecured convertible note was issued on January 13, 2017 to Jamison Partners, L.P. (“Jamison”) in the principal amount of $2,500,000. The note has an interest rate of four percent per annum, with interest payable on the maturity date of January 13, 2020. The maturity date was subsequently extended to July 13, 2020 and then further extended to December 1, 2020. The note remains unpaid, and as of the Petition Date, principal and interest on the Jamison note totaled $2,871,505. A third unsecured convertible note was issued on October 1, 2019 to The WS 2006 Irrevocable Trust in the principal amount of $2,700,000. The note has an interest rate of seven percent per annum with principal and interest due on the maturity date of October 1, 2022. The note remains unpaid, and as of the Petition Date, principal and interest on the note totaled $2,889,518. A secured convertible note and security agreement was issued on February 5, 2020 to Surface Energy Partners, L.P. (“SEP”) in the principal amount of up to $4,000,000 (the “SEP Note”). The note was amended as of February 20, 2020, to clarify certain provisions of the note and funding thereunder. The SEP note has a monthly interest rate of one percent with principal and interest due on the maturity date of August 31, 2020. The note grants to SEP a security interest in all of Viziv’s personal property and intangible property but specifically excluding all Disclosure Statement Page 7 of 26 Case 20-32554-sgj11 Doc 397 Filed 10/04/21 Entered 10/04/21 16:14:58 Page 8 of 26 Intellectual Property of Viziv. The SEP note is not secured by the real property owned by Viziv Properties. The maturity date for the note was extended to December 15, 2020. The note remains unpaid, and as of the Petition Date, principal and interest on the note totaled $3,946,769.00. 3. Trade Debt Viziv also utilizes third-party vendors who provide professional and commercial services and products for Viziv and its Subsidiaries. Generally, Viziv pays for these services and then charges the Subsidiaries using intercompany accounts based upon the nature of the services and goods provided. For example, equipment may be acquired for Viziv Labs, but Debtor will pay for the equipment and then charge the intercompany account of Viziv Labs for that payment. Because the Subsidiaries are wholly-owned by Viziv, the intercompany accounts between Viziv and the Subsidiaries are ignored for purposes of the Plans. As of the Petition Date, the trade debt of Viziv was approximately $813,682.00. Except as noted below, these obligations are not disputed by Viziv. 4. Employee Claims Employees of Viziv hold claims arising from (a) notes representing deferred compensation for periods prior to the Petition Date; (b) unused vacation and paid time off, and (c) claims for severance of employment (collectively, the “Employee Claims”). As of the Petition Date, there are 17 Employee Claims of Viziv as reflected in the Schedules filed by the Debtor, with a total amount of claims of $279,608.74. Thirteen of these claims totaling $266,853.25 have been transferred by the original claim holder to KBST Investments, LLC, one of the Plan Proponents. 5. Disputed Claims The following claims are disputed by the Debtor: (a) Texzon Utilities, Ltd. and Steve Wilson. Texzon Utilities, Ltd., (“Texzon”)2 an entity controlled by Steve Wilson (“Wilson”). Texzon and Wilson have filed proofs of claim that assert, among other things, that Viziv’s adoption of the current operating agreement (the Sixth Amended and Restated Operating Agreement, or “OA-6”) and the preceding company agreement (the Fifth Amended and Restated Operating Agreement, or “OA-5”) were not validly adopted by Viziv. Texzon also makes claims for reimbursement in the amount of $5,500, and both Wilson and Texzon assert potential indemnity obligations of Viziv. Texzon and Wilson had previously asserted claims relating to a terminated agreement between Viziv and Texzon, but these claims have not been asserted in this Bankruptcy Case. Viziv believes that OA-6 was validly adopted and is the operating agreement that governs Viziv’s business. OA-6 and OA-5 are discussed in greater detail in Section I.G. below. --- 2 The Debtor and some of its subsidiaries previously operated with company names that included “Texzon”; however, Texzon Utilities was not and is not an affiliate of the Debtor. Texzon is an owner of 10,000,000 Class A-2 Units. Disclosure Statement Page 8 of 26 Case 20-32554-sgj11 Doc 397 Filed 10/04/21 Entered 10/04/21 16:14:58 Page 9 of 26 (b) Founders Claims. (i) David Griffith and The Indian Shore Trust. David Griffith and The Indian Shore Trust have filed proofs of claim in the amount of $13,169,279.40 and $13,156,246.22, respectively. These claims are based upon assertions that (a) OA-6 was not validly adopted; (b) that they are entitled to claims of $11,500,000 because of a liquidation preference stated in OA-5, (c) claims for tax obligations they have incurred in the amount of $1,635,786.21, and (d) claims for indemnity. Additionally, Griffith also asserts a claim for reimbursement in the amount of $20,460 and compensation for salary deferment in the amount of $8,033.16. KBST has filed an objection to the claims of Griffith and The Indian Shore Trust (Dkt. No. 365). The claims for reimbursement and for salary deferment are not disputed by Viziv. (ii) Basil Pinzone and The Pinzone Family Irrevocable Trust. Basil Pinzone and The Pinzone Family Irrevocable Trust have filed proofs of claim in the amount of $15,489,531.40 and $15,485,590.85, respectively. These claims are based upon assertions that (a) OA-6 was not validly adopted; (b) that they are entitled to claims of $13,000,000 because of a liquidation preference stated in OA-5, (c) claims for tax obligations they have incurred in the amount of $2,485,590.86, and (d) claims for indemnity. Additionally, Pinzone also asserts a claim for compensation for salary deferment in the amount of $3,940.55. KBST has filed an objection to the claims of Pinzone and the Pinzone Family Irrevocable Trust (Dkt. No. 366). The claim for salary deferment is not disputed by Viziv. (iii) James Corum and Kenneth Corum. The other two Founders, James Corum and Kenneth Corum, have not filed proofs of claim. The foregoing claims are referred to collectively in this Disclosure Statement as the “Founders Claims”. (c) Syntony, LLC. Viziv received a claim from Syntony, LLC of Trumansburg, New York, owned by Jim and Judy Hardesty (“Hardesty”) asserting a claim for $50,325.17. Viziv understands that this claim arises from the relationship between Hardesty and Jim Corum, who apparently asked Syntony to pack and move Jim Corum’s “museum” of electromagnetic history technology to Texas. No request was made by Viziv for this service and it does not involve Company property. Viziv disputes the claim in full. There may be other claims that may be disputed if they vary from the amounts listed in the Schedules filed by Viziv. C. Assets of Viziv Viziv’s assets (owned directly or through the Subsidiaries) consist of four general categories: real estate and improvements, personal property, Intellectual Property, and causes of action and other general intangibles. All of the values stated below are drawn from the 2019 audited financial statements of Viziv and may be subject to significant reduction if Viziv’s auditors find Disclosure Statement Page 9 of 26 Case 20-32554-sgj11 Doc 397 Filed 10/04/21 Entered 10/04/21 16:14:58 Page 10 of 26 that the assets are impaired. Testimony before the Court has also indicated that the values of the real estate and equipment, and the Intellectual Property are interrelated with and dependent on the know-how of the persons who are currently working to develop the technology, forming something akin to a three-legged stool. If any one of these “legs” (that is, the equipment, the intellectual property, and the know-how of Viziv’s personnel) are separated, then the value of Viziv’s assets may be significantly diminished. 1. Real Estate On April 29, 2016, Viziv acquired a tract of real property consisting of approximately 386 acres in Ellis County, Texas (the “Test Site”). On September 27, 2017, Viziv conveyed the Test Site to its subsidiary, Viziv Properties, LLC (“Viziv Properties”). After the acquisition of the Test Site, Viziv began to construct buildings to house the personnel and equipment needed for research and development. Viziv also began construction of a 198-foot tower and substructure that would be used for what was referred to as the Global Demonstration Project (“GDP”). As of April 30, 2020, the net book value of the assets after depreciation (including the GDP substructure) held by Viziv Properties was $8,819,990.37. 2. Equipment Viziv invested heavily in the equipment needed to build and demonstrate the Viziv technology (described below in Section I. D.) This equipment was acquired through Viziv’s subsidiary Viziv Labs, LLC (“Viziv Labs”). Much of the equipment is specialized and has limited use outside of the purposes for which Viziv employs the equipment. In addition, Viziv recorded the GDP tower as part of the equipment of Viziv, having a cost of over $25 million. As of April 30, 2020, the net book value of the assets held by Viziv Labs was $25,899,827.43. 3. Intellectual Property As explained in Section I. A. above, the Intellectual Property of Viziv is held in a subsidiary, CPG. Viziv invested heavily in establishing intellectual property rights through the prosecution of patents both domestically and internationally. At this time, Viziv holds a total of 195 patents, approximately 140 issued patents and 55 patents pending in all developed nations around the world. The patents are managed through an agreement with Global Intellectual Property Group, PLLC (“GIPG”). Mark Guetlich, a former employee of Viziv, is the principal of GIPG. Viziv sought and obtained Court authority to continue to use GIPG and foreign patent agents in the ordinary course of business to maintain the patents of Viziv. Viziv also holds trademarks for the “Viziv” mark that have been granted and are being finalized. In addition, much of the technology that is under development at the current time constitutes trade secrets under applicable law. Because of the potential for global application of the technology, Viziv has implemented and continues to enforce controls and strict policies to protect its trade secrets. In the last audit report that reported results through December 21, 2019, the value of patents, patents pending and trademarks (less accumulated depreciation) totaled $7,311,158. The trade secrets and other common law intellectual property rights cannot be assigned a monetary value. Disclosure Statement Page 10 of 26 Case 20-32554-sgj11 Doc 397 Filed 10/04/21 Entered 10/04/21 16:14:58 Page 11 of 26 4. Causes of Action and Other Intangibles The Bankruptcy Code provides that a debtor may bring suit to recover avoidable transfers, including preferences and fraudulent transfers. Viziv has not completed the analysis of potential avoidable transfer claims. The Plans contemplate that such actions will be reviewed and initiated as provided under the Plans. D. The Technology of Viziv From its inception, Viziv has pursued, and continues to pursue, the research and development of wireless power and signaling technology. The mission statement of Viziv is “Enabling the adoption of surface wave products and services in a safe, environmentally conscious and reliable manner, improving living conditions across the globe.” The concept of surface wave transmission was postulated by James Clerk Maxwell (1831-1879) who synthesized his work in the area of electricity and electromagnetism in the now-famous “Maxwell’s equations”. Maxwell’s work was applied by Arnold Sommerfeld and Jonathan Zenneck to the problem of wave propagation using the earth’s surface. Nicola Tesla worked to develop a system for wireless electric power distribution and conducted demonstrations of this concept in the early 1900’s. Tesla’s wireless power ideas were never fully funded, developed, and characterized before his death in 1943, and the emerging electric energy industry continued to rely upon wired distribution systems for transmission of electric power as it does today. As conceived by the Founders and further developed by the scientists of Viziv, the scientific principles pioneered by Maxwell, Zenneck, and Tesla can be followed to produce a system for safe, wireless delivery of electric power. Viziv is developing proprietary methods to carry out this vision. Demonstrations of Viziv’s emerging technology are ongoing today and show encouraging signs that surface wave transmission may be possible. However, Viziv has only been able to demonstrate a proof of concept with very low efficiency transmissions. If Viziv can realize on the promise of this technology, the potential applications of wireless power technology could be global in scale and reach across virtually every vertical of business. The possibility of wireless transmission in the energy delivery sector alone is staggering. However, Viziv’s technology is not able to be commercialized today, and the prospect of commercialization will require more advances in technology. In order to demonstrate the commercial viability of Zenneck surface wave transmission of electric power, Viziv has projected that certain milestones need to be accomplished. Generally, these milestones involve a demonstration of the launch and operation of an efficient Zenneck wave over set distances. This effort will require significant additional investment. In order to meet the next milestones, Viziv estimates it could need at least $20 million of funding for the next milestone and up to $90 million of additional funding to complete the final milestone. The final milestone would be designed to demonstrate the ability to commercialize the technology. However, there is no assurance that these tests can be completed or that they will be successful. In summary, any person who acquires Viziv and its technology will not have any commercial product or service to sell to anyone. The acquiror must be willing to make or obtain very significant additional investments in order to demonstrate commercial viability. Commercial viability may not be possible, and as a result the entire amount of Disclosure Statement Page 11 of 26 Case 20-32554-sgj11 Doc 397 Filed 10/04/21 Entered 10/04/21 16:14:58 Page 12 of 26 capital invested in the acquisition of Viziv or its assets, and additional funding of efforts to commercialize the technology, may be lost. See the additional cautionary statements concerning Viziv’s technology in Part II. C below. E. Assessment of Other Competitive Wireless Technologies Viziv believes its Zenneck surface wave research is years ahead of its competitors in wireless power delivery technology. Debtor researchers, scientists and engineers have not found any evidence of direct competitors with safe, long-range wireless power transfer or delivery using similar technology. Viziv research has identified only five small startup companies (developing power cord and extension cord replacement type products) which are not directly competitive with Viziv. However, it is possible other companies are developing a technology that is competitive with the technology of Viziv and that these companies may be better financed or have more resources than Viziv. It is also possible that other companies may in the future attempt to create a technology that is competitive with the Viziv technology. Please note the risk factors stated in Section II relating to competition risk after the confirmation of a Plan. F. Commercialization Pathways for Viziv’s Technology Research and development of Viziv’s technology has continued during the Chapter 11 Case. The primary goal of Viziv is to establish global wave propagation for the purpose of the delivery of electricity for commercial use. Achieving this technical attribute will unlock the massive global transformation that is Viziv’s objective: To Power the Planet and Bring Light to the World. The combination of high launch efficiency and a commercially viable global standing wave could enable the delivery of electricity from any source to any location. If implemented, Viziv’s systems could provide a path to the new paradigm of wireless electricity delivery. Diesel generator replacement, powering island nations, and accessing stranded natural gas reserves are all potential early adoption markets for Viziv’s solutions. However, even if Viziv cannot establish a global standing wave for the delivery of electricity, the Viziv technology has other potential applications for short and medium range wireless delivery of electricity and signaling. Examples of potential commercial pathways for Viziv include: 1. Power Delivery within a Structure Launching of surface waves and creating a standing wave pattern within a structure could simplify local power access. Power delivery in this setting could power industrial factories and warehouses to wirelessly charge and power robots, forklifts, RFID tags, and other equipment within these structures. 2. Modest Launch Efficiency over the Ground Successful launching of surface waves with 25% – 50% energy conversion into surface waves enables commercialization of radio frequency signaling systems. Surface wave signaling transforms applications like long-range AM Radio, eLoran, timing signals, and beacons. Using Disclosure Statement Page 12 of 26 Case 20-32554-sgj11 Doc 397 Filed 10/04/21 Entered 10/04/21 16:14:58 Page 13 of 26 eLoran3 as an example, Viziv’s technology could provide a system that uses far fewer and much shorter structures, operates with much smaller transmitters, and requires a fraction of the standard land mass while meeting all safety requirements. In short, if developed, Viziv’s surface wave technology provides a greatly enhanced value proposition for future eLoran signaling implementations. 3. Sufficient Bandwidth to enable Data Communications Viziv’s surface wave systems are projected to have significant data carrying capabilities. This attribute was not viable with Viziv’s legacy designs. Supervisory Control and Data Acquisition systems and radio frequency data communication systems can be replaced with superior surface wave implementations. Small launchers and receivers can provide critical data, telemetry, and control links to locations and systems where traditional technologies are not feasible. If developed, Viziv’s surface wave systems could enable applications like continuous pipeline leak detection across remote areas, management of offshore oil platforms, advanced electricity grid control and redundancy as just a few examples. 4. High Launch Efficiency over the Ground If implemented, achieving high launch efficiency (70% - 90%) using surface waves would directly improve the cost/benefit of Viziv’s wireless signaling and data communications solutions. More signal translates into further distances from smaller transmitters. A basic application would be delivering critical commercial power backup applications up to a range of approximately 100 miles. 5. Mobile Operation Power delivery using a wireless delivery method could provide power to mobile receivers on trains, ships, trucks, and cars. In this segment, Viziv hopes to demonstrate that its receiver technology can operate efficiently and safely without a “grounded” connection and provide power to electric vehicles. 6. Compact Receivers and Miniaturization Power delivery to individual electricity loads such as houses, mobile phones, laptops, and cellular network components could be possible using Viziv’s technology. Power handling capacity of Viziv’s technology could also be important to support larger electricity usage such as a remote village or rural community centers. 7. Electro-Magnetic Interference (EMI) and Pulse (EMP) Tolerant Applications Viziv’s surface waves are not impacted by EMI or EMP. However, the launchers and receivers are not immune to adverse effects. If launchers and receivers can be “hardened” to protect the electronics from EMI and EMP, government, military, and industrial / commercial power, --- 3 Enhanced Loran (“eLoran”) is an internationally-standardized positioning, navigation, and timing (PNT) service for use by many modes of transport and in other applications. It is the latest in the longstanding and proven series of low-frequency, LOng-RAnge Navigation (LORAN) systems, one that takes full advantage of 21st century technology. Disclosure Statement Page 13 of 26 Case 20-32554-sgj11 Doc 397 Filed 10/04/21 Entered 10/04/21 16:14:58 Page 14 of 26 signaling, and communications systems become more resistant to EMI and EMP attacks. Securing the grid, control of water systems, and flight navigation are potential examples of this application of Viziv’s technology. In summary, there are multiple areas for potential application of Viziv’s technology that could provide very significant revenue and growth opportunities. Power delivery inside factories and warehouses, along with surface wave signaling and data communications, are all early market opportunities for Viziv that could be addressed without the attainment of high efficiency launch structures and global wave propagation. G. Events Leading to Chapter 11 Filing As described above in Part I.B., Viziv had raised about $80 million of capital from Class A-3 unitholders. These funds were largely depleted by the end of 2018 due to the significant effort made to build the GDP tower and conduct a surface wave test. On March 15, 2019, Viziv adopted the Fifth Amended and Restated Limited Liability Company Agreement (“OA-5”). At that time, the board of managers consisted of Jim Corum, Ken Corum, David Griffith, Basil Pinzone, Brigadier Gen. (Ret.) Michael W. Miller (who at that time was the CEO of Viziv), and Terry Knutson, who acted as the Class A-3 representative on the Board. In addition, the board at that time passed a resolution to initiate a search for a new chief executive officer. By August of 2019, Viziv had identified F. Craig Farrill (“Farrill”) as the person who should be appointed as its new Chief Executive Officer. The Board brought Farrill in as CEO to shift from a joint venture model to a global technology licensing model as a means to raise capital, reduce operating expenses and accelerate commercialization of wireless power through global licensing. The unanimous resolution appointing Farrill as CEO also expanded the Board of Managers of Viziv to eight members and added Farrill as the “CEO Manager.” By the end of 2019, Viziv had less than $3 million cash on hand (according to the 2019 audit report) and was on track to spend more than $2 million in January of 2020 based upon all of the spending needs of Viziv. In early February, the Board of Managers met to review the current status of Viziv and take action on the cash shortage. In meetings over three days and lasting over 18 hours, the managers agreed upon several resolutions that included: (a) The managers voted unanimously to adopt the Sixth Amended and Restated Operating Agreement (“OA-6”). OA-6 provided, among other things, that (i) the board of managers would be expanded to nine persons and that the Class A-3 unitholders would have two board seats; (ii) the distribution waterfall under the agreement was changed to eliminate a $50 million preferred distribution to the Founders and instead provide that the Founders receive a $10 million payment from any Unrestricted License Revenue (as defined in OA-6); (iii) the distributions made to unit holders would pari passu across all of Classes A-1, A-2, and A-3 and certain B unitholders (Class B consisted of units granted to current and former employees and other parties); and (iv) requiring that certain “Major Decisions” be approved by the Board and by at least 60% of the Class A-1 unitholders, and at least a majority of the A-3 unitholders. Disclosure Statement Page 14 of 26 Case 20-32554-sgj11 Doc 397 Filed 10/04/21 Entered 10/04/21 16:14:58 Page 15 of 26 (b) Farrill was authorized to execute the SEP Note (described in Section I.B.2 above) so that Viziv could address its immediate short-term cash needs. As the financial condition of Viziv continued to deteriorate in 2020, Farrill was concerned that Viziv would soon run out of cash without any avenue for obtaining additional funding through loans by third parties. Viziv engaged in further significant cost-cutting measures, including furloughing the majority of staff, pay reductions to minimum wage and agreed deferment of compensation, outsourcing multiple roles and functions, as well as scaling back of research work, supercomputer simulations and investments in Intellectual Property and technology development efforts. Farrill sought the advice of bankruptcy counsel in August 2020, when Viziv could no longer pay its debts as they became due. A majority of the members of the Board of Managers passed a resolution on October 5, 2020, appointing Farrill as Chief Restructuring Officer, authorizing him, if necessary, to initiate a bankruptcy proceeding, and to take certain actions in the bankruptcy case if one was filed. H. Significant Events During the Bankruptcy Case 1. The Involuntary Petition Before Viziv could take further action, Jamison, SEP, and another creditor (the “Petitioning Creditors”) filed an involuntary bankruptcy petition on October 7, 2020. The Debtor knew that the allegations of the involuntary petition were true, and that bankruptcy offered a path to survival because of the possibility of post-petition financing that would be give a lender superpriority status and the protection of a court order (see the description below, Debtor-in-Possession Financing). Therefore, in order to facilitate those ends, the Debtor filed a response the same day admitting the allegations of the involuntary petition. On October 12, the order for relief was entered by the Bankruptcy Court (the “Petition Date”). 2. The Motion to Dismiss and Other Actions by the Founders Soon after the Petition Date, the Founders and their affiliated Trusts, together with Texzon and Wilson, filed a motion requesting that the Court dismiss or abstain from hearing the Bankruptcy Case [Dkt. Nos. 46, 47 and 54]4 (the “Motion to Dismiss”). The Court encouraged the parties to attempt to settle so that the bankruptcy estate would not be dissipated by litigation. The parties engaged in negotiations but were not able to reach a comprehensive settlement. The Founders continued to object to the Debtor’s motions and actions filed in the Bankruptcy Case. Eventually, counsel for the Founders filed a motion to withdraw from the representation of Jim Corum and Kenneth Corum, and then sought to withdraw the Motion to Dismiss. A joint stipulation of withdrawal of the Motion to Dismiss signed by counsel for Griffith and Pinzone (and their related trusts) and Wilson and Texzon (the “Objectors”), the Petitioning Creditors and Viziv was filed on March 4, 2021 [Dkt. No. 220]. In addition, all of the other objections filed on behalf of the Founders were overruled or were settled by agreement. --- 4 References in this Disclosure Statement to Docket Numbers means the docket number of that pleading or order that is filed in the Bankruptcy Case. Copies of these documents are available from the clerk of the Bankruptcy Court and can also be accessed by investors at Viziv’s investor web portal. Disclosure Statement Page 15 of 26 Case 20-32554-sgj11 Doc 397 Filed 10/04/21 Entered 10/04/21 16:14:58 Page 16 of 26 3. Operational Matters Approved by the Court Viziv has also taken steps in the Bankruptcy Case to address its obligation to perform operational matters as a debtor-in-possession. Such actions include the applications to employ professionals (including bankruptcy counsel, corporate counsel, litigation counsel, and accountants), matters relating to insurance and banking relationships, the continued use of GIPG and foreign patent agents and extending the time in which Viziv as the Debtor has the exclusive right to file a plan of reorganization. All of these matters were approved by the Court after Viziv filed motions requesting such relief. 4. The Debtor-in-Possession Financing As stated above, Viziv entered the Bankruptcy Case with very little available cash, no source of income to support operations, and had temporarily furloughed much of its staff. Viziv could not survive in Chapter 11 case without obtaining additional financing as the “debtor-in-possession” or “DIP”. Viziv has filed several motions to obtain post-petition financing in order to continue operations during the Bankruptcy Case. The current DIP lender is 3:10 Capital WPF VII, LLC, one of the Plan Proponents. The Court entered an Order on April 8, 2021, approving the DIP loan from 3:10 Capital WPF VII, LLC (the “3:10 DIP Loan”) [Dkt. No. 272] in the amount of $4 million. On June 25, 2021, Viziv filed a motion [Docket No. 304] to increase and extend the 3:10 DIP Loan. This renewal and extension modified the 3:10 DIP Loan by, among other terms, (a) increasing the 3:10 DIP Loan amount to $5 million, (b) reducing the interest rate on the 3:10 DIP loan to zero, and (c) releasing the liens on Viziv’s property that had previously secured the 3:10 DIP Loan. The Court entered an order on July 12, 2021 approving these terms of the DIP Loan [Docket No. 323]. On September 24, 2021, the Debtor sought and obtained another extension and renewal of the 3:10 DIP Loan [Dkt. No. 396], that provides for an additional $1 million for continued operations of the Debtor through the budget period ending December 31, 2021. Under this extension of the 3:10 DIP Loan, the amount of the 3:10 DIP loan is now $6 million plus $216,211.11 of unpaid interest that had accrued prior to the modification of the 3:10 DIP Loan. 5. The Appointment of the Independent Director After issues arose in the hearings on the 3:10 DIP Loan concerning the need for an independent review of the loan, Viziv filed a Motion for Appointment of Independent Director on March 22, 2021 [Dkt. No. 249], requesting that Robin E. Phelan (“Phelan”) be appointed as an independent director working with the existing Board to review related party transactions, important bankruptcy decisions, and other matters. The Court granted the Motion by an order entered on March 31, 2021 [Dkt. No. 258] that included certain agreed governance procedures relating to Viziv’s Board of Managers and the activity of the Independent Director. Since his appointment, the Independent Director has reviewed the terms of the DIP Motion and is the primary interface with Stout Capital. The Independent Director has participated in all Board of Managers meetings and has reviewed the significant developments in the Bankruptcy Case, including the two proposed Plans and this Disclosure Statement. 6. The Engagement of Stout Capital by Viziv Prior to the Petition Date, Viziv had been in discussions with two different groups concerning their interest in making a significant investment in Viziv. These discussions were pursued in the Disclosure Statement Page 16 of 26 Case 20-32554-sgj11 Doc 397 Filed 10/04/21 Entered 10/04/21 16:14:58 Page 17 of 26 early stages of the case, but when they did not produce a signed letter of intent, Viziv began reviewing alternative sources of capital, and also began to interview investment banking firms. Viziv selected Stout Capital, LLC (“Stout Capital”) because of its expertise and favorable fee structure and filed an application in the Bankruptcy Case to employ Stout Capital on February 23, 2021 [Dkt. No. 203]. The Court granted Viziv’s request and authorized the employment of Stout Capital as Debtor’s investment banker on March 22, 2021 [Dkt. No. 248]. Since that date, Stout Capital has provided Viziv with advice concerning the availability of DIP funding sources (as described above) and capital investment and plan funding for Viziv. Stout Capital has also advised Viziv with respect to the plan proposals received by Viziv. 7. Technology and Regulatory Matters During the pendency of Bankruptcy Case, Viziv continued with testing, simulations, and development of its technology. Viziv has also continued its collaborative engagement with the Department of Energy (“DOE”) and its designated scientific partner, Sandia Laboratories (“Sandia”) concerning the safety of Viziv’s technology if it were used as currently anticipated. Sandia is recognized as an international expert on health and environmental safety aspects associated with electromagnetic waves and systems. In May, 2021, Sandia completed its Safety Assessment of Viziv Technologies’ Wireless Power Transfer Development System report confirming that, operating at or below specified parameters, Viziv’s technology is safe and that the Viziv system produced field-strength values well within acceptable health and safety limits. Please note the risk factors stated in Part II relating to regulatory risk after the confirmation of a Plan. 8. The Marketing of the Investment Opportunity by Stout Capital Pursuant to the employment of Stout Capital that was approved by the Bankruptcy Court, Stout Capital contacted over 140 entities that could be potential sources of capital for Viziv, either as an investor, a lender or a purchaser of assets. Initially, the emphasis was on an investment in Viziv sufficient to prepare for and complete the contemplated Milestone 1 and Milestone 2 goals that would demonstrate commercial viability of Viziv’s technology. The reaction of the marketplace to Stout Capital’s inquiries did not generate the level of interest hoped for by Stout Capital and Viziv. Accordingly, Stout Capital broadened its reach to make it clear that Viziv would entertain any offers, whether as an investment, loan or sale of assets. No other offers emerged from this marketing effort. In addition, Stout Capital has reviewed and advised Viziv concerning the Plans and has managed the data rooms and the negotiation of non-disclosure statements for persons expressing an interest in the Debtor. I. Current and Historical Financial Condition Viziv has had its financial condition independently audited since 2015. RSM US, LLP (“RSM”) has served as the external auditors of Viziv since 2015. The most recent audit report produced by RMS covers the period of January 1 through December 31, 2019 (the “2019 Audit Report”). The 2019 Audit Report states the financial condition of Viziv and its subsidiaries on a consolidated basis. Therefore, the financial information provided in this Disclosure Statement is presented on a consolidated basis. Disclosure Statement Page 17 of 26 Case 20-32554-sgj11 Doc 397 Filed 10/04/21 Entered 10/04/21 16:14:58 Page 18 of 26 The 2019 Audit Report is Viziv’s most recent financial statements issued before bankruptcy, including the consolidated balance sheets, consolidated statements of operation, consolidated statements of equity and consolidated statements of cash flows are set forth in Exhibit C. An audit for calendar year 2020 was not prepared due to the high costs of an audit and lack of funds. However, the Debtor has completed and filed the tax return for calendar year 2020 in a timely fashion. A summary of Viziv’s periodic operating reports filed since the commencement of Viziv’s bankruptcy case is set forth in Exhibit D. PART II: SUMMARY OF GENERAL TERMS THAT APPLY TO THE PLANS OF REORGANIZATION A. Plan Purpose and Requirements 1. What is the Purpose of a Plan of Reorganization? As required by the Bankruptcy Code, a Plan of Reorganization places claims and equity interests in various classes and describes the treatment each class will receive. A Plan also states whether each class of claims or equity interests is impaired or unimpaired. If a Plan is confirmed, your recovery will be limited to the amount provided by that Plan. 2. Confirmation Requirements and Procedures At the Confirmation Hearing, the Bankruptcy Court will determine whether the Bankruptcy Code’s requirements for confirmation of the Plan have been satisfied, in which event the Bankruptcy Court will enter an order confirming the Plan. As set forth in § 1129 of the Bankruptcy Code, these requirements that are relevant to the Plans are as follows: (a) The Plan complies with the applicable provisions of the Bankruptcy Code. (b) The proponent of the Plan complies with the applicable provisions of the Bankruptcy Code. (c) The Plan has been proposed in good faith and not by any means forbidden by law. (d) Any payment made or to be made by the Plan proponent, or by a person issuing securities or acquiring property under the Plan, for services or for costs and expenses in, or in connection with the case, or in connection with the Plan and incident to the case, has been approved by, or is subject to the approval of, the Bankruptcy Court as reasonable. (e) The proponent of the Plan has disclosed the identity and affiliations of any individual proposed to serve, after confirmation of the Plan, as a director, officer, or voting trustee of the Debtor, or a successor to the Debtor under the Plan; and the appointment to, or continuance in, such office of such individual, is consistent with the interests of Creditors and with public policy; and the proponent of the Plan has disclosed the identity of any insider that will be employed or retained by the Debtor, and the nature of any compensation for such insider. (f) Any governmental regulatory commission with jurisdiction, after confirmation of the Plan, over the rates of the Debtor, has approved any rate change provided for in the Plan, or such rate change is expressly conditioned on such approval. (g) With respect to each class of impaired claims or equity interests: Disclosure Statement Page 18 of 26 Case 20-32554-sgj11 Doc 397 Filed 10/04/21 Entered 10/04/21 16:14:58 Page 19 of 26 (i) each holder of a claim or interest of such class: (A) has accepted the Plan; or (B) will receive or retain under the Plan on account of such claim or interest property of a value, as of the effective date of the Plan, that is not less than the amount that such holder would so receive or retain if the Debtor were liquidated under Chapter 7 of the Bankruptcy Code on such date; or (ii) if § 1111(b)(2) of the Bankruptcy Code applies to the claims of such class, the holder of a claim of such class will receive or retain under the Plan on account of such claim property of a value, as of the effective date of the Plan, that is not less than the value of such holder’s interest in the estate’s interest in the property that secured such claims. (h) Except to the extent that the holder of a particular claim has agreed to a different treatment of such claim, the Plan provides that: (i) with respect to a claim of a kind specified in § 507(a)(2) (administrative expenses of the Bankruptcy Case) of the Bankruptcy Code, on the effective date of the Plan, the holder of such claim will receive on account of such claim cash equal to the allowed amount of such claim; (ii) with respect to a class of claims of a kind specified in §§ 507(a)(3) (involuntary petition expenses), 507(a)(4) (certain employee wage claims), or 507(a)(5) (contributions to employee benefit plans) of the Bankruptcy Code, each holder of a claim of such class will receive: (A) if such class has accepted the Plan, deferred cash payments of a value, as of the effective date of the Plan, equal to the allowed amount of such claim; or (B) if such class has not accepted the Plan, cash on the effective date of the Plan equal to the allowed amount of such claim; and (i) If a class is impaired under the Plan, at least one class of claims that is impaired has accepted the Plan, determined without including any acceptance of the Plan by any insider. (j) Confirmation of the Plan is not likely to be followed by the liquidation, or the need for further financial reorganization, of the Plan proponent or any successor to the Plan proponent under the Plan, unless such liquidation or reorganization is proposed in the Plan. In the event that any impaired class of Claims does not accept the Plan, the Bankruptcy Court may still confirm the Plan if, as to each impaired class which has not accepted the Plan, the Plan does not discriminate unfairly and is “fair and equitable.” A plan of reorganization does not discriminate unfairly within the meaning of the Bankruptcy Code if no class receives more than it is legally entitled to receive for its claims or equity interests. “Fair and equitable” has different meanings with respect to the treatment of secured and unsecured claims and interests. Because the Plans propose to pay creditors in full (or they will accept a different treatment), the meaning of “fair and equitable” as it relates to equity interest is set forth in § 1129(b)(2) of the Bankruptcy Code as follows: Disclosure Statement Page 19 of 26 Case 20-32554-sgj11 Doc 397 Filed 10/04/21 Entered 10/04/21 16:14:58 Page 20 of 26 (k) With respect to a class of interests, the Plan provides: (i) that each holder of an interest of such class receive or retain on account of such interest property of a value, as of the effective date of the Plan, equal to the greatest of the allowed amount of any fixed liquidation preference to which such holder is entitled, any fixed redemption price to which such holder is entitled, or the value of such interest; or (ii) the holder of any interest that is junior to the interests of such class will not receive or retain under the Plan on account of such junior interest any property. The Bankruptcy Court will determine at the Confirmation Hearing whether the Plan is fair and equitable with respect to, and does not discriminate unfairly against, any rejecting impaired class of Claims. 3. Who May Object to a Plan Any party in interest may object to the confirmation of a Plan if the party believes that the requirements for confirmation are not met. The deadline for filing an objection to any Plan is ______________, 2021. B. Voting on the Plans 1. Who May Vote on a Plan A creditor or equity interest holder has a right to vote for or against a Plan only if that creditor or equity interest holder has a claim or equity interest that is both: (a) allowed or allowed for voting purposes and (b) impaired. Generally, a claim or equity interest is allowed if either: (a) Viziv has scheduled the claim on Viziv’s schedules, unless the claim has been scheduled as disputed, contingent, or unliquidated, or (b) the creditor has filed a proof of claim or equity interest, unless an objection has been filed to such proof of claim or equity interest. When a claim or equity interest is not allowed, the creditor or equity interest holder holding the claim or equity interest cannot vote unless the Court, after notice and hearing, either overrules the objection or allows the claim or equity interest for voting purposes pursuant to Rule 3018(a) of the Federal Rules of Bankruptcy Procedure. The deadline for filing a proof of claim in this case was March 16, 2021. Viziv has filed a list of record owners of the Class A-1, Class A-2, Class A-3, and Class B units issued by the Company. If you are a beneficial owner of units issued by Viziv and the units are held in the name of a broker or some other person, you as beneficial holder of the units have the right to vote those units. Other than the disputes with the Founders Disclosure Statement Page 20 of 26 Case 20-32554-sgj11 Doc 397 Filed 10/04/21 Entered 10/04/21 16:14:58 Page 21 of 26 described above, all of the issued units are not contested by Viziv and would be considered as “allowed” interests. Please note that both of the Plans have proposed a settlement with the Founders concerning their claims and interests. Please refer to the Plan Addenda for a description of the proposed treatment of the Founders claims and interests. Generally, whether a claim or interest is impaired is determined by the class of creditors or interests your claim or interest is a part of. Impairment means the legal, equitable and contractual rights of the claim or interest are altered by the plan. Each Plan Addendum will identify those creditors and equity interest holders who are eligible to vote under each Plan. The Plan Addendum for each of the Plans will describe who is entitled to vote with respect to that Plan. 2. Who is Not Entitled to Vote on a Plan The holders of the following five types of claims and equity interests are not entitled to vote: ▪ holders of other claims or equity interests that are not “allowed claims” or “allowed equity interests” (as discussed above), unless they have been “allowed” for voting purposes; ▪ holders of claims or equity interests in unimpaired classes; ▪ holders of claims entitled to priority pursuant to §§ 507(a)(2), (a)(3), and (a)(8) of the Bankruptcy Code; ▪ holders of claims or equity interests in classes that do not receive or retain any value under the Plan; and ▪ holders of administrative expense claims. The Plans that have been proposed by the Plan Proponents provide that many creditor claims (such as employee claims and trade claims) will be paid in full. If your claim is paid in full, you will not be eligible to vote because your claim is not impaired. The Plan Addendum for each of the Plans will describe who is not entitled to vote with respect to that Plan. 3. How to Vote on the Plans As noted above, with this Disclosure Statement you are receiving the Confirmation Hearing Notice as well as a ballot (the “Ballot”) for each Plan. The Confirmation Hearing Notice and the Ballot give you instructions on how to complete your Ballot(s), how to return the Ballot(s), and the deadline by which Ballots must be received by the Ballot administrator. The deadline to return a Ballot to the Ballot administrator is _________________, 2021. C. Confirmation Hearing for the Plans Section 1128(a) requires the Bankruptcy Court, after notice, to hold a hearing on confirmation of the Plans (the Confirmation Hearing). The Confirmation Hearing has been Disclosure Statement Page 21 of 26 Case 20-32554-sgj11 Doc 397 Filed 10/04/21 Entered 10/04/21 16:14:58 Page 22 of 26 scheduled before the Honorable Stacey G. C. Jernigan, Chief United States Bankruptcy Judge, on ___________, 2021 at ______ a.m./p.m. Central Time. The Confirmation Hearing may be adjourned from time to time by the Bankruptcy Court without further notice except an announcement made at the Confirmation Hearing or any adjournment thereof. Section 1128(b) provides that any party in interest may object to confirmation of the Plan. However, an impaired Creditor who votes to accept the Plan may not have standing to object to the Plan. Objections to confirmation of the Plan are governed by Bankruptcy Rule 9014 and any applicable Local Rules of the Bankruptcy Court. The deadline for filing objections to confirmation of the Plan is on ___________, 2021 at ______ a.m./p.m. Central Time. Objections to confirmation must be filed with the Clerk of Court. UNLESS AN OBJECTION TO CONFIRMATION IS TIMELY FILED AND SERVED, IT WILL NOT BE CONSIDERED BY THE BANKRUPTCY COURT. D. Certain Matters Relating to Plan Implementation In this Section, the “Reorganized Company” refers to the reorganized business of Viziv under either of the Plans. 1. Executory Contracts and Unexpired Leases Any contract that was in effect as of the Petition Date and under which contract performance remains due on the part of both Viziv and the contract party is an “executory contract” under the Bankruptcy Code. Likewise, an “unexpired lease” is a lease of real or personal property that is in force at the time of the Petition Date. Section 365 of the Bankruptcy Code allows a debtor (or a successor to a debtor under a plan) to elect to accept or reject an executory contract or unexpired lease under certain conditions. If an executory contract or lease is assumed, the debtor or its successor is required to cure any defaults and provide adequate assurance of future performance of that contract or lease. If an executory contract or lease is rejected, the contract party may have a claim for damages. Each of the Plans provide for the treatment of executory contracts and unexpired leases. Please see the Addenda and the Plans for a description of the treatment of such claims. 2. Issuance of New Securities Each of the Plans proposes the issuance of securities to existing holders of claims and/or interests in Viziv. Please see the Plan Addenda for a description of these securities under each Plan. UPON CONFIRMATION OF THE PLAN, CERTAIN OF THE SECURITIES DESCRIBED IN THE PLAN SUMMARIES WILL BE ISSUED WITHOUT REGISTRATION UNDER THE SECURITIES ACT, OR SIMILAR FEDERAL, STATE, LOCAL, OR FOREIGN LAWS, IN RELIANCE ON THE EXEMPTION SET FORTH IN SECTION 1145 OF THE BANKRUPTCY CODE. OTHER SECURITIES MAY BE ISSUED PURSUANT TO OTHER APPLICABLE EXEMPTIONS UNDER THE FEDERAL SECURITIES LAWS. TO THE EXTENT EXEMPTIONS FROM REGISTRATION UNDER SECTION 1145 OF THE BANKRUPTCY CODE OR Disclosure Statement Page 22 of 26 Case 20-32554-sgj11 Doc 397 Filed 10/04/21 Entered 10/04/21 16:14:58 Page 23 of 26 APPLICABLE FEDERAL SECURITIES LAW DO NOT APPLY, THE SECURITIES MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO A VALID EXEMPTION OR UPON REGISTRATION UNDER THE SECURITIES ACT. 3. Risk Factors Relating to the Plans THE STATEMENTS MADE IN THIS DISCLOSURE STATEMENT MAY BE CONSIDERED FORWARD-LOOKING STATEMENTS UNDER FEDERAL SECURITIES LAWS. FORWARD-LOOKING STATEMENTS MAY INCLUDE STATEMENTS ABOUT THE : • THE ABILITY OF THE REORGANIZED COMPANY TO ADVANCE AND COMMERCIALIZE THE TECHNOLOGY; • THE REORGANIZED COMPANY’S FINANCIAL CONDITION, REVENUES OR LACK THEREOF, CASH FLOWS AND POSSIBLE LACK OF LIQUIDITY, AND EXPENSES AND RISK OF UNDERCAPITALIZATION; • THE ACCURACY OF THE REORGANIZED COMPANY’S COST ESTIMATES, BUDGETS, PROJECTIONS, AND OPERATING RESULTS; • THE LACK OF ANY OPERATING REVENUE AFTER THE PLAN IS CONSUMMATED; • THE NASCENT CHARACTER OF THE WIRELESS POWER INDUSTRY; • NEW GOVERNMENTAL REGULATION OR THE EXTENSION OF EXISTING REGULATIONS (IN THE UNITED STATES OR FOREIGN JURISDICTIONS) CONCERNING THE WIRELESS POWER DELIVERY INDUSTRY; • GOVERNEMENT LICENSING OR OTHER REGULATION OF ELECTROMAGNETIC SPECTRUMS USED BY VIZIV’S TECHNOLOGY; • COMPETITOIN BY PARTIES UNKNOWN TO VIZIV OR THE INTRODUCTION OF NEW COMPETITORS INTO VIZIV’S MARKETS; • COMPETITION FROM THE PERSONS LICENSED TO USE THE REORGANIZED COMPANY’S INTELLECTUAL PROPERTY UNDER THE PLAN, OR THE ASSIGNEES OR SUBLICENSEES OF SUCH PERSONS; • THE AMOUNT, NATURE, AND TIMING OF THE CAPITAL EXPENDITURES NEEDED TO COMMERCIALIZE VIZIV’S TECHNOLOGY; • THE AVAILABILITY AND TERMS OF CAPITAL FOR A PLAN PROPONENT TO CARRY OUT ITS BUSINESS PLAN; • GENERAL ECONOMIC AND BUSINESS CONDITIONS THAT MAY NEGATIVELY AFFECT THE REORGANIZED COMPANY’S BUSINESS; Disclosure Statement Page 23 of 26 Case 20-32554-sgj11 Doc 397 Filed 10/04/21 Entered 10/04/21 16:14:58 Page 24 of 26 • EFFECTIVENESS OF THE REORGANIZED COMPANY’S RISK MANAGEMENT ACTIVITIES; • THE OUTCOME OF ANY FUTURE LITIGATION THAT INVOLVES THE REORGANIZED COMPANY OR ITS INTELLECTUAL PROPERTY; • UNCERTAINTY REGARDING FUTURE OPERATING RESULTS, INCLUDING THE ABILITY OF THE REORGANIZED COMPANY TO LICENSE THE TECHNOLOGY; • THE LOSS OF KEY SCIENTIFIC PERSONNEL WHO ARE NECESSARY TO CONTINUE DEVELOPMENT OF THE TECHNOLOGY; • THE ABILITY TO CONTINUE TO PRESERVE AND ENFORCE INTELLECTUAL PROPERTY RIGHTS RELATING TO THE REORGANIZED COMPANY’S TECHNOLOGY; AND • RISKS IN CONNECTION WITH ANY POTENTIAL ACQUISITIONS OR BUSINESS COMBINATIONS INVOLVING THE REORGANIZED COMPANY. STATEMENTS CONCERNING THESE AND OTHER MATTERS ARE NOT GUARANTEES OF THE REORGANIZED COMPANY’S FUTURE PERFORMANCE. THERE ARE RISKS, UNCERTAINTIES, AND OTHER IMPORTANT FACTORS THAT COULD CAUSE THE REORGANIZED COMPANY’S ACTUAL PERFORMANCE OR ACHIEVEMENTS TO BE DIFFERENT FROM THOSE THAT ARE PROJECTED, AND THE REORGANIZED COMPANY UNDERTAKES NO OBLIGATION TO UPDATE THE PROJECTIONS MADE HEREIN. THESE RISKS, UNCERTAINTIES, AND FACTORS MAY INCLUDE THE FOLLOWING: THE ABILITY OF A PLAN PROPONENT TO CONFIRM AND CONSUMMATE ITS CONFIRMED PLAN; THE POTENTIAL THAT VIZIV MAY NEED TO PURSUE AN ALTERNATIVE TRANSACTION IF A PLAN IS NOT CONFIRMED; THE REORGANIZED COMPANY’S ABILITY TO RAISE CAPITAL IN AN AMOUNT SUFFICIENT TO DEMONSTRATE THE COMMERCIAL VALUE OF THE TECHNOLOGY; THE POTENTIAL ADVERSE IMPACT OF THE CHAPTER 11 CASES ON VIZIV’S OPERATIONS, MANAGEMENT, AND EMPLOYEES; THE RISKS ASSOCIATED WITH OPERATING VIZIV’S BUSINESSES DURING THE CHAPTER 11 CASES; THE GENERAL ECONOMIC, BUSINESS, AND MARKET CONDITIONS; CURRENCY FLUCTUATIONS; INTEREST RATE FLUCTUATIONS; PRICE INCREASES; EXPOSURE TO LITIGATION; THE EMERGENCE OF COMPETITION TO THE REORGANIZED COMPANY’S BUSINESS; THE REORGANIZED COMPANY’S ABILITY TO MANAGE SPENDING COSTS; ADVERSE TAX CHANGES; LIMITED ACCESS TO CAPITAL RESOURCES; CHANGES IN DOMESTIC AND FOREIGN LAWS AND REGULATIONS; TRADE BALANCE; NATURAL DISASTERS; GEOPOLITICAL INSTABILITY; AND THE EFFECTS OF GOVERNMENTAL REGULATION ON VIZIVS’ BUSINESSES. Disclosure Statement Page 24 of 26 Case 20-32554-sgj11 Doc 397 Filed 10/04/21 Entered 10/04/21 16:14:58 Page 25 of 26 4. Discharge of Debtor On the effective date of the Plan, Viziv shall be discharged from any debt that arose before confirmation of the Plan, subject to the occurrence of the effective date, to the extent specified in § 1141(d)(1)(A) of the Code, except that Viziv shall not be discharged of any debt: (1) imposed by the Plan, or (2) to the extent provided in 11 U.S.C. § 1141(d)(6). 5. Modification of the Plans The Plan Proponent may modify its Plan at any time before confirmation of the Plan. However, the Court may require a new disclosure statement and/or re-voting on the Plan. The Plan Proponent may also seek to modify its Plan at any time after confirmation only if (a) the Plan has not been substantially consummated and (b) the Court authorizes the proposed modifications after notice and a hearing. 6. Releases of Third Parties Each of the Plans proposes releases of certain third parties, including the principals of the Plan Proponents, the Founders, and other parties. Please read each Plan Addendum to determine the releases provided for under that Plan. The releases provided for under each Plan must be approved by the Bankruptcy Court as part of the confirmation of a Plan before they become effective. 7. Retention of Jurisdiction The Plans provide the Bankruptcy Court will retain jurisdiction over this Chapter 11 Case and to hear and determine controversies regarding the Plans following the Confirmation Date. Please refer to the Addenda for specific provisions regarding the retention of jurisdiction by the Bankruptcy Court. 8. Final Decree Once the estate has been fully administered, as provided in Rule 3022 of the Federal Rules of Bankruptcy Procedure, the Plan Proponent, or such other party as the Court shall designate in the Plan Confirmation Order, shall file a motion with the Court to obtain a final decree to close the case. Alternatively, the Court may enter such a final decree on its own motion. ****************************************************************************** Disclosure Statement Page 25 of 26 Case 20-32554-sgj11 Doc 397 Filed 10/04/21 Entered 10/04/21 16:14:58 Page 26 of 26 Respectfully submitted, VIZIV TECHNOLOGIES, LLC By: //s// F. Craig Farrill F. Craig Farrill, Chief Executive Officer and Chief Restructuring Officer By: //s// Christopher J. Volkmer Charles B. Hendricks Texas Bar No. 09451050 Christopher J. Volkmer State Bar No. 20607800 CAVAZOS HENDRICKS POIROT, P.C. Suite 570, Founders Square 900 Jackson Street Dallas, TX 75202 Phone: (214) 573-7322 Fax: (214) 573-7399 Email: [email protected] Email: [email protected] Attorneys for Debtor ADDENDA 3:10 Capital Plan Addendum KBST Plan Addendum EXHIBITS Exhibit A-1 3:10 Capital Plan Exhibit A-2 KBST Plan Exhibit B Organizational Chart – Debtor and Subsidiaries Exhibit C 2019 Audited Financial Statement Documents Exhibit D Summary of Chapter 11 Operating Reports Disclosure Statement Page 26 of 26