Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 1, 2017
Soupman, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
000-53943
61-1638630
(Commission File Number)
(IRS Employer Identification No.)
1110 South Avenue, Suite 100
Staten Island, NY 10314
(Address of principal executive offices and zip code)
(212) 768-7687
(Registrant’s telephone number, including area code)
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12(b))
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ¨
If an emerging growth company, indicate by checkmark 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. ¨ Item 1.03. Bankruptcy or Receivership.
As previously disclosed, on June 13, 2017, Soupman, Inc. (the “Company”) and certain of its wholly-owned and indirect subsidiaries (collectively with the Company, the “Debtors”) filed a voluntary petition (the “Chapter 11 Case”) under Chapter 11 (“Chapter 11”) of Title 11 of the United States Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the District of Delaware (the “Court”). The Chapter 11 Case is being administered under the caption In re The Original Soupman, Inc. (Case No. 1:17-bk-11313). The Company has continued to operate its business in the ordinary course as a “debtor-in-possession” under the jurisdiction of the Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Court.
As previously disclosed, in connection with the filing of the Chapter 11 Case, the Debtors entered into that certain Asset Purchase Agreement (the “Asset Purchase Agreement”), dated as of September 6, 2017 with Gallant Brands, Inc. (the “Purchaser”) pursuant to which the Purchaser agreed to purchase substantially all of the assets of the Company (such assets, the “Assets,” and such transaction, the “Asset Sale”) for a purchase price equal to approximately $6.7 million, which would be satisfied in cash and the assumption of certain specified liabilities. The closing of the Asset Sale contemplated under the Asset Purchase Agreement occurred on September 8, 2017. An auction was conducted on August 28, 2017 pursuant to the bid procedures approved by the Court and the sale was approved by order of the Court entered September 7, 2017. The Debtors received total consideration of approximately $6.7 million.
Following the Debtors’ sale of substantially all of their assets to the Buyer in the Asset Sale, the Debtors have worked to wind-down their remaining business and evaluate the Company’s options with respect to the remaining immaterial assets, while also evaluating their options for final resolution of the Chapter 11 Case. As described in the Conversion Motion (defined and described below), the Debtors have determined that it would be in the best interest of all creditors and stakeholders to convert the Chapter 11 Case to a case under Chapter 7 of the Bankruptcy Code (the “Chapter 7 Case”). Accordingly, on October 17, 2017, the Debtors filed a motion with the Court seeking to convert their Chapter 11 Case into a Chapter 7 Case (the “Conversion Motion”). A hearing on the Conversion Motion has been scheduled for October 31, 2017. A copy of the Conversion Motion is attached as Exhibit 99.1 to this Report on Form 8-K and incorporated herein by reference.
If approved by the Court, the Conversion Motion is expected to be effective on October 31, 2017. Further, if the Conversion Motion is approved by the Court, the Debtors’ Chapter 11 Case will be converted to a Chapter 7 Case, and a trustee will be appointed to liquidate the Debtors’ remaining assets for distribution in accordance with the priorities established by Chapter 7 of the Bankruptcy Code. If the conversion to a Chapter 7 Case occurs, the Debtors will no longer remain in possession of their remaining assets and properties, they will cease operating their remaining businesses and managing their remaining properties as debtors-in-possession, and their assets and properties will be liquidated for the benefit of their creditors. The Company believes that its stockholders will not receive any distributions in or after the liquidation proceedings, and, accordingly, that the shares of its common stock are worthless.
Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
On October 1, 2017, Jamieson Karson resigned as the Company’s Chief Executive Officer and as Chairman of the Company’s Board of Directors. Further, on October 1, 2017, Ronald Crane resigned as a member of the Company’s Board of Directors. The resignations of Mr. Karson and Mr. Crane were not the result of any disagreement with the Company regarding the Company’s operations, policies, or practices.
The Company expects that, if the Conversion Motion is approved, a trustee appointed by the Court will assume control over all assets and operations of the Company. Mr. Michael Wyse, Interim Chief Financial Officer and Chief Restructuring Officer, will continue in that capacity until a trustee is appointed and assumes control.
Item 7.01. Regulation FD Disclosure.
As a result of the Company's present financial condition discussed in more detail elsewhere herein, the Company does not anticipate filing any further reports under the Securities Exchange Act of 1934, including Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, or Current Reports on Form 8-K unless or until deemed appropriate by the Chapter 7 trustee. The Company does not expect to be able to distribute any proceeds to the Company’s stockholders in or after the expected liquidation proceedings.
Additional information on the Chapter 11 Case, including access to documents filed with the Court and other general information about the Chapter 11 Case, is available at a subscription based service known as PACER, at https://ecf.deb.uscourts.gov/cgi-bin/iquery.pl?949006151816262-L_1_0-1.
The information in Item 7.01 of this Form 8-K is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of such section. The information in Item 7.01 of this Form 8-K shall not be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any incorporation by reference language in any such filing.
Item 9.01. Financial Statements and Exhibits.
Exhibit
Description
99.1
Debtors’ Motion for Entry Of An Order Converting Their Chapter 11 Proceeds To Chapter 7 Pursuant To 11 U.S.C. 1112(a)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
The Original Soupman, Inc. and its affiliated debtors and debtors-in-possession (the “Debtors”) in the above-captioned chapter 11 cases (the “Chapter 11 Cases”) move on an expedited basis (the “Motion”) for entry of an order, substantially in the form attached hereto as Exhibit A (the “Proposed Order”), pursuant to section 1112(a) of title 11 of the United States Code (the “Bankruptcy Code”), to convert the Chapter 11 Cases to Chapter 7. In support of the Motion, the Debtors respectfully represent as follows:
I.
JURISDICTION AND VENUE
1.
The United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”) has jurisdiction over this matter pursuant to 28 U.S.C. §§ 157 and 1334 and the Amended Standing Order of Reference from the United States District Court for the District of Delaware, dated February 29, 2012. This matter is a core proceeding within the meaning of 28 U.S.C. § 157(b)(2), and the Debtors confirm their consent pursuant to rule 9013-
————————————————
1 The Debtors, together with the last four digits of each Debtor’s federal tax identification number, are: The Original Soupman, Inc. (0182); Soupman, Inc. (8630); and Kiosk Concepts, Inc. (4839). The location of the Debtors’ corporate headquarters and the service address for all Debtors is 1110 South Ave. Suite 100, Staten Island, NY 10314.
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l(f) of the Local Rules of Bankruptcy Practice and Procedure of the United States Bankruptcy Court for the District of Delaware to the entry of a final order by the Court in connection with this Motion to the extent that it is later determined that the Court, absent consent of the parties, cannot enter final orders or judgments in connection herewith consistent with Article III of the United States Constitution.
2.
Venue of these cases and this Motion is proper in this Bankruptcy Court pursuant to 28 U.S.C. §§ 1408 and 1409.
3.
The statutory predicate for the relief requested herein is Bankruptcy Code section 1112(a).
II.
BACKGROUND
4.
On June 13, 2017 (the “Petition Date”), each of the Debtors filed a voluntary petition for relief pursuant to chapter 11 of the Bankruptcy Code. The Debtors are operating their business and managing their property as debtors-in-possession pursuant to Bankruptcy Code sections 1107(a) and 1108. No request for the appointment of a trustee or an examiner has been made in the Cases, and no committees have been appointed or designated.
5.
Shortly after the Petition Date, the Debtors a motion to sell substantially all of their assets to Soupman Lending, LLC, the Debtors’ postpetition lender, for a credit bid of $1,785,000. An auction was held pursuant to Bankruptcy Court-approved procedures and the winning bidder, Gallant Brands, LLC, was approved as the successful bidder by the Bankruptcy Court. The sale of substantially all of the Debtors’ assets closed on September 8, 2017.
6.
The Debtors no longer maintain active business operations and have only operated their businesses for the purpose of maximizing the value of the Debtors’ assets,
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resolving certain claims and winding down their affairs for the benefit of the Debtors’ creditors. The Debtors’ remaining assets include, among other things, potential causes of action including, among others, avoidance actions under the Bankruptcy Code. The Debtors have determined that the best interest of all creditors will best be served by converting these Chapter 11 Cases to cases under Chapter 7 of the Bankruptcy Code so that a Chapter 7 trustee may investigate and pursue those causes of actions to maximize recoveries while reducing the continuing costs of the administration of these estates.
III.
RELIEF REQUESTED
7.
By this Motion, and pursuant to section 1112(a) of the Bankruptcy Code, Crestwood respectfully requests the entry of an order (the “Order”), the proposed form of which is attached hereto as Exhibit A: (i) converting the Chapter 11 Cases to cases under Chapter 7 of the Bankruptcy Code effective as of the date of the entry of the Order; and (ii) directing the U.S. Trustee to appoint a Chapter 7 trustee.
IV.
BASIS FOR RELIEF REQUESTED
8.
The Debtors have sold substantially all of their assets, have no operating business to save and cannot propose a feasible plan of reorganization. Accordingly, the Debtors have no alternative but to convert their Chapter 11 proceedings to Chapter 7 pursuant to section 1112(a) of the Bankruptcy Code, which provides:
The debtor may convert a case under this chapter to a cause under chapter 7 of this title unless —
(1)
the debtor is not a debtor in possession;
(2)
the case originally was commenced as an involuntary case under this chapter; or
3
(3)
the case was converted to a cause under this chapter other than on the debtor’s request.
11 U.S.C. § 1112(a).
9.
The legislative history for section 1112(a) states that this subsection “gives the debtor the absolute right to convert a voluntarily commenced chapter 11 case in which the debtor remains in possession to a liquidation case.” In re Schuler, 119 B.R. 191, 192 (Bankr. W.D. Mo. 1990) (quoting H.R. Rep. No. 595, 95th Cong., 1st Sess. 405 (1977); S. Rep. No. 989, 95th Cong., 2nd Sess. 117 (1978)). Other courts have also suggested that, provided the exceptions set forth in section 1112(a) do not exist, a debtor has an absolute right to convert its case from Chapter 11 to Chapter 7. See In re Texas Extrusion Corp., 884 F.2d 1142, 1161 (5th Cir. 1988); In re Marrill Alarm Systems, Inc., 100 B.R. 606, 607 (Bankr. S.D. Fla. 1989); In re Dieckhaus Stationers of King of Prussia, Inc., 73 B.R. 969, 971 (Bankr. E.D. Pa. 1987) (Section 1112(a) “gives the debtor an absolute right to convert”).
10.
As a threshold matter, none of the limitations provided in section 1112(a) on a debtor’s right to convert is present because (a) the Debtors are debtors in possession, (b) the case was commenced by filing a voluntary petition for relief, and (c) there have been no prior conversions. Furthermore, no extreme or unusual circumstances exist that would warrant denial of this Motion.
11.
Moreover, the Debtors currently do not have sufficient funds available to formulate and seek confirmation of a Chapter 11 plan, and the potential causes of action, while believed to have value, will take a long time to liquidate. It is the Debtors’ judgment that in the particular circumstances of these Chapter 11 cases, the goal of maximizing the net recoveries to creditors will best be achieved through an orderly process that may be administered by a Chapter 7 trustee.
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V.
NOTICE
12.
Notice of the Motion will be given to the following parties, or in lieu thereof, to their counsel: (a) the Office of the United States Trustee; (b) counsel for Soupman Lending, LLC; (c) counsel for Hillair Capital Investments, LLC; (d) counsel for Gallant Brands, LLC; and (e) all persons and entities that have filed a request for service of filings in the Cases pursuant to Bankruptcy Rule 2002. In light of the nature of the relief requested in this Motion, the Debtors submit that no other or further notice is necessary.
WHEREFORE, the Debtors respectfully request that the Court enter the Proposed Order, in substantially in the form attached as Exhibit A granting the relief requested in the Motion and
such other and further relief as may be just and proper.
Dated: October 17, 2017
POLSINELLI PC
Wilmington, Delaware
/s/ Christopher A. Ward
Christopher A. Ward (Del Bar. No. 3877)
222 Delaware Ave., Suite 1101
Wilmington, Delaware 19801
T: (302) 252-0920
F: (302) 252-0921
cward@polsinelli.com
-and-
Jeremy R. Johnson (Admitted Pro Hac Vice)
600 3rd Ave., 42nd Fl.
New York, New York 10016
T: (212) 684-0199
F: (212) 684-0197
jeremy.johnson@polsinelli.com
Counsel for the Debtors and Debtors-In-Possession
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EXHIBIT A
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
In re:
THE ORIGINAL SOUPMAN, INC., et al.,
Debtors.1
Chapter 11
Case No. 17-11313 (LSS)
Jointly Administered
Re: Docket No. ______
ORDER CONVERTING CASES FROM CHAPTER 11 TO CHAPTER 7
OF THE BANKRUPTCY CODE PURSUANT TO SECTION 1112(A)
Upon the emergency motion (the “Motion”)2 of the above-captioned debtors and debtors- in-possession (the “Debtors”) for entry of an order, pursuant to section 105 of title 11 of the United States Code, authorizing the Debtors to supplement the record with respect to the Sale Motion; and this Court having jurisdiction over this matter pursuant to 28 U.S.C. §§ 157 and 1334 and the Amended Standing Order of Reference from the United States District Court for the District of Delaware, dated February 29, 2012; and this Court having found that this is a core proceeding pursuant to 28 U.S.C. § 157(b)(2); and this Court being able to issue a final order consistent with Article III of the United States Constitution; and this Court having found that venue of this proceeding and the Motion in this District is proper before this Court pursuant to 28 U.S.C. §§ 1408 and 1409; and due and proper notice of the Motion having been given on an expedited basis; and it appearing that no other or further notice of the Motion is required; and this Court having found that the relief requested by the Motion is in the best interests of the
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1 The Debtors, together with the last four digits of each Debtor’s federal tax identification number, are: The Original Soupman, Inc. (0182); Soupman, Inc. (8630); and Kiosk Concepts, Inc. (4839). The location of the Debtors’ corporate headquarters and the service address for all Debtors is 1110 South Ave. Suite 100, Staten Island, NY 10314.
2 Capitalized terms used in this Order but not otherwise defined in this Order shall have the meanings ascribed to such terms in the Motion.
1
Debtors’ estates, their creditors, and other parties in interest; and sufficient cause appearing therefor, it is hereby
ORDERED, ADJUDGED, AND DECREED THAT:
1.
The Motion is GRANTED as set forth herein.
2.
The Chapter 11 Cases are hereby converted to cases under Chapter 7 of the Bankruptcy Code as of [ ]. 2017.
3.
This Court shall retain jurisdiction with respect to all matters relating to the interpretation or implementation of this Order.
4.
The Debtor shall:
a.
Forthwith turn over to the Chapter 7 trustee all records and property of the estate under its custody and control as required by Federal Rules of Bankruptcy Procedures (“FRBP”) 1019(4);
b.
Within fifteen (15) days of the date of this order file a schedule of unpaid debts incurred after commencement of the superseded case including the name and address of each creditor, as required by FRBP 1019(5);
c.
Within 15 days of the date of this order, file the statements and schedules required by FRBP 1019(a)(A) and 1007(b), if such documents have not already been filed; and
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d.
Within thirty (30) days from the date of this order, file and transmit to the United States Trustee a final report and account as required by FRBP 1019(5)(A).
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