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1 David S. Kupetz (CA Bar No. 125062) dkupetz@sulmeyerlaw.com 2 Jason D. Balitzer (CA Bar No. 244537) jbalitzer@sulmeyerlaw.com 3 SulmeyerKupetz A Professional Corporation 4 333 South Hope Street, Thirty-Fifth Floor Los Angeles, California 90071-1406 5 Telephone: 213.626.2311 Facsimile: 213.629.4520 6 Bankruptcy Counsel for Webalo, Inc., 7 Debtor and Debtor in Possession 8 UNITED STATES BANKRUPTCY COURT 9 CENTRAL DISTRICT OF CALIFORNIA
333 SOUTH HOPE STREET, THIRTY-FIFTH FLOOR LOS ANGELES, CALIFORNIA 90071-1406 TEL 213.626.2311 FAX 213.629.4520

10 LOS ANGELES DIVISION 11 In re 12 Webalo, Inc., a California corporation, 13 Debtor. 14 15 16 17 18 Employer ID #94-3352073 19 20 21 22 23 24 25 26 27 28 DATE: [To be Set] TIME: [To be Set] PLACE: Courtroom 1375 PLACE: U.S. Bankruptcy Court 255 East Temple Street Los Angeles, CA 90012 OMNIBUS DECLARATION OF PETER PRICE IN SUPPORT OF DEBTOR'S FIRST-DAY MOTIONS Chapter 11 Case No. 2:14-bk-11467-WB

Sulmeyer Kupetz,

A Professional Corporation

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1 2 3

DECLARATION OF PETER PRICE I, Peter Price, declare: 1. I have personal knowledge of the facts stated herein. I can testify that said

4 facts are true and correct. 5 2. I am the Chief Executive Officer and co-founder of Webalo, Inc. ("Webalo"

6 or the "Debtor"). 7 8 California. 9


333 SOUTH HOPE STREET, THIRTY-FIFTH FLOOR LOS ANGELES, CALIFORNIA 90071-1406 TEL 213.626.2311 FAX 213.629.4520

3.

Webalo is a California corporation. Webalo has its office in Los Angeles,

4.

Initially founded in 2000, Webalo is a re-launched (2012) early stage

10 technology company, with a product in the market and partners established. Webalo is just 11 entering the revenue generation stage. 12 5. Webalo's proprietary technology transforms data and enterprise applications

A Professional Corporation

13 to make them compatible with mobile devices. This eliminates the need for custom programming, 14 and the deployment of applications is performed in comparatively less time. Webalo aims to 15 deliver enterprise mobile solutions in an easy, fast, and affordable manner. 16 6. Webalo was founded in 2000 by veterans in the IT sector with rich industry

Sulmeyer Kupetz,

17 experience. I have served as Webalo's Chief Executive Officer since 2001. 18 7. I have over thirty years of technology industry management and leadership

19 experience. Prior to co-founding Webalo, I served as founder and/or senior executive in the 20 financing, building and selling of four early-stage technology companies. My business operations 21 experience expands across major global software markets. 22 8. In 1984, I co-founded Expertech, a developer of expert system software

23 based in Europe. In 1990, I managed the acquisition of Expertech by Inference, a California-based 24 provider of self-service and knowledge management tools for customer service and help desk 25 industries. In July 1995, I was a member of the Management Committee that organized 26 Inference's successful initial public offering. 27 9. In 1996, I joined Limbex, a developer of the award-winning WebCompass

28 product (an end-user tool for acquiring and managing Internet information), and participated in its

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1 sale to Quarterdeck later that year. In 1997, I co-founded TriVida, a leading provider of a 2 networked personalization hosted service, and managed its acquisition by Be Free in 2000. 3 10. Webalo's management team has worked together in the enterprise software

4 market, in various companies, in all or part of the last four decades, and has been responsible for 5 building and deploying major technology-rich enterprise applications in corporations such as 6 American Airlines, American Express, AT&T, Boeing, Lockheed, Canon, Dell, Dun & Bradstreet, 7 Ford Motor Co., General Electric, Mitsubishi, NASA, Sun America, Swiss Bank, and many 8 others. 9
333 SOUTH HOPE STREET, THIRTY-FIFTH FLOOR LOS ANGELES, CALIFORNIA 90071-1406 TEL 213.626.2311 FAX 213.629.4520

11.

Webalo commenced a bankruptcy reorganization case by filing voluntary

10 chapter 11 petition on January 27, 2014 (the "Petition Date"). 11 12. Webalo continues to manage and operate its business as a debtor in

A Professional Corporation

12 possession. No creditors committee has yet been appointed in its chapter 11 case. 13 14 13. COMPANY HISTORY Following its founding in 2000, Webalo and spent its first two years

Sulmeyer Kupetz,

15 exploring technology opportunities in the area of user interaction with enterprise data from multi16 channel devices. The company conceived, developed and patented (2011 - US Patent 8078731) an 17 uniquely innovative and potentially highly lucrative product/platform opportunity. 18 14. In the years that followed, post 9/11 and with subsequent recessions and

19 major industry transformations, the financing market for early-stage enterprise technology 20 companies was largely shut-down forcing Webalo to maintain a private financing model, 21 opportunistically supplemented with revenues from consulting services for companies such as 22 Symantec and the Federal Government. 23 15. In 2005, Webalo introduced its initial product to the BlackBerry

24 Smartphone market, aimed at mobilizing business intelligence. 25 16. Though early signs were encouragingly positive, the following years proved

26 to be unexpectedly challenging due to the successful introduction in 2007/2008 of next generation 27 mobile devices from vendors such as Apple and Android. This led almost immediately to the 28 enterprise market starting a transformational shift from BlackBerry to supporting Apple and then

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1 to Android and other devices. These major hardware, infrastructure transitions had the effect of 2 postponing the arrival of the enterprise mobile application software market - Webalos market. 3 17. During this period, Webalo foresaw these major industry changes and

4 adapted to this market shift by transforming its technology/product to support these new 5 generation smart phones and entering the resulting Cloud and Bring-Your-Own-Device era with a 6 major new product/platform launch at the end of 2012. 7 18. At the start of 2013, based on its new service for mobilizing enterprise

8 applications, Webalo launched its sales/distribution channel strategy; and throughout the year built 9 a network of corporate partners who are now ready to generate revenue for Webalo in 2014 and
333 SOUTH HOPE STREET, THIRTY-FIFTH FLOOR LOS ANGELES, CALIFORNIA 90071-1406 TEL 213.626.2311 FAX 213.629.4520

10 beyond. 11 19. Webalo, financed exclusively by individual investors, rather than

A Professional Corporation

12 institutional investors, raised approximately $18,600,000 of equity financing from inception 13 through 2011, and since then, an additional approximate $9,000,000 of debt financing. 14 20. In 2007/2008, a new group of private investors, who we call the S2

Sulmeyer Kupetz,

15 Investors, invested in Webalo. As a condition of their investment, this group insisted on being 16 given special rights to approve capital transactions which they subsequently used to systematically 17 and repeatedly challenge and oppose management, the companys strategy and business plans as 18 well as the other shareholders and creditors who fully supported Webalo and its strategy. The 19 result was that, over the past seven years, Webalo spent a considerable amount of time and effort 20 accommodating this group, in order to offset their blocking rights. This came at the great expense 21 of time, resources and money and to the substantial detriment of business progress. 22 23 21. DEBT AND EQUITY STRUCTURE Webalo has issued Secured Promissory Notes (the Junior Secured Notes)

24 and Senior Secured Promissory Notes (the Senior Secured Notes) pursuant to (i) a Secured Note 25 Purchase Agreement dated on or about March 13, 2013, by and among the Webalo and the holders 26 of the Junior Secured Notes; and (ii) a Senior Secured Note Purchase Agreement dated on or about 27 September 15, 2013, by and among Webalo and the holders of the Senior Secured Notes. The 28 Junior Secured Notes are held by approximately 44 holders and have a cumulative outstanding

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1 principal amount of approximately $1,679,150. The Senior Secured Notes are held by 2 approximately 28 holders and have a cumulative outstanding principal amount of approximately 3 $2,580,000. 4 22. From April 2012 through January 2013, Webalo raised approximately

5 $4,558,000 through the issuance of unsecured debt in the form of convertible promissory "bridge" 6 notes (the "Bridge Notes"). The Bridge Notes are held by approximately 48 holders and had a 7 maturity date of December 31, 2013. Pursuant to the language in the Bridge Note documents, the 8 Bridge Notes were to convert to equity if not paid or within 20 days following the December 31, 9 2013 maturity date, and after the company provided a conversion notice. Such notice was not
333 SOUTH HOPE STREET, THIRTY-FIFTH FLOOR LOS ANGELES, CALIFORNIA 90071-1406 TEL 213.626.2311 FAX 213.629.4520

10 provided since it had been determined by that time that Webalo would file a Chapter 11 11 reorganization case. As of the Petition Date, Webalo has miscellaneous other unsecured debt in 12 the estimated approximate sum of $235,000. 13 23. Webalo raised approximately $18,600,000 in equity financing from

A Professional Corporation

14 inception through 2011. The equity interests issued by Webalo take the form of preferred and 15 common stock and are held by approximately 135 holders. The preferred stock has been issued in 16 a number of series (Series 1, 1A, 2, 2B, 3, 4, and 4B). Approximately $123,000 was raised from 17 investors through the issuance of common stock. 18 24. Shortly prior to the Petition Date and in contemplation of its chapter 11

Sulmeyer Kupetz,

19 filing Webalo obtained approximately $400,000 in funds under the same terms as the Senior 20 Secured Notes. Additional funding is to be provided postpetition to allow Webalo to continue to 21 operate and pay administrative expenses connected with the chapter 11 case. 22 23 24 apps: 25 26 27 28 o o To generate enterprise mobile applications, all an enterprise needs to do is point Webalo at their data and Webalo does the rest. Webalo connects to any standards-based enterprise application such as those from IBM, Microsoft, Oracle, SAP, Salesforce.com and even in-house custom built applications. 25. BUSINESS SUMMARY Webalo is an infrastructural solution for automatically mobilizing enterprise

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1 2 3 4 5 6 7 8 9 o
333 SOUTH HOPE STREET, THIRTY-FIFTH FLOOR LOS ANGELES, CALIFORNIA 90071-1406 TEL 213.626.2311 FAX 213.629.4520

Webalo automatically generates rich mobile UIs (user interface) for any Android, Apple, BlackBerry or Windows Smartphone, tablet or desktop device. Webalo is available either as a cloud-based SaaS (Software as a Service) platform or as a behind-the-firewall virtual appliance.

26.

Webalo's go-to-market strategy is 100% channel-based: o Webalo integrates directly with, and partners with, EMM (Enterprise Mobile Management) infrastructure vendors such as AirWatch, Aruba, Citrix, Good Technology, MobileIron, Symantec etc. GEs Intelligent Platforms division is a strategic partner and will roll out a Webalo based real-time operational intelligence app to its 30,000 global customers in Q2 2014

10 11 12 27.

A Professional Corporation

Since launching the platform in October 2012, 25 resellers and

13 approximately 800 companies have signed up for Webalo, with a very positive response to 14 Webalo's product: 15 16 17 18 19 20 21 22 23 24 25 26 27 28 28. o o o o Volkswagen Financial Services: The ease of development means that we can be fully deployed with Webalo in much less time, and at less cost, than it would take with other approaches. Nixon Hire: flexibility was one of the advantages we saw in Webalo. Were able to select the exact data and functionality that each mobile employee needs and give them mobile access in a remarkably short time for an insignificant cost. Bell Nursery: ...we rely on Webalo to equip hundreds of our employees with the tools they need to optimize daily replenishment in all of our store locations A comprehensive mobility solution is critical to the success of our business, and we are delighted to partner with Webalo. University Hospitals Birmingham: Its astounding that we can deliver data and functions so fast and provide virtually instantaneous benefits to both users and patients. Webalo is the golden nugget that makes our mobility possible. Its remarkable.

Sulmeyer Kupetz,

Benefits to Webalo Customers and Partners: o Ease of Deployment: Webalo provides low-cost, rapid, out-of-thebox enterprise mobile app deployment. Customers can sign-up for

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333 SOUTH HOPE STREET, THIRTY-FIFTH FLOOR LOS ANGELES, CALIFORNIA 90071-1406 TEL 213.626.2311 FAX 213.629.4520

free at webalo.com and within minutes deploy their enterprise mobile app. The simple set-up, configuration, and deployment process takes minutes to complete and generates device specific native mobile interfaces without the IT department having to write code or use cumbersome development tools. This, combined with the integrated training and support environment, eliminates the need for expensive consulting, training, and engineering demands that bedevil other approaches. For Webalo and its channel partners, this means dramatically lower cost of sales in developing customer relationships from pilot to enterprise wide deployments. o Mobile User Experience: Similar to native mobile consumer apps on their devices, users benefit from a rich, visual experience which provides them with their own personalized view of the enterprise applications and data. Aggregate Multiple Enterprise Applications: Uniquely, Webalo can access and combine data from multiple enterprise applications, such as those from IBM, Microsoft, Oracle, SAP, Salesforce.com, and even in-house custom built applications, into a single app. This enables users to interact with only the parts of the various enterprise applications, services, and data that they need through one single app rather than having to access separate mobile versions of various enterprise applications from multiple vendors and navigate through unnecessary layers to do what they want to do. Business scalable: Webalo has been designed to meet the requirements of companies that now have to mobilize everything. The accessible, self-service Webalo platform enables small businesses that will need tens of apps, mid-size companies that will need hundreds of apps and large enterprises that will need thousands of apps to deploy them all rapidly, simply, and at a very low-cost. Once the Webalo client is deployed on a device, the company can mobilize any number of enterprise applications, services or datasets without any additional cost or disruption for the end user. Secure: Webalo standardizes and commoditizes enterprise mobility, packaging enterprise-class solutions that automatically meet mobility security challenges. Rather than providing tools for building applications from scratch, where each line of code represents a potential security vulnerability, a possible bug, and a maintenance burden, Webalo provides controlled access to existing enterprise applications and data, eliminating much of the human factor and all of the security pitfalls associated with building mobile applications from scratch.

10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

Sulmeyer Kupetz,

A Professional Corporation

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29.

Webalo's primary competition includes mobile versions of packaged

2 enterprise applications and in-house custom mobile application development. Packaged apps, 3 including those from IBM, Microsoft, Oracle, SAP & others, are designed from a desktop 4 paradigm that in addition to being isolated do not deliver the simple, fast and responsive 5 experience that users, now conditioned by consumer mobile experiences, expect. Custom mobile 6 application development, and associated tools, is complex, time consuming and expensive and can 7 often only meet return-on-investment goals in hyper-scale (FedEx, Hertz etc.) deployments. Both 8 approaches rely on high-skill/high-cost mobile designers and programmers. Whether building 9 from scratch or customizing packaged apps to fit their environment, IT organizations face
333 SOUTH HOPE STREET, THIRTY-FIFTH FLOOR LOS ANGELES, CALIFORNIA 90071-1406 TEL 213.626.2311 FAX 213.629.4520

10 significant challenges deploying effective, user-friendly enterprise mobile apps as the process 11 always requires architecture design, integration with existing enterprise applications and data, UI 12 design, coding, and implementation, security infrastructure integration, provisioning and 13 deployment. Furthermore, the process has to be repeated for each mobile OS and every time 14 changes are required for the app. This reality can be variously described as complex, time 15 consuming, expensive, etc. But the real challenge is that the model is simply not scalable. It does 16 not work for todays all-mobile-all-the-time business environment. Webalo solves this challenge 17 by providing a scalable model for mobile app generation with dramatically lower cost and effort 18 than these traditional mobile application development approaches. 19 20 30. PRE-REVENUE FINANCIAL HISTORY As stated above, Webalo has been operating since 2000. Webalo, however,

Sulmeyer Kupetz,

A Professional Corporation

21 was re-launched in 2012 and is properly characterized as an early-stage technology company, with 22 a product in the market and partners established, that is just entering the revenue generation stage 23 in a meaningful way. 24 31. Webalo's fiscal year begins in January and ends in December. Historically,

25 Webalo started generating revenues in 2007. In 2011, Webalo generated $0.27 million in 26 revenues. In the same year, Webalo's operating expenses totaled $3.75 million. Consequently, 27 Webalo reported a loss of approximately $3.45 million during 2011. In 2012, Webalo generated 28 $216,052 in revenues. In that year, Webalo's operating expenses totaled $4,239,805 and costs of

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1 goods sold amounted to 725,042. Accordingly, Webalo reported an operating loss of 2 approximately $4,748,795 during 2012. For the 11 months ending November 30, 2013, Webalo 3 generated $149,860 in revenues. For that period, Webalo's operating expenses totaled $4,220,892 4 and costs of goods sold amounted to $661,629. Consequently, Webalo reported an operating loss 5 of approximately $4,732,661 for the first 11 months of 2013. 6 32. At this time, Webalo is poised to promptly move forward with a

7 restructuring plan. Further funding necessary for continued operations and to pay chapter 11 8 administrative expenses will be obtained postpetition and substantial funding will be provided in 9 connection with Webalo's chapter 11 plan. Webalo anticipates filing its chapter 11 plan within 60
333 SOUTH HOPE STREET, THIRTY-FIFTH FLOOR LOS ANGELES, CALIFORNIA 90071-1406 TEL 213.626.2311 FAX 213.629.4520

10 days of the commencement of the case. The company's current projections, which are subject to 11 adjustment, are attached hereto as Exhibit 2 and are incorporated herein by this reference. As 12 reflected in the projections, Webalo and I presently anticipate further funding under the Senior 13 Secured Note Purchase Agreement in the sum of $1,000,000 by the end of February 2014 and an 14 additional $1,500,000 by the end of March 2014. 15 16 33. FACTORS PRECIPITATING CHAPTER 11 FILING Early in 2013, Webalo intended to launch an institutional financing round

Sulmeyer Kupetz,

A Professional Corporation

17 with the aim of closing it by the end of 2013. To finance Webalo over this period, the company 18 tried to negotiate an extension of its existing debt financing, but experienced intense opposition 19 from the S2 Investors despite the support of this strategy from the majority of creditors and 20 shareholders. 21 34. Several months of negotiations with the S2 Investors ensued delaying the

22 companys progress once again, and this time the institutional financing process itself. At the 23 conclusion of this process the S2 Investors withdrew any remaining support of the company and 24 its finances, with the result that, though aggressively pursued, the institutional financing process 25 was never able to progress with prospective investors beyond the initial exploratory stage because 26 Webalo was forced to struggle forward with month-to-month financing, thereby never having the 27 resources required to finance the operating plan required to achieve the milestones expected by the 28 institutional investors if they were to fund the company.

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35.

Despite these challenges, Webalo made excellent progress in establishing

2 its business partnerships in 2013, and supportive existing investors continued to finance the 3 company. 4 36. A revised plan was put in place in October 2013, to raise $3,500,000 to fund

5 the Webalos operations for the ensuing year without the inefficiency of month-to-month 6 financing. Supportive investors were willing to fund the company, but only with the possibility of 7 support from the S2 Investors. To that end, Webalo chose to carry out good faith negotiations 8 with the S2 Investors to ensure that they (the S2 Investors) would not use their rights to the 9 disadvantage of the investors who were being asked to fund the company at significant risk.
333 SOUTH HOPE STREET, THIRTY-FIFTH FLOOR LOS ANGELES, CALIFORNIA 90071-1406 TEL 213.626.2311 FAX 213.629.4520

10

37.

Several more months were spent trying to come to agreement with the S2

A Professional Corporation

11 Investors, but in the end the S2 Investors, despite initially coming to an acceptable verbal 12 agreement, declined to conclude a written agreement. 13 38. As of the end of 2013, Webalo was in urgent need of financing and would

14 not be able to continue operations without obtaining funding. 15 39. I have been actively engaged in seeking financing for Webalo for the past

Sulmeyer Kupetz,

16 several months and determined that the only financing available to the company is from a group of 17 investors led by certain current investors (but anticipated to include some new investors). That 18 group was and is willing to fund Webalo through a reorganization or recapitalization, including 19 through a bankruptcy, but would not fund the company unless a structure was put in place that 20 simplifies the capitalization table and eliminates minority blocking rights, including specifically 21 the blocking rights currently held by the S2 Investors. 22 40. As indicated above, Webalo engaged in significant and prolonged

23 negotiations with the S2 Investors. In these negotiations, Webalo offered significant concessions 24 and incentives to facilitate a negotiated recapitalization. The S2 Investors articulated a number of 25 asks which, Webalo was led to believe, would result in a negotiated compromise and allow the 26 company to move forward with a mutually agreed-upon recapitalization and financing. Webalo 27 submitted a proposal which captured the negotiated agreement, but the S2 Investors rejected the 28 proposal and advised the company that, despite prior discussions, the S2 Investors would not agree

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1 to any recapitalization that limits their rights as they then currently stood. Following the S2 2 Investors rejection of the negotiated proposal, I had further discussions with the current investor 3 group prepared to provide Webalo with additional funding, but the current investor group 4 reconfirmed its unwillingness to fund the company without a reorganization of the company, 5 including recapitalization, restructuring of Webalo's debt and equity interests, and elimination of 6 minority blocking rights. 7 41. With Webalo unable to continue operations without additional financing,

8 and with no financing being available under the current circumstances, the only feasible options 9 available to the company were: (i) cease operations and liquidate the companys assets; or (ii)
333 SOUTH HOPE STREET, THIRTY-FIFTH FLOOR LOS ANGELES, CALIFORNIA 90071-1406 TEL 213.626.2311 FAX 213.629.4520

10 pursue a restructuring through bankruptcy. 11 42. Webalo's Board unanimously agreed that the best interests of the companys

A Professional Corporation

12 creditors and shareholders would not be served by a shutdown and liquidation of Webalo and that 13 a recapitalization and/or restructuring would be in the best interests of the creditors and 14 shareholders. Accordingly, having exhausted all other reasonable options, the Board approved a 15 Chapter 11 filing in order to pursue a restructuring through a bankruptcy reorganization case. 16 17 43. CHAPTER 11 CASE The Senior Secured Note holders and the Junior Secured Note holders have

Sulmeyer Kupetz,

18 consented, through their duly appointed agents, to Webalo's use of cash collateral to continue to 19 operate its business in the ordinary course and to fund administrative expenses connected with 20 Webalo's chapter 11 case. A true and correct copy of such written consent obtained by Webalo is 21 attached hereto as Exhibit 1 and is incorporated herein by this reference. 22 44. Additionally, further funds will be provided postpetition adequate to allow

23 Webalo to continue its operations and pay administrative expenses. 24 45. Webalo anticipates filing a plan of reorganization providing for

25 restructuring of its debt and equity interests within 60 days of the commencement of Webalo's 26 chapter 11 case. Substantial additional funding will be provided in connection with the plan. 27 28

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1 2 3 4

FACTS IN SUPPORT OF FIRST DAY MOTIONS Motion for Order Authorizing Payment and/or Honoring of Prepetition Employee Compensation Benefits, Reimbursements, Withholding Taxes, Accrued Vacation, and Related Employee Claims (the Employee Claims Motions) 46. As of the Petition Date, Webalo has 19 salaried employees, 1 hourly

5 employee, and 3 individuals who work remotely as contractors and submit monthly invoices to 6 Webalo. In the ordinary course, Webalo's employees are paid on a monthly basis (at the end of 7 each month). Webalo uses an outside payroll service, Paycom, to handle payroll. For the month 8 of January 2014, payroll was funded by Webalo to Paycom January 23, 2014, with the exception 9 that I was not paid from this payroll. As is the case each month, Paycom makes the payment to
333 SOUTH HOPE STREET, THIRTY-FIFTH FLOOR LOS ANGELES, CALIFORNIA 90071-1406 TEL 213.626.2311 FAX 213.629.4520

10 Webalo's employees. A true and correct list of Webalo's employees' monthly compensation and 11 annual salary is attached to the Employee Claims Motion as Exhibit 1. For privacy reasons and to 12 protect Webalo's business, this chart does not identify the employees by name or specific position. 13 As set forth in Exhibit 2 to the Employee Claims Motion, Webalo also provides its employees 14 with health, disability, life, and workers compensation insurance, 401k plan, and paid time off. 15 47. Each of the employees for whom the Debtor requests the relief in the

Sulmeyer Kupetz,

A Professional Corporation

16 Employee Claims Motions is currently employed with the company. Webalo will not pay pre17 petition wages or claims to employees who are no longer employed by the company, or to any 18 employees who have provided notice to the company that they will be leaving. 19 48. I believe that paying and/or honoring employee claims and benefits will

20 allow Webalo to retain necessary employees, maximize the value of the companys business and 21 assets, and leave Webalo in a position where it can move forward with its business operations on a 22 viable basis. Webalo has access to adequate funds to continue its ongoing operations. 23 49. The amounts of Webalo's employees salaries for each pay period and

24 annually are accurately set forth in the chart attached to the Employee Claims Motions as 25 Exhibit 1. The Company is not seeking to pay out the vacation pay to the employees, but only 26 honor accrued vacation days in the ordinary course of its business. I submit that it is appropriate 27 to honor such claims, provided, however, that the vacation pay is not actually paid out. 28

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50.

With respect to payroll, the Employee Claims Motion is brought in an

2 abundance of caution since it relates to a payroll period covering the month of January 2014, 3 although payroll was funded to Paycom prepetition on January 23, 2014. The amount of the 4 Webalos employees gross pay for each pay period and annual compensation are accurately set 5 forth in the chart attached to the Employees Claims Motion as Exhibit 1. 6 51. In large part, Webalo's ongoing operations and the opportunity for the

7 company to maximize the value of the estate is dependent upon a stable and productive work 8 force. In order to maintain employee stability, morale, and loyalty and to sustain the work effort 9 and ethic being demonstrated by its employees, I believe that it is imperative that payment to all
333 SOUTH HOPE STREET, THIRTY-FIFTH FLOOR LOS ANGELES, CALIFORNIA 90071-1406 TEL 213.626.2311 FAX 213.629.4520

10 employees and honoring of all employee benefits remains current. Further, some of the company's 11 employees simply may not be able to afford to miss a pay period (especially since each pay period 12 is an entire month) or be deprived of benefits they receive in the ordinary course of their 13 employment. 14 52. The stability of the Webalo's employee pool is tenuous. The labor pool is

Sulmeyer Kupetz,

A Professional Corporation

15 mobile. At the same time, it could be difficult for the company to find qualified replacement 16 employees with the unfavorable publicity of disrupted pay or benefits. Even if replacements could 17 be hired, it could take significant time before they could be fully trained and qualified for the jobs, 18 resulting in further disruption and harm to the company's business operations and the pending 19 reorganization process. Any interruption in Webalos business or downturn in productivit y could 20 detrimentally impact the value of the estate and harm the interests of creditors of the company. 21 53. If prepetition compensation, reimbursement amounts and customary

22 benefits are not received and honored in the ordinary course, some of the employees may suffer 23 extreme personal hardship. Such a result would obviously damage employee morale. At this 24 time, any serious deterioration in employee morale would substantially and adversely impact the 25 companys ability to move forward in a manner that maximizes the value of the estate. I submit 26 that the total amount to be paid to or for the benefit of the company's employees if the requested 27 relief is granted is significantly outweighed by the importance and necessity of the employees and 28 the magnitude of loss of business value the company would suffer if those amounts are not paid.

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54.

Webalo's employees receive compensation for services rendered in amounts

2 that are competitive within the company's industry. Webalo's employees are compensated in 3 arrears once each month. As mentioned above, Webalo uses Paycom as a third-party payroll 4 processor. 5 55. Webalo offers its employees various benefits consistent with industry

6 standards, including medical and dental coverage, vision care, and paid vacations. See Exhibit 2 7 to the Employee Claims motion for greater detail. As with the payment of wages, it is important 8 that benefits continue to be provided on an uninterrupted basis. By the Employee Claims Motion, 9 Webalo requests that it be authorized to continue the employee benefit plans identified in Exhibit
333 SOUTH HOPE STREET, THIRTY-FIFTH FLOOR LOS ANGELES, CALIFORNIA 90071-1406 TEL 213.626.2311 FAX 213.629.4520

10 2 to the Employee Claims Motion and referenced below. 11 56. The company has established and maintained its own benefit plans for its

A Professional Corporation

12 employees. The general benefit plans to Webalo's employees (as described in Exhibit 2 to the 13 Employees Claims Motion) include: 14 15 16 17 18 19 20 21 Medical and Vision coverage; Dental Insurance; Short term and long term disability coverage; Life insurance; Worker's compensation insurance; 401k plan; and Paid Time Off and company holidays. 57. Webalo customarily reimburses employees who incur business expenses in

Sulmeyer Kupetz,

22 the ordinary course of the company's business. The companys employees submit reimbursement 23 requests monthly around the 20th of following month. It is estimated that some of the company's 24 employees will not have timely submitted receipts and/or other documentation for a minimal 25 amount of reimbursement of business expenses as of the Petition Date. Further, some checks that 26 were issued prior to the Petition Date may not have been cashed before the bankruptcy was filed. 27 Webalo estimates that the total of both the unpaid expenses and outstanding checks for expenses 28 already paid will total less than $50,000. Webalo requests that the Court authorize the Company

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1 to pay any outstanding expense reimbursements as of the Petition Date, and direct the Companys 2 bank (Wells Fargo Bank) to honor any outstanding checks. 3 4 5 58. 6 Cloud, telephone and other similar services from a number of different utility suppliers (the 7 8 chart attached to the Utilities Motion as Exhibit 1. This Exhibit 1 accurately details Webalo's 9 Utility Providers, the name, address and other contact information for the providers, the type of
333 SOUTH HOPE STREET, THIRTY-FIFTH FLOOR LOS ANGELES, CALIFORNIA 90071-1406 TEL 213.626.2311 FAX 213.629.4520

Motion for Order (1) Deeming Utility Companies Adequately Assured of Future Performance, (2) Establishing Procedures for Requests for Additional Assurance, and (3) Restraining Utility Companies From Discontinuing Alternating or Refusing Service (the Utilities Motion). In connection with the operation of its business, Webalo obtains internet,

Utility Providers). The Utility Providers are identified to the best of Webalo's ability in the

10 service provided, and the amounts of the company's average one month charges for each utility. 11 The Utility Providers supply Webalo with services essential to the continuation of Webalo's 12 business. Any interruption in the utility services provided to Webalo would seriously disrupt 13 Webalo's operations and could jeopardize Webalo's opportunity to reorganize and maximize the 14 value of the estate. As set forth in the Utilities Motion, Webalo shall furnish adequate assurance 15 of payment to its Utility Providers. 16 17 18 59. 19 Junior Secured Notes, 28 holders of the Senior Secured Notes, and 135 equity holders (while there 20 is material overlap between these groups, there are more than 175 different parties in Webalo's 21 mailing list). Further, I am advised that the company may be required to bring a number of 22 administrative matters before the Court in its chapter 11 case. Limiting the extent of notice 23 required for such matters could materially reduce the burden and expense that would be imposed 24 upon the estate if the Webalo is required to provide notice of all administrative matters in this case 25 to all of its creditors and various other parties. At the same time, a creditor, shareholder, or other 26 party in interest desiring to receive notice of administrative matters can ensure that notice will be 27 received by filing and serving a request for special notice or courtesy ECF notice. Moreover, in 28 Webalo has approximately 48 holders of the Bridge Notes, 44 holders of the Motion of NFRS, NFMX, and Simo Holdings for Order Limiting Extent of Notice Required for Administrative Matters and Authorizing Service by Email (the Limiting Notice Motions)

Sulmeyer Kupetz,

A Professional Corporation

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1 order to save the estate substantial expense in postage and copying costs, and to make receipt of 2 documents more convenient and expedient for various interested parties, Webalo also requests that 3 the Court authorize the company to serve notices, pleadings, and other documents filed in this case 4 by email on those parties who consent in advance to receiving service of such documents by 5 email. 6 60. Webalo seeks to reduce the burden and expense of providing notice of all

7 administrative matters in this case. Service of notices, pleadings, and other documents filed with 8 the Court by email on parties who consent, in advance, to receiving service of documents by email 9 will reduce postage and copying expenses in this case and will expedite service in a manner that
333 SOUTH HOPE STREET, THIRTY-FIFTH FLOOR LOS ANGELES, CALIFORNIA 90071-1406 TEL 213.626.2311 FAX 213.629.4520

10 many parties will likely find preferable to the other more costly alternatives. Further, I understand 11 that the Court's approval of the Limiting Notice Motion will eliminate the necessity and expense 12 of the Company requesting limited notice separately in each administrative matter as it arises. 13 14 15 61. In the Schedules Extension Motion filed by Webalo, the company requests Motion for Extension of Time to File Bankruptcy Schedules, Statement of Affairs and Lists (the Schedules Extension Motions)

Sulmeyer Kupetz,

A Professional Corporation

16 an extension of time of thirty (30) days to file its bankruptcy schedules, statement of affairs, lists, 17 and related documents. 18 19 62. The reasons for this request, among other things, include the following: (a) Upon commencement of this case, in order to continue its operations

20 and avoid irreparable harm to the estate, Webalo was required, among other things, to file various 21 first day motions, including (among others) motions (i) to obtain authorization to pay and honor 22 priority prepetition wage and benefit claims owed to its employees, and (ii) to provide adequate 23 assurance in accordance with Bankruptcy Code section 366 to utility providers. These matters 24 required the immediate attention of the company and its limited accounting personnel. The 25 company's accounting staff is limited to one person, Lora Mekikian (Vice President, Finance). Ms. 26 Mekikian handles accounting, finance, and human resources matters for Webalo. Since this is an 27 operating case (Webalo has an ongoing operating business), significant attention must continue to 28 be devoted to the company's business operations.

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EXHIBIT 1

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EXHIBIT 2

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PROOF OF SERVICE OF DOCUMENT


I am over the age of 18 and not a party to this bankruptcy case or adversary proceeding. My business address is 333 South Hope Street, Thirty-Fifth Floor, Los Angeles, California 90071-1406. A true and correct copy of the foregoing document entitled ( specify): OMNIBUS DECLARATION OF PETER PRICE IN SUPPORT OF DEBTOR'S FIRST-DAY MOTIONS will be served or was served (a) on the judge in chambers in the form and manner required by LBR 5005-2(d); and (b) in the manner stated below: 1. TO BE SERVED BY THE COURT VIA NOTICE OF ELECTRONIC FILING (NEF) : Pursuant to controlling General Orders and LBR, the foregoing document will be served by the court via NEF and hyperlink to the document. On ( date) January 27, 2014 I checked the CM/ECF docket for this bankruptcy case or adversary proceeding and determined that the following persons are on the Electronic Mail Notice List to receive NEF transmission at the email addresses stated below: SEE ATTACHED SERVICE LIST Service information continued on attached page. 2. SERVED BY UNITED STATES MAIL: On (date) January 27, 2014 , I served the following persons and/or entities at the last known addresses in this bankruptcy case or adversary proceeding by placing a true and correct copy thereof in a sealed envelope in the United States mail, first class, postage prepaid, and addressed as follows. Listing the judge here constitutes a declaration that mailing to the judge will be completed no later than 24 hours after the document is filed. The Honorable Julia W. Brand U.S. Bankruptcy Court Roybal Federal Building 255 E. Temple Street, Suite 1382 Los Angeles, CA 90012-3332 Service information continued on attached page. 3. SERVED BY PERSONAL DELIVERY, OVERNIGHT MAIL, FACSIMILE TRANSMISSION OR EMAIL (state method for each person or entity served): Pursuant to F.R.Civ.P. 5 and/or controlling LBR, on (date) January 27, 2014 , I served the following persons and/or entities by personal delivery, overnight mail service, or (for those who consented in writing to such service method), by facsimile transmission and/or email as follows. Listing the judge here constitutes a declaration that personal delivery on, or overnight mail to, the judge will be completed no later than 24 hours after the document is filed. The Honorable Julia W. Brand U.S. Bankruptcy Court Roybal Federal Building 255 E. Temple Street Bin outside of Suite 1382 Los Angeles, CA 90012-3332 Service information continued on attached page. I declare under penalty of perjury under the laws of the United States that the foregoing is true and correct.

January 27, 2014 Date

Shirley Lee Printed Name

/s/Shirley Lee Signature

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ADDITIONAL SERVICE INFORMATION (if needed):

Agents for Secured Creditors: Alex Jacobson adon472@gmail.com Gerard Kenny, Esq. gkenny@gibsondunn.com 20 Largest Unsecured Creditors The Lorne Weil 2006 Irrev. Trust lorne.weil@gmail.com Noel William Robbins brobbins@hotmail.co.uk Desert Pathology Med. Group Pension rosser.md@gte.net Balch Hill Partners, LP simon@balchhill.com Robert J. & Susan E. Rosser rosser.md@gte.net James R. Waisman M.D. jimwaisman@aol.com Park Family Trust davepark1942@gmail.com Stephen M. Ehrlichman Decl Trust stelarsme@aol.com SLP Ventures II, LLC bschwartz@strategiclaw.com Robert H. Wass bobwass@mindspring.com Antony J. Hitchen ahitch@btinternet.com Craig H. Millet CMillet@gibsondunn.com Kenny Family Trust gkenny@gibsondunn.com Inspiration Point Advisors LLC ashishagarwal0504@yahoo.com
This form is mandatory. It has been approved for use by the United States Bankruptcy Court for the Central District of California.

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Wayne & Sheryl Smith wsmith3743@msn.com Reeves Family Trust JReeves@gibsondunn.com MG Capital I, LLC DeLuca@mgallis.com John Quarrey johnquarrey@krowcommunications.com Greendot Investments, LLC paul@greendotinvestments.com Brooks H. Pierce Brooks.Pierce@scientificgames.com Utility Providers Amazon Web Services (Acct. No. 0970-0757-2752) AWS-receivables@amazon.com AT&T (Acct. No. 287247160671) as724a@att.com Cisco WebEx Attn: Tarek Bahnasy (Re: Acct. No. 107157) tabhanas@cisco.com Nextiva (Re: Acct. No. 1037755) sales@nextiva.com T Mobile (Re: Acct. No. 368879247) Post Office Box 51843 Los Angeles, CA 90051-6143 (Served via U.S. Mail) Time Warner Cable Business Class (Re: Acct. No. 8448 20 019 1653178) Dustin.Pratt@twcable.com Verizon California (Re: Acct. No. 01 1790 117730055004) Post Office Box 920041 Dallas, TX 75392-0041 (Served via U.S. Mail) Virtual PBX (Re: Acct. No. 2696254) billing@virtualpbx.com
This form is mandatory. It has been approved for use by the United States Bankruptcy Court for the Central District of California.

June 2012

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