TEUM Pareteum Corporation

As filed with the Securities and Exchange Commission on January 11, 2019

Registration No. 333-228665​

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Amendment No. 2
to
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

PARETEUM CORPORATION

(Exact Name of Registrant as Specified in Its Charter)

1185 Avenue of the Americas, 37 th Floor
New York, New York 10036
Telephone: (212) 984-1096
(Address, including Zip Code, and Telephone Number, including Area Code, of Registrant’s Principal Executive Offices)

Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after the effectiveness of this registration statement and the satisfaction or waiver of the conditions to the transactions described herein.

If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box: ☐

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐

If applicable, place an ☒ in the box to designate the appropriate rule provision relied upon in conducting this transaction:

Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer)   ☐

Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer)   ☐

The information in this document may change. The registrant may not complete the offer or the merger and issue these securities until the registration statement filed with the U.S. Securities and Exchange Commission is effective. This document is not an offer to sell these securities and the registrant is not soliciting an offer to buy these securities in any state or jurisdiction in which such offer is not permitted.

PRELIMINARY AND SUBJECT TO CHANGE, DATED JANUARY 11, 2019

Offer by

TBR, Inc.,
a direct wholly owned subsidiary of

PARETEUM CORPORATION,
to exchange each outstanding share of common stock of

IPASS INC.

for

1.17 shares of common stock of Pareteum Corporation

THE OFFER AND THE WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON FEBRUARY 12, 2019, UNLESS EXTENDED OR TERMINATED.

Pareteum Corporation (“Pareteum”), through its direct wholly owned subsidiary TBR, Inc. (the “Offeror”), is offering (the “offer”), upon the terms and subject to the conditions set forth in this prospectus/offer and in the accompanying letter of transmittal, to exchange for each outstanding share of common stock of iPass (“iPass”), par value $0.001 per share, that is validly tendered in the offer and not properly withdrawn, 1.17 shares of Pareteum common stock, par value $0.00001 per share, together with cash in lieu of any fractional shares of Pareteum common stock, without interest and less any applicable withholding taxes.

We refer to the above as the “transaction consideration.”

The Offeror’s obligation to accept for exchange, and to exchange, shares of iPass common stock for shares of Pareteum common stock in the offer is subject to a number of conditions, including there having been validly tendered and not properly withdrawn at least the number of shares of iPass common stock that, together with any shares of iPass common stock directly or indirectly owned by Pareteum and the Offeror, represents at least a majority of the outstanding shares of iPass common stock. See “Merger Agreement — Conditions to the Offer” for a description of all such conditions.

The offer is being made pursuant to an Agreement and Plan of Merger (the “merger agreement”), dated November 12, 2018, among Pareteum, the Offeror and iPass. A copy of the merger agreement is attached to this document as Annex A .

The offer is the first step in Pareteum’s plan to acquire control of, and ultimately all of the outstanding equity in, iPass. Accordingly, if the offer is completed, pursuant to the terms and subject to the conditions of the merger agreement, as soon as practicable following the consummation of the offer, Pareteum intends to consummate a merger of the Offeror with and into iPass, with iPass surviving the merger (the “merger” and together with the offer, the “transactions”). The purpose of the merger is for Pareteum to acquire all shares of iPass common stock that it did not acquire in the offer. In the merger, each outstanding share of iPass common stock that was not acquired by Pareteum or the Offeror in the offer (other than certain dissenting, converted and cancelled shares, as described further in this document) will be converted into the right to receive the transaction consideration. After the merger, the iPass business will be held in a direct wholly owned subsidiary of Pareteum, and the former stockholders of iPass will no longer have any direct ownership interest in the surviving corporation. The merger will be governed by Section 251(h) of the General Corporation Law of the State of Delaware (the “DGCL”), and accordingly no stockholder vote will be required to complete the merger.

The board of directors of iPass determined that the terms of the merger agreement and the transactions contemplated by the merger agreement, including the offer and the merger, are fair to, and in the best interests of, iPass and its stockholders. The board of directors of iPass has also resolved to recommend that the stockholders of iPass accept the offer and tender their shares of iPass common stock to the Offeror pursuant to the offer.

The board of directors of Pareteum also determined that the terms of the merger agreement and the transactions contemplated by the merger agreement, including the offer and the merger, are fair to, and in the best interests of, Pareteum and its stockholders.

Pareteum common stock is listed on the Nasdaq Capital Market (“Nasdaq”) under the symbol “TEUM.” iPass common stock is listed on Nasdaq under the ticker symbol “IPAS.” You are encouraged to obtain current market quotations for Pareteum common stock and iPass common stock in connection with your decision whether to tender your shares in the offer.

For a discussion of certain factors that iPass stockholders should consider in connection with the offer, please read the section of this document titled “Risk Factors” beginning on page 12 .

You are encouraged to read this entire document and the related letter of transmittal carefully, including the annexes and information referred to or incorporated by reference in this document.

Neither Pareteum nor the Offeror has authorized any person to provide any information or to make any representation in connection with the offer other than the information contained or incorporated by reference in this document, and if any person provides any information or makes any representation of this kind, that information or representation must not be relied upon as having been authorized by Pareteum or the Offeror.

Neither the U.S. Securities and Exchange Commission (the “SEC”) nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this document. Any representation to the contrary is a criminal offense.

The date of this prospectus/offer to exchange is                  .

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QUESTIONS AND ANSWERS ABOUT THE OFFER

Below are some of the questions that you as a holder of shares of iPass common stock may have regarding the offer and answers to those questions. You are urged to carefully read the remainder of this document, the related letter of transmittal, the annexes to this document and the other information referred to or incorporated by reference in this document because the information contained in this section and in the “Summary” section is not complete. See “Where To Obtain Additional Information.”

As used in this document, unless otherwise indicated or the context requires: “Pareteum” (or “we,” “us” and “our”) refers to Pareteum Corporation, a Delaware corporation, and its consolidated subsidiaries; the “Offeror” refers to TBR, Inc., a Delaware corporation and direct wholly owned subsidiary of Pareteum; and “iPass” refers to iPass Inc., a Delaware corporation, and its consolidated subsidiaries.

Who is offering to buy my iPass shares?

Pareteum, through the Offeror, is making this offer to exchange (the “offer”), for each share of common stock of iPass that is validly tendered in the offer and not properly withdrawn, 1.17 shares of common stock of Pareteum.

Pareteum is a leading global provider of mobile communications technology platforms and high-value services that increase revenues and reduce costs for its customers globally with a SaaS business model and a diverse customer base that ranges from small tech companies to some of the largest mobile networks in the world. Organizations use Pareteum to energize their growth and profitability through cloud communication services and complete turnkey solutions featuring relevant content, applications, and connectivity worldwide. Pareteum’s platform services partners (technologies integrated into Pareteum’s cloud) include: HPE, IBM, Sonus, Oracle, Microsoft, and other world class technology providers. All of the relevant customer acquired value is derived from Pareteum’s award winning software, developed and enhanced over many years. By harnessing the value of communications, Pareteum serves enterprise, retail and IoT customers. Pareteum currently has offices in New York, Sao Paulo, Madrid, Barcelona, Bahrain and the Netherlands.

What is Pareteum proposing?

Pursuant to the terms and subject to the conditions set forth in the Agreement and Plan of Merger (the “merger agreement”), entered into by Pareteum, the Offeror and iPass on November 12, 2018, Pareteum proposes to acquire control of, and ultimately all of the outstanding equity in, iPass.

The offer is the first step in Pareteum’s plan to acquire all of the outstanding equity of iPass, and the merger is the second step in such plan.

In the offer, if a sufficient number of shares of iPass common stock are validly tendered into the offer and not properly withdrawn such that, together with any shares of iPass common stock directly or indirectly owned by Pareteum and the Offeror, Pareteum will own at least a majority of the then-outstanding shares of iPass common stock, subject to the satisfaction or waiver of the other conditions to the offer, Pareteum will accept for exchange, and exchange, the shares tendered in the offer. Then, as soon as practicable thereafter, Pareteum will consummate a merger of the Offeror with and into iPass, with iPass surviving the merger (the “merger”). The purpose of the merger is for Pareteum to acquire all remaining shares of iPass common stock that it did not acquire in the offer. After the merger, the iPass business will be held in a direct wholly owned subsidiary of Pareteum, and the former stockholders of iPass will no longer have any direct ownership interest in the surviving corporation. The merger will be governed by Section 251(h) of the General Corporation Law of the State of Delaware (the “DGCL”), and accordingly no stockholder vote will be required to consummate the merger.

Why is Pareteum proposing the offer and the merger?

Pareteum is proposing the offer and the merger to acquire control of, and ultimately the entire equity interest in, iPass. The board of directors of Pareteum determined that the terms of the merger agreement and the transactions contemplated by the merger agreement, including the offer and the merger, are fair to, and in the best interests of, Pareteum and its stockholders. See “The Offer and the Merger — Pareteum’s Reasons for the Offer and the Merger” for more information.

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Does the board of directors of iPass support the offer and the merger?

Yes. The board of directors of iPass resolved to recommend that iPass stockholders accept the offer and tender their iPass shares to the Offeror pursuant to the offer. The board of directors of iPass also determined that the terms of the merger agreement and the transactions contemplated by the merger agreement, including the offer and the merger, are fair to, and in the best interests of, iPass and its stockholders.

See “The Offer and the Merger — iPass’s Reasons for the Offer and the Merger; Recommendation of the Board of Directors of iPass” for more information. A description of the reasons for this recommendation is also set forth in iPass’s Solicitation/Recommendation Statement on Schedule 14D-9 (the “Schedule 14D-9”) that is being mailed to you together with this document.

What are the classes and amounts of iPass securities that the Offeror is offering to acquire?

Pareteum, through the Offeror, is seeking to acquire all issued and outstanding shares of iPass common stock, par value $0.001 per share.

What will I receive for my shares of iPass common stock?

Pareteum, through the Offeror, is offering, upon the terms and subject to the conditions set forth in this document and in the accompanying letter of transmittal, to exchange for each outstanding share of iPass common stock that is validly tendered in the offer and not properly withdrawn, 1.17 shares of Pareteum common stock, par value $0.00001 per share, together with cash in lieu of any fractional shares of Pareteum common stock, without interest and less any applicable withholding taxes (the “transaction consideration”).

If you do not tender your shares into the offer but the merger is completed, you will also receive the transaction consideration in exchange for your shares of iPass common stock.

Will I have to pay any fee or commission to exchange my shares of iPass common stock?

If you are the record owner of your shares of iPass common stock and you tender those shares in the offer, you will not have to pay any brokerage fees, commissions or similar expenses. If you own your shares of iPass common stock through a broker, dealer, commercial bank, trust company or other nominee and your broker, dealer, commercial bank, trust company or other nominee tenders your shares on your behalf, your broker or such other nominee may charge a fee for doing so. You should consult your broker, dealer, commercial bank, trust company or other nominee to determine whether any charges will apply.

What are the conditions to the offer?

The Offeror and Pareteum are not obligated to consummate the offer unless the following conditions, among others, have been satisfied:

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Minimum Tender Condition  — iPass stockholders having validly tendered and not properly withdrawn prior to the expiration of the offer a number of shares of iPass common stock that, together with any shares of iPass common stock then owned by Pareteum, the Offeror or Pareteum’s other subsidiaries, represents at least a majority of all then-outstanding shares of iPass common stock (the “minimum tender condition”);

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Effectiveness of Form S-4  — the registration statement on Form S-4 of which this document is a part having been declared effective by the SEC under the U.S. Securities Act of 1933, as amended (the “Securities Act”), and no stop order having been issued or proceeding seeking a stop order having been initiated or threatened by the SEC;

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Listing of Pareteum Common Stock  — the shares of Pareteum common stock to be issued in the offer and the merger having been approved for listing on Nasdaq, subject to official notice of issuance;

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Accuracy of iPass’s Representations  — the representations and warranties of iPass contained in the merger agreement being true and correct as of the date of the merger agreement and the expiration date of the offer, subject to specified materiality standards;

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iPass’s Compliance with Covenants  — iPass having complied with or performed in all material respects with its covenants under the merger agreement;

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No Legal Prohibition  — other than with respect to foreign antitrust laws, no governmental entity having jurisdiction over Pareteum, the Offeror or iPass having issued an order, decree or ruling or taken any other material action enjoining or otherwise prohibiting consummation of the offer or the merger substantially on the terms contemplated by the merger agreement;

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No Material Adverse Effect  — since the date of the merger agreement, no material adverse effect on the business, financial condition or results of operations of iPass having occurred;

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Certain Consents —  iPass shall have obtained the consents of certain third parties, including iPass’s secured lender Fortress Credit Corp. (“Fortress”), to the offer and merger; and

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No Merger Agreement Termination  — the merger agreement not having been terminated in accordance with its terms.

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For a more complete description of the conditions to the offer, see the section entitled “Merger Agreement — Conditions to the Offer.”

Pareteum’s obligation to consummate the offer is not conditioned upon any financing arrangements or contingencies.

How long will it take to complete the proposed offer and the merger?

The offer and the merger are currently expected to be completed in the first quarter of 2019, subject to the satisfaction or waiver of the conditions described in “Merger Agreement — Conditions to the Offer” and “Merger Agreement — Conditions to the Merger.”

Until what time can I tender my shares of iPass common stock in the offer?

The offer is scheduled to expire at 5:00 P.M., New York City time, on February 12, 2019, unless extended or terminated. Any extension, delay, termination, waiver or amendment of the offer will be followed as promptly as practicable by public announcement thereof to be made no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled expiration date. During any such extension, all shares previously tendered and not properly withdrawn will remain subject to the offer, subject to the rights of a tendering stockholder to withdraw such stockholder’s shares. “Expiration date” means February 12, 2019, unless and until the Offeror has extended the period during which the offer is open, subject to the terms and conditions of the merger agreement or as required by applicable laws, in which event the term “expiration date” means the earliest time and date at which the offer, as so extended by the Offeror, will expire.

Subject to the provisions of the merger agreement, and unless iPass consents otherwise or the offer or the merger agreement is terminated, (i) the Offeror will extend the offer for any period required by the U.S. federal securities laws and rules and regulations of the SEC and its staff or of Nasdaq (but in no event will the Offeror be required to extend past May 11, 2019 (the “termination date”)), and (ii) if the offer conditions are not satisfied at any scheduled expiration date, the Offeror is required to extend the offer for successive periods of not more than 10 business days from the previously scheduled expiration date. However, in no event will the Offeror be required to extend the offer to a date that is or after the termination date nor will the Offeror be permitted to extend past the termination date without iPass’s prior written consent.

If the merger agreement is terminated, the Offeror will promptly terminate the offer.

Other than as described above, the Offeror may not extend, terminate or withdraw the offer without the prior written consent of iPass.

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Any decision to extend, terminate or withdraw the offer will be made public by a press release or otherwise by a public announcement.

See “Exchange Offer Procedures — Extension, Termination and Amendment of Offer.”

How do I tender my shares of iPass common stock?

To validly tender shares of iPass common stock held of record, iPass stockholders must:

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if such shares are in certificated form or are held in book entry form directly with iPass via the direct registration system, deliver a properly completed and duly executed letter of transmittal, along with any required signature guarantees and any other required documents, and certificates, if applicable, for tendered iPass shares to Continental Stock Transfer & Trust Company,, the exchange agent for the offer, at its address set forth elsewhere in this document and the letter of transmittal, all of which must be received by the exchange agent prior to the expiration date; or

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if such shares are in electronic book-entry form, deliver an agent’s message in connection with a book-entry transfer, and any other required documents, to the exchange agent at its address set forth elsewhere in this document and the letter of transmittal and follow the other procedures for book-entry tender set forth herein, all of which must be received by the exchange agent prior to the expiration date.

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If your shares of iPass common stock are held in “street name” (i.e., through a broker, dealer, commercial bank, trust company or other nominee), those shares may be tendered by your nominee by book-entry transfer through The Depository Trust Company. To validly tender such shares held in street name, you should instruct such nominee to do so prior to the expiration date.

We are not providing for guaranteed delivery procedures. Accordingly you must allow sufficient time for the necessary tender procedures to be completed during normal business hours prior to the expiration date. Tenders received by the exchange agent after the expiration date will be disregarded and of no effect. In all cases, you will receive your consideration for your tendered shares only after timely receipt by the exchange agent of certificates for such shares, if any, or of a confirmation of a book-entry transfer of such shares, and a properly completed and duly executed letter of transmittal and any other required documents.

For a more complete discussion of the procedures for tendering your shares of iPass common stock, see “Exchange Offer Procedures — Procedures for Tendering.”

Until what time can I withdraw tendered shares of iPass common stock?

You may withdraw your previously tendered shares of iPass common stock at any time until the offer has expired; provided, that if the Offeror has not yet accepted shares of iPass common stock tendered for exchange, any iPass shareholder may withdraw its tendered shares after the 60 th day following commencement of the offer pursuant to Section 14(d)(5) of the Exchange Act. For a more complete discussion of the procedures for withdrawing your iPass shares, see “Exchange Offer Procedures — Withdrawal Rights.”

How do I withdraw previously tendered shares of iPass common stock?

To withdraw previously tendered shares of iPass common stock that are held of record, you must deliver a written notice of withdrawal with the required information to the exchange agent at any time at which you have the right to withdraw shares.

To withdraw previously tendered shares of iPass common stock that are held in “street name,” you must instruct your broker, dealer, commercial bank, trust company or other nominee to arrange for the withdrawal of your shares and such broker, dealer, commercial bank, trust company or other nominee must effectively withdraw such shares at any time at which you have the right to withdraw shares.

For a more complete discussion of the procedures for withdrawing your iPass shares, including the applicable deadlines for effecting withdrawals, see “Exchange Offer Procedures — Withdrawal Rights.”

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When and how will I receive the transaction consideration in exchange for my tendered shares of iPass common stock?

Upon the terms and subject to the satisfaction or waiver of the conditions of the offer (including, if the offer is extended or amended, the terms and conditions of any extension or amendment), promptly following the expiration date, the Offeror will accept for exchange, and will thereafter promptly exchange, all shares of iPass common stock validly tendered and not properly withdrawn prior to the expiration date.

The Offeror will deliver the transaction consideration for your validly tendered and not properly withdrawn shares through the exchange agent, which will act as your agent for the purpose of receiving the transaction consideration from the Offeror and transmitting such transaction consideration to you. In all cases, you will receive your consideration for your tendered shares only after timely receipt by the exchange agent of certificates for such iPass shares, if any, or a confirmation of a book-entry transfer of such shares, and a properly completed and duly executed letter of transmittal and any other required documents for such shares.

What happens if I do not tender my shares of iPass common stock?

If Pareteum completes the offer, it intends to complete the merger as soon as practicable following the completion of the offer. Upon consummation of the merger, each share of iPass common stock that has not been tendered and accepted for exchange in the offer, other than shares held in treasury by iPass or shares held by Pareteum or any subsidiary of Pareteum, will be converted in the merger into the right to receive the transaction consideration.

If the offer is completed, will iPass continue as a public company?

No. If the merger takes place, iPass will no longer be publicly traded, and iPass will be held as a wholly owned subsidiary of Pareteum. Pareteum is required, on the terms and subject to the satisfaction or waiver of the conditions set forth in the merger agreement, to consummate the merger as soon as practicable following its acceptance for purchase of shares of iPass common stock in the offer. The merger will be governed by Section 251(h) of the DGCL, and accordingly no stockholder vote will be required to consummate the merger. As such, Pareteum does not expect there to be a significant period of time between the consummation of the offer and the consummation of the merger.

Will I have the right to have my shares of iPass common stock appraised?

Appraisal rights are not available in connection with the offer, and iPass stockholders who tender their shares in the offer will not have appraisal rights in connection with the merger.

Who should I contact if I have questions about the offer?

You may contact Morrow Sodali, the information agent, by phone toll-free at (800) 662-5200 or by email at ipass@morrowsodali.com.

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Per-Share iPass Closing Price

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Per-Share Pareteum Closing Price

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Implied Transaction Value of iPass Share

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November 9, 2018

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$

1.48

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$

2.22

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$

2.60

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January 10, 2019

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$

2.33

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$

2.15

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$

2.52

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​	​	509 Madison Avenue Suite 1608 New York, NY 10022 Stockholders Call Toll Free: (800) 662-5200 E-mail: ipass@morrowsodali.com	​	​

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Pareteum common stock may be adversely affected by factors different from those that would affect iPass’s results of operations and stock price. In addition, holders of shares of Pareteum common stock will have rights as Pareteum stockholders that differ from the rights they had as iPass stockholders before the offer and the merger. For a comparison of the rights of Pareteum stockholders to the rights of iPass stockholders, see “Comparison of Stockholders’ Rights.”

iPass stockholders will have a reduced ownership and voting interest in Pareteum.

Immediately following consummation of the offer and the merger, iPass stockholders will collectively own approximately 9.18% of the outstanding shares of Pareteum common stock. Consequently, iPass stockholders will not be able to exercise as much influence over the management and policies of Pareteum as they currently exercise over iPass.

Pareteum may fail to realize any or all of the anticipated benefits of the offer and the merger or those benefits may take longer to realize than expected.

The benefits of the offer and the merger may not be realized as expected or may not be achieved within the anticipated time frame, or at all. Failure to achieve the anticipated benefits of the offer and the merger could adversely affect Pareteum’s results of operations or cash flows, cause dilution to the earnings per share of Pareteum, decrease or delay the expected benefits of the offer and the merger and negatively affect the price of Pareteum common stock.

Pareteum and iPass will incur direct and indirect costs as a result of the offer and the merger.

Pareteum and iPass will incur substantial expenses in connection with and as a result of completing the offer and the merger and, following the completion of the merger, Pareteum expects to incur additional expenses in connection with combining the businesses, operations, policies and procedures of Pareteum and iPass. Factors beyond Pareteum’s control could affect the total amount or timing of those expenses, many of which, by their nature, are difficult to estimate accurately. Moreover, diversion of management focus and resources from the day-to-day operation of the business to matters relating to the offer and the merger could adversely affect each company’s business, regardless of whether the offer and the merger are completed. In addition, Pareteum and iPass will be required to devote significant attention and resources prior to closing to prepare for the post-closing operation of the surviving company to the merger, and Pareteum will be required post-closing to devote significant attention and resources to successfully align the business practices and integrate the operations of Pareteum and iPass. This process may disrupt the businesses and, if ineffective, would limit the anticipated benefits of the offer and the merger.

Pareteum’s actual financial positions and results of operations may differ materially from the unaudited pro forma condensed combined financial information included in this document.

The unaudited pro forma condensed combined financial information contained in this document is presented for illustrative purposes only and may differ materially from what Pareteum’s actual financial position or results of operations would have been had the offer and the merger been completed on the dates indicated. The unaudited pro forma condensed combined financial information has been derived from the audited and unaudited historical financial statements of Pareteum, and certain adjustments and assumptions have been made regarding the combined company after giving effect to the offer and the merger. The assets and liabilities of iPass have been measured at fair value based on various preliminary estimates using assumptions that Pareteum management believes are reasonable utilizing information currently available. The process for estimating the fair value of acquired assets and assumed liabilities requires the use of judgment in determining the appropriate assumptions and estimates. These estimates may vary significantly as additional information becomes available and as additional analyses are performed. Differences between preliminary estimates in the unaudited pro forma condensed combined financial information and the final acquisition accounting may occur and are not necessarily indicative of financial position or results of operations in future periods or that would have been realized in historical periods presented.

In addition, the assumptions used in preparing the unaudited pro forma condensed combined financial information may not prove to be accurate, and other factors may affect Pareteum’s financial condition or results of operations following the closing. Any potential decline in Pareteum’s financial condition or results

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of operations may cause significant variations in the share price of Pareteum. See “Unaudited Pro Forma Condensed Combined Financial Information.”

The merger agreement limits iPass’s ability to pursue alternative transactions, and in certain instances requires payment of a termination fee, which could deter a third party from proposing an alternative transaction.

The merger agreement contains provisions that, subject to certain exceptions, limit iPass’s ability to solicit, initiate or knowingly encourage or knowingly facilitate any inquiries regarding or the making of any proposal or offer that constitutes or could reasonably be expected to lead to an alternative takeover proposal. See “Merger Agreement — No Solicitation of Acquisition Proposals.” In addition, under specified circumstances, iPass is required to pay a termination fee of  $780,000 if the merger agreement is terminated. See “Merger Agreement — Termination Fee” and “— Expenses.” It is possible that these or other provisions might discourage a potential competing acquirer that might have an interest in acquiring all or a significant part of iPass from considering or proposing an acquisition or might result in a potential competing acquirer proposing to pay a lower per share price to acquire iPass than it might otherwise have proposed to pay.

If the increase in the value of Pareteum’s business from the acquisition of iPass, together with any synergies to be achieved from Pareteum’s acquisition of iPass, is less than the value of the aggregate transaction consideration, the trading price of shares of Pareteum common stock could decrease.

If investors believe that the value of the stock consideration to be exchanged for iPass shares in connection with the offer and the merger, together with transaction costs, is greater than the value of iPass’s business, together with any synergies expected to be achieved from Pareteum’s acquisition of iPass, the trading price of Pareteum common stock could decrease and the offer and the merger could have a dilutive effect on the value of common shares held by Pareteum stockholders (including former iPass stockholders).

Uncertainty during the pendency of the offer and the merger may cause suppliers, customers or other business partners to delay or defer decisions concerning Pareteum and/or iPass or re-negotiate agreements with Pareteum and/or iPass, and completion of the offer and the merger could cause suppliers, customers and other business partners to terminate or re-negotiate their relationships with the surviving company or Pareteum.

The offer and the merger will be completed only if specified conditions are met, many of which are outside the control of Pareteum and iPass. In addition, both parties have rights to terminate the merger agreement under specified circumstances. Accordingly, there may be uncertainty regarding the consummation of the offer and the merger, both as to whether they will be consummated and when. This uncertainty may cause suppliers, customers or other business partners of Pareteum and/or iPass to delay or defer decisions concerning each such company’s products or businesses, or may seek to change existing agreements with Pareteum and/or iPass, which could negatively affect their respective businesses, results of operations and financial conditions.

Additionally, if the offer and the merger are completed, certain suppliers, customers or other business partners may attempt to terminate or change their relationships with the surviving company or Pareteum. These decisions could have an adverse effect on the business of the combined company.

Pareteum’s acquisition of iPass could trigger certain change-of-control or similar provisions contained in iPass’s agreements with third parties that could permit such parties to terminate or re-negotiate those agreements.

iPass may be a party to agreements that permit a counterparty to terminate an agreement or receive payments because the offer or the merger would cause a default or violate an anti-assignment, change-of-control or similar clause in such agreement. If this happens, Pareteum may have to seek to replace that agreement with a new agreement or make additional payments under such agreement. However, Pareteum may be unable to replace a terminated agreement on comparable terms or at all. Depending on the importance of such agreement to iPass’s business, the failure to replace a terminated agreement on similar terms or at all, and requirements to pay additional amounts, may increase the costs to Pareteum of operating iPass’s business or decrease the expected benefits of the merger to the surviving company and Pareteum.

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The stock prices of Pareteum and iPass common stock may be adversely affected if the offer and the merger are not completed.

If the offer and the merger are not completed, the prices of Pareteum common stock and iPass common stock may decline to the extent that the current market prices of such common stock reflect a market assumption that the offer and the merger will be completed and have value.

Failure to effectively retain, attract and motivate key employees could diminish the anticipated benefits of the merger.

The success of the acquisition of iPass will depend in part on the attraction, retention and motivation of personnel critical to the business and operations of the surviving company due to, for example, their technical skills or industry and management expertise. Employees and consultants may experience uncertainty about their future roles with Pareteum and iPass during the pendency of the offer and the merger or after their completion. Pareteum and iPass, while similar and sharing a number of core values, do not have identical corporate cultures, and some employees or consultants may not want to work for the surviving company. In addition, competitors may recruit employees during Pareteum’s integration of iPass. If the companies are unable to attract, retain and motivate personnel that are critical to the successful integration and future operation of the companies, the surviving company could face disruptions in its operations, loss of existing customers, key information, expertise or know-how and unanticipated additional recruiting and training costs. In addition, the loss of key personnel could diminish the anticipated benefits of the acquisition of iPass to Pareteum.

The Internal Revenue Service may challenge the qualification of the offer and merger as a tax-free reorganization.

While Pareteum believes that the offer and merger will constitute a qualified reorganization within the meaning of the Code, with the result that the beneficial owners of iPass will recognize no gain or loss on the exchange of their iPass common stock for Pareteum common stock, the Internal Revenue Service (the “IRS”) may not agree with this position and may challenge the tax-free status of the transactions. See “Material U.S. Federal Income Tax Consequences,” below.

The financial analyses and forecasts considered by iPass, Pareteum and their respective financial advisors may not be realized.

While the financial projections utilized by iPass, Pareteum and their respective advisors in connection with the offer and the merger and summarized in this prospectus were prepared in good faith based on information available at the time of preparation, no assurances can be made regarding future events or that the assumptions made in preparing such projections will accurately reflect future conditions. In preparing such projections, the management of iPass and Pareteum made assumptions regarding, among other things, future economic, competitive, regulatory and financial market conditions and future business decisions that may not be realized and that are inherently subject to significant uncertainties and contingencies, including, among others, risks and uncertainties described or incorporated by reference in this section and the section titled “Forward-Looking Statements,” all of which are difficult to predict and many of which are beyond the control of iPass and Pareteum and will be beyond the control of the surviving company. There can be no assurance that the underlying assumptions or projected results will be realized, and actual results will likely differ, and may differ materially, from those reflected in the unaudited financial projections, whether or not the offer and the merger are completed. As a result, the unaudited financial projections cannot be considered predictive of actual future operating results, and this information should not be relied on as such. In addition, since such projections cover multiple years, the information by its nature becomes less predictive with each successive year.

Risks Related to Pareteum’s Business

You should read and consider the risk factors specific to Pareteum’s business that will also affect the combined company after the merger. These risks are described in Pareteum’s Quarterly Report on Form 10-Q for the period ended September 30, 2018, the Risk Factors section of Pareteum’s Definitive Merger Proxy Statement on Schedule 14A as filed with the SEC on August 3, 2018 and in Pareteum’s

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Annual Report on Form 10-K for the year ended December 31, 2017 as filed with the SEC on March 30, 2018, and in other documents that are incorporated by reference into this document. See “Where to Obtain Additional Information” for the location of information incorporated by reference in this document.

Risks Related to iPass’s Business

iPass’s revenue and overall profitability may be adversely impacted by material reductions in existing customer and partner purchase commitments.

iPass’s customers and partners have traditionally agreed to contractual provisions that require them to pay the greater of the fees generated from the use of iPass’s services or a minimum committed amount over a pre-determined period of time. Minimum commitments are negotiated by customers to improve their unit pricing, effectively guaranteeing a certain volume to achieve a reduced unit price. Recent global economic conditions in certain cases caused iPass’s customers and partners to generate fees from the use of iPass’s services that are significantly less than their minimum committed amounts. Consequently, this shortfall has caused some partners and customers upon renewal of their contracts with iPass to renew with a lower minimum commitment and in some cases with no minimum commitment. Additionally, in some cases partners and customers are requesting a re-evaluation of their minimum commitments on a prospective basis during the term of their existing contract; to maintain these commercial relationships, iPass has addressed these requests on a contract by contract basis. The reduction or elimination of minimum purchase commitments could result in lower future revenues.

Significant dependency on key network providers could negatively affect iPass’s revenues.

There are certain venues (hotels, airports, airplanes, cafes, etc.) globally where iPass depends on key providers for network access in those venues. Additionally, in certain geographies iPass depends on a small number of providers for a large portion of network access. If such a provider were to go out of business, terminate their agreement with iPass, or encounter technical difficulties such that network access was not available to iPass’s customers for an extended period of time, it could have a negative impact on iPass’s revenues and profitability if iPass cannot find an alternative provider to enable network access in those venues or geographies.

If iPass does not accurately predict network usage for its Flat Rate or iPass UNLIMITED price plans, its costs could increase without a corresponding increase in network revenue.

A significant number of iPass’s customers have purchased iPass’s Flat Rate network price plans, and iPass is signing new customers to its iPass UNLIMITED plan. In these plans, iPass’s customers pay a flat rate price to access iPass’s network services. However, in some situations iPass continues to pay its providers based on actual network usage (pay-as-you-go). The rate iPass charges in these plans is based on statistical predictions of usage across a pool of users within a customer. If actual usage is higher than expected, iPass’s expenses may increase without a commensurate increase in revenues, and iPass’s ability to achieve profitability could be negatively impacted.

Starting in 2014, iPass implemented certain fixed rate buying structures with some providers to mitigate this risk. However, buying network access at a fixed rate creates additional risk if iPass’s customers were to use less Wi-Fi than anticipated in the future, which could result in iPass’s costs exceeding its revenues and could negatively impact iPass’s profitability.

If demand for mobile connectivity services does not grow or grows in ways that do not require use of iPass’s services, iPass may experience a decline in revenues and profitability.

The growth of iPass’s business is dependent, in part, upon the increased use of mobile connectivity services and iPass’s ability to capture a higher proportion of this market. If the demand for mobile connectivity services does not continue to grow, or grows in ways that do not require use of iPass’s services, then iPass may not be able to grow its business, or achieve profitability. Increased usage of iPass’s services depends on numerous factors, including:

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Willingness of enterprises to make additional information technology expenditures;

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Availability of security services necessary to ensure data privacy over a variety of networks;

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Quality, cost and functionality of iPass’s services and competing services;

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Increased adoption of wireless broadband access methods and iPass’s ability to support these new methods;

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Proliferation of smartphones, tablets and mobile handheld devices and related applications, and iPass’s ability to provide valuable services and support for those devices;

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iPass’s ability to partner with mobile network operators and service providers that are willing to stimulate consumer awareness and adoption of iPass’s services; and

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iPass’s ability to timely implement technology changes to iPass’s services to meet evolving industry standards for mobile devices, Wi-Fi network access and customer business requirements.

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Customer adoption and deployment of iPass’s platform has been slower than iPass expected, and if it does not increase, iPass’s ability to significantly grow its services business and achieve profitability could be harmed.

The future success of iPass’s business will depend in large part on iPass’s current and prospective customers’ timeliness of adoption and deployment of iPass’s platform and related services. Key risks associated with iPass’s platform and services are as follows:

Customer adoption and deployment of iPass’s platform may be slow.    iPass believes that the growth of its business is dependent on the timely adoption and deployment of iPass’s platform by iPass’s customers. A material delay in the adoption and deployment of the platform by iPass’s customers will adversely impact iPass’s ability to grow revenues and achieve profitability.

Customer deployment of iPass’s platform may not result in increased use of iPass’s services.    iPass believes it is important to the future success of its business that users of iPass’s services increase their usage and network services to validate iPass’s value proposition. iPass believes that the deployment by its customers of iPass’s platform will lead to increased usage of iPass’s platform services and correspondingly, its network services, which will lead to an increase in iPass’s revenue. iPass also believes increased deployment of iPass’s platform will generate additional data and more intrinsically valuable data analytics, both of which are critical to growing iPass Network Intelligence big data product revenues (formally branded as Veri-Fi). However, even if a significant portion of iPass’s customers deploy iPass’s platform, there is no guarantee that iPass’s customers will use iPass’s services more frequently.

iPass’s platform may have technical limitations that cause iPass’s customers to delay adoption or deployment.    There is risk that the platform may contain technological limitations, bugs or errors that would cause iPass’s customers to not adopt or delay the adoption of the platform. If some or all of these risks associated with iPass’s platform were to occur, adoption and deployment of iPass’s platform may not occur and iPass’s business could be harmed.

iPass relies significantly on information technology to accurately provision, service, and bill iPass’s customers and any failure, inadequacy or interruption of that technology could negatively impact iPass’s ability to onboard and service iPass’s customers or report on iPass’s financial performance on a timely basis.

A key component of iPass’s ability to attract and retain customers is the timely and accurate furnishing of monthly detail billing records of activity on iPass’s network, rated for the agreements in place with both iPass’s customers and suppliers. iPass’s ability to meet these billing requirements, as well as to effectively manage and maintain iPass’s books and records, and internal reporting requirements, depends significantly on iPass’s internal information technology. In addition, iPass’s information technology infrastructure is designed to process large volumes of users and data, but any unanticipated capacity constraints could harm iPass’s ability to onboard and service iPass’s customers.

If iPass’s strategic and channel partners do not successfully market iPass’s services to their customers, then iPass’s ability to grow its revenues could be impaired.

iPass sells its services directly through its sales force and indirectly through iPass’s strategic and channel partners, which include telecommunication carriers, systems integrators, value-added resellers, OEMs, and business to business to consumer partnerships. A large percentage of iPass’s sales outside of the

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United States are made through these partners. iPass’s business depends on the efforts and the success of these partners in marketing iPass’s services to their customers. iPass’s own ability to promote its services directly to iPass’s partners’ customers is often limited. Many of iPass’s partners may offer services to their customers that may be similar to, or competitive with, iPass’s services. Therefore, these partners may not actively promote iPass’s services. If iPass’s partners fail to market iPass’s services effectively, iPass’s ability to grow its revenue could be reduced and its business may be impaired.

If iPass’s Strategic Partnership service offerings do not achieve expanded market acceptance, iPass’s ability to grow its business could be harmed.

iPass’s Strategic Partnership service offerings incorporate iPass’s platform, global authentication fabric, and global Wi-Fi network to provide reseller, wholesale, and partners around the world with the infrastructure to offer their customers new Mobile Connectivity Services. iPass has entered into contracts with a number of customers for iPass’s Strategic Partnership services, but ramping revenues takes time to develop. iPass has devoted significant resources to building its Strategic Partnership service line of business. If Strategic Partnership service offerings do not achieve expanded market acceptance and generate meaningful revenues, or if these partners fail financially, iPass’s financial condition may be harmed.

If key global Wi-Fi venues offer “no charge” Internet access to all users, iPass’s network revenues could be negatively affected.

iPass derives a significant portion of iPass’s revenue from providing Wi-Fi access in certain key venues (e.g., hotels, airports, trains, and cafes). In general, these venues charge their customers for Wi-Fi access. If these venues begin offering Wi-Fi access at no charge, the amount iPass can charge iPass’s customers for Wi-Fi access at these venues will likely decrease or iPass may not charge iPass’s customers for Wi-Fi access at these venues. iPass is a proponent of free Wi-Fi as iPass’s service platform overlays benefits for all connectivity: security, ease of use, and broad coverage. And iPass has engaged partnerships to include free Wi-Fi in iPass’s available footprint. As iPass migrates more of its users to its UNLIMITED offering, pay-as-you-go pricing becomes less relevant to iPass’s revenue streams and the risk of free Wi-Fi decreases.

iPass may be exposed to credit risk, collection risk and payment delinquencies on iPass’s accounts receivable.

A substantial majority of iPass’s outstanding accounts receivables are not secured. iPass’s standard terms and conditions permit payment within a specified number of days following the receipt of iPass’s services. While iPass has procedures to monitor and limit exposure to credit risk on its receivables, there can be no assurance such procedures will effectively limit iPass’s collection risk and avoid losses. In addition, under poor global economic conditions, certain of iPass’s customers have faced and may face liquidity concerns and have delayed and may delay or may be unable to satisfy their payment obligations, which may have a material adverse effect on iPass’s financial condition and operating results.

To compete, iPass must attract and retain key employees, and its failure to do so could harm iPass’s results of operations.

To compete, iPass must attract and retain executives, sales representatives, engineers and other key employees. Hiring and retaining qualified executives, sales representatives and engineers are critical to iPass’s business, and competition for experienced employees in iPass’s industry can be intense. If iPass experiences an unexpected significant turnover of its executives, sales representatives, engineers and other key employees it will be difficult to achieve iPass’s business objectives and could adversely impact its results of operations.

If licenses to third party technologies do not continue to be available to iPass at a reasonable cost, or at all, iPass’s business and operations may be adversely affected.

iPass licenses technologies from several software providers that are incorporated into iPass’s services. iPass anticipates that it will continue to license technology from third parties in the future. Licenses to third party technologies may not continue to be available to iPass at a reasonable cost, or at all. The loss of the right to use these technologies or other technologies that iPass licenses could have an adverse effect on iPass’s services and increase iPass’s costs or cause interruptions, degradations or delays in iPass’s services until substitute technologies, if available, are developed or identified, licensed and successfully integrated into iPass’s services.

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iPass’s sales cycles are lengthy and could require iPass to incur substantial costs that may not result in related revenues.

iPass’s Strategic Partnership revenue stream is characterized by a lengthy sales cycle. Once a contract with a partner is signed there is typically an extended period before the customer or customer’s end-users begin to use iPass’s services, which is when iPass begins to realize revenues. As a result, iPass may invest a significant amount of time and effort in attempting to secure a customer which may not result in any revenues in the near term. Even if iPass enters a contract, it may have incurred substantial sales-related expenses well before it recognizes any related revenues. If the expenses associated with sales efforts increase and iPass is not successful in its sales efforts, or if iPass is unable to generate associated offsetting revenues in a timely manner, iPass’s operating results could be harmed.

iPass’s software is complex and may contain errors that could damage iPass’s reputation and decrease usage of its services.

iPass’s software may contain errors that interrupt network access or have other unintended consequences. If network access is disrupted due to a software error, or if any other unintended negative results occur, such as the loss of billing information, a security breach, unauthorized access to iPass’s cloud-based platform or the introduction of a virus by iPass’s software onto iPass’s customers’ computers or networks, iPass’s reputation could be harmed and its business may suffer. iPass’s contracts generally limit iPass’s exposure to incidental and consequential damages and to the extent possible, iPass further limits its exposure by entering into insurance policies that are designed to protect iPass’s customers and iPass from these and other types of losses. If these contractual provisions are not enforced or enforceable, or if liabilities arise that are not effectively limited or insured, iPass’s operating results and financial condition could be harmed.

Cybersecurity risks and privacy concerns related to Internet-based services could reduce demand for iPass’s services.

The secure transmission of confidential information and mission critical data when using Internet-based services is extremely important to iPass’s customers. A key component of iPass’s ability to attract and retain customers is the security measures that iPass has engineered into its network for the authentication of the end-user’s credentials. These measures are designed to protect against unauthorized access to iPass’s customers’ networks. Because techniques used to obtain unauthorized access or to sabotage networks change frequently and generally are not recognized until launched against a target, iPass may be unable to anticipate these techniques or to implement adequate preventative measures against unauthorized access or sabotage. If an actual or perceived breach of network security occurs, that is attributable to iPass’s services, the market perception of the effectiveness of iPass’s cybersecurity measures could be harmed resulting in a negative impact to iPass’s business.

As part of providing iPass’s services, iPass collects certain aggregated information about the users of iPass’s service. As such iPass must comply with evolving laws and regulations regarding the protection and disclosure of such user information. While iPass has taken steps to comply with applicable privacy laws and regulations and to protect user information, any well-publicized compromises of iPass’s users’ data may reduce demand for iPass’s services and harm iPass’s business.

iPass’s business is subject to complex and evolving U.S. and international laws and regulation regarding privacy and data protection. Many of these laws and regulations are subject to change and uncertain interpretation and could result in claims, changes to iPass’s business practices, penalties, increased cost of operations, or declines in user growth or engagement, or otherwise harm iPass’s business.

Regulatory authorities around the world are considering a number of legislative and regulatory proposals concerning data protection, including measures to ensure that encryption of users’ data does not hinder law enforcement agencies’ access to that data. In addition, the interpretation and application of consumer and data protection laws in the U.S., Europe and elsewhere are often uncertain and in flux. It is possible that these laws may be interpreted and applied in a manner that is inconsistent with iPass’s data practices. These legislative and regulatory proposals, if adopted, and such interpretations could, in addition

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to the possibility of fines, result in an order requiring that iPass change its data practices, which could have an adverse effect on iPass’s business and results of operations. Complying with these various laws could cause iPass to incur substantial costs or require it to change its business practices in a manner adverse to its business.

Recent legal developments in Europe have created compliance uncertainty regarding certain transfers of personal data from Europe to the United States. For example, the General Data Protection Regulation (“GDPR”), coming into application in the European Union (“EU”) on May 25, 2018, apply to some of iPass’s activities conducted from an establishment in the EU or related to products and services that iPass offers to EU users. The GDPR creates a range of new compliance obligations, which could cause iPass to change its business practices, and significantly increases financial penalties for noncompliance (including possible fines of up to 4% of global annual turnover for the preceding financial year or €20 million (whichever is higher) for the most serious infringements).

In addition, the European Commission in July 2016 and the Swiss Government in January 2017 approved the EU-U.S. and the Swiss-U.S. Privacy Shield frameworks, respectively, which are designed to allow U.S. companies that self-certify to the U.S. Department of Commerce and publicly commit to comply with the Privacy Shield requirements to freely import personal data from the EU and Switzerland. However, these frameworks face a number of legal challenges and their validity remains subject to legal, regulatory and political developments in both Europe and the U.S. This has resulted in some uncertainty, and compliance obligations could cause iPass to incur costs or require iPass to change its business practices in a manner adverse to its business.

If iPass is unable to meet the challenges posed by Wi-Fi access, iPass’s ability to profitably grow iPass’s business may be impaired.

A substantial portion of the growth of iPass’s business has depended, and will continue to depend, in part upon iPass’s ability to expand its global Wi-Fi network. Such an expansion may not result directly in additional revenues to iPass, but building and maintaining a large footprint is key to iPass’s value proposition. Key challenges in expanding iPass’s Wi-Fi network include:

The Wi-Fi access market continues to develop at a rapid pace.    iPass derives a significant portion of its revenues from wireless broadband “hotspots,” such as certain airports, hotels, airplanes and convention centers. The Wi-Fi access market continues to develop rapidly, in particular, the market for enterprise connectivity services through Wi-Fi is characterized by evolving industry standards and specifications and there is currently no uniform standard for Wi-Fi access. Furthermore, although the use of wireless frequencies generally does not require a license in the United States and abroad, if Wi-Fi frequencies become subject to licensing requirements, or are otherwise restricted, this would substantially impair the growth of Wi-Fi access. Some large telecommunications providers and other stakeholders that pay large sums of money to license other portions of the wireless spectrum may seek to have the Wi-Fi spectrum become subject to licensing restrictions. In addition, certain government agencies such as the Federal Communications Commission (“FCC”) may implement policies and regulations that limit the value of iPass’s services to certain segments of iPass’s customers. If the Wi-Fi access market develops in ways that limit access growth, iPass’s ability to generate substantial revenues from Wi-Fi access could be harmed.

The Wi-Fi service provider market is highly fragmented.    There are currently many Wi-Fi service providers that provide coverage in only one or a small number of hotspots. iPass has entered into contractual relationships with numerous Wi-Fi service providers. These contracts generally have an initial term of two years or less. iPass must continue to develop relationships with many providers on terms commercially acceptable to iPass to provide adequate coverage for iPass’s customers’ mobile workers and Strategic Partners’ devices and to expand iPass’s Wi-Fi coverage. iPass may also be required to develop additional technologies to integrate new wireless broadband services into its service offering. If iPass is unable to develop these relationships or technologies, iPass’s ability to grow its business could be impaired.

Consolidation of large Wi-Fi service providers may impair iPass’s ability to expand network service coverage, negotiate favorable network access terms, and deliver consistent service in iPass’s network.    The telecommunications industry is rapidly evolving and highly competitive. These factors may cause large Wi-Fi network service providers to consolidate, which would reduce the number of network service

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providers from which iPass is able to obtain network access in key locations. If significant consolidation occurs, iPass will have a smaller number of network service providers to acquire Wi-Fi network access from and iPass may not be able to provide additional or sufficient redundant access points in some geographic areas, which could diminish iPass’s ability to provide broad, reliable, redundant coverage. Further, iPass’s ability to negotiate favorable access rates from Wi-Fi network service providers could be impaired, which could increase iPass’s network access expenses and harm iPass’s operating results.

Wi-Fi service provider actions may restrict iPass’s ability to sell its services.    Some Wi-Fi network providers restrict iPass’s ability to sell access to their networks to iPass’s resellers whom they consider competitive with them. This can reduce iPass’s revenue by limiting the footprint iPass’s partners can make available to their customers.

If competitive cellular data roaming rates decline precipitously, iPass’s ability to grow its business could be adversely impacted.

For iPass’s network services to be attractive to iPass’s customers, the cost of cellular roaming must be meaningfully greater than the cost of iPass’s Wi-Fi network services. Currently, in certain geographies such as Asia, cellular roaming prices are not significantly higher than iPass’s rates for Wi-Fi access. In Europe, legislation has been enacted mandating the reduction of wholesale cellular roaming prices. If cellular roaming prices do not remain meaningfully higher than iPass’s Wi-Fi network prices, then iPass’s ability to sell iPass’s Mobile Connectivity Services could be impacted and iPass’s business could be harmed. It is iPass’s intention to continue to drive the price of Wi-Fi down to insure Wi-Fi connectivity remains an economically viable and customer preferred connectivity option.

iPass faces competition in the market for mobile connectivity services, which could make it difficult for iPass to succeed.

While iPass does not believe there are service providers in the mobile connectivity services market that offer a platform or range of services in an integrated offering as iPass does, iPass competes with a variety of service providers, including facilities-based carriers, cloud-based platform operators and mobility management solution providers. Some of these providers have substantially greater resources, larger customer bases, longer operating histories and/or greater name recognition than iPass has. In addition, iPass faces the following challenges:

Many of iPass’s competitors can compete on price.

Because many of iPass’s facilities-based competitors own and operate physical networks they may be able to provide additional hotspot access at little incremental cost to them. As a result, they may offer network access services at a lower cost, and may be willing to discount or subsidize network access services to capture other sources of revenue. In contrast, iPass has traditionally purchased network access from facilities-based network service providers to enable iPass’s network access service and in these cases, may not be able to compete aggressively on price. In addition, new cloud-based platform operators may enter the mobile connectivity services market and compete on price. In either case, iPass may lose business or be forced to lower its prices to compete, which could reduce its revenues.

Many of iPass’s competitors offer additional services that iPass does not, which enables them to bundle these services and compete favorably against iPass.

Some of iPass’s competitors provide services that iPass does not, such as cellular data roaming, local exchange and long distance services, voicemail and digital subscriber line, or DSL, services. Potential customers that desire these services on a bundled basis may choose to subscribe to network access from a competitor that provides these additional services.

iPass’s potential customers may have unrelated business relationships with iPass’s competitors and consider those relationships when deciding between iPass’s services and those of iPass’s competitors.

Many of iPass’s competitors are large facilities-based carriers that purchase substantial amounts of services or provide other services or goods unrelated to network access services. As a result, if a potential customer is also a supplier to one of iPass’s large competitors, or purchases unrelated services or goods

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from iPass’s competitor, the potential customer may be motivated to purchase its network access services from iPass’s competitor to maintain or enhance its business relationship with that competitor. In addition, iPass’s current or potential carrier customers may already have or may consider buying services from mobility management solution providers which may impact iPass’s ability to sell its services to those customers as well as drive market prices down for the services that iPass offers.

Users may take advantage of free Wi-Fi networks for Internet and corporate access.

Telecommunications providers may offer free Wi-Fi as part of a home broadband or other service contract, which may force down the prices which the market will bear for iPass’s services and could reduce iPass’s revenues.

If iPass fails to develop and effectively market iPass’s brand, its operating results may be harmed.

iPass believes that expanding awareness of the iPass brand is important to growing and achieving acceptance of iPass’s platform and services. iPass has increased its marketing efforts, including new promotional and marketing activities, to further implement iPass’s global marketing objectives. These promotional and marketing activities may not result in any increased revenue. Further, any potential revenue increase as a result of these promotional and marketing activities may not offset the expenses incurred in further promoting the iPass brand.

Because a meaningful portion of iPass’s business is international, iPass encounters additional risks, which may impact its revenues and profitability.

iPass generates a substantial portion of its revenues from international customers. Revenues from customers domiciled outside of the United States were approximately 49% in the nine months ended September 30, 2018, and 53% of iPass’s revenues for the year ended December 31, 2017, of which approximately 41% and 45%, respectively were generated in the EMEA region and approximately 8% were generated throughout the rest of the world. The functional currency of iPass’s foreign subsidiaries is the U.S. Dollar and iPass currently bills nearly all of its services in U.S. Dollars. However, iPass pays certain expenses in local currencies. During the nine months ended September 30, 2018, and years ended December 31, 2017 and2016, iPass did not enter into any hedging contracts to manage foreign currency exposure. iPass’s international operations subject its business to specific risks that could negatively impact iPass’s business, including:

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Generally longer payment cycles for foreign customers;

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The impact of changes in foreign currency exchange rates on both the attractiveness of iPass’s USD-based pricing and its operating results, particularly upon the re-measurement of assets, liabilities, revenues and expenses and the transactional settlement of outstanding local currency liabilities;

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High taxes, and related complexities and changing compliance requirements in some foreign jurisdictions;

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Difficulty in complying with Internet and data privacy related regulations in foreign jurisdictions;

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Difficulty enforcing intellectual property rights and weaker laws protecting these rights; and

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Ability to efficiently deploy capital and generate returns in foreign jurisdictions.

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The June 23, 2016, referendum by British voters to exit the EU (“Brexit”) adversely impacted global markets, including currencies, and resulted in a decline in the value of the British pound, as compared to the U.S. dollar and other currencies. In the longer term, any impact from Brexit on iPass’s business, financial results and operations, will depend, in part, on the future terms of the U.K.’s relationship with the EU, and could create uncertainty surrounding iPass’s business, including iPass’s relationships with its existing and future customers, suppliers and employees.

Litigation arising out of intellectual property infringement could be expensive and disrupt iPass’s business.

iPass cannot be certain that its services do not, or will not, infringe upon patents, trademarks, copyrights or other intellectual property rights held by third parties, or that other parties will not assert

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infringement claims against iPass. Any claim of infringement of proprietary rights of others, even if ultimately decided in iPass’s favor, could result in substantial costs and diversion of iPass’s resources. Successful claims against iPass may result in an injunction or substantial monetary liability, which in either case could significantly impact iPass’s results of operations or materially disrupt the conduct of iPass’s business. If iPass is enjoined from using a technology, iPass will need to obtain a license to use the technology, but licenses to third-party technology may not be available to iPass at a reasonable cost, or at all.

The recently passed comprehensive tax reform bill could adversely affect iPass’s business and financial condition.

On December 22, 2017, President Trump signed into law the Tax Cuts and Jobs Act that significantly reforms the Code. The Tax Cuts and Jobs Act, among other things, contains significant changes to corporate taxation, including reduction of the corporate tax rate from a top marginal rate of 35% to a flat rate of 21%, limitation of the tax deduction for interest expense to 30% of adjusted earnings (except for certain small businesses), limitation of the deduction of future net operating losses to 80% of current year taxable income and elimination of net operating loss carrybacks, one-time taxation of offshore earnings at reduced rates regardless of whether they are repatriated, elimination of U.S. tax on foreign earnings (subject to certain important exceptions), immediate deductions for certain new capital investments instead of deductions for depreciation expense over time, and the modification or repeal of many business deductions and credits, including the deductibility of executive compensation. Notwithstanding the reduction in the corporate income tax rate, the overall impact of the Tax Cuts and Jobs Act is uncertain and iPass’s business and financial condition could be adversely affected. The impact of this tax reform on holders of iPass’s common stock is also uncertain and could be adverse. iPass urges iPass’s stockholders to consult with their legal and tax advisors with respect to this legislation and the potential tax consequences of investing in or holding iPass’s common stock.

Additional Risks to iPass if the Merger Does Not Occur

iPass has outstanding debt secured by all of the iPass assets, including iPass’s intellectual property, and failure by iPass or its intellectual property holding subsidiary to fulfill iPass’s obligations under the applicable loan transaction agreements may cause the repayment obligations to accelerate and result in iPass’s loss of control over its assets, including iPass’s intellectual property

In June 2018, through a newly formed special purpose entity (“SPE”) that is consolidated within iPass’s financial statements, iPass entered into a credit arrangement with Fortress pursuant to which iPass initially borrowed $10 million and may request additional $1 million installments up to an additional aggregate of $10 million, each such subsequent installment subject to Fortress’s consent. iPass assigned to the SPE iPass’s current and future intellectual property as first-priority security for the payment of all outstanding principal and interest. The credit agreement provides for principal payment beginning December 2019, and requires iPass to meet and maintain within specified levels and thresholds certain specific financial and operational covenants, requires a December 31, 2018 audit report without a going concern emphasis of a matter paragraph, and requires iPass to: satisfy key employee retention requirements; maintain iPass’s current business and operations; satisfy certain working capital and debt limitations; and not undertake certain actions and transactions such as paying dividends or entering into a change of control transaction, without Fortress consent. Failure to meet and maintain any of these covenants and requirements, to repay principal and interest in a timely manner or to undertake any of the prohibited actions or transactions would result in an event of default and allow Fortress to accelerate and require mandatory prepayment of all outstanding principal and interest, including fees. There can be no assurance that iPass will be able to perform the obligations under the credit agreement, including the timely repayment of the amounts outstanding under the credit agreement, and upon the occurrence of an event of default under the credit agreement, if iPass is not able to perform iPass’s obligations and repay all outstanding amounts required when due, which iPass is currently not able to do, iPass would lose control over iPass’s assets, including iPass’s intellectual property, which would seriously harm iPass’s business and operations.

There is substantial doubt about iPass’s ability to continue as a going concern. iPass requires additional capital to support its business growth, and such capital may not be available.

iPass’s existing cash balances will not be sufficient to meet its working capital and operating resource expenditure requirements for the next twelve months. iPass intends to continue to make investments to

23

support its business and require additional funds to respond to business challenges, which include the need to develop new solutions and partnerships or enhance existing solutions and partnerships, and enhance iPass’s operating infrastructure. Accordingly, iPass needs additional equity or debt financing to secure funds. Equity and debt financing, however, is not readily available and, if becomes available, might not be available on terms satisfactory to iPass. If iPass raises additional funds through equity financing, iPass’s stockholders will experience dilution. Debt financing, if available, may involve covenants restricting iPass’s operations or iPass’s ability to incur additional debt, as is the case with iPass’s credit arrangement with Fortress. If iPass is unable to obtain adequate financing or financing on terms satisfactory to iPass, iPass’s ability to continue to support its business and to respond to business challenges will be significantly limited and iPass will have to delay, reduce the scope of or eliminate initiatives, as well as significantly reduce operating expenses, which would harm iPass’s operating results. However, there is no assurance that iPass will be able to achieve these objectives; therefore, there is substantial doubt about iPass’s ability to continue as a going concern.

Trading of iPass’s common stock will be suspended from trading on the Nasdaq Capital Market on January 31, 2019, unless iPass is able to obtain an extension as a result of the government shutdown, and Nasdaq may complete the delisting process by filing a Form 25 with the SEC thereafter.

On November 5, 2018, iPass received a notice from The Nasdaq Stock Market LLC indicating that the Nasdaq Hearings Panel (the “Panel”) had determined to delist iPass’s securities from the Nasdaq Capital Market based upon iPass’s non-compliance with the minimum $35 million market value of listed securities requirement. Nasdaq suspended trading of iPass’s shares was effective November 7, 2018; however, Nasdaq lifted the suspension on trading of iPass’s common stock following iPass’s motion for reconsideration until January 31, 2019. However, as a result of the government shutdown, Pareteum will not be able to close the merger by that date, and iPass is in the process of requesting an extension from Nasdaq to the extraordinary circumstances resulting from the government shutdown. If iPass is not able to obtain an extension, the trading of iPass’s common stock will once again be suspended on January 31, 2019, and Nasdaq will complete the delisting process by filing a Form 25 “Notification of Delisting” with the SEC thereafter.

If iPass fails to maintain an effective system of internal controls, iPass may not be able to accurately report iPass’s financial results and prevent fraud.

The Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) requires, among other things, that iPass maintains effective internal control over financial reporting and disclosure controls and procedures. In particular, iPass must perform system and process evaluation and testing of its internal control over financial reporting to allow management to report on the effectiveness of iPass’s internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act. There can be no assurance that material weaknesses or other control or significant deficiencies will not be identified in the future. If iPass fails to maintain appropriate controls, such circumstances could cause iPass to fail to meet its periodic reporting obligations or result in material misstatements in iPass’s financial statements or adversely affect the results of periodic management evaluations and annual auditor attestation reports. iPass could be required to restate its financial results. Each of the foregoing results could cause stockholders to lose confidence in iPass’s reported financial information and lead to a decline in iPass’s stock price or to stockholder litigation.

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•

inability to develop new technologies and products to satisfy changes in customer demand or the development by competitors of products that decrease the demand for Pareteum’s or iPass’s services or products;

​

•

potential effects of system outages;

​

•

inability to fulfill customer demand and resulting loss of customers;

​

•

variations in customer order preferences;

​

•

difficulties foreseeing future demand;

​

•

the uncertainty of litigation, the costs and expenses of litigation, the potential material adverse effect litigation could have on Pareteum’s or iPass’s respective businesses and results of operations if an adverse determination in litigation is made, and the time and attention required of management to attend to litigation;

​

•

difficulties in determining the scope of, and procuring and maintaining, adequate insurance coverage;

​

•

difficulties and costs of protecting patents and other proprietary rights;

​

•

the hiring and retention of qualified personnel in a competitive labor market;

​

•

general political, economic and business conditions and industry conditions;

​

•

the inherent uncertainty associated with financial or other projections; and

​

•

the ability to implement and achieve business strategies successfully.

​

These risks and uncertainties, along with the risk factors discussed under “Risk Factors” in this document, should be considered in evaluating any forward-looking statements contained in this document.

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THE COMPANIES

Pareteum

Pareteum is a leading global provider of mobile communications technology platforms and high-value services that increase revenues and reduce costs for its customers globally with a SaaS business model and a diverse customer base that ranges from small tech companies to some of the largest mobile networks in the world. Organizations use Pareteum to energize their growth and profitability through cloud communication services and complete turnkey solutions featuring relevant content, applications, and connectivity worldwide. Pareteum’s platform services partners (technologies integrated into Pareteum’s cloud) include: HPE, IBM, Sonus, Oracle, Microsoft, and other world class technology providers. All of the relevant customer acquired value is derived from Pareteum’s award winning software, developed and enhanced over many years. By harnessing the value of communications, Pareteum serves enterprise, retail and IoT customers. Pareteum currently has offices in New York, Sao Paulo, Madrid, Barcelona, Bahrain and the Netherlands.

Pareteum was incorporated in Delaware in 2001 and became a public company in June, 2008. Its shares are traded on Nasdaq under the ticker symbol “TEUM.”

The address and telephone number of Pareteum’s principal executive offices is 1185 Avenue of the Americas, 37 th Floor, New York, NY 10036.

Pareteum also maintains a website at www.Pareteum.com. Pareteum’s website and the information contained therein or connected thereto shall not be deemed to be incorporated herein, and you should not rely on any such information in making an investment decision.

Offeror

The Offeror is a Delaware corporation and a direct wholly owned subsidiary of Pareteum. The Offeror was incorporated on November 9, 2018 for the purpose of making the offer and consummating the merger. The Offeror has engaged in no business activities to date and it has no material assets or liabilities of any kind, other than those incidental to its formation and those incurred in connection with the offer and the merger.

The address and telephone number of the Offeror’s principal executive offices is c/o 1185 Avenue of the Americas, 37 th Floor, New York, NY 10036.

iPass

See “iPass Inc.” immediately below.

iPass was incorporated in California in July 1996 and reincorporated in Delaware in June 2000. It became a publicly traded company in 2003. Its shares are traded on Nasdaq under the ticker symbol “IPAS.”

IPASS INC.

iPass Business

Overview

iPass Inc. is a leading provider of global mobile connectivity, offering simple, secure, always-on Wi-Fi access on any mobile device. Built on a software-as-a-service (“SaaS”) platform, the iPass cloud-based service keeps its customers connected by providing unlimited Wi-Fi connectivity on unlimited devices. iPass is the world’s largest Wi-Fi network, with more than 68 million hotspots globally, at airports, hotels, train stations, convention centers, outdoor venues, inflight on more than 20 leading airlines, and more. Using patented technology, the iPass SmartConnect™ platform takes the guesswork out of Wi-Fi, automatically connecting customers to the best hotspot for their needs. Customers simply download the iPass application (“app”) to experience UNLIMITED, EVERYWHERE and INVISIBLE Wi-Fi.

27

Business Highlights

Strategic iPass Assets

iPass believes it has a unique set of global mobile connectivity assets that provide it with competitive advantages. iPass sees its three core assets as follows:

iPass Technology Platform:    iPass’s app is an intelligent, cloud-based service manager that securely connects users and devices to iPass’s global Wi-Fi footprint. The app is built on the backbone of years of iPass’s intellectual property and is developed from iPass’s own Software Development Kit (“SDK”) that allows partners and customers to integrate the same technological advancements into their own applications. Benefits of the technology include:

•

iPass SmartConnect™ which is evolving mobile connectivity expectations from “best efforts” to a truly intelligent always-best-connected experience, solving for problems like false positives, network outages, and low connection success rates.

​

•

Wi-Fi data offload from cellular networks, saving mobile virtual network operators and mobile network operators bandwidth and money.

​

•

Last-Mile VPN security to protect user data, even at free, open Wi-Fi hotspots.

​

•

iPass Network Intelligence big data aggregation and analysis intelligence (previously branded as Veri-Fi™) to rate hotspots on critical quality of service criteria, optimize network performance attributes, and provide intelligent data to a variety of partner use cases.

​

•

Hotspot discovery and curation to keep iPass’s network growing both organically and commercially in the places most important to iPass’s users.

​

iPass’s Back-end Infrastructure:    iPass has a global authentication fabric of integrated servers, cloud-based virtualized assets, and software that is interconnected with major commercial networks around the globe. This infrastructure allows iPass to provide secure, highly-available and seamless four-party global authentication, clearing and settlement of Wi-Fi users for iPass’s partners and customers. This infrastructure makes the over 68 million hotspots iPass aggregates look and feel like iPass hotspots; there is no need to enter personal data, watch commercials, or spend any nonproductive time logging into these locations; the platform just connects. Between iPass’s physical colocation facilities and its growing virtualization of cloud-based infrastructure assets, iPass has the ability to process millions of data records per day to drive the performance of its aggregated network and the evolving use cases of its big data analyses. The architecture is built on a telecom-based transaction, reporting, and clearing back-end that would be time consuming and expensive to replicate.

iPass’s Wi-Fi Network:    iPass has a Wi-Fi network footprint and supply chain that consists of over 68 million hotspots globally, including major airports, convention centers, planes, trains, train stations, hotels, restaurants, retail, and small business locations. In addition, with iPass’s embedded curation feature, iPass continues to identify and provide access to millions more free access hotspots in virtually every country in the world, providing more connectivity options for iPass’s SmartConnect users.

The combination of the above assets allows iPass to drive three distinct but interconnected monetization streams in the future; technology integration through iPass’s SDK, big data intelligence, and iPass’s mobile connectivity solutions.

Business Portfolio and Go-to-Market Strategy

iPass has a single reportable operating segment, Mobile Connectivity Services. iPass’s cloud-based service gives iPass customers and their users access to iPass’s global Wi-Fi network to stay connected to the people and information that matters most to them. iPass categorizes its services in two broad go-to-market approaches:

Enterprise (Business to Business or B2B):    Representing approximately 80% of total revenue, this go-to-market strategy focuses on providing mobile connectivity solutions to enterprises, from small to large. With an easy-to-download app, a user on a variety of platforms (Android, iOS, Windows) can

28

quickly access iPass’s hosted service and connect to iPass’s over 68 million Wi-Fi hotspots around the globe. While iPass continues to have existing customers that use its services under a variety of pay-as-you-go (“PAYG”) or flat rate pricing plans (together “Other Pricing Plans”), in 2015 iPass introduced its UNLIMITED pricing. Under UNLIMITED, for a set price per subscriber per month, iPass’s customers have access to iPass’s entire network of hotspots without the worries of throttling usage or running up large overage expenses. Starting in the second quarter of 2018, iPass began selling its technology to enterprise customers under a perpetual software license. Customers can embed iPass’s technology into their own offerings, realizing the power and benefits of iPass SmartConnect.

Strategic Partnerships (Business to Business to Consumer or B2B2C):    At approximately 20% of total revenue, this strategy is executed through business development deals intended to open channel distributions for iPass’s product to reach the consumer market. While the channel customer may use a combination of iPass’s platform, technology infrastructure, or network, iPass negotiates each deal independently based on specific customer needs. Strategic Partnerships include global Original Equipment Manufacturers (“OEMs”), loyalty programs like credit card companies, promotional and marketing agencies, software product and service providers, and communication companies. With the advent of iPass’s SDK and big data generated from iPass SmartConnect, iPass envisions additional monetization streams in the future with iPass’s strategic partners.

Seasonality

iPass generally experiences seasonality in its business due to decreased business travel during the summer, particularly in Europe, and during the year-end holiday season which results in lower usage of iPass’s network services. Seasonal trends or other factors, such as bad weather, may cause fluctuations in iPass’s business results.

Network Service Providers

iPass has contractual relationships with numerous telecommunications carriers, Internet service providers and other network service providers that enable iPass to offer its network services around the world. iPass pays network service providers for access to their network on a usage, session or subscription basis. Most of these contracts have a one or two-year term, after which either party can terminate or renegotiate the contract with notice. The contracts iPass has entered into with providers can be exclusive or non-exclusive and may contain minimum commitments for the purchase of network access.

Sales and Marketing

iPass’s sales organization is structured into regional account teams, which include sales management, sales engineers and customer success teams. iPass sells its services directly through its global sales force and indirectly through its reseller and strategic partners. iPass has sales and marketing offices in the United States, United Kingdom, Germany, France, Singapore and Netherlands. As of September 30, 2018, iPass’s sales organization comprised 39 individuals: 20 in North America, 14 in Europe, Middle East and Africa (“EMEA”) and 5 in Asia Pacific. iPass’s sales and marketing expenses were $7.7 million, $10.2 million and $11.2 million in the nine months ended September 30, 2018, and the years ended December 31, 2017 and 2016, respectively.

iPass’s reseller, wholesale, and strategic partners typically sign a one to two-year agreement with iPass through which iPass appoints them primarily as a non-exclusive reseller of iPass’s services. Their reseller responsibilities vary and may include actively marketing and selling iPass’s services, deploying and supporting customer accounts, and implementing and managing billing for their customers. iPass’s current sales structure allows it to offer its services without incurring the full cost of customer acquisition (sales and marketing) or customer post-sales support. iPass’s reseller, wholesale, and strategic partners typically sell complementary hardware, software, and services, and bundle iPass’s services with their core offerings. They may also have a base of existing customers to whom they can efficiently sell iPass’s portfolio of services. In many cases iPass’s salespeople do support iPass’s reseller, wholesale, and strategic partners with closing new business, and iPass’s post-sales team may work with them to ensure successful implementation of iPass’s services. However, the enterprise or consumer remains the customer of iPass’s reseller, wholesale, and strategic partners and has no direct financial relationship with iPass.

29

iPass focuses its marketing efforts on establishing a strong corporate reputation in the market, creating awareness and preference for iPass’s services and their benefits, educating potential customers, generating new sales opportunities, generating end-user awareness and demand within existing customer accounts and enabling iPass’s sales force and channel partners to effectively sell and deploy iPass’s service offerings. iPass conducts a variety of marketing programs that may include advertising, promotions, public relations, analyst relations, telemarketing, direct marketing, web and e-mail marketing, collateral and sales tools creation, seminars, events and trade shows, training, co-operative channel marketing, Internet marketing and promotions.

Competition

The market for global mobile connectivity is fragmented with a variety of competitors, both direct and indirect, including telecom operators, cloud-based platform operators, cable companies, and smaller Internet service providers. iPass partners with many point Wi-Fi providers to drive incremental users to their connectivity resources, helping to further monetize their assets via iPass’s roaming customer base. iPass’s unique technology infrastructure and global partnerships with Wi-Fi networks creates a scale and user experience that iPass believes is hard to replicate by any single competitor, and creates an important differentiating factor for iPass. However, since iPass does not own its Wi-Fi network, iPass’s competitors who own their Wi-Fi networks can offer lower Wi-Fi pricing than iPass can offer in specific markets, can bundle Wi-Fi network access with other services, and can use these additional service offerings to drive increased brand awareness.

iPass believes the principal competitive factors in its industry include the following:

•

Global roaming coverage;

​

•

Perception of technology benefits;

​

•

Ease of use and reliability of service;

​

•

Price, both of Wi-Fi connectivity, and of alternative connectivity options such as 3G/4G;

​

•

Brand awareness;

​

•

Perceived benefit of connectivity by customers and strategic partners;

​

•

Access to data to differentiate services and drive additional value propositions;

​

•

Security concerns; and

​

•

Bundled connectivity services.

​

Research and Development

iPass is committed to continuous enhancement of its underlying technology and to innovate and incorporate new technologies and features into iPass’s services and network architecture. iPass’s research and development efforts are focused on improving and enhancing iPass’s platform and service offerings, including developing an SDK for iPass’s partners to easily integrate iPass’s technology into their applications.

As of September 30, 2018, iPass’s research and development organization consisted of 61 employees, approximately 17 in North America and 44 in India. iPass’s research and development expenses were $5.7 million, $8.0 million and $7.3 million in the nine months ended September 30, 2018, and the years ended December 31, 2017 and 2016, respectively.

Intellectual Property

iPass believes its technology and platform contains valuable intellectual property. iPass relies on a combination of trademark, copyright, trade secret laws, patents and disclosure restrictions to protect these intellectual property rights. iPass licenses third-party technologies that are incorporated in its services. iPass also enters into confidentiality and proprietary rights agreements with iPass’s employees, consultants and other third parties and control access to software, documentation and other proprietary information. iPass

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has a patent portfolio, related to iPass’s mobile connectivity services, consisting of 28 U.S. patents and twelve international patents. iPass’s patents expire between 2018 and 2036. iPass currently has four U.S. patent applications pending, and two international patent applications pending (in the same subject areas as two of the U.S. patent applications). iPass, the iPass logo, iPass SmartConnect, and Veri-Fi are registered trademarks. iPass has also applied for or registered company trademarks in the U.S. and numerous other countries.

Loan Agreement

On June 14, 2018, iPass entered into a loan and security agreement and related transaction documents (together forming the “Credit Agreement”) with Fortress Credit Corp. for an initial term loan of $10.0 million. From June 14, 2018 through September 14, 2019, iPass may request an additional draw down in $1.0 million increments not to exceed $10.0 million in total (the “Delayed Draw Term Loan”). Each Delayed Draw Term Loan is made at Fortress’s sole discretion. See “iPass Management’s Discussion and Analysis of Financial Condition and Results of Operations” for more information on the Credit Agreement.

Employees

As of September 30, 2018, iPass had 157 employees worldwide, all of which were full-time employees.

Available Information

iPass uses its website, www.ipass.com, as a routine channel for distribution of important information, including news releases, annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities and Exchange Act, as amended, as soon as reasonably practicable after they are electronically filed with, or furnished to the SEC. These postings and filings are available on iPass’s website free of charge. iPass does not intend, by this reference, that its website should be deemed to be part of this registration statement. The reports filed with the SEC are also available at www.sec.gov .

Corporate Formation

iPass was incorporated in California in July 1996 and reincorporated in Delaware in June 2000.

iPass Properties

iPass currently leases approximately 25,000 square feet of space for iPass’s headquarters in Redwood Shores, California. iPass signed a lease renewal effective May 1, 2015, that expires in 2020. iPass also leases sales and support offices abroad in EMEA and Asia Pacific. iPass believes that its principal facility in Redwood Shores, and sales and support offices abroad are adequate for its business needs, and iPass expects that additional facilities will be available in other jurisdictions to the extent iPass needs to add new offices.

iPass Legal Proceedings

On December 12, 2018, a lawsuit was filed in the United States District Court for the Northern District of California, captioned Darrell Boswell v. iPass Inc., et al. , Case No. 3:18-cv-7486 (the “Boswell Action”). The Boswell Action is brought against iPass and the five members of the iPass board and alleges that the Schedule 14D-9 failed to disclose material information regarding the proposed transaction including certain financial projections, the valuation of Pareteum and the merger consideration, and certain inputs underlying the valuation analyses performed by Raymond James & Associates, which rendered the Schedule 14D-9 materially false or misleading. The causes of action set forth in the complaint are (i) a claim against all defendants for violations of Section 14(e) of the Exchange Act, as well as (ii) a claim against the members of the iPass board for violations of Section 20(a) of the Exchange Act. The complaint seeks, among other things, an order that the action may be maintained as a class action, injunctive relief, rescission of the merger agreement, damages, and an award of attorneys’ fees and expenses. iPass believes that the action is without merit.

31

On December 18, 2018, a second lawsuit was filed in the United States District Court for District of Delaware, captioned Jordan Rosenblatt v. iPass Inc., et al. , Case No. 1:18-cv-03004 (the “Rosenblatt Action”). The Rosenblatt Action is brought against iPass, the five members of the iPass Board, Pareteum Corporation, and TBR, Inc. The complaint in the Rosenblatt Action alleges that the Schedule 14D-9 failed to disclose material information regarding the proposed transaction including certain financial projections and certain inputs underlying the valuation analysis performed by Raymond James, which rendered the Schedule 14D-9 materially false or misleading. The causes of action set forth in the complaint are (i) a claim against all defendants for violations of Section 14(e) of the Exchange Act, (ii) a claim against all defendants for violations of Section 14(d) of the Exchange Act, and (iii) a claim against the members of the Board, Pareteum, and TBR, Inc. for violations of Section 20(a) of the Exchange Act. The complaint seeks, among other things, an order that the action may be maintained as a class action, injunctive relief, rescission of the Merger Agreement, damages, and an award of attorneys’ fees and expenses. iPass believes that the action is without merit.

iPass is involved in legal proceedings and claims arising in the ordinary course of business. While there can be no assurances as to the ultimate outcome of any litigation involving iPass, management does not believe any such pending legal proceeding or claim will result in a judgment or settlement that would have a material adverse effect on iPass’s financial position, results of operations or cash flows.

iPass Management’s Discussion and Analysis of Financial Condition and Results of Operations

This iPass Management’s Discussion and Analysis of Financial Condition and Results of Operations (or “MD&A”) is provided in addition to the iPass consolidated financial statements and notes included elsewhere in this prospectus, to assist readers in understanding iPass’s results of operations, financial condition, and cash flows. The following discussion and analysis should be read in conjunction with the consolidated financial statements and notes thereto of iPass included in this prospectus.

This MD&A is organized as follows:

The various sections of this MD&A contain forward-looking statements regarding future events and iPass’s future results that are based on current expectations, estimates, forecasts, and projections about the industries in which iPass operates and the beliefs and assumptions of iPass’s management. Words such as “expect,” “will,” “anticipate,” “intend,” “believe,” “estimate,” variations of such words, and similar expressions are intended to identify such forward-looking statements. In addition, any statements which refer to projections

32

of iPass’s future financial performance, its anticipated trends in its business, and other characterizations of future events or circumstances, are forward-looking statements. Readers are cautioned that these forward-looking statements are only predictions and are subject to risks, uncertainties, and assumptions that are difficult to predict. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. Readers are directed to risks and uncertainties identified in “Risks Related to iPass’s Business” in this prospectus for factors that may cause actual results to be different from those expressed in these forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made and, except as required by law, iPass undertakes no obligation to revise or update publicly any forward-looking statements for any reason.

Overview

iPass Inc. is a leading provider of global mobile connectivity, offering simple, secure, always-on Wi-Fi access on any mobile device. Built on a software-as-a-service (“SaaS”) platform, the iPass cloud-based service keeps its customers connected by providing unlimited Wi-Fi connectivity on unlimited devices. iPass is the world’s largest Wi-Fi network, with more than 68 million hotspots globally, at airports, hotels, train stations, convention centers, outdoor venues, inflight on more than 20 leading airlines, and more. Using patented technology, the iPass SmartConnect™ platform takes the guesswork out of Wi-Fi, automatically connecting customers to the best hotspot for their needs. Customers simply download the iPass application (“app”) to experience UNLIMITED, EVERYWHERE and INVISIBLE Wi-Fi.

Business Highlights

Strategic iPass Assets

iPass believes it has a unique set of global mobile connectivity assets that provide it with competitive advantages. iPass sees its three core assets as follows:

iPass’s Technology Platform:    iPass’s app is an intelligent, cloud-based service manager that securely connects users and devices to iPass’s global Wi-Fi footprint. The app is built on the backbone of years of iPass’s intellectual property and is developed from iPass’s own Software Development Kit (“SDK”) that allows partners and customers to integrate the same technological advancements into their own applications. Benefits of the technology include:

•

iPass SmartConnect™ which is evolving mobile connectivity expectations from “best efforts” to a truly intelligent always-best-connected experience, solving for problems like false positives, network outages, and low connection success rates.

​

•

Wi-Fi data offload from cellular networks, saving mobile virtual network operators and mobile network operators bandwidth and money.

​

•

Last-Mile VPN security to protect user data, even at free, open Wi-Fi hotspots.

​

•

iPass Network Intelligence big data aggregation and analysis intelligence (previously branded as Veri-Fi™) to rate hotspots on critical quality of service criteria, optimize network performance attributes, and provide intelligent data to a variety of partner use cases.

​

•

Hotspot discovery and curation to keep iPass’s network growing both organically and commercially in the places most important to iPass’s users.

​

iPass’s Back-end Infrastructure:    iPass has a global authentication fabric of integrated servers, cloud-based virtualized assets, and software that is interconnected with major commercial networks around the globe. This infrastructure allows iPass to provide secure, highly-available and seamless four-party global authentication, clearing and settlement of Wi-Fi users for iPass’s partners and customers. This infrastructure makes the over 68 million hotspots iPass aggregates look and feel like iPass hotspots; there is no need to enter personal data, watch commercials, or spend any nonproductive time logging into these locations; the platform just connects. Between iPass’s physical colocation facilities and its growing

33

virtualization of cloud-based infrastructure assets, iPass has the ability to process millions of data records per day to drive the performance of iPass’s aggregated network and the evolving use cases of its big data analyses. The architecture is built on a telecom-based transaction, reporting, and clearing back-end that would be time consuming and expensive to replicate.

iPass’s Wi-Fi Network:    iPass has a Wi-Fi network footprint and supply chain that consists of over 68 million hotspots globally, including major airports, convention centers, planes, trains, train stations, hotels, restaurants, retail, and small business locations. In addition, with iPass’s embedded curation feature, iPass continues to identify and provide access to millions more free access hotspots in virtually every country in the world, providing more connectivity options for iPass’s SmartConnect users.

The combination of the above assets allows iPass to drive three distinct but interconnected monetization streams in the future; technology integration through iPass’s SDK, big data intelligence, and iPass’s mobile connectivity solutions.

Business Portfolio and Go-to-Market Strategy

iPass has a single reportable operating segment, Mobile Connectivity Services. iPass’s cloud-based service gives iPass’s customers and their users access to iPass’s global Wi-Fi network to stay connected to the people and information that matters most to them. iPass categorizes its services in two broad go-to-market approaches:

Enterprise (Business to Business or B2B):    Representing approximately 80% of total revenue, this go-to-market strategy focuses on providing mobile connectivity solutions to enterprises, from small to large. With an easy-to-download app, a user on a variety of platforms (Android, iOS, Windows) can quickly access iPass’s hosted service and connect to iPass’s over 68 million Wi-Fi hotspots around the globe. While iPass continues to have existing customers that use iPass’s services under a variety of pay-as-you-go (“PAYG”) or flat rate pricing plans (together “Other Pricing Plans”), in 2015 iPass introduced its UNLIMITED pricing. Under UNLIMITED, for a set price per subscriber per month, iPass’s customers have access to iPass’s entire network of hotspots without the worries of throttling usage or running up large overage expenses. Starting in the second quarter of 2018, iPass began selling its technology to enterprise customers under a perpetual software license. Customers can embed iPass’s technology into their own offerings, realizing the power and benefits of iPass SmartConnect.

Strategic Partnerships (Business to Business to Consumer or B2B2C):    At approximately 20% of total revenue, this strategy is executed through business development deals intended to open channel distributions for iPass’s product to reach the consumer market. While the channel customer may use a combination of iPass’s platform, technology infrastructure, or network, iPass negotiates each deal independently based on specific customer needs. Strategic Partnerships include global Original Equipment Manufacturers (“OEMs”), loyalty programs like credit card companies, promotional and marketing agencies, software product and service providers, and communication companies. With the advent of iPass’s SDK and big data generated from iPass SmartConnect, iPass envisions additional monetization streams in the future with iPass’s strategic partners.

For a detailed discussion regarding iPass’s business, including iPass’s strategy and its service offerings, see “iPass Business” included in this prospectus.

Significant Trends and Events

Nine Months Ended September 30, 2018

The following describes significant trends and events that impacted iPass’s financial condition, results of operations, and/or the direction of its business in the nine-months ended September 30, 2018:

Customer Churn and Commoditization of Wi-Fi

While iPass believes its UNLIMITED offering provides significant value for those seeking mobile connectivity solutions, churn of existing customers, both via termination and account write-downs has adversely impacted revenue in 2018. iPass’s goal is to transition customers from Other Pricing Plans and

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PAYG models to the Unlimited model, but iPass has experienced customer churn in that process. With the increase in unlimited data plans from mobile network operators and increasing amount of free Wi-Fi at cafes, hotels, and airports, driving a value proposition on iPass’s technology stack is key to mitigating customer churn and the lower cost of data connectivity

Going Concern and Financing

As iPass’s capital position has deteriorated and iPass’s revenue has declined during 2018, iPass believes some difficulties in increasing sales are due to customer perception of iPass’s long term viability. Over the past year iPass has worked hard to secure the financing required to meet operational needs, further product development, and address potential customers’ concerns.

On August 31, 2017, iPass filed a shelf registration statement on Form S-3 with the SEC to enable it to offer up to $20.0 million of securities as described in that prospectus. On March 20, 2018, iPass filed a prospectus supplement that stated that, pursuant to the General Instruction I.B.6 of Form S-3, in no event will iPass sell shares with a value of more than one-third of the aggregate market value of iPass’s common stock held by non-affiliates in any twelve month period, so long as the aggregate market value of iPass’s common stock held by non-affiliates is less than $75.0 million.

On November 16, 2017, iPass entered into a Common Stock Purchase Agreement (“CSPA”) with Aspire Capital Fund, LLC (“Aspire Capital”) that allowed iPass to sell up to $10.0 million worth of common stock to Aspire Capital over a 24 month period. Upon execution of the CSPA, Aspire Capital purchased from iPass shares of common stock for a total purchase price of  $1.0 million. iPass also issued to Aspire Capital commitment shares. Beyond the initial purchase, iPass, at its discretion, had the right to direct Aspire Capital to purchase additional shares. The total number of shares available to be issued to Aspire Capital was 133,417 shares (post-reverse stock split) without stockholder approval. By the end of the second quarter 2018, iPass issued a total of all such shares to Aspire Capital for $5.1 million and therefore cannot sell any additional shares under the current agreement.

On June 14, 2018, iPass entered into a loan and security agreement (“Credit Agreement”) with Fortress Credit Corp (“Fortress”) for an initial term loan of  $10.0 million. From June 14, 2018 through September 14, 2019, iPass may request an additional draw down in $1.0 million increments not to exceed $10.0 million in total (the “Delayed Draw Term Loan”). Each Delayed Draw Term Loan is made at Fortress’s sole discretion. The Credit Agreement bears an annual interest at a stated rate of 11.0% plus the greater of the following i) LIBO Rate or ii) 1.0%. Payments are due at the beginning of each month and the first 18 payments are interest-only. Starting in December 2019, iPass shall make thirty monthly principal payments, plus any accrued and unpaid interest, to fully payoff the Credit Agreement. At the end of the term iPass will pay a fee equal to 5.0% of the principal amount.

Despite the financing described above, iPass continues to believe its customers have concern about iPass’s ability to continue as a going concern. In addition, unless iPass is able to significantly increase sales, raise a substantial amount of equity or debt financing, or further reduce expenses, iPass will not have adequate resources available to it to continue operations over a meaningful period of time. Therefore, iPass concluded there is reasonable doubt about iPass’s ability to continue as a going concern for the next twelve months.

Two Years Ended December 31, 2017 and 2016

The following describes significant trends and events that impacted iPass’s financial condition, results of operations, and/or the direction of its business in the years ended December 31, 2017 and 2016:

Product Evolution

iPass continues to focus primarily on selling its UNLIMITED subscriptions to new or renewal customers. iPass’s product was being optimized for UNLIMITED, providing always-on, secure connectivity to users, without any usage restrictions. Because iPass SmartConnect™ is optimized for UNLIMITED customers, it can have unintended impacts on its legacy pay-per-use customers and associated revenues. iPass SmartConnect is designed to optimize the user quality of service attributes, such as connection success

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rates, over connecting a user to any available hotspot, irrespective of the quality of that hotspot connection. During the year ended December 31, 2017, iPass’s pay-per-use revenue was adversely impacted as iPass continued to evolve the algorithms that optimize quality of service with always best-connected attributes.

iPass’s iPass SmartConnect SDK provides the tools to build adaptive network selection applications for smartphones, tablets, and laptops. Developers can access iPass core technologies to activate, authenticate, connect, and create custom interfaces for presenting and selecting Wi-Fi networks. Applications or core technologies built using the iPass SDK have instant and secure access to the iPass network and the benefits of all the related data that is collected. The SDK is designed for enterprises, operators and solution vendors seeking to leverage iPass wireless connectivity technology in their applications. In the fourth quarter, iPass announced the launch of Veri-Fi suite of mobile device analytics and big data services (later rebranded in 2018 as iPass Network Intelligence). This data can help iPass customers and prospects create new applications and services from iPass technology, broadening iPass’s reach and addressable market not only to network providers, but also to retail, fintech, advertising, hospitality, and app developers.

Network Access Investments

iPass continued to leverage the power of network curation, community, and strategic partner procurement. And while pure numbers emphasize an element of iPass’s EVERYWHERE initiative, was enhancing iPass’s network through iPass’s platform technology to improve the user experience and mitigate issues like “false positives” (a network that broadcasts a signal but is not active in the iPass footprint), failed authentications, poor bandwidth, or other quality issues. To support iPass’s UNLIMITED strategy and to meet the needs of iPass’s customers’ increasing consumption of Wi-Fi, iPass continued to invest in network access through selective investment decisions to lock up additional network capacity and drive the effective cost of data connectivity continually down. Due to unexpected customer terminations and slower rollout ramps, iPass significantly over-purchased network capacity in 2017, but iPass’s effective cost per hour still declined 4% over 2016. While iPass had not been successful in filling its network capacity purchases, iPass continued to drive down the cost per unit of iPass’s network access costs (“NAC”). As of December 31, 2017, iPass had $10.8 million of committed NAC spend in full year 2018, allowing considerable flexibility in renegotiating supplier agreements and optimizing its capacity buys.

Customer Roll-Out Initiatives

In 2017, iPass struggled to convert previously signed and committed contracts into production and revenue recognition. The issues ranged from lack of development resources on iPass’s part to support a multitude of simultaneous implementations to poor execution or prioritizing on the part of iPass’s partners. iPass evolved its pre-sales screening process to be more focused and selective in choosing iPass’s sales targets, signed several implementation or reseller partners to distribute the workload, and renegotiated commitments with customers who were unable to pay their committed fees due to delays in production.

Capital Raise

As described above, on August 31, 2017, iPass filed a shelf registration statement on Form S-3 with the SEC to enable iPass to offer up to $20.0 million of securities as described in that prospectus. On November 16, 2017, iPass entered into the CSPA with Aspire Capital. Upon execution of the CSPA, Aspire Capital purchased from iPass shares of common stock for a total purchase price of  $1.0 million. iPass also issued to Aspire Capital commitment shares. As of December 31, 2017, iPass had sold additional shares to Aspire Capital for $0.2 million.

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(1)

ACV, or Annual Contract Value, represents the annualized sales value committed under contract for newly acquired customers or significant upsell. ACV is not an alternative measure for GAAP revenue but only an operational metric iPass believes to be a leading indicator of future revenue. ACV has not met all five steps to recognize revenue. For example, while iPass may have identified a contract with a customer, performance obligations may not yet have been satisfied. When a previously reported ACV customer fails to perform under the contract, such remaining calculated ACV will be reversed in the current period.

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(2)

Committed purchase capacity is the percentage of total quarterly NAC related to committed Wi-Fi capacity deals (versus pay-as-you-go deals).

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(3)

Total purchased capacity is the average monthly Wi-Fi network usage capacity in a given quarter, shown in terabytes.

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(4)

Capacity consumed is shown as a percentage of total purchased capacity consumed in a given quarter.

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(5)

Gross margin represents total revenue less network access costs less network operations costs divided by total revenue.

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(6)

Network Hours Consumed represents the average monthly number of hours used by iPass’s customers on iPass’s commercial footprint in a given quarter.

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(7)

Wi-Fi Network Users, categorized by iPass’s go-to-market revenue streams, is the unique count of users each month in each quarter that connected to the iPass network. Starting this quarter, the iPass network includes both commercial footprint and open access footprint, curated via iPass SmartConnect (restated for all prior quarters).

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Critical Accounting Policies and Estimates

iPass’s discussion and analysis of its financial condition and results of operations is based upon iPass’s consolidated financial statements which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these consolidated financial statements requires iPass to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. iPass bases its estimates and judgments on its historical experience, knowledge of current conditions and its belief of what could occur in the future considering available information, including assumptions that are believed to be reasonable under the circumstances. By their nature, these estimates and judgments are subject to an inherent degree of uncertainty and actual results could differ materially from the amounts reported based on these policies. On an ongoing basis, iPass evaluates its estimates, including those related to revenue recognition. iPass believes its most significant estimates, judgments and assumptions used in the preparation of its consolidated financial statements are used in the following critical accounting policies.

Revenue Recognition

Nine Months Ended September 30, 2018

On January 1, 2018, iPass adopted Topic 606 using the modified retrospective method applied to those contracts which were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018, are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with iPass’s historic accounting under ASC Topic 605.

Revenue is recognized when control of the promised goods or services is transferred to iPass’s customers in an amount that reflects the consideration iPass expects to be entitled to in exchange for those goods or services. The majority of iPass ‘s revenue is derived from monthly recurring arrangements that provide iPass ‘s customers access to iPass ‘s Wi-Fi network footprint. Other sources of revenue include professional services, iPass Network Intelligence big data analytics, software license and support. iPass applies the following five steps to recognize revenue:

1. Identify the contract with a customer:    The terms and conditions of iPass’s contracts are considered to identify contracts under Topic 606. iPass identifies a contract with a customer once the contract is approved, details each party’s rights regarding the services to be transferred, specifies the payment terms for the services, iPass has determined the customer has the ability and intent to pay, and the contract has commercial substance. Typically, the terms of contracts with customers is twelve months. Payment terms less than 90 days are not considered a significant financing component.

2. Identify the performance obligations in the contract:    Performance obligations in contracts are identified based on the services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the service either on its own or together with other resources that are readily available from third parties or from iPass, and are distinct in the context of the contract, whereby the transfer of the services is separately identifiable from other promises in the contract. The most significant performance obligations identified by iPass consist of 1) access to iPass ‘s Wi-Fi network footprint via the iPass SmartConnect application (which forms a monthly series of performance obligations together with technical support and unspecified upgrades), 2) professional services, 3) iPass Network Intelligence big data analytics 4) software licenses and 5) support. As iPass’s product offerings continue to evolve, iPass could identify further performance obligations based on the terms of the contract.

3. Determine the transaction price:    The transaction price is based on the consideration to which iPass expects to be entitled in exchange for transferring services to the customer. iPass concludes that because fees are consistently priced throughout the contract on a monthly basis, there is no need to allocate potential variable consideration. None of iPass ‘s contracts contain a significant financing component. In certain situations the transaction price is constrained to avoid the risk of a potential material revenue reversal.

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4. Allocate the transaction price to performance obligations in the contract:    If the contract contains a single performance obligation, the entire transaction price is allocated to that performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative standalone selling price (“SSP”).

5. Recognize revenue when the performance obligation is satisfied:    Revenue is recognized at the time the related performance obligation is satisfied by transferring the promised services to a customer. iPass recognizes revenue when iPass transfers control of the services to the customers for an amount that reflects the consideration that iPass expects to receive in exchange for those services. Typically, access to iPass ‘s Wi-Fi network footprint and iPass providing support services is recognized over time, such as over a month or quarter, and at a point in time for when professional services, iPass Network Intelligence big data analytics, or software license obligations are satisfied.

Costs to Obtain a Customer Contract.    The costs associated with obtaining a customer contract were previously expensed in the period they were incurred. Under Topic 606, these payments have been deferred on iPass’s consolidated balance sheets as other current assets and other assets and amortized over the expected life of the customer contract.

iPass capitalizes sales commissions that are incremental to the acquisition of contracts with customers. iPass determines whether costs should be deferred based on sales compensation plans and agreements when the costs are in fact incremental and would not have occurred absent the customer contract. The deferred commission amounts are deemed recoverable through future revenue streams and positive margins. Deferred commissions are amortized on a straight-line basis over the expected customer contract life and included in sales and marketing expense in the consolidated statements of operations and comprehensive loss.

iPass periodically reviews these deferred costs to determine whether events or changes in circumstances have occurred that could impact the period of benefit of these deferred sales commissions. There were no material impairment losses for deferred sales commissions through September 30, 2018.

Two Years Ended December 31, 2017 and 2016

iPass’s revenue recognition policy under ASC 605 required iPass to make certain estimates and judgments, for example, in the recognition of monthly minimum commitment (“MMC”) revenue or deferred revenue.

For customers that agreed to an MMC fee in connection with network usage, such customer’s monthly invoice reflects the greater of the customer’s actual usage during the month or the customer’s contractually committed monthly minimum for that month. If the MMC exceeds actual usage (“Shortfall”), iPass determined whether the Shortfall was fixed or determinable in accordance with the revenue recognition criteria. If iPass concluded that the Shortfall was fixed or determinable, based upon customer specific collection history, and all other revenue recognition criteria have been met, iPass recognized as revenue the amount of the Shortfall which was invoiced. If the customer was in a Shortfall situation and it was determined that the Shortfall was not fixed or determinable, iPass recognized revenue only when the Shortfall was collected.

iPass deferred revenue for services that billed in advance or prepaid as required per customer agreements. iPass recognized revenue as the services were being delivered, or ratably over the estimated service period, depending on the nature of the service. iPass classified amounts expected to be recognized as revenue within one year as short-term. For services that were billed but not yet performed and the related receivable was not collected, for balance sheet presentation purposes, iPass offset the deferred revenue with the related accounts receivable, despite the receivable representing an enforceable obligation.

Performance-Based Restricted Stock Awards

Certain restricted stock awards have performance-based goals based on the achievement of targeted quarterly revenue or targeted earnings, which require an assessment of the probability and timing of vesting. iPass amortizes stock-based compensation expense for performance-based awards on a graded vesting basis over the vesting period, after assessing probability of achieving the requisite performance

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criteria. Estimating the time in which iPass expects to achieve the requisite performance criteria requires judgment. If events or circumstances occur that cause iPass to revise its estimated vest dates, iPass recognizes the unamortized expense prospectively over the revised estimated vesting period. Such a change in estimated vest dates could have a material impact on iPass’s financial statements. As of December 31, 2017, there were no outstanding awards solely based on performance. As of September 30, 2018, there were 420,000 outstanding awards solely based on performance.

Derivative Liability

iPass analyzes its debt and equity arrangements for potential embedded derivatives as defined under ASC 815, Derivatives and Hedging. Embedded derivative may require bifurcation and measurement at fair value at each reporting period. iPass assessed the Credit Agreement with Fortress and noted it contained an embedded derivative that required fair value measurement at each reporting period. iPass uses a probability assessment on the event of default to determine the fair value of the derivative liability. As of September 30, 2018, the fair value of the embedded derivative was deemed to be $0.9 million, an increase of  $0.2 million from initial assessment. The change in fair value of the derivative was recorded in other expense in the consolidated statements of operations and comprehensive loss.

Warrants

From time to time, iPass may issue warrants that are convertible into common stock that are required to be assessed under ASC 480, Distinguishing Liabilities from Equity , and ASC 815, Derivatives and Hedging . At the execution of the Credit Agreement with Fortress, iPass issued to entities related to Fortress 278,493 common stock warrants at a per share exercise price of  $3.022 with a seven year life (after adjusted for the reverse stock split effected on August 23, 2018). iPass considered the guidance in ASC 480, Distinguishing Liabilities from Equity , and ASC 815, Derivatives and Hedging, and concluded the warrants should be classified as equity. The fair value of  $0.8 million was calculated using the Black-Scholes model.

Recent Accounting Pronouncements

See Note 1 “Basis of Presentation” included in iPass’s audited financial statements, and Note 1 “Basis of Presentation and Summary of Significant Accounting Policies” included in iPass’s unaudited financial statements, included in this prospectus for information regarding recent accounting pronouncements.

Results of Operations

iPass differentiated and analyzed its revenue generation streams as follows:

Enterprise revenues consist of Wi-Fi, platform, software license, and other fees charged to enterprise customers of the iPass service. Revenues are generated by customers that purchase iPass’s service on a per user per month subscription basis (“Unlimited Customers”) or under a variety of other pricing models which may include PAYG usage, flat rate pricing per active user, separate platform fees, legacy offerings, and other ancillary services such as consulting or platform customization (“Other Pricing Plan Customers”).

Strategic Partnership revenues consist of Wi-Fi, platform, technology, iPass Network Intelligence, and other fees charged to iPass’s strategic partnership customers. In contrast to Enterprise revenue, pricing on these deals is negotiated specific to the customer needs and can include per device charges, platform only charges (including SDK), cost-plus or PAYG arrangements on Wi-Fi usage, and various other pricing mechanisms.

Legacy iPC revenues (analyzed in 2017 and 2016 only, as part of Enterprise revenue in 2018) consist of Dial-up and 3G network, iPass’s iPC platform, and related platform services, as well as iPC driven network usage, including iPC user driven Wi-Fi and minimum commit shortfall.

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For the three months ended September 30, 2018, revenue decreased $4.1 million or 31% as compared to the same period in 2017. This was largely due to lower Enterprise revenue of  $3.1 million, with the largest decrease coming from Other Pricing Plan Customers of  $2.8 million due to declines in usage by PAYG customers and customer churn. Revenue from Strategic Partnerships decreased $1.0 million largely due to the churn of a strategic partner and overall declining usage, offset in part by revenue from the sale of iPass’s first software license.

For the nine months ended September 30, 2018, revenue decreased $9.9 million or 24% as compared to the same period in 2017. This was largely due to lower Enterprise revenue of  $8.4 million. While Unlimited Customers have increased $0.5 million, this was offset by a decrease from Other Pricing Plan Customers of $8.9 million. Revenue from Strategic Partnerships declined $1.5 million largely due to customer churn, declining usage, and declining shipments of iPass enabled devices for one strategic partner offset in part by revenue from the sale of iPass’s first software license.

Cost of Revenue and Operating Expenses

Network Access Costs (NAC)

NAC consist of charges for network access which iPass pays to its network service providers and other direct cost of sales.

For the three months ended September 30, 2018, NAC as a percentage of total revenue decreased fifteen percentage points as compared to the same period in 2017. The decline in NAC was primarily related to the renegotiation of the majority of iPass’s annual commitment contracts during the fourth quarter 2017 and first quarter 2018. Also contributing to lower NAC was a decline in usage of 49% from approximately 2.8 million hours in the third quarter 2017 to 1.4 million hours for the same period in 2018.

For the nine months ended September 30, 2018, NAC as a percentage of total revenue deceased eleven percentage points as compared to the same period in 2017, also largely due to the renegotiation of annual commitment contracts plus a decline in usage. The renegotiation efforts saved iPass $5.3 million on premium inflight Wi-Fi network charges.

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For the three months ended September 30, 2018, network operations costs decreased approximately $0.3 million, or 21%, compared to the same period in 2017 due to savings on maintenance and support for iPass’s database and infrastructure.

For the nine months ended September 30, 2018, network operations costs decreased approximately $0.8 million, or 16%, compared to the same period in 2017 due to savings on maintenance and support for iPass’s database and infrastructure.

Research and Development

Research and development expenses consist of compensation and benefits for iPass’s research and development personnel, software, consulting, and allocated overhead costs.

For the three months ended September 30, 2018, research and development expense decreased by approximately $0.1 million, or 6%, compared to the same period in 2017 due to decreases in salary and related payroll expenses. This is due to a slight reduction in headcount in the United States and Europe.

For the nine months ended September 30, 2018, research and development expense decreased by approximately $0.3 million, or 5%, compared to the same period in 2017 due to decreases in salary and related payroll expenses. This is due to a slight reduction in headcount in the United States and Europe.

Sales and Marketing

Sales and marketing expenses consist of compensation, benefits, advertising and lead generation costs, and allocated overhead costs.

For the three months ended September 30, 2018, sales and marketing expense increased by approximately $0.2 million, or 10%, compared to the same period in 2017 primarily due to an increase in severance expense of  $0.3 million.

For the nine months ended September 30, 2018, sales and marketing expense increased by approximately $0.1 million, or 1%, compared to the same period in 2017 due to an increase in consulting expense of  $0.2 million and severance expense of  $0.3 million, offset by less marketing and traveling expenditures of  $0.3 million.

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For the three months ended September 30, 2018, general and administrative expense decreased by $1.0 million or 29%, as compared to the same period in 2017. This was primarily due to the decrease of $0.5 million in legal expenses related to legal fees incurred in the third quarter of 2017 in connection with an investigation of a claim by a former employee, $0.2 million of depreciation expenses, and decrease in salary and related payroll expenses due to a decline in headcount.

For the nine months ended September 30, 2018, general and administrative expense decreased by $0.8 million, or 9%, compared to the same period in 2017, primarily due to a decrease of  $0.5 million in depreciation expense and a decrease of  $0.3 million in salary and related payroll expenses due to a decline in headcount.

Other Income and Expenses

Other income and expense is made up of interest income and expense, foreign exchange gain or loss, and other expenses and was a $0.8 million expense for the three months ended September 30, 2018 as compared to $0.2 million expense for the three months ended September 30, 2017. The increase is primarily related to $0.6 million of interest expense and amortization of debt discounts from the June 2018 Fortress debt, as well as a $0.2 million expense from the change in fair value of a derivative liability related to the Fortress debt. This was offset in part by a $0.1 million decrease in foreign exchange loss.

Other income and expense was a $0.9 million expense for the nine months ended September 30, 2018 as compared to $0.3 million expense for the nine months ended September 30, 2017. The increase in expense is similar to the above explanations related to the June 2018 Fortress debt.

Through September 30, 2018, iPass did not enter into any hedging contracts.

Provision for Income Taxes

Income tax expense for each of the three and nine months ended September 30, 2018 was less than $0.1 million and approximately $0.2 million, respectively, and is primarily related to foreign income taxes on iPass’s cost-plus entities. Income tax expense for each of the three and nine months ended September 30, 2017 was approximately $0.1 million and $0.4 million, respectively.

Years Ended December 31, 2017 and 2016

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For the year ended December 31, 2017, revenue decreased $8.8 million or 14% as compared to the same period in 2016. This was largely due to lower Enterprise revenue of  $7.3 million, of which $11.8 million related to a decrease from Other Pricing Plan Customers, partially offset by an increase of $4.5 million in Unlimited Customers. Revenue from Strategic Partnerships decreased $1.0 million. This decrease was due to a decrease of  $2.1 million from ongoing Strategic Partnership customers, partially offset by revenue from Veri-Fi Data (rebranded as iPass Network Intelligence in 2018) of  $0.8 million and $0.4 million in iPass SmartConnect technology. Legacy iPC revenue decreased by $0.5 million as a result of expected lower usage for iPass’s 3G, Dial-up, and iPC services.

Gross Margin

iPass uses gross margin as a metric to assist in assessing the profitability of its various network and network-related services. iPass’s overall gross margin is defined as total revenue less network access cost less network operations expense divided by total revenue.

For the year ended December 31, 2017, gross margin decreased by 18.1 percentage points, as compared to the same period in 2016 which is primarily due to the increase of iPass’s network access costs as a result of the investment in additional network capacity, as well as a decrease in total revenue. iPass purchased additional capacity to support its go-to-market initiatives on UNLIMITED and Strategic Partnerships, and to drive down its cost per unit of network consumed. While iPass was able to reduce its cost per unit, the decrease in revenue was steeper resulting in a declining gross margin.

Cost of Revenues and Operating Expenses

Network Access Costs (NAC)

NAC consist of charges for network access which iPass pays to its network service providers and other direct cost of sales.

For the year ended December 31, 2017, network access costs as a percentage of total revenue increased 18.5 percentage points, as compared to the same period in 2016. This was primarily due to the increase in commit spend to acquire additional network capacity and a decrease in iPass’s Enterprise revenue.

Network Operations

Network operations expenses consist of compensation and benefits for iPass’s network engineering, customer support and network access quality personnel, outside consultants, co-location center fees, network equipment depreciation, inventory costs, and allocated overhead costs.

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The decrease in network operations expenses of approximately $1.2 million or 16% for 2017 compared to 2016 was primarily due to decrease in headcount costs of  $0.4 million and a decrease in depreciation expense of  $0.9 million due to some property and equipment reaching the end of their estimated useful life.

Research and Development

Research and development expenses consist of compensation and benefits for iPass’s research and development personnel, software, consulting, and allocated overhead costs.

The increase in research and development expenses of approximately $0.7 million or 9% for 2017 compared to 2016 was primarily due to an increase in software license and fees of approximately $0.6 million due to licensed software to assist iPass with the development of its curation technology.

Sales and Marketing

Sales and marketing expenses consist of compensation, benefits, advertising and lead generation costs, and allocated overhead costs.

The decrease in sales and marketing expenses of approximately $0.9 million or 8% for 2017 compared to 2016 was primarily due to the decrease in headcount-related costs of  $0.5 million and decrease in spending on marketing programs of  $0.4 million.

General and Administrative

General and administrative expenses consist primarily of compensation and benefits for general and administrative personnel, facilities, legal and accounting expenses.

The increase in general and administrative expenses of approximately $0.7 million or 6% for 2017 compared to 2016 was primarily due to an $0.8 million increase in legal expenses of which a charge of $0.7 million related to legal fees incurred in connection with the investigation of a claim by a former employee, an increase in bad debt expense of  $0.2 million, and an increase in consulting services of $0.2 million, offset by a decrease in headcount related costs of  $0.5 million.

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During the first quarter of 2016, iPass announced a restructuring plan (“Q1 2016 Plan”). The Q1 2016 Plan reduced headcount globally by 57 employees, or 30% of the workforce, and primarily eliminated positions in engineering and network operations groups, including a reduction of personnel in the India team. This resulted in a charge of approximately $0.8 million in 2016, and as of December 31, 2016 iPass had completed all of the related payments associated this restructuring Plan.

Non-Operating Income and Expenses

Foreign Exchange Gains and Losses

Foreign exchange gains and losses primarily include realized and unrealized gains and losses on foreign currency transactions. Foreign currency exchange rate fluctuations impact the re-measurement of certain assets and liabilities denominated in currencies other than the U.S. dollar and generate unrealized foreign exchange gains or losses. In addition, some of iPass’s network access costs are invoiced in currencies other than the U.S. dollar. The transactional settlement of these outstanding invoices and other cross-currency transactions generate realized foreign exchange gains or losses depending on the fluctuation of exchange rates between the date of invoicing and the date of payment.

During the years ended December 31, 2017 and 2016, iPass did not enter any hedging contracts and foreign exchange losses were approximately $0.4 million and $0.2 million, respectively. The foreign exchange losses in 2017 were mainly due the unfavorable re-measurement of foreign currency denominated assets and liabilities.

Provision For Income Taxes

Income tax expenses were recorded for the years ended December 31, 2017 and 2016, of approximately $0.2 million each. The income tax expenses recorded for the years ended December 31, 2017 and 2016, primarily relates to foreign taxes on expected profits in the foreign jurisdictions.

The effective tax rate was a provision of 1% and 3% for 2017 and 2016, respectively.

Liquidity and Capital Resources

iPass had cash and cash equivalents of  $4.9 million at September 30, 2018, compared to $5.2 million at December 31, 2017, and 16.1 million at December 31, 2016.

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Operating Activities

Net cash used in operating activities increased by approximately $3.7 million for the nine months ended September 30, 2018 compared to the same period in 2017. There are several factors, but this increase in cash used was primarily due to the pay down of iPass’s accounts payable balance in the nine months ended September 30, 2018, offset by collections of accounts receivable and a reduction in net loss after adjustments for non-cash items.

Net cash used in operating activities increased by approximately $6.0 million from $5.5 million used for the year ended December 31, 2016 to $11.5 million for the same period in 2017. Net loss after adjustments for non-cash items declined by $13.2 million year over year, mainly due to the increase of net loss. The remaining variance was driven by normal working capital fluctuations.

Investing Activities

Net cash used in investing activities decreased by $0.5 million from the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2018. This decrease is due to a decrease in purchases of property and equipment in the nine months ended September 30, 2018.

Net cash used by investing activities increased by approximately $0.2 million from the net cash used by investing activities of  $0.6 million for the year ended December 31, 2016 to the net cash used by investing activities of  $0.8 million for the same period in 2017. This increase is primarily due to paying off prior period accrual for property and equipment purchases.

Financing Activities

Net cash provided by financing activities increased by $11.9 million from the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2018. This significant increase is due to the $10.0 million of debt signed in the second quarter 2018 offset in part by $1.6 million in transaction costs paid, plus $3.9 million raised from the issuance of common stock to Aspire Capital under the CSPA.

Net cash provided by financing activities decreased by approximately $0.4 million from $1.8 million for the year ended December 31, 2016 to $1.4 million for the same period in 2017. The decrease is mainly related to the decrease in 2017 compared to 2016 of cash from stock options exercises of  $2.7, offset by $1.1 million net cash from issuance of common stock in 2017, $0.9 million used due to vendor equipment financing payoff in 2016, and $0.3 million of stock repurchased in 2016.

Sources of Cash and Future Cash Requirements

iPass has historically relied on existing cash and cash equivalents, issuance of equity securities, and debt for its liquidity needs.

In November 2017, iPass entered into a CSPA with Aspire Capital. By the end of the second quarter 2018, iPass had issued a total of 1,334,175 shares to Aspire Capital for $5.1 million. Under the terms of the original agreement, there are no additional shares available to sell to Aspire Capital.

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On June 14, 2018, iPass entered into a Credit Agreement Fortress for an initial term loan of $10.0 million. From June 14, 2018 through September 14, 2019, iPass may request an additional draw down in $1.0 million increments not to exceed $10.0 million in total (the “Delayed Draw Term Loan”). Each Delayed Draw Term Loan is made at Fortress’s sole discretion. The Credit Agreement bears an annual interest at a stated rate of 11.0% plus the greater of the following i) LIBO Rate or ii) 1.0%. Payments are due at the beginning of each month and the first 18 payments are interest-only. Starting in December 2019, iPass shall make thirty monthly principal payments, plus any accrued and unpaid interest, to fully payoff the Credit Agreement. At the end of the term iPass will pay a fee equal to 5.0% of the principal amount.

iPass believes that based on its current revenue prospects, anticipated cash flows from operations, and the remaining debt available to iPass under the Delayed Draw Term Loan (the issuance of which is at Fortress’s discretion), iPass’s existing cash balances will still not be sufficient to meet its working capital and operating resource expenditure requirements for at least the next twelve months, even when factoring in significant changes to operations or potential financing. Without a meaningful increase in revenue in the near term, achievement of iPass’s business objectives will require obtaining additional capital or cost reductions. However, there is no assurance that iPass will be able to achieve these objectives; therefore, there is substantial doubt about iPass’s ability to continue as a going concern.

The amount of cash and cash equivalents held by iPass’s foreign subsidiaries as of September 30, 2018 and December 31, 2017 was $0.3 million. iPass currently does not intend to distribute any of its cumulative earnings by its foreign subsidiaries to the parent company in the U.S.

Primary Uses of Cash

iPass’s principal use of cash during the three and nine months periods ended September 30, 2018, and the years ended December 31, 2017 and 2016, was for network access, payroll related expenses, acquisition of debt financing, interest expense, and general operating expenses including office rent.

Off-Balance Sheet Arrangements

iPass did not have any off-balance sheet arrangements at September 30, 2018, December 31, 2017, and December 31, 2016, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.

Changes in and Disagreements with Accountants

Previous Independent Registered Public Accounting Firm

On March 28, 2018, iPass notified Grant Thornton LLP of its dismissal as iPass’s independent registered public accounting firm effective as of that date. The decision to change independent registered public accounting firms was approved by iPass’s audit committee of the board of directors.

The audit report of Grant Thornton LLP on the consolidated financial statements of iPass as of and for the years ended December 31, 2017 and 2016, did not contain any adverse opinion or a disclaimer of opinion, and were not qualified or modified as to the uncertainty, audit scope, or accounting principle except the report for the year ended December 31, 2017, which contained an emphasis paragraph regarding iPass’s ability to continue as a going concern.

During iPass’s fiscal years ended December 31, 2017 and 2016, and the period through March 28, 2018, there were no: i) disagreements with Grant Thornton LLP on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Grant Thornton LLP, would have caused it to make reference to the subject matter of the disagreement, or ii) reportable events as set forth in Item 304(a)(1)(v) of Regulation S-K.

Grant Thornton LLP’s letter to the SEC stating its agreement with the statements in these paragraphs was filed as Exhibit 16.1 to iPass’s Current Report on Form 8-K filed with the SEC on April 2, 2018.

New Independent Registered Public Accounting Firm

On March 30, 2018, iPass engaged BDO USA, LLP as its new independent registered public accounting firm. The decision to engage BDO USA, LLP as iPass’s independent registered public accounting firm was approved by iPass’s audit committee. During iPass’s fiscal years ended December 31,

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2017 and 2016, and through March 30, 2018, the date of BDO USA, LLP’s engagement, iPass did not consult with BDO USA, LLP regarding any of the matters or events set forth in Item 304(a)(2)(i) and (ii) of Regulation S-K.

iPass Market Price and Dividends

Price Range of Common Stock

iPass common stock traded on the Nasdaq Global Select Market until May 9, 2018, and on the Nasdaq Capital Market from May 9, 2018, until November 7, 2018, under the symbol “IPAS”. Beginning on November 7, 2018, through November 21, 2018, iPass common stock traded on the over the counter market. Beginning on November 23, 2018, iPass common stock resumed trading on the Nasdaq Capital Market. In August 2018, iPass conducted a 1-for-10 reverse stock split of its common stock.

iPass had 8,431,625 shares of iPass common stock outstanding as of January 9, 2019, held by 85 holders of record, although there are a significantly larger number of beneficial owners of iPass common stock.

Dividends

iPass did not pay cash dividends on iPass common stock in 2018, 2017 or 2016. iPass currently does not expect to pay cash dividends. Further, iPass’s credit agreement with Fortress Capital prohibits iPass from paying cash dividends.

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On April 12, 2018, Mr. McCarthy visited the iPass corporate headquarters again, meeting with Mr. Griffiths, Ms. Hume, and Mr. Vickery. At this meeting, iPass provided more detailed information about its business, employees, and corporate structure. This meeting began several months of mutual due diligence between the parties.

On April 25, 2018, the parties signed a new commercial transaction, the Channel Partner Reseller Agreement, expanding the strategic alliance and providing Pareteum commercial pricing for reselling iPass SmartConnect and related Wi-Fi connectivity services to Pareteum’s customers. iPass issued a press release announcing the expansion of the partnership on May 3, 2018.

On May 8, 2018, the parties signed another new commercial transaction, the Software License Agreement, granting Pareteum a perpetual, non-exclusive, and non-transferable license to SmartConnect for up to 25,000,000 authorized devices. iPass publicly announced the license sale in its Q1 2018 earnings press release.

During May and June of 2018, iPass continued to actively search for a capital infusion. Ultimately, as mentioned above, iPass closed a credit facility with Fortress Investment Group LLC, which was announced in a press release on June 19, 2018, drawing $10.0 million at closing with another $10.0 million available at the discretion of Fortress. The transaction provided an additional two to three quarters of available cash needed to close some large commercial technology deals in the pipeline. Prior to closing the debt facility, iPass was in negotiations with Pareteum to make an equity investment in iPass. Negotiations regarding the equity investment by Pareteum ceased after iPass received the capital infusion from Fortress.

In an update email sent to the iPass board on July 26, 2018, ahead of the in-person board meeting on July 30, 2018, Mr. Griffiths provided additional background on the ongoing discussions with Pareteum. Mr. Griffiths advised the iPass board that Pareteum had requested to attend a session of the July 30, 2018 board meeting to express their interest in acquiring iPass.

At the July 30, 2018, iPass board meeting, Mr. Turner and Mr. McCarthy presented to the iPass directors for approximately one hour. They provided a detailed description of Pareteum’s business and highlighted reasons they believed a combination of the two companies made strategic sense. Questions were asked and discussion ensued. After Pareteum management left the meeting, iPass management was directed by the iPass board to pursue additional discussions with Pareteum. In addition, the iPass board directed management to begin interviewing investment banking advisors to assist in the M&A process.

Also at the July 30, 2018, iPass board meeting, the iPass board authorized the formation of a Strategy Committee, comprised of the Chairman of the iPass board, Michael Tedesco, and the newly appointed director, Neal Goldman. iPass publicly announced the addition of Mr. Goldman to the iPass board and the formation of the Strategy Committee “with the objective of exploring new strategic partnerships, acquisitions, mergers, licenses, joint ventures and other strategic opportunities that the committee feels would benefit iPass shareholders” in a press release on August 2, 2018.

The Strategy Committee of the iPass board met with iPass management on September 7, 2018, to discuss the process of hiring one of the investment banking candidates.

On September 10, 2018, Mr. Griffiths and Ms. Hume met in Los Angeles with Mr. McCarthy and Vic Bozzo (Pareteum CEO) to conduct additional due diligence.

During September 2018, the Strategy Committee of the iPass board along with iPass management met and interviewed investment banking candidates.

In the latter part of September 2018, the Strategy Committee determined to engage Raymond James as iPass’s investment banking advisor in connection with a potential M&A transaction. This was confirmed by the iPass board at a meeting convened on September 26, 2018.

After selecting Raymond James as its advisor, iPass management began working with Raymond James to create marketing materials, process documentation and a list of potential prospects that might have interest in acquiring iPass. Beginning on September 27, 2018, at the direction of the iPass board, Raymond James assisted iPass in conducting a market check process to assess interest from other prospects in acquiring iPass.

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At the direction of the iPass board, Raymond James contacted 18 prospects in addition to Pareteum. Raymond James shared preliminary descriptive information about iPass with potential prospects and conducted initial discussions with prospects to explore potential transaction. Interested parties were encouraged to sign non-disclosure agreements to allow more detailed information regarding iPass to be shared.

Three prospects signed non-disclosure agreements with iPass and requested meetings with iPass management, while 15 prospects either declined the opportunity or were unresponsive to the outreach by Raymond James. Prospects that declined the opportunity cited a lack of strategic fit with iPass, concerns with iPass’s financial profile, including sustained revenue declines and operating losses, and the unproven nature of iPass’s technology licensing and data analytics offerings.

On October 11, 2018, Pareteum submitted a preliminary non-binding letter of intent describing the terms under which Pareteum proposed to acquire iPass (the “Initial LOI”). Based the Initial LOI, Pareteum proposed to issue shares of its common stock with a value equal to $20 million in exchange for all of the shares of iPass common stock, with the final exchange ratio to be negotiated as part of the definitive agreement process. Pareteum also indicated that the offer represented an approximate exchange ratio of 0.78x and an implied stock price premium of approximately 35% based on recent prices for Pareteum’s common stock. In addition, the Initial LOI indicated that Pareteum was prepared to assume up to $6 million of iPass net debt at closing, subject to a detailed review of twelve months of working capital balances. The Initial LOI also included a requirement for exclusive negotiations for an unspecified period of time.

On October 12, 2018, Mr. Griffiths and Mr. Vickery from iPass, Mr. McCarthy from Pareteum and their respective financial advisors from Raymond James and Jefferies, met at the iPass headquarters to discuss the Initial LOI. iPass indicated that the proposed exchange ratio of 0.78x was not acceptable because it undervalued the business and did not share anticipated synergies with iPass in an equitable manner. The parties engaged in discussions regarding the most appropriate valuation methodologies and the expected pro forma impact of the transaction to Pareteum. Pareteum agreed to reconsider its proposal and deliver to iPass a revised letter of intent.

After the October 12, 2018 meeting with Pareteum, Mr. Griffiths provided an update regarding the ongoing discussions with Pareteum to the members of the iPass Strategy Committee.

On October 17, 2018, iPass executed an NDA with an interested party (“Prospect A”), which included a standstill provision that terminated at the earlier of two years from the date of execution and the date a definitive agreement was signed. Later that day, iPass conducted a conference call with Prospect A to provide a business and financial overview and to explore the strategic fit between the two companies. On the conference call, Prospect A informed iPass that it would first need to conduct a commercial trial to assess the potential sales synergies between the two companies, a process that would take at least several months to complete. iPass informed Prospect A that feedback regarding a potential acquisition of iPass would need to be received within a few weeks, and Prospect A confirmed that it would not be able to meet this timetable. iPass and Prospect A agreed to continue exploring commercial opportunities together, but mutually ended the acquisition discussions.

On October 21, 2018, Pareteum submitted a revised non-binding letter of intent describing the terms under which Pareteum was prepared to acquire iPass (the “Second LOI”). Based the Second LOI, Pareteum was prepared to acquire 100% of the common stock of iPass in an all-stock transaction based on an exchange ratio of 1.00x share of Pareteum common stock for each fully diluted iPass share based on the treasury stock method. Pareteum indicated the Second LOI implied a per share value to iPass of  $2.61 based on Pareteum’s 10-day volume weighted average price (“VWAP”) ending October 17, 2018, and an approximate premium of 56% to iPass’s 10-day VWAP for the period ending October 17, 2018. Pareteum also noted that the exchange ratio contained in the Second LOI represented an improvement of 28% compared to the 0.78x exchange ratio contained in the Initial LOI. In addition, the Second LOI indicated that Pareteum was prepared to assume up to $6.5 million of iPass net debt at closing, subject to a detailed review of twelve months of working capital balances. The Second LOI included a timetable that called for definitive documentation to be signed by late November or December, and a requirement for exclusive negotiations that would last until December 31, 2018, or later if the transaction period was extended by mutual agreement.

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On October 22, 2018, iPass executed a non-disclosure agreement with an interested party (“Prospect B”), which included a standstill provision that terminated at the earlier of two years from the date of execution and the date a definitive agreement was signed. Later that day, iPass conducted a conference call with Prospect B to provide a business and financial overview and to explore the strategic fit between the two companies. The following day, Prospect B informed Raymond James that there was insufficient interest in the opportunity to move forward with further discussions. Prospect A saw potential in the technology of iPass, but the financial profile of the Company was too much of an obstacle.

Also on October 22, 2018, iPass executed a non-disclosure agreement with an interested party (“Prospect C”), which included a standstill provision that terminated at the earlier of six months from the date of execution and the date a definitive agreement was signed. The following day, on October 23, 2018, iPass conducted a meeting and conference call with Prospect C to provide a business and financial overview and to explore the strategic fit between the two companies. The following day, on October 24, 2018, Prospect C informed Raymond James that after discussing the opportunity internally, there was insufficient interest in moving forward with further discussions.

On October 23, 2018, an iPass board meeting was held, including iPass management and Raymond James. Raymond James presented an update regarding negotiations with Pareteum and the market check process. The board directed iPass management to continue to negotiate with Pareteum while continuing the market check process.

On October 25, 2018, at the direction of the iPass board, Raymond James communicated to Jefferies, Pareteum’s financial advisor, that the iPass board was supportive of a fixed exchange ratio of 1.40x, which implied, based on recent closing stock prices, a per share value of approximately $3.15. Raymond James also indicated that in return for the higher exchange ratio, the iPass board would be willing to enter into a 10-day period of exclusive negotiations.

On October 26, 2018, Jefferies spoke with Raymond James and indicated that Pareteum was willing to increase the exchange ratio to a maximum of 1.20x. Jefferies also indicated that Pareteum had set an internal cap of 10 million shares they were willing to issue in the transaction. Later that evening, Mr. Griffiths informed Mr. Turner that iPass needed to move the exchange ratio to at least 1.30x in order to satisfy the iPass board. At the time, the iPass board and management believed that both parties would reach a compromise at a 1.25x exchange ratio.

On October 27, 2018, at the direction of the iPass board, Raymond James delivered a written counterproposal to Jefferies (the “Counterproposal”). Under the terms of the Counterproposal, Pareteum would acquire 100% of the stock of iPass an all-stock transaction based on an exchange ratio of 1.25x share of Pareteum common stock for each fully diluted Company Share based on the treasury stock method, implying a per share value of iPass of  $2.79 based on Pareteum’s closing stock price on October 26, 2018. In addition, Pareteum would assume the net debt of iPass at closing, with no limitation or working capital adjustment. The Counterproposal included a timetable that called for definitive documentation to be signed by the end of November, and a 14-day period of exclusive negotiations, subject to extension by mutual agreement.

Later on October 27, 2018, Raymond James representatives spoke with Jefferies representatives who indicated they were unwilling to advise Pareteum to accept a 1.25x exchange ratio. Jefferies encouraged Raymond James to revert to a 1.20x exchange ratio — the maximum level that Jefferies had communicated on October 26, 2018.

On October 29, 2018, Pareteum submitted a revised non-binding letter of intent describing the terms under which Pareteum was prepared to acquire iPass (the “Third LOI”). Based the Third LOI, Pareteum was prepared to acquire 100% of the stock of iPass in an all-stock transaction based on an exchange ratio of 1.222x share of Pareteum common stock for each fully diluted iPass share based on the treasury stock method. Pareteum indicated the Third LOI implied a per share value to iPass of  $2.725 based on Pareteum’s closing stock price on October 26, 2018. In addition, Pareteum would assume the net debt of iPass at closing, with no limitation or working capital adjustment. The Third LOI included a timetable that called for definitive documentation to be signed by the end of November, and a period of exclusive negotiations that would last until November 15, 2018, subject to extension by mutual agreement. Raymond James discussed with Jefferies the potential to shift the exclusivity expiration to November 13, 2018, but this request was rejected.

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Later on October 29, 2018, the iPass board had its regularly scheduled in-person quarterly meeting at the iPass corporate headquarters. Also in attendance were representatives of Cooley LLP (iPass counsel) and Raymond James. Raymond James provided an update regarding negotiations with Pareteum and the market check process. Raymond James discussed the current proposal from Pareteum (the Third LOI), including implied valuation metrics, key terms and potential responses. Based on this discussion, the iPass board then adopted a resolution authorizing iPass management to execute the Third LOI.

On October 29, 2018, after conclusion of the board meeting, iPass executed the LOI and Raymond James returned it to Jefferies, thus starting an exclusivity period with Pareteum that would last through November 15, 2018. All contact with other potential acquirers ceased on this date.

On October 31, 2018, iPass management along with representatives of Cooley had a telephone conference with Pareteum management and their counsel, Sichenzia Ross Ference LLP, to begin discussions on the structure of the transaction and the terms of a definitive agreement.

On October 31, 2018, iPass management received access to the Pareteum virtual dataroom and, with the assistance of Raymond James, began conducting reverse due diligence. iPass management and Raymond James reviewed materials in Pareteum’s virtual data room, as well as publicly available information, including Pareteum’s SEC filings, press releases and investor relations materials, and available Wall Street research reports.

On October 31, November 1 and November 2 of 2018, Mr. Griffiths, Mr. McCarthy, and Mr. Vickery had telephonic conference calls to review status and next steps on the drafting of the definitive agreement.

On November 2, 218, Sichenzia Ross Ference LLP, delivered a first draft of the merger agreement, which included a potential downward adjustment to the exchange ratio, valued at $500,000 in Pareteum stock, which would be based on the net working capital of iPass at closing.

As noted above, on November 5, 2018, iPass received notice that Nasdaq had determined to suspend trading of the Company’s securities effective November 7, 2018 based upon the Company’s non-compliance with the minimum $35 million market value of listed securities requirement, which would lead in due course to a formal action by Nasdaq to delist the Company’s securities. The Company’s stock price closed down 35% that day as a result of the news. iPass filed a Form 8-K announcing the development on November 6, 2018.

Also on November 5, 2018, a meeting of iPass management, the Strategy Committee, Cooley, and Raymond James was held to review current negotiations, the status of the definitive agreement and next steps.

On November 6, 2018, a meeting to conduct reverse due diligence on Pareteum was held in the iPass corporate headquarters. Raymond James, iPass management and Mr. Goldman of the Strategy Committee participated in the discussion. Mr. McCarthy provided additional details regarding Pareteum’s business, strategy and financial results and expectations.

Also on November 6, 2018, legal counsel for iPass, Cooley, delivered a mark-up to the draft merger agreement, which among other changes, eliminated the potential downward adjustment to the exchange ratio based on the net working capital of iPass at closing. iPass instead suggested relying on operating covenants to ensure that iPass managed its working capital in a normal manner between signing and closing.

On November 7, 8, and 9 of 2018, meetings were held between iPass management and Pareteum management to conduct additional mutual due diligence. Jefferies and Raymond James also participated in the sessions. At these meetings, the parties discussed the recent suspension in the trading of the iPass common stock, the subsequent decrease in the iPass trading price and the potential effect this development would have on the proposed transaction.

On November 8, 2018, an iPass board meeting was held, including iPass management, and representatives of Cooley and Raymond James. The status of the negotiations and the definitive agreement were discussed, including the likely negative impact the suspension in the trading of iPass common stock on Nasdaq would have on the transaction terms. iPass management and Raymond James also discussed the results of reverse due diligence on Pareteum, and Cooley provided an update on the definitive agreement and the expected timetable to completion.

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On November 9, 2018, iPass management, Pareteum management and each parties’ respective legal counsels conducted a conference call to discuss the terms of the definitive agreement. Over the weekend of November 10 and 11, 2018, definitive agreement disclosure schedules were finalized, and negotiations of remaining terms continued.

On November 11, 2018, Sichenzia Ross Ference LLP delivered a revised draft of the merger agreement, which among other changes, reflected Pareteum’s proposal to adjust the exchange ratio to 1.17x, eliminated the potential downward adjustment to the exchange ratio based on the net working capital of iPass at closing and eliminated the proposed closing condition related to required customer continuity.

On the morning of November 12, 2018, definitive agreement terms were finalized. iPass held a board meeting to review the definitive agreement. Raymond James provided its financial analyses of iPass and the transaction consideration and delivered its oral opinion, subsequently confirmed in writing, to the iPass board that, as November 12, 2018, and based upon and subject to the various matters, limitations, qualifications and assumptions set forth in its opinion, the Per Share Amount (as defined in the merger agreement) to be received by holders of iPass’s common stock (other than Excluded Shares, as below in “Opinion of iPass’s Financial Advisor”) pursuant to the merger agreement was fair, from a financial point of view to such holders. Cooley reviewed the legal terms of the transaction and the legal obligations of the iPass board and the legal standards against which the actions of the iPass board would be evaluated and judged. The iPass board then voted unanimously to approve execution of the definitive agreement.

Following the conclusion of this meeting, iPass executed the definitive agreement with Pareteum and issued a joint press release with Pareteum after the close of market on that date announcing the signing of the definitive agreement.

Pareteum’s Reasons for the Offer and the Merger

The board of directors of Pareteum approved the merger agreement and determined that the merger agreement and the transactions contemplated by the merger agreement, including the offer, the merger and the issuance of Pareteum common stock as part of the transaction consideration, are fair to, and in the best interests of, Pareteum and its stockholders.

In reaching its determination, the board of directors of Pareteum consulted with Pareteum’s management, as well as with Pareteum’s legal and financial advisors, and considered a variety of factors weighing favorably towards the offer and the merger, including the factors described below. The board of directors of Pareteum believes that the offer and the merger will allow Pareteum to realize a number of significant benefits, including the following (not in any relative order of importance):

Strategic Considerations

•

The combination of iPass’s SmartConnect and big data solutions with Pareteum’s software defined global cloud platform creates an integrated software value package with global communications connectivity, enhancing the combined company’s ability to acquire 500 new enterprise customers;

​

•

The acquisition of iPass will expand revenue upside through cross-selling and new product sets;

​

•

The acquisition of iPass will provide Pareteum with a larger platform from which to expand into new markets and pursue further acquisition opportunities;

​

•

The acquisition of iPass will provide Pareteum with significant opportunity to monetize customer bases through cross-selling and upselling the combined company’s offerings;

​

•

The combined company’s enhanced products will allow Pareteum to better serve both Pareteum and iPass customers; and

​

•

iPass complements and extends Pareteum’s global footprint for software and API services.

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Forecasted Synergies and Other Financial Considerations

•

Significant synergy and value creation potential which will enhance stockholder value;

​

•

Pareteum expects to achieve more than $15 million in annual cost synergies following the acquisition of iPass, with $12 million in cost savings expected to be realized in the first full quarter of the combined company’s operations;

​

•

After adjusting for expected cost synergies, the combined company is expected to achieve strong growth in pro forma operating cash flow generation; and

​

•

The acquisition of iPass is expected to be significantly accretive to Pareteum’s non-GAAP earnings per share and cash flow.

​

Market Conditions

•

The board of directors of Pareteum also took into account current financial market conditions and the current and historical market prices and volatility of, and trading information with respect to, shares of iPass and Pareteum common stock; and

​

•

The combined company is expected to have better access to capital markets as a result of enhanced size and business diversification, and expected increased earnings and cash flow over time.

​

Due Diligence

•

The board of directors of Pareteum further considered its familiarity with the business operations, strategy, earnings and prospects of each of Pareteum and iPass and the scope and results of the due diligence investigation conducted by Pareteum’s management and advisors with respect to iPass

​

Financial Terms of the Transaction

•

The board of directors of Pareteum reviewed the amount and form of consideration to be paid in the transaction, the fact that the exchange ratio is fixed, the expected pro forma ownership of the combined company and other financial terms of the offer and the merger.

​

Recommendation of Management

•

The board of directors of Pareteum took into account the recommendation of Pareteum’s management in favor of the offer and the merger.

​

Provisions of the Merger Agreement

•

The board of directors of Pareteum considered the structure of the offer and the merger and terms and conditions of the merger agreement, including the financial terms, the anticipated short time period from announcement to completion achievable through the exchange offer structure, the restrictions placed on iPass’s ability to seek a superior proposal, the conditions to completion, the termination rights of the parties, the obligation of iPass to pay a $780,000 termination fee; and

​

•

The expectation that the conditions to consummation of the offer and the merger will be satisfied on a timely basis.

​

The board of directors of Pareteum also identified and considered certain potentially negative factors in its deliberations to be balanced against the positive factors, including:

•

the risk that the anticipated benefits of the offer and the merger will not be realized in full or in part, including the risks that expected synergies will not be achieved or not achieved on the expected timeframe;

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•

the risk that while Pareteum performed due diligence on iPass and its business, the scope of that due diligence was limited and there may be aspects of iPass or its business of which Pareteum is not aware;

​

•

the risk that the transaction may not be consummated despite the parties’ efforts or that the closing of the transaction may be unduly delayed;

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•

other costs associated with the offer and the merger;

​

•

the risk that the trading price of Pareteum common stock could decrease and the offer and the merger could have a dilutive effect on the value of common shares held by Pareteum stockholders for any number of reasons, some of which are outside Pareteum’s control, including for example if investors believe that the value of the transaction consideration to be exchanged for iPass shares in connection with the offer and the merger, together with transaction costs, is greater than the value of iPass’s business, together with any synergies expected to be achieved or actually realized from Pareteum’s acquisition of iPass;

​

•

potential challenges in integrating the two companies in addition to Pareteum’s other recent acquisitions;

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•

the provisions of the merger agreement that place restrictions on the interim operations of Pareteum and its subsidiaries pending the closing (see “Merger Agreement — Conduct of Pareteum’s Business Pending the Merger”);

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•

the risks associated with the occurrence of events which may materially adversely affect the operations or financial condition of iPass and its subsidiaries, which may not entitle Pareteum to terminate the merger agreement;

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the risk of diverting Pareteum management’s focus and resources from other strategic opportunities and from operational matters while working to implement the transaction with iPass, and other potential disruption associated with combining the companies, and the potential effects of such diversion and disruption on the businesses and customer relationships of Pareteum and iPass; and

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the risks associated with the offer and the merger, the combined company following the offer and the merger, Pareteum’s business and iPass’s business described under the sections entitled “Forward-Looking Statements” and “Risk Factors.”

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After consideration of these factors, the board of directors of Pareteum determined that, overall, the potential benefits of the offer and the merger outweighed the potential risks.

This discussion of the information and factors considered by the board of directors of Pareteum includes the material positive and negative factors considered by the board of directors of Pareteum, but it is not intended to be exhaustive and may not include all the factors considered by the board of directors of Pareteum. The board of directors of Pareteum did not quantify or assign any relative or specific weights to the various factors that it considered in reaching its determination to approve the merger agreement and the offer and the merger. Rather, the board of directors of Pareteum viewed its position and recommendation as being based on the totality of the information presented to and factors considered by it. In addition, individual members of the board of directors of Pareteum may have given differing weights to different factors. It should be noted that this explanation of the reasoning of the board of directors of Pareteum and certain information presented in this section is forward-looking in nature and, therefore, should be read in light of the factors discussed in the section entitled “Forward-Looking Statements.”

iPass’s Reasons for the Offer and the Merger; Recommendation of the Board of Directors of iPass

At a meeting held on November 12, 2018, the iPass board determined that the offer and merger was advisable, fair to, and in the best interests of, the iPass stockholders, approved the merger agreement, and the transactions contemplated thereby, including the offer and the merger, and recommend that the iPass stockholders tender their shares in the offer.

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In evaluating the offer, the merger and the merger agreement, the iPass board consulted with the iPass executive management team, as well as iPass’s outside legal and financial advisors, and considered a number of factors, including the following material factors (not in any relative order of importance):

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the fact that the market price of the proposed all-stock consideration to be received by the holders of iPass’s common stock of 1.17 shares of Pareteum common stock for each issued and outstanding share of iPass common stock represented a premium over the market prices at which iPass’s common stock traded prior to the public announcement of the proposed transaction, based on the closing price of the two parties’ stock on the day before public announcement of the transaction the exchange ratio represented a 76% premium to iPass stock price;

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the fact that the consideration offered in the proposed transaction is composed entirely of shares of Pareteum common stock, thus permitting iPass’s stockholders to have an ability to participate in any future “upside” in the equity ownership of the combined company;

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the iPass board’s expectations regarding the anticipated timing of consummations of the offer and the merger. The potential for closing in a relatively short time frame could reduce the amount of time in which the iPass business would be subject to potential disruptions and uncertainty pending closing, potential future default conditions under the Fortress credit facility, adverse developments in ongoing suspension and delisting discussions with Nasdaq, and risks associated with raising additional capital, and could enable iPass’s stockholders to more quickly enjoy any accretive benefits of the merger;

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the belief that significant concerns existed as to iPass’s continuing viability as a standalone business without a near-term capital infusion and, given recent discussions, a belief that iPass’s continuing access to the debt and capital markets would be limited;

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the belief of the iPass board that the offer and the merger are more favorable to iPass’s stockholders than the potential value that might result from the other alternatives reasonably available to iPass, including the alternative of remaining a stand-alone public company and other strategies that might be pursued as a stand-alone public company;

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the fact that the price proposed by Pareteum reflected extensive negotiations between the parties and their respective advisors, and was superior to any other alternatives that would present an equally quick closing;

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the iPass board’s belief, after consultation with iPass’s financial advisors, that the final price proposed by Pareteum was the highest it would pay;

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the oral opinion of Raymond James, subsequently confirmed in writing, delivered to the iPass board that, as of November 12, 2018 and based upon and subject to the various matters, limitations, qualifications and assumptions set forth in its opinion, the Per Share Amount to be received by the holders of iPass’s common stock (other than Excluded Shares, as defined below in “The Offer and the Merger — Opinion of iPass’s Financial Advisor”) pursuant to the merger agreement was fair, from a financial point of view, to such holders, as more fully described below in the section of this document captioned “The Offer and the Merger — Opinion of iPass’s Financial Advisor.”

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the belief of the iPass board, in consultation with executive management, that large strategic partner customers and prospective customers, especially those considering investing in long-term software licensing arrangements, have been and will continue to be reluctant to engage in an ongoing business relationship with a micro-capitalized company and that this reality presents a significant hindrance to iPass achieving future revenue goals and projections;

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the iPass board’s assessment that Pareteum has adequate financial resources and reasonable access to additional capital based on publicly available information to immediately improve the perceived financial health of iPass, which would likely help retain current customers during the pendency of the offer;

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the terms and conditions of the merger agreement, in addition to those described above, including:

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the limited and otherwise customary conditions to the parties’ obligations to complete the offer and the merger;

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the requirement that consummation of the offer is conditioned on the satisfaction of the minimum tender condition which, if satisfied, would demonstrate strong support for the offer and the merger by holders of iPass common stock;

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iPass’s ability to specifically enforce Pareteum’s obligations under the merger agreement, including Pareteum’s obligations to consummate the offer and the merger;

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that the Offeror is required to extend the offer beyond the initial expiration date if any condition to consummation of the offer is not satisfied and has not been waived until 11:59 p.m. New York City Time on May 11, 2019, as described in the Offer to Exchange under the heading “Exchange Offer Procedures — Extension, Termination and Amendment of Offer;”

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iPass’s ability to seek damages in the event of fraud or knowing and intentional breach by Pareteum of its obligations under the merger agreement;

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iPass’s ability, under certain limited circumstances, to furnish information to, and conduct negotiations with, third parties regarding an acquisition proposal that is, or would reasonably be expected to lead to, a superior proposal;

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iPass’s ability, subject to certain conditions, to terminate the merger agreement in order to accept a superior proposal, subject to paying or causing to be paid to Pareteum the termination fee of  $780,000. The board determined, after discussing with it legal and financial advisors, that the proposed termination fee was reasonable in light of, among other things, the benefits of the offer and the merger to the iPass stockholders, the typical size of such fees in similar transactions and the belief that a fee of such size would not preclude or unreasonably restrict the emergence of alternative transaction proposals;

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the ability of the iPass board, subject to certain conditions, to change its recommendation supporting the offer and the merger in response to an intervening event, regardless of the existence of a competing or superior acquisition proposal, to the extent the iPass board determines that such action is necessary to comply with its fiduciary duties to iPass’s stockholders under applicable law;

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the fact, dating back to 2014, that iPass conducted a thorough process of exploring its strategic alternatives prior to entering into the Merger Agreement with Pareteum;

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after lengthy meetings with management, the board’s consideration of iPass’s business, strategy, assets, financial condition, capital requirements, results of operations, competitive position, historical and projected financial performance, related risks, and upside potential, specifically as those factors impact the trading price of the iPass’s common stock (which cannot be quantified numerically);

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the risks and uncertainties associated with maintaining iPass’s existence as a stand-alone company compared to the opportunities presented by the Offer and the Merger and related synergies of providing a full end-to-end connectivity solution, above and beyond the current go-to-market Wi-Fi opportunity of iPass;

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the negotiation process with Pareteum, which was conducted at arm’s length, and the fact that iPass’s executive management and its legal and financial advisors were directly involved throughout the negotiations and updated the iPass board directly and frequently.

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The iPass board also considered a variety of potentially negative factors in its deliberations concerning the offer, the merger, and the merger agreement, including the following (not in any relative order of importance):

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the fact the transaction is all stock and without a cash component precludes iPass’s stockholders from enjoying certainty of value for their shares of iPass’s common stock;

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capital markets broadly, and small-cap stock specifically, can have significant volatility which may result in fluctuations in the value and portion of the consideration to iPass’s stockholders to be paid in Pareteum stock;

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the risks and costs to iPass if the offer and the merger do not close, including the diversion of management and employee attention, potential employee attrition, and the potential effect on business and customer relationships;

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the fact that an insufficient number of holders of shares of iPass’s common stock may tender into the offer to satisfy the minimum condition;

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the merger agreement’s restrictions on the conduct of iPass’s business prior to the completion of the merger, generally requiring iPass to conduct its business only in the ordinary course, subject to specific limitations, which may delay or prevent iPass from undertaking business opportunities that may arise pending completion of the merger;

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the risk that Pareteum cannot reach mutually agreeable terms with iPass’s debt holder to assume the existing debt or cannot raise sufficient capital to pay off the debt at the closing;

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the fact that iPass has incurred and will continue to incur significant transaction costs and expenses in connection with the proposed transaction, regardless of whether the Merger is consummated;

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After considering the foregoing potentially positive and potentially negative factors, the iPass board concluded that the potential benefits of the offer, the merger, and the merger agreement outweighed the risks and other potentially negative factors.

The foregoing discussion of the information and factors considered by the iPass board is not intended to be exhaustive, but includes the material factors considered by the iPass board. In view of the variety of factors considered in connection with its evaluation, the iPass board did not find it practicable to, and did not, quantify or otherwise assign relative weights to the specific factors considered in reaching its determination and recommendation. In addition, individual directors may have given different weights to different factors. The iPass board did not undertake to make any specific determination as to whether any factor, or any particular aspect of any factor, supported or did not support its ultimate decision. The iPass board based its recommendation on the totality of the information presented.

For the reasons described above, and in light of other factors that they believed were appropriate, the board of directors of iPass approved the merger agreement and the transactions contemplated thereby, including the offer and the merger, and recommends that iPass’s stockholders tender their shares of iPass common stock pursuant to the offer.

Opinion of iPass’s Financial Advisor

Summary

At the November 12, 2018 meeting of the iPass board, representatives of Raymond James & Associates, Inc. (“Raymond James”) rendered Raymond James’ oral opinion, which was subsequently confirmed by delivery of a written opinion to the iPass board dated November 12, 2018, that, as of such date, the Per Share Amount to be received by the holders of iPass’s outstanding common stock (other than (i) shares of iPass’s common stock that are owned by iPass as treasury shares and (ii) any shares of iPass’s common stock owned by Pareteum, Sub or any other direct or indirect subsidiary of Pareteum (collectively, the “Excluded Shares”)) pursuant to the Merger Agreement was fair, from a financial point of view, to such holders, based upon and subject to the various matters, limitations, qualifications and assumptions considered in connection with the preparation of its opinion.

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The full text of the written opinion of Raymond James, dated November 12, 2018, which sets forth, among other things, the various qualifications, assumptions and limitations on the scope of the review undertaken, is attached as Annex B to this document. Raymond James provided its opinion for the information and assistance of the iPass board (solely in its capacity as such) in connection with, and for purposes of, its consideration of the offer (the “Offer”) and the merger (the “Merger”), and its opinion only addresses whether the Per Share Amount to be received by the holders of iPass’s common stock (other than the Excluded Shares) pursuant to the merger agreement (the “Merger Agreement”) was fair, from a financial point of view, to such holders. The opinion of Raymond James did not address any other term or aspect of the Merger Agreement or the Offer and the Merger contemplated thereby. The Raymond James opinion does not constitute a recommendation to the iPass board or any holder of iPass common stock as to how the iPass board, such stockholder or any other person should vote or otherwise act with respect to the Merger Agreement, the Offer and the Merger or any other matter.

Opinion of iPass’s Financial Advisor

iPass retained Raymond James as its financial advisor on September 27, 2018 pursuant to an engagement letter. Pursuant to that engagement letter, the iPass board requested that Raymond James evaluate whether the Per Share Amount to be received by the holders of iPass’s common stock (other than the Excluded Shares) pursuant to the Merger Agreement was fair, from a financial point of view, to such holders.

At the November 12, 2018 meeting of the iPass board, representatives of Raymond James rendered Raymond James’ oral opinion, which was subsequently confirmed by delivery of a written opinion to the iPass board dated November 12, 2018, that, as of such date, the Per Share Amount to be received by the holders of iPass’s outstanding common stock (other than the Excluded Shares) pursuant to the Merger Agreement was fair, from a financial point of view, to such holders, based upon and subject to the various matters, limitations, qualifications and assumptions considered in connection with the preparation of its opinion.

The full text of the written opinion of Raymond James is attached as Annex B to this document. The summary of the opinion of Raymond James set forth in this document is qualified in its entirety by reference to the full text of such written opinion. Holders of iPass common stock are urged to read this opinion in its entirety. In addition, such holders should read the opinion and this section together with the information under “ Certain Unaudited Prospective Financial Information of iPass ” below which describes the financial projections prepared by the management of iPass relating to iPass for the periods ending December 31, 2018 through December 31, 2021, as approved for Raymond James’s use by iPass (the “Projections”).

Raymond James provided its opinion for the information of the iPass board (solely in its capacity as such) in connection with, and for purposes of, its consideration of the Offer and the Merger and its opinion only addresses whether the Per Share Amount to be received by the holders of iPass’s common stock (other than the Excluded Shares) pursuant to the Merger Agreement was fair, from a financial point of view, to such holders. The opinion of Raymond James does not address any other term or aspect of the Merger Agreement or the Offer and the Merger contemplated thereby. The opinion of Raymond James does not constitute a recommendation to the iPass board or to any holder of iPass common stock as to how the iPass board, such stockholder or any other person should vote or otherwise act with respect to the Merger Agreement, the Offer and the Merger or any other matter. Raymond James expressed no opinion as to the likely trading range of Pareteum common stock following the consummation of the Offer and the Merger, which may vary depending on numerous factors that generally impact the price of securities or on the financial condition of Pareteum at that time.

In connection with its review of the Offer and the Merger and the preparation of its opinion, Raymond James, among other things:

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reviewed the financial terms and conditions as stated in the draft of the Merger Agreement dated November 11, 2018 (the “Draft Agreement”);

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reviewed certain information related to the historical, current and future operations, financial condition and prospects of iPass made available by iPass including, but not limited to, the Projections;

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reviewed iPass’s recent public filings and certain other publicly available information regarding iPass;

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reviewed financial, operating and other information regarding iPass and the industries in which it operates;

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reviewed the financial and operating performance of iPass and those of other selected public companies that Raymond James deemed to be relevant;

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considered the publicly available financial terms of certain transactions that Raymond James deemed to be relevant;

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reviewed the current and historical market prices and trading volume for iPass’s common stock, and the current market prices of the publicly traded securities of certain other companies that Raymond James deemed to be relevant;

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conducted such other financial studies, analyses and inquiries and considered such other information and factors as Raymond James deemed appropriate; and

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discussed with members of the senior management of each of iPass and Pareteum certain information relating to the aforementioned and any other matters which Raymond James has deemed relevant to its inquiry.

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With the iPass board’s consent, Raymond James assumed and relied upon the accuracy and completeness of all information supplied by or on behalf of iPass, or otherwise reviewed by or discussed with Raymond James, and Raymond James did not undertake any duty or responsibility to, nor did Raymond James, independently verify any of such information. Raymond James did not make or obtain an independent appraisal of the assets or liabilities (contingent or otherwise) of iPass or Pareteum. With respect to the Projections and any other information and data provided to or otherwise reviewed by or discussed with Raymond James, Raymond James, with the iPass board’s consent, assumed that the Projections and such other information and data were reasonably prepared in good faith on bases reflecting the best currently available estimates and judgments of management of iPass, and Raymond James relied upon iPass to advise Raymond James promptly if any information previously provided became inaccurate or was required to be updated during the period of its review. Raymond James expressed no opinion with respect to the Projections or the assumptions on which they were based. Raymond James assumed that the definitive Merger Agreement would be substantially similar to the Draft Agreement reviewed by Raymond James, and that the Offer and the Merger would be consummated in accordance with the terms of the Merger Agreement without waiver of or amendment to any of the conditions thereto. Furthermore, Raymond James assumed, in all respects material to its analysis, that the representations and warranties of each party contained in the Merger Agreement were true and correct and that each party will perform all of the covenants and agreements required to be performed by it under the Merger Agreement without being waived. Raymond James also relied upon and assumed, without independent verification, that (i) the Offer and the Merger would be consummated in a manner that complies in all respects with all applicable international, federal and state statutes, rules and regulations, and (ii) all governmental, regulatory or other consents and approvals necessary for the consummation of the Offer and the Merger, if any, would be obtained and that no delay, limitations, restrictions or conditions would be imposed or amendments, modifications or waivers made that would have an effect on the Offer and the Merger, iPass or Pareteum that would be material to its analysis or opinion. In addition, Raymond James assumed that the Offer and the Merger would be treated as a tax-free reorganization pursuant to the Code.

Raymond James expressed no opinion as to the underlying business decision to effect the Offer and the Merger, the structure or tax consequences of the Offer and the Merger, or the availability or advisability of any alternatives to the Offer and the Merger. The Raymond James opinion is limited to the fairness, from a financial point of view, of the Per Share Amount to be received by the holders of iPass’s common stock (other than the Excluded Shares). Raymond James expressed no opinion with respect to any other reasons (legal, business, or otherwise) that may support the decision of the iPass board to approve or consummate the Offer and the Merger. Furthermore, no opinion, counsel or interpretation was intended by Raymond James on matters that require legal, accounting or tax advice. Raymond James assumed that such opinion, counsel or interpretations had been or would be obtained from appropriate professional sources.

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Furthermore, Raymond James relied, with the consent of the iPass board, on the fact that iPass was assisted by legal, accounting and tax advisors, and, with the consent of the iPass board, relied upon and assumed the accuracy and completeness of the assessments by iPass and its advisors, as to all legal, accounting and tax matters with respect to iPass and the Offer and the Merger.

In formulating its opinion, Raymond James considered only the Per Share Amount to be received by the holders of iPass’s common stock (other than the Excluded Shares), and Raymond James did not consider, and its opinion did not address, the fairness of the amount or nature of any compensation to be paid or payable to any of the officers, directors or employees of iPass, or such class of persons, in connection with the Offer and the Merger whether relative to compensation received by the holders of iPass’s common stock (other than the Excluded Shares) or otherwise. Raymond James was not requested to opine as to, and its opinion did not express an opinion as to or otherwise address, among other things: (i) the fairness of the Offer and the Merger to the holders of any class of securities, creditors or other constituencies of iPass, or to any other party, except and only to the extent expressly set forth in the last sentence of its opinion or (ii) the fairness of the Offer and the Merger to any one class or group of iPass’s or any other party’s security holders or other constituents vis-à-vis any other class or group of iPass’s or such other party’s security holders or other constituents (including, without limitation, the allocation of any consideration to be received in the Offer and the Merger amongst or within such classes or groups of security holders or other constituents). Raymond James expressed no opinion as to the impact of the Offer and the Merger on the solvency or viability of iPass or Pareteum or the ability of iPass or Pareteum to pay their respective obligations when they come due.

Material Financial Analyses

The following summarizes the material financial analyses reviewed by Raymond James with the iPass board at its meeting on November 12, 2018, which material was considered by Raymond James in rendering its opinion. No company or transaction used in the analyses described below is identical or directly comparable to iPass, Pareteum or the contemplated Offer and Merger.

Selected Companies Analysis.    Raymond James analyzed the relative valuation multiples of the following twelve communications technology companies publicly traded on North American securities exchanges with market capitalizations of less than $100 million and gross margins of less than 70% in the most recently reported twelve months as of November 9, 2018 (“LTM”) that it deemed relevant:

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Although none of the selected companies are directly comparable to iPass, the selected companies were chosen because they share, in Raymond James’ professional judgment and experience, similar industry and business characteristics with iPass (including, but not limited to, the types of products or services they offer, their business models or their target market) or have similar operating characteristics as iPass. Raymond James determined, using its professional judgment, that the selected companies were appropriate for purposes of this analysis.

For each selected company, Raymond James calculated financial multiples based on the enterprise value (defined as equity market value plus debt, plus preferred stock, plus minority interests, less cash and equivalents) compared to revenue for the LTM and Wall Street research analysts’ projected revenue for the selected companies for the calendar years ending December 31, 2018 (“CY 2018E”) and December 31, 2019 (“CY 2019E”), to the extent such projections were available for the selected companies. The estimates published by Wall Street research analysts were not prepared in connection with the Offer and the Merger or at the request of Raymond James and may or may not prove to be accurate. Raymond James reviewed the first quartile, mean, median and third quartile relative valuation multiples of the selected companies and compared them to corresponding valuation multiples for iPass implied by the Per Share Amount. The results of the selected public companies analysis are summarized below:

Raymond James applied the first quartile, mean, median and third quartile relative valuation multiples for each of the metrics to iPass’s revenue for the LTM and projected revenue for CY 2018E and CY 2019E based upon the Projections so as to determine the implied equity price per share of iPass’s common stock, and then compared those implied equity values per share to the Per Share Amount which, for purposes of Raymond James’s analysis and its opinion, and with the iPass board’s consent, Raymond James assumed would have an implied value of  $2.60 per share of iPass’s common stock. The results of this analysis are summarized below:

Selected Transaction Analysis.    In its selected transaction analysis, Raymond James examined the valuation multiples of transaction enterprise value compared to the target companies’ revenue for both the Selected Transaction LTM and the Selected Transaction NTM, where such information was publicly available. Raymond James reviewed the first quartile, mean, median and third quartile relative valuation multiples of the selected transactions and compared them to corresponding valuation multiples for iPass implied by the Per Share Amount. The results of the selected transactions analysis are summarized below:

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Raymond James applied the first quartile, mean, median and third quartile relative valuation multiples to iPass’s revenue for the LTM, and iPass’s revenue for the next twelve months following the announcement of the Offer and the Merger based on the Projections, in order to determine the implied equity price per share, and it then compared those implied equity values per share to the Per Share Amount which, for purposes of Raymond James’s analysis and its opinion, and with the iPass board’s consent, Raymond James assumed would have an implied value of  $2.60 per share of iPass’s common stock. The results of the implied equity price per share analysis are summarized below:

Although none of the selected transactions are directly comparable to the Offer and the Merger, the selected transactions were chosen because the target companies in such transactions share, in Raymond James’ professional judgment and experience, similar industry and business characteristics with iPass (including, but not limited to, the types of products or services they offer, their business models or their target market) or have similar operating characteristics to iPass. Raymond James determined, using its professional judgment, that the selected transactions were appropriate for purposes of this analysis.

Discounted Cash Flow Analysis.    Raymond James analyzed the discounted present value of iPass’s projected free cash flows for the quarter ending December 31, 2018 and the years ending December 31, 2019 through 2021 on a standalone basis, based on the Projections. Raymond James used unleveraged free cash flows, defined as adjusted EBITDA (excluding stock-based compensation expense) less income taxes, less increases in net working capital, less capital expenditures.

Raymond James performed a discounted cash flow analysis based on the Projections which calculated terminal value using a perpetual growth methodology. Consistent with the periods reflected in the Projections, Raymond James used calendar year 2021 as the final year for such analysis and applied perpetual growth rates, selected in Raymond James’ professional judgment and experience, ranging from 1.0% to 3.0%, to the unlevered free cash flows in order to derive a range of present enterprise values for iPass at the end of 2021. Additionally, Raymond James performed an analysis based on the balance of Net Operating Losses (“NOLs”) as of the periods contemplated by the Projections to evaluate the additional potential equity value of iPass’s standalone tax attributes, on a present value basis.

The projected unlevered free cash flows, NOL tax savings and terminal values were discounted using rates ranging from 16.0% to 20.0%, which, based on Raymond James’ professional judgment and experience, reflected the weighted average after-tax cost of debt and equity capital associated with executing

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iPass’s business plan. The resulting range of present enterprise values was adjusted by iPass’s current capitalization and divided by the number of diluted shares outstanding in order to arrive at a range of present values per share of iPass’s common stock. Raymond James reviewed the range of per share prices derived in the discounted cash flow analysis and compared them to the price per share of iPass’s common stock implied by the Per Share Amount which, for purposes of Raymond James’s analysis and its opinion, and with the iPass board’s consent, Raymond James assumed would have an implied value of  $2.60 per share of iPass’s common stock. The results of the discounted cash flow analysis are summarized below:

Additional Considerations.    The preparation of a fairness opinion is a complex process and is not susceptible to a partial analysis or summary description. Raymond James believes that its analyses must be considered as a whole and that selecting portions of its analyses, without considering the analyses taken as a whole, would create an incomplete view of the process underlying its opinion. In addition, Raymond James considered the results of all such analyses and did not assign relative weights to any of the analyses, but rather made qualitative judgments as to significance and relevance of each analysis and factor, so the ranges of valuations resulting from any particular analysis described above should not be taken to be the view of Raymond James as to the actual value of iPass.

In performing its analyses, Raymond James made numerous assumptions with respect to industry performance, general business, economic and regulatory conditions and other matters, many of which are beyond the control of iPass. The analyses performed by Raymond James are not necessarily indicative of actual values, trading values or actual future results which might be achieved, all of which may be significantly more or less favorable than suggested by such analyses. Such analyses were provided to the iPass board (solely in its capacity as such) and were prepared solely as part of the analysis of Raymond James of whether the Per Share Amount to be received by the holders of iPass’s common stock (other than the Excluded Shares) pursuant to the Merger Agreement was fair, from a financial point of view, to such holders. The analyses do not purport to be appraisals or to reflect the prices at which companies may actually be sold, and such estimates are inherently subject to uncertainty. The opinion of Raymond James was one of many factors taken into account by the iPass board in making its determination to approve the Offer and the Merger. Neither Raymond James’ opinion nor the analyses described above should be viewed as determinative of the iPass board’s or iPass management’s views with respect to iPass, Pareteum or the Offer and the Merger. Raymond James provided advice to iPass with respect to the proposed transaction. Raymond James did not, however, recommend any specific amount of consideration to the iPass board or that any specific consideration constituted the only appropriate consideration for the Offer and the Merger. iPass placed no limits on the scope of the analysis performed, or opinion expressed, by Raymond James.

The Raymond James opinion was based upon market, economic, financial and other circumstances and conditions existing and disclosed to it as of November 12, 2018 and any material change in such circumstances and conditions would require a reevaluation, update, revision or reaffirmation of its opinion, which Raymond James is not any under obligation to undertake and which Raymond James has not assumed. Raymond James has relied upon and assumed, without independent verification, that there had been no change in the business, assets, liabilities, financial condition, results of operations, cash flows or prospects of iPass or Pareteum since the respective dates of the most recent financial statements and other information, financial or otherwise, provided to Raymond James that would be material to its analyses or its opinion, and that there was no information or any facts that would make any of the information reviewed by Raymond James incomplete or misleading in any material respect.

During the two years preceding the date of Raymond James’ written opinion, Raymond James has not been engaged by, performed services for or received any compensation from iPass (other than any amounts that were paid to Raymond James under the engagement letter described in this document pursuant to

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which Raymond James was retained as a financial advisor to iPass to provide advisory services in connection with the Offer and the Merger). In addition, during the two years preceding the date of Raymond James’ written opinion, Raymond James has not been engaged by, performed services for or received any compensation from Pareteum.

For services rendered in connection with Raymond James’ engagement, iPass paid Raymond James a fee of  $250,000 upon delivery of its opinion which was not contingent on the successful completion of the Offer and the Merger. iPass will pay Raymond James a fee of approximately $1.15 million, net of previously paid opinion fees, for advisory services in connection with the Offer and the Merger which is contingent upon the consummation of the Offer and the Merger. iPass also agreed to reimburse Raymond James for its expenses incurred in connection with its services, including the fees and expenses of its counsel, and will indemnify Raymond James against certain liabilities arising out of its engagement.

Raymond James is actively involved in the investment banking business and regularly undertakes the valuation of investment securities in connection with public offerings, private placements, business combinations and similar transactions. In the ordinary course of business, Raymond James may trade in the securities of iPass and/or Pareteum for its own account and for the accounts of its customers and, accordingly, may at any time hold a long or short position in such securities. Raymond James may provide investment banking, financial advisory and other financial services to iPass and/or Pareteum or other participants in the Offer and the Merger in the future, for which Raymond James may receive compensation.

Certain Unaudited Prospective Financial Information of iPass

iPass does not generally publish its business plans and strategies or make external disclosures of its anticipated financial position or results of operations other than for providing, from time to time, estimated expected financial results and operational metrics for the current year in its regular earnings press releases and other investor materials.

In November of 2018, iPass’s management presented updated financial projections to the board of directors of iPass based upon iPass’s year-to-date performance through September 30, 2018 that included a forecast that represented management’s judgment as to the results that could be achieved, taking into account iPass’s management’s judgment as to the likelihood of winning new business for which iPass was competing and expectations of account churn, among other risks. In connection with the evaluation of iPass’s strategic alternatives, iPass’s management provided the forecasted projections to parties interested in a potential strategic transaction with iPass that entered into confidentiality agreements with iPass, including to Pareteum. The financial projection was also intended for use internally to evaluate management’s performance. The projections were provided by management with a view to showing potential bidders the potential performance of iPass, subject to certain assumptions reflected therein. Based upon the judgment of the board of directors of iPass and management that the financial projections reflected the results that were more likely to be achieved, the board of directors of iPass instructed Raymond James to use and rely on the projections in connection with its financial analyses in connection with its opinion summarized in the section entitled “Opinion of iPass’s Financial Advisor.”

These financial projections and forecasts were not prepared with a view toward public disclosure or compliance with published guidelines of the SEC or the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information, International Financial Reporting Standards, or U.S. GAAP, and do not, and were not intended to, act as public guidance regarding iPass’s future financial performance. The inclusion of this information in this document should not be regarded as an indication that iPass or any recipient of this information considered, now considers or will consider this information to be necessarily predictive of future results. iPass does not intend to update or otherwise revise the financial projections to correct any errors existing in such projections when made, to reflect circumstances existing after the date when made or to reflect the occurrence of future events even in the event that any or all of the assumptions underlying the financial projections are shown to be in error.

Although presented with numerical specificity, the financial projections and forecasts included in this document are based on numerous estimates, assumptions and judgments (in addition to those described below) that may not be realized and are inherently subject to significant business, economic and competitive

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uncertainties and contingencies related to various factors, including the competitiveness of iPass’s current or future products, iPass’s ability to transition customers to the Unlimited model from legacy pricing plans in order to mitigate customer churn, timely completion of iPass’s product development schedules and the other factors listed in the section entitled “Forward-Looking Statements”. These or other factors may cause the financial projections or the underlying assumptions and estimates to be inaccurate. Since the financial projections cover multiple years, such information by its nature becomes less reliable with each successive year. The financial projections also do not take into account any circumstances or events occurring after the date they were prepared. The inclusion of the financial projections and forecasts in this document shall not be deemed an admission or representation by us that such information is material. The inclusion of the projections should not be regarded as an indication that iPass considered or now considers them to be a reliable prediction of future results and you should not rely on them as such. Accordingly, there can be no assurance that the financial projections will be realized, and actual results may vary materially from those reflected in the projections. You should read the section entitled “Forward-Looking Statements” for additional information regarding the risks inherent in forward-looking information such as the financial projections.

Certain of the financial projections set forth herein may be considered non-GAAP financial measures. A non-GAAP financial measure is a numerical measure of a company’s performance, financial position, or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. iPass believes that the additional non-GAAP measure Adjusted EBITDA is useful to investors for the purpose of financial analysis. iPass defines Adjusted EBITDA as net income (loss) before interest, income taxes, depreciation, stock-based compensation, and non-recurring legal and financing costs. iPass believes Adjusted EBITDA provides a meaningful comparison between its core operating results, on a consistent basis, over different periods of time. Accordingly, management uses this financial measure for evaluating and making operating decisions and for purposes of comparison with its strategic plan, operating budgets and allocation of resources.

Furthermore, iPass believes the use of Adjusted EBITDA is useful to investors:

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To provide an additional analytical tool for understanding iPass’s projected financial performance by excluding the impact of items which may obscure trends in the core operating performance of the business;

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To provide consistency and enhance investors’ ability to compare iPass’s performance across financial reporting periods; and

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To facilitate comparisons to the operating results of other companies in iPass’s industry, which may use similar financial measures to supplement their GAAP results.

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Adjusted EBITDA should not be considered in isolation, or construed as an alternative to net income, or any other performance measure derived in accordance with GAAP, or as an alternative to cash flow from operating activities or as a measure of the company’s liquidity. In addition, other companies may calculate Adjusted EBITDA differently than iPass does, which would limit its usefulness in comparing iPass’s financial results with those of such other companies. The dollar amounts below are in millions of U.S. dollars, rounded to the nearest one million dollars.

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