CIRCLE8 GROUP INC 10-Q

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. None Item 3. Defaults Upon Senior Securities/Global Settlement SPP Credit Advisors LLC and Rick Arrowsmith v. Atlantic International Corp et al. In the Court of Chancery of The State of Delaware (Case No. 2026-0448-JTL) As previously reported in our Form 10-K for December 31, 2025, on April 2, 2026, Rick Arrowsmith, on behalf of SPP, and in response to the Company’s and its Lyneer Subsidiaries’ commencement on the same day of a lawsuit against SPP, commenced a lawsuit in the Court of Chancery of the State of Delaware against the Company, its’ officers and former officers, based on the unfounded alleged events of default, the plaintiff, appointed by SPP to take managerial control of the Lyneer subsidiaries. The plaintiff is seeking declaratory relief that he was able to remove all officers of the Company and is entitled to declaratory, preliminary and permanent injunctive relief to take control of the Company. On April 27, 2026, the Court entered a Status Quo Order (the “Order”). The Order controls the governance and management of the Lyneer Subsidiaries pending (a) a final disposition of the matter, or (b) an order that expressly modifies or supersedes the Order. The Order requires Lyneer to operate in the ordinary course of business (as defined) and to provide Mr. Arrowsmith with certain current financial statements as reasonably requested. SPP Lyneer Term Note Default Notice On March 30, 2026, SPP notified Atlantic and Lyneer that certain events of default have occurred and are continuing under the Financing Agreement. SPP asserted that the events of default related to our failure to satisfy certain financial and non-financial covenants under the Financing Agreement of the Term Note By letter dated April 30, 2026, SPP notified Atlantic and Lyneer that certain additional Events of Default had occurred, specifically as a result of (i) various Events of Default set forth in a statement from SLR to Lyneer Staffing dated April 17, 2026 (the “SLR Default”) as described below, and (ii) Certain payments made to or for the benefit of Atlantic. SPP has attempted to exercise its pledge and has sought to try to replace the management of Lyneer. SPP Credit Agreement Default Notice Simultaneously with the default letter under the Financing Agreement as described above, SPP notified the Company of certain events of default under (a) the Credit Agreement, dated June 18, 2024, and (b) the Pledge and Security Agreement dated as of June 18, 2024. By letter dated April 30, 2026, SPP notified Atlantic and Lyneer of certain additional Events of Default, specifically, as a result of (i) various Events of Default described in the above-described SLR Letter, (ii) various Events of Default described in the Default Notice dated March 30, 2026 from SPP to Lyneer, and (iii) permitting a subsidiary of Atlantic to make certain payments to or for the benefit of Atlantic. SPP Global Settlement On August 7, 2026, Circle8 Group, Inc. (herein referred to as “Atlantic”), together with Lyneer Investments, LLC, a Delaware limited liability company (“Lyneer Investments”), Lyneer Staffing Solutions, LLC, a Delaware limited liability company (“Lyneer Staffing”), and Lyneer Holdings, Inc., a Delaware corporation (“Lyneer Holdings,” and together with Lyneer Investments and Lyneer Staffing, the “Companies”), entered into a settlement agreement with SPP Credit Advisors, LLC (“SPP”), in its capacity as the Administrative Agent for itself and the lenders under the Bridge Loan Credit Agreement (as defined in the Settlement Agreement) and in its capacity as the Agent for itself and the secured parties under the Term Loan Credit Agreement (as defined in the Settlement Agreement.), to which that Companies, Atlantic, SPP and IDC Technologies, Inc., a California corporation (“IDC’) are parties. The settlement agreement (the “Settlement Agreement”) resolves outstanding litigation and claims (the “Pending Litigation”) between the parties arising out of the Bridge Loan Credit Agreement and the Lyneer Term Loan Credit Agreement (collectively, the “Loan Agreements”). Additionally, among other terms, the Settlement Agreement extinguishes a $35,000,000 Promissory note that was convertible into the common stock of the Company and provides for an orderly repayment of the Loan Agreements. To avoid further expense and uncertainty, the parties agreed to enter into the Settlement Agreement without admitting liability, agreeing to file joint stipulations of dismissal without prejudice for both the New York and Delaware actions upon execution. Key terms of the Settlement Agreement include: Share Exchange & Call Option : Atlantic agreed to issue 21,983,926 shares of Atlantic common Stock (the “New Atlantic Shares”) to SPP. In exchange, SPP granted Atlantic a ten-year call option to acquire 21,983,926 shares of Atlantic Common Stock foreclosed upon by SPP from IDC at a purchase price of $0.00001 per share for immediate retirement and 84 cancellation. Additionally, the $35,000,000 convertible promissory note issued by Atlantic to IDC in connection with the Company’s acquisition of the Lyneer Companies was released, canceled and discharged. Legal Fee Shares : Atlantic agreed to issue such number of shares of Common Stock to SPP (the “Legal Fee Shares”) as equals the total amount of SPP’s legal fees and expenses incurred in connection with the litigation, not exceeding $1,800,000. Disposition of Shares : SPP agreed to use commercially reasonable efforts to sell the New Atlantic Shares over an 18-month period (the “Disposition Period”) to satisfy the SPP Indebtedness. The indebtedness will bear interest at a non-default rate of 5% per annum during this period. If sales do not fully satisfy the indebtedness, Atlantic will execute an amended term note for the remaining balance with a 13-month term. If the SPP Indebtedness is repaid in full before all the shares are sold, any remaining shares will be returned to Atlantic for cancellation. Registration Rights & Liquidated Damages : Atlantic agreed to file a prospectus supplement to its existing Form S-3 shelf registration statement to register the resale of the New Atlantic Shares. Failure to file the supplement within three business days or maintain an effective registration statement during the Disposition Period obligates Atlantic to pay liquidated damages equal to 2% per month of the closing price multiplied by the covered shares. Management & Governance Changes: Lyneer Staffing agreed to engage Robert O. Riiska of SierraConstellation Partners LLC as Chief Transformation Officer (CTO). The board of directors of Lyneer Staffing will be reconstituted to consist of three members: one Atlantic designee, one SPP designee, and an Independent Director (initially Matthew Kahn). Specific material actions (such as bankruptcy filings, asset sales, mergers, or capital structure changes) remain subject to express written approval by Atlantic. Refinancing of Senior Debt : Lyneer Staffing agreed to use commercially reasonable efforts, without recourse if unsuccessful, to refinance the Loan and Security Agreement dated as of April 29, 2025, with North Mill Capital LLC (d/b/a SLR Business Credit, hereafter “SLR”) within 45 days of August 7, 2026. Upon refinancing of the SLR facility Lyneer is obligated to make a $5 million payment to SPP to: (i) first satisfy the SPP Bridge Loan in full; (ii) second to any remaining SPP legal Fees, and (iii) third to reduce the principal balance of the SPP indebtedness. Capital Raises & Proceeds Distribution : Proceeds from any future debt or equity capital raises by Atlantic will be distributed as follows: 20% divided equally between SPP (to pay legal fees and reduce loan principal) and Employers HR, LLC (to reduce payroll-related obligations), and 80% retained by Atlantic for corporate and operational expenses. No proceeds may be used for the purpose of paying employee bonuses. Nasdaq Delisting Notice On August 13, 2026, Circle8 Group, Inc. (the “Company”) received a deficiency letter from the NASDAQ Listing Qualifications Department (the “Staff”) of The NASDAQ Stock Market LLC (“NASDAQ”) notifying the Company that, for the last 30 consecutive business days, the closing bid price for the Company’s common stock has been below the minimum $1.00 per share required for continued listing on The NASDAQ Global Select Market pursuant to NASDAQ Listing Rule 5450(a)(1) (the “Minimum Bid Price Requirement”). The NASDAQ deficiency letter has no immediate effect on the listing of the Company’s common stock, and its common stock will continue to trade on The NASDAQ Global Market under the symbol “CIRC” at this time. In accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company has been given 180 calendar days, or until February 9, 2027, to regain compliance with the Minimum Bid Price Requirement. If at any time before February 9, 2027, the bid price of the Company’s common stock closes at $1.00 per share or more for a minimum of 10 consecutive business days, the Staff will provide written confirmation that the Company has achieved compliance. If the Company does not regain compliance with the Minimum Bid Price Requirement by February 9, 2027, the Company may be afforded a second 180 calendar day period to regain compliance. If the Company does not regain compliance with the Minimum Bid Price Requirement by the end of the compliance period (or the second compliance period, if applicable), the Company’s common stock will become subject to delisting. In the event that the Company receives notice that its common stock is being delisted, the Nasdaq listing rules permit the Company to appeal a delisting determination by the Staff to a hearings panel. The Company intends to monitor the closing bid price of its common stock and may, if appropriate, consider available options to regain compliance with the Minimum Bid Price Requirement, including initiating a reverse stock split. However, there can be no assurance that the Company will be able to regain compliance with the Minimum Bid Price Requirement or will otherwise be in compliance with other NASDAQ Listing Rules. 85 Item 4. Mine Safety Disclosures. Not applicable.