Boxlight Corp. 8-K Summary: September 21, 2020
Business Context and Reporting Period
Boxlight Corporation (Nasdaq: BOXL), an emerging growth company incorporated in Nevada, filed this Current Report on Form 8-K on September 21, 2020. The filing discloses the entry into material definitive agreements and the unregistered sale of equity securities to secure immediate liquidity.
Key Financial Metrics and Transaction Details
- Capital Raised: The Company received $20,000,000 in cash funding.
- Debt Instrument: Issued a $22,000,000 secured convertible note (face value) to Lind Global Asset Management, LLC.
- Equity Issued: Sold 310,399 shares of Class A common stock as a bonus fee component.
- Interest Rate: 4% annual interest, reduced to 0% if the Common Stock trades at $3.50 or more per share.
- Repayment Terms: 24-month term with 22 equal installments commencing 60 days after funding. Repayment may be made in cash or Common Stock at the Company's option.
- Conversion Terms: Conversion price of $3.50 per share, allowing conversion into up to 6,285,714 shares. A "down-round" provision adjusts the price to 90% of the average five lowest daily VWAPs if market capitalization falls below $50,000,000.
- Fees: Paid a $400,000 commitment fee and a $500,000 bonus fee (paid in stock).
Material Changes and Agreements
The filing details the execution of a Securities Purchase Agreement (Lind SPA) and the restructuring of existing security arrangements:
- Security Agreement: Entered into a Third Amended and Restated Security Agreement with Lind Global Macro Fund, LP (GMF), incorporating the new Convertible Note.
- Intercreditor Agreement: Executed a Third Amended and Restated Intercreditor Agreement involving Sallyport Commercial Finance, LLC (first lien creditor) and GMF/Lind (second lien creditors) to reaffirm security interest priorities.
- Registration Rights: Common Stock issuable for the bonus payment and upon conversion of the note will be registered for resale under the Company's existing Form S-3 shelf registration.
Outlook, Risks, and Contingencies
The transaction was conducted under Section 4(a)(2) of the Securities Act as an exemption from registration, with the investor representing accredited status. Key risks and contingencies include:
- Dilution Risk: Significant potential dilution exists if the note is converted into up to 6.3 million shares, particularly if the stock price triggers the conversion price adjustment mechanism.
- Liquidity Dependency: The 0% interest rate is contingent on the stock price remaining above $3.50; falling below this threshold increases the cost of debt.
- Market Cap Trigger: If the Company's market capitalization drops below $50,000,000, the conversion price adjusts downward, increasing the number of shares issuable upon conversion.
Investor Verification Checklist
- Verify the current trading price of Boxlight stock relative to the $3.50 interest rate threshold and the $50,000,000 market capitalization trigger.
- Review the impact of the potential 6,285,714 convertible shares on existing shareholder dilution.
- Confirm the Company's ability to meet the 22 installment payments starting 60 days post-closing.
- Examine the existing shelf registration statement (Form S-3) to ensure capacity for the required resale registration of bonus and conversion shares.
- Assess the priority of claims between Sallyport (first lien) and Lind/GMF (second lien) in the event of default.