Filing Summary
Registrant and reporting date: The filing identifies the registrant as Cryptyde, Inc. (trading symbol TYDE), although the request metadata names Eightco Holdings Inc. The Form 8-K reports events dated March 15, 2023, and was signed March 16, 2023.
Business Context and Reporting Period
The filing concerns a proposed private placement and related financing documents. It does not provide operating results, revenue, profit, cash flow, margins, or other period-specific financial statements.
Transaction and Key Financial Terms
- The company entered into a Securities Purchase Agreement with an accredited investor for a senior secured convertible note with initial principal of $5.555 million and a warrant to purchase up to 44,475,581 common shares.
- The stated purchase price for the note and warrant is $5.0 million.
- The initial conversion price of the note and exercise price of the warrant are both $0.1249 per share, subject to stock-combination and anti-dilution adjustments.
- The note is expected to mature on January 15, 2024. It does not bear interest unless an event of default occurs, in which case it bears interest at 18% per year.
- The note will be senior secured and supported by guarantees, pledges, control agreements, and other security documents covering company and subsidiary assets, as applicable.
- The warrant is immediately exercisable upon issuance, has a five-year term, and may be exercised on a cashless or alternative cashless basis while the underlying shares are not registered or otherwise available for resale.
- The placement agent, Palladium Capital Group, LLC, is to receive $400,000 in cash at closing, equal to 8% of gross proceeds, and a warrant for up to 3,558,047 shares.
Material Changes and Financing Implications
- The proposed financing would create a substantial senior secured debt obligation and potential equity dilution through conversion of the note and exercise of warrants.
- The note and warrants include broad anti-dilution provisions that may reduce the conversion or exercise price and could increase the number of shares issuable.
- The investor’s conversion and exercise rights are generally subject to a 9.99% beneficial ownership limitation, which may be changed with advance notice but not above 9.99%.
- The company must obtain stockholder approval to increase its authorized shares and file a related Delaware certificate amendment as a condition to closing.
Closing Conditions, Guidance, Risks, and Contingencies
- The transaction had not necessarily closed as of the filing; closing was subject to investor and company conditions, including the authorized-share increase, a lock-up agreement, and an amendment to an existing subordination agreement.
- Either party may terminate its obligations if closing has not occurred by March 22, 2023 because of the other party’s failure to satisfy its closing obligations.
- Events of default include failures involving registration statements, trading-listing status, share delivery, share reserves, payment obligations, other indebtedness, security perfection, and compliance with note covenants.
- Following an event of default, the investor may require redemption at generally 130% of specified outstanding amounts, subject to detailed provisions that may produce a higher redemption amount based on the stock price.
- The company is restricted from incurring certain indebtedness or liens, making specified debt payments, or paying dividends or distributions.
- The company must seek registration of shares underlying the note and warrants. Failure to meet specified filing or effectiveness deadlines may result in payments equal to 2% of the purchase price on the delinquency date and each subsequent 30-day period, subject to the agreement’s terms.
- The financing is intended to be issued to accredited investors under the Section 4(a)(2) and Rule 506 exemptions from registration.
Most Important Facts to Verify
- Whether the financing actually closed and whether the note, investor warrant, and placement-agent warrant were issued.
- Whether stockholder approval and the authorized-share increase were obtained and filed.
- The company’s existing debt, collateral position, and the effect of the new senior secured obligations on liquidity.
- The maximum potential dilution after applying the note’s and warrants’ anti-dilution provisions.
- Whether required resale registration statements were filed and declared effective on schedule.
- The complete transaction documents and omitted schedules, which govern the detailed redemption, security, default, and registration terms.