Business Context and Reporting Period
This Form 8-K was filed by KokiCare, Inc. (not Beyond Air, Inc.) on April 11, 2016, reporting events that occurred on April 5, 2016. The company is incorporated in Delaware and is based in Stevenson Ranch, California.
Key Financial Metrics
The filing discloses the issuance of a convertible promissory note with the following terms:
- Principal Amount: $5,000.00
- Interest Rate: 8% per annum (increases to 22% per annum retroactively upon default)
- Maturity Date: October 2, 2016
- Conversion Price: 60% of the average of the lowest three trading prices during the ten trading days prior to conversion
- Accounting Classification: Current liability
The filing text does not provide clear values for revenue, profit, cash flow, margins, or total debt levels outside of this specific transaction.
Material Changes
The primary material change is the entry into a Material Definitive Agreement and the creation of a direct financial obligation. The company has increased its short-term liabilities by $5,000 through the issuance of the note to an accredited investor.
Outlook, Risks, and Contingencies
Default Provisions: The note contains a penalty clause where the interest rate accelerates to 22% per annum retroactive to the issuance date if the holder accelerates the note due to default.
Equity Dilution: The conversion formula (60% of the lowest average price) is highly dilutive to existing shareholders if the stock price is volatile or declining.
Regulatory Status: The issuance was made to an accredited investor and is claimed to be exempt from SEC registration under Section 4(2) of the Securities Act of 1933.
Investor Verification Checklist
- Verify the company name discrepancy (Request listed "Beyond Air, Inc." but filing is for "KokiCare, Inc.").
- Confirm the total outstanding debt load to assess the significance of the $5,000 note relative to the company's overall liquidity.
- Review the company's recent stock price history to model potential dilution under the 60% conversion discount.
- Check for any existing defaults or covenant breaches that could trigger the 22% penalty interest rate.