Business Context and Reporting Period
Company: FORM Holdings Corp. (Registrant) acquiring XpresSpa Holdings, LLC.
Filing Type: Form 8-K (Current Report)
Date of Report: December 23, 2016
Event: Completion of a merger where FORM Holdings Corp. acquired XpresSpa Holdings, LLC. XpresSpa became a wholly-owned subsidiary of FORM.
Key Financial Metrics and Transaction Details
This filing details the structure of the acquisition rather than standard operating financials (revenue, profit, cash flow) for the period, which are noted as forthcoming in a future amendment.
- Merger Consideration Issued to XpresSpa Unitholders:
- 2,500,000 shares of FORM Common Stock.
- 494,792 shares of Series D Convertible Preferred Stock (Initial liquidation preference: $23,750,000; Dividend rate: 9% per annum; Initial conversion into 3,958,336 shares of Common Stock).
- Five-year warrants to purchase 2,500,000 shares of FORM Common Stock at an exercise price of $3.00 per share.
- Post-Merger Ownership: Former XpresSpa stockholders own approximately 18% of FORM Common Stock (33% on a fully diluted basis). Pre-merger FORM stockholders own approximately 82% (67% fully diluted).
- Debt Assumption: FORM guaranteed a Senior Secured Note held by Rockmore Investment Master Fund Ltd. with an outstanding balance of approximately $6,500,000. The note accrues interest at 9.24% per annum plus an additional 2.0% per annum and matures on May 1, 2018.
Material Changes Versus Prior Period
The primary material change is the consolidation of XpresSpa into FORM Holdings Corp. as of December 23, 2016. This transaction significantly altered the capital structure through the issuance of new equity and preferred stock and the assumption of specific debt obligations. No comparative revenue or profit data is provided in this filing.
Guidance, Outlook, Risks, and Unusual Items
- Forward-Looking Statements: The filing includes standard disclaimers that actual results may differ materially from projections. Management disclaims any obligation to update these statements.
- Preferred Stock Repayment Risk: The Series D Preferred Stock matures in seven years (2023). FORM may repay in cash or stock. If repaid in stock and the share price is below $9.00, a "Premium Share" mechanism applies, potentially issuing a large number of shares (e.g., up to 11,875,000 shares if the price is $2.50), which could negatively impact the trading price of FORM Common Stock.
- Related Party Transaction: The Senior Secured Note holder, Rockmore, is controlled by FORM board member Bruce T. Bernstein. Rockmore received approximately 9.5% of the merger consideration and holds approximately 4.7% of FORM's outstanding common stock on a fully diluted basis post-merger.
- Management Changes: Edward Jankowski was elected Senior Vice President and CEO of XpresSpa. Andrew R. Heyer was elected to the Board of Directors as the designee for the Series D Preferred Stock holders.
- Financial Statements: Financial statements of the acquired business and pro forma financial information are not included in this report and will be filed within 71 days.
Important Facts for Investor Verification
- Verify the upcoming filing (within 71 days) for the financial statements of XpresSpa and pro forma combined financial information.
- Monitor the terms of the Series D Convertible Preferred Stock, specifically the potential for significant dilution if the stock price is below $9.00 at the 2023 maturity date.
- Review the related party nature of the $6.5 million Senior Secured Note held by Rockmore Investment Master Fund Ltd.
- Confirm the finalization of the employment agreement for Edward Jankowski, which is currently under negotiation.
- Check the impact of the 18% (33% fully diluted) ownership stake held by former XpresSpa unitholders on future corporate governance.