Business Context and Reporting Period
This Form 8-K was filed by Slinger Bag Inc. (referred to in metadata as AIRWA INC.) on August 4, 2021, reporting events occurring on August 4 and August 6, 2021. The company is a Nevada corporation reporting the consummation of a private placement offering and the entry into a new short-term loan agreement.
Key Financial Metrics and Capital Structure
- Debt Financing: The company issued 8% Senior Convertible Notes with an aggregate principal amount of $11,000,000.
- Equity Instruments: Warrants were issued to purchase up to 7,333,334 shares of common stock.
- Cash Proceeds: The company received $11,000,000 in gross proceeds from the convertible note offering.
- Short-Term Debt: A separate $500,000 loan (Ontario Loan) was secured at 12% interest, due within 30 days.
- Debt Repayment: Proceeds from the $11 million offering were used to pay 100% of the outstanding principal and accrued interest on a $2,000,000 secured term promissory note (15% interest) owed to SB Invesco LLC.
Material Changes and Agreements
The primary material change is the entry into a Material Definitive Agreement (Securities Purchase Agreement) and the creation of direct financial obligations. The company executed a Subsidiary Guarantee, making its subsidiaries jointly and severally liable for the $11 million note obligations. Additionally, a Registration Rights Agreement was entered into, requiring the company to file a registration statement with the SEC within 90 days of closing to cover shares issuable upon conversion or exercise.
Terms, Outlook, and Risks
- Use of Proceeds: Net proceeds are designated for working capital and the repayment of the SB Invesco LLC loan. Proceeds are restricted from being used for debt satisfaction (other than the specified loan), stock redemptions, litigation settlements, or margin stock purchases.
- Conversion Terms: Notes are convertible at $3.00 per share (subject to adjustments) or a discounted price upon an uplist to NASDAQ. An "Alternate Conversion" option becomes available after December 31, 2021, or upon an Event of Default.
- Warrant Terms: Warrants are exercisable for five years at the lesser of $3.00 or a 20% discount to the public offering price upon a NASDAQ/NYSE listing.
- Liquidity Constraints: The $500,000 Ontario Loan prohibits any distributions or dividends until the loan is repaid in full.
- Risks: The securities were sold under Section 4(a)(2) and Rule 506(b) exemptions and carry restrictive legends preventing resale unless registered. The company is classified as an emerging growth company.
Investor Verification Checklist
- Verify the effective date of the registration statement required under the Registration Rights Agreement (must be within 90 days of August 6, 2021).
- Confirm the full repayment status of the $500,000 Ontario Loan to ensure dividend restrictions are lifted.
- Review the specific "Alternate Conversion" pricing formula in the Note agreement (Exhibit 4.1) for post-December 2021 conversions.
- Check for any subsequent filings regarding the uplisting of the company's stock to NASDAQ, which would trigger specific conversion and warrant exercise pricing.
- Confirm the identity of the "Subsidiaries" executing the guarantee to assess the scope of collateral backing the debt.