Business Context and Reporting Period
This Form 8-K Current Report was filed by Bond Laboratories, Inc. (referred to in metadata as FITLIFE BRANDS, INC.) on June 29, 2010. The filing discloses the entry into a material definitive agreement involving a bridge financing transaction with three accredited investors.
Key Financial Metrics
- Debt Issued: $172,000 in aggregate principal amount of promissory bridge notes.
- Net Proceeds: Approximately $149,050 after deducting selling commissions and expenses.
- Interest Rate: 10% per annum, accruing on the principal.
- Maturity Date: June 30, 2011 (one year from issuance).
- Equity Issued: 86,000 shares of common stock ($0.001 par value).
- Warrants Issued: Warrants to purchase 172,000 shares of common stock at an exercise price of $0.40 per share.
Material Changes and Terms
The company has incurred a new direct financial obligation through the issuance of Bridge Notes. Key terms include:
- Conversion/Exchange: In the event of a "Qualified Financing" (gross proceeds of at least $3.0 million), the outstanding balance (principal plus accrued interest) automatically exchanges for new securities. Investors receive credit for 115% of the outstanding balance toward the purchase price.
- Alternative Conversion: Investors may elect to convert the outstanding balance into common stock at a price of $0.35 per share, subject to adjustments.
- Covenants: The company requires prior written consent from investors to create or sell securities ranking senior to or pari passu with the Bridge Notes.
- Prepayment: The company may prepay amounts without penalty after the issuance date.
Outlook, Risks, and Management Commentary
Management intends to use the net proceeds for general working capital purposes. The company anticipates a need for additional capital to fund short-term working capital requirements. The filing explicitly states there is no assurance that the company will be able to obtain such additional financing on acceptable terms or at all. The securities were issued pursuant to exemptions under Regulation D and/or Section 4(2) of the Securities Act of 1933 and are not registered.
Investor Verification Checklist
- Verify the company's current cash position and ability to service the 10% interest and principal repayment by June 30, 2011.
- Confirm the dilution impact of the 86,000 shares issued and the potential 172,000 shares from warrant exercises.
- Assess the likelihood of a "Qualified Financing" ($3.0 million) occurring before maturity to trigger the automatic exchange mechanism.
- Review the specific adjustments to the $0.35 conversion price detailed in the attached Exhibit 10.1.
- Monitor for any future financing attempts that may require investor consent under the new covenants.