Business Context and Reporting Period
This Form 8-K was filed by uBid Holdings, Inc. (trading symbol: UBID) on July 29, 2019. The registrant is an emerging growth company incorporated in Delaware. The report details a material definitive contract entered into on the same date.
Key Financial Metrics and Transaction Details
The filing discloses a financing transaction with Auctus Fund, LLC involving the following terms:
- Convertible Promissory Note: Principal amount of $277,500.
- Fees Deducted: $27,500 due diligence fee and $4,000 legal fee were deducted from the principal.
- Interest Rate: 8% per annum.
- Maturity Date: July 22, 2020.
- Conversion Price: The lesser of $0.06 or 70% of the average of the three lowest volume-weighted average prices over the ten trading days preceding conversion notice.
- Warrant Issued: Right to purchase up to 7,000,000 shares at an exercise price of $0.06 per share, exercisable for three years.
- Prepayment Terms: Authorized to prepay within 180 days of issuance by paying 115% of the outstanding principal plus accrued interest.
Material Changes
The primary material change is the entry into the securities purchase agreement, resulting in new debt obligations and potential equity dilution through the convertible note and warrant. The filing does not provide comparative financial data or changes in revenue, profit, or cash flow versus prior periods.
Outlook, Risks, and Contingencies
The filing does not contain management commentary, forward-looking guidance, or specific risk factors beyond the terms of the agreement. A significant contingency noted is the requirement for uBid to maintain coverage of potential conversion equal to three times the number of shares into which the unpaid principal and accrued interest are convertible.
Investor Verification Checklist
- Verify the net cash proceeds received after the deduction of the $31,500 in fees.
- Assess the potential dilution impact of the 7,000,000 share warrant and the convertible note.
- Confirm the company's ability to meet the "three times coverage" requirement for potential conversion.
- Review the company's liquidity position to determine if prepayment within 180 days is feasible.