Business Context and Reporting Period
This Form 6-K filing by Dragon Victory International Limited (associated with Metalpha Technology Holding Ltd) covers the month of November 2020. The report discloses the entry into material definitive agreements regarding a private placement of convertible debentures.
Key Financial Metrics and Transaction Details
The filing details a financing transaction rather than standard periodic financial results. Key metrics include:
- Total Financing Capacity: Up to $1,500,000 in convertible debentures.
- Initial Issuance: $500,000 issued on November 20, 2020.
- Interest Rate: 5% annual rate, increasing to 15% upon an event of default.
- Maturity: Twelve months from issuance.
- Conversion Price: Fixed at $2.69 per ordinary share.
- Additional Shares: 50,000 ordinary shares issued to the investor as part of the transaction.
The filing text does not provide clear values for revenue, profit, cash flow, margins, or existing debt levels outside of this specific transaction.
Material Changes and Transaction Structure
The primary material change is the execution of a Securities Purchase Agreement with YA II PN, Ltd. The $1,500,000 total commitment is structured in three tranches:
- $500,000 purchased upon signing (completed).
- $500,000 purchased upon filing of a registration statement for resale of conversion shares.
- $500,000 purchased upon the registration statement being declared effective by the SEC.
The Company also entered into a Registration Rights Agreement requiring the filing of a registration statement (Form F-1 or F-3) within 21 days of the agreement date.
Outlook, Risks, and Management Commentary
Redemption Rights: The Company retains the right, but not the obligation, to redeem the debentures early if the trading price of the ordinary shares is less than the fixed conversion price of $2.69, provided 10 business days' prior written notice is given.
Risks: The interest rate escalates to 15% if an event of default remains uncured. The full funding of the $1,500,000 facility is contingent upon regulatory filings and effectiveness.
Investor Verification Checklist
- Verify the status of the SEC registration statement (Form F-1 or F-3) required for the second and third tranches of funding.
- Confirm the current trading price of the ordinary shares relative to the $2.69 conversion price to assess redemption risk.
- Review the full text of the Securities Purchase Agreement and Convertible Debenture (Exhibits 10.1 and 10.3) for specific default conditions.
- Check subsequent filings to confirm if the remaining $1,000,000 of the debentures was issued.