Business Context and Reporting Period
This Form 8-K was filed by uBid Holdings, Inc. (trading symbol: UBID) on July 29, 2019. The report details a material definitive contract entered into on the same date with Auctus Fund, LLC. The registrant is an emerging growth company incorporated in Delaware.
Key Financial Metrics and Transaction Details
The filing discloses a financing transaction rather than periodic financial performance metrics. Key terms of the agreement include:
- Convertible Promissory Note: Principal amount of $277,500.
- Net Proceeds: $246,000 (after deducting a $27,500 due diligence fee and $4,000 legal fees).
- Interest Rate: 8% per annum.
- Maturity Date: July 22, 2020.
- Warrant Issuance: Right to purchase up to 7,000,000 shares of common stock at an exercise price of $0.06 per share, exercisable for three years.
- Conversion Price: The lesser of $0.06 or 70% of the average of the three lowest volume-weighted average prices during the ten trading days preceding conversion notice.
- Prepayment Terms: Allowed within 180 days of issuance at 115% of the outstanding principal plus accrued interest.
Material Changes Versus Prior Period
The filing does not provide comparative financial data or revenue/profit metrics against prior periods. The material change reported is the entry into the new debt and equity-linked financing agreement with Auctus Fund, LLC.
Guidance, Outlook, and Risks
The filing does not contain forward-looking guidance, management commentary on future operations, or specific risk factors beyond the terms of the contract. Notable contractual obligations include:
- Share Coverage Requirement: uBid must maintain coverage of potential conversion equal to three times the number of shares into which the unpaid principal and accrued interest are convertible.
- Registration Rights: The warrant shares are to be registered under the 1933 Act.
Investor Verification Checklist
- Verify the current share count to assess the potential dilution from the 7,000,000 warrant shares and the convertible note.
- Confirm the company's ability to meet the "three times" share coverage requirement for the convertible note.
- Review the impact of the 8% interest rate and potential 15% prepayment penalty on future cash flow.
- Check the OTCQB trading volume and price history to understand the variable conversion price mechanism.