Business Context and Reporting Period
This Form 8-K is a current report filed by nFüsz, Inc. (not TON Strategy Co) on January 26, 2018, covering events occurring on January 10, 2018, and January 11, 2018. The company is an emerging growth company incorporated in Nevada, headquartered in Los Angeles, California. The filing discloses the entry into material definitive agreements involving the issuance of unsecured convertible notes and warrants.
Key Financial Metrics and Transaction Details
The filing details two separate financing transactions totaling $150,000 in principal debt. The filing text does not provide specific revenue, profit, cash flow, or margin data for the reporting period.
- Total Debt Issued: $150,000 (two notes of $75,000 each).
- Interest Rate: 8% per annum on both notes.
- Maturity Dates: January 11, 2019 (EMA Note) and January 10, 2019 (Auctus Note).
- Warrants Issued: 1,000,000 total (500,000 per investor) with an exercise price of $0.14 per share, expiring in January 2023.
- Use of Proceeds: Funding current software development initiatives and general business purposes.
Material Changes and Terms
The primary material change is the creation of new direct financial obligations and potential equity dilution through convertible notes and warrants.
- Conversion Rights: If unpaid 180 days after issuance, investors may convert the notes into common stock at a price equal to 70% of the lower of (a) the lowest sale price during the 10 trading days preceding conversion, or (b) the closing bid price.
- Investors: EMA Financial, LLC and Auctus Fund, LLC.
- Regulatory Basis: Transactions relied on exemptions under Regulation S and/or Section 4(a)(2) of the Securities Act of 1933.
Outlook, Risks, and Contingencies
Management intends to utilize the proceeds for software development and general operations. The filing highlights significant dilution risk due to the "ratchet" conversion feature, which allows conversion at a 30% discount to the market price if the notes are not repaid within 180 days. The company is classified as an emerging growth company, which may impact financial reporting requirements.
Investor Verification Checklist
- Verify the current market price of nFüsz, Inc. common stock to assess the potential dilution impact of the 70% conversion discount.
- Confirm the company's ability to repay the $150,000 principal plus accrued interest within 180 days to avoid mandatory conversion.
- Review the full text of the Securities Purchase Agreements (Exhibits 10.1 and 10.4) for additional covenants or default provisions not summarized in the 8-K.
- Check subsequent filings for any updates on the status of these notes or additional equity issuances.