Business Context and Reporting Period
This Form 8-K is filed by Slinger Bag Inc. (Nevada corporation) on April 6, 2020, with the report dated April 8, 2020. The filing primarily addresses the formalization of executive leadership and a new strategic partnership.
Key Financial Metrics and Compensation
The filing does not report standard financial performance metrics such as revenue, profit, cash flow, or debt levels. Instead, it details significant compensation commitments:
- Base Salary: $360,000 annually for CEO Mike Ballardie.
- Equity Grant: Issuance of shares equal to 10% of outstanding common stock on a fully issued, converted, and diluted basis.
- Bonus: Minimum of 50% of the base salary.
- Benefits: Standard executive benefits or a cash allowance of at least $7,500 gross per month.
- Debt Contingency: Unpaid salary may be deferred and recorded as a loan to the Company, convertible into shares at the average trading price of the 10 days prior to the request.
Material Changes
- Executive Appointment: Mike Ballardie, previously serving as operating President and CEO without a formal agreement, has signed a formal Service Agreement effective April 6, 2020.
- Strategic Partnership: The Company entered into an exclusive distribution agreement with Globeride Inc., announced via press release on April 8, 2020.
Outlook, Risks, and Contingencies
Management Commentary and Risks:
- Liquidity Risk: The salary agreement explicitly acknowledges potential cash flow constraints. If funds are insufficient, salary is deferred as a loan, creating a contingent liability convertible to equity.
- Termination Liability: In the event of termination without cause or for "good reason," the Company is liable for the greater of the unexpired term or two years of base salary and benefits. Additionally, 100% of unvested stock and options vest immediately.
- Dilution Risk: The 10% equity grant is calculated on a fully diluted basis, which may significantly impact existing shareholders depending on the conversion of outstanding notes, warrants, and options.
Investor Verification Checklist
- Verify the Company's current cash position to assess the ability to fund the $360,000 annual salary and potential deferred loan obligations.
- Review the fully diluted share count to calculate the exact number of shares to be issued to Mr. Ballardie under the 10% grant.
- Examine the terms of the exclusive distribution agreement with Globeride Inc. (Exhibit 99.1) for revenue potential and obligations.
- Assess the impact of the two-year termination liability on the Company's future cash flow projections.