On March 23, 2015, Massive Interactive, Inc. (the “Company”) closed on private offerings of secured convertible promissory notes (each a “Note” and collectively, the “Notes”) in the aggregate amount of $636,310 to multiple investors including the Company’s Chairman of the Board of Directors and Chief Executive Officer (Ron Downey) and Chief Creative officer (Derek Ellis). The offerings, made pursuant to note subscription agreements, represent initial closings in the Company’s private placement of up to $2,000,000 (the “Private Placement”). The note subscription agreements contain certain customary representations and warranties.
The Notes are secured by a first priority lien on all the Company’s assets pursuant to a security agreement among the Company and the Note holders. The Notes bear interest at an annual rate of 12% and mature on the first to occur of (i) December 31, 2015, (ii) certain change in control transactions (each a “Deemed Liquidation Event”), or (iii) the closing of the next issuance and sale of capital stock of the Company resulting in gross proceeds to the Company of at least $2,000,000 (a “Qualified Financing”).
In the event of a Deemed Liquidation Event, the Company will pay each Note holder an additional purchase premium equal to 100% of the principal amount of such holder’s Note. In the event any of the Notes remain outstanding and unpaid after December 31, 2015, the Company will pay the Note holder monthly liquidated damages payments equal to 1% of the original principal amount of the Note for each month that such Note remains unsatisfied, up to a cap of 12%. Upon the closing of a Qualified Financing, each Note holder will have the option to convert the principal and accrued but unpaid interest on their Note into shares of the securities sold in the Qualified Financing at a 20% discount to the lowest price paid by any investor in the Qualified Financing.
The outstanding principal and accrued but unpaid interest on all Notes may be prepaid by the Company without penalty with the prior written consent of the holders of a majority in interest of the then outstanding principal amounts of the Notes. The Notes will fall into default in certain customary events and, in addition, if Mr. Downey ceases to be the sole member of the Company's Board of Directors and Chief Executive Officer of the Company. Upon certain events of default, all then outstanding principal and accrued interest on the Notes automatically will become immediately due and payable.
The Notes provide for piggyback registration rights whereby the Company must notify all holders of capital stock issued upon the conversion of the Notes (the “Registrable Securities”) in writing at least 15 days prior to the filing of any registration statement on Form S-1 (not including the next public offering of securities of the Company) and will afford each holder of Registrable Securities an opportunity to include in such registration statement all or part of such holder’s Registrable Securities.
The Notes were offered and sold in the Private Placement without registration under the Securities Act of 1933, as amended (the “Securities Act”) in reliance on the exemption provided by Section 4(a)(2) of the Securities Act as provided in Rule 506(b) of Regulation D promulgated thereunder.
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The foregoing description of the Notes, note subscription agreements and security agreement is qualified in its entirety by reference to the form of such agreements, copies of which will be filed as exhibits to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015.
The information contained in this Current Report on Form 8-K is provided pursuant to Rule 135C of the Securities Act and does not and shall not constitute an offer to sell or the solicitation of an offer to buy any securities nor shall there be any sale of securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful.
