B. Financing
On April 18, 2016, the Company issued to Apollo Capital Group, LLC (“Apollo Capital”) a Convertible Promissory Note (the “Note”) in the original principal amount of $220,000 (the “Purchase Price”) which Note bears interest at 12% per annum and is compounded daily. The Company sold the Note to Apollo Capital for $200,000 with $20,000 retained by Apollo Capital as an original issuance discount for due diligence and legal expenses related to the transaction. The principal amount and accrued interest under the Note is convertible into the Company’s common stock, $0.001 par value (the “Common Stock”), at Apollo Capital’s option, at any time beginning 180 days after the date of issuance at a 50% discount of by the lowest trading price for the Company’s common stock during the 20 trading day period prior to conversion (the “Conversion Price”). All outstanding principal and accrued interest on the Note is due and payable on the maturity date, which date is October 17, 2016 (the “Maturity Date”). The conversion price is subject to adjustment in the event the Company sells or grants any option to purchase or sells or grants any right to reprice, or otherwise disposes of or issues (or announces any sale, grant or any option to purchase or other disposition), any common stock or common stock equivalents entitling any person to acquire shares of Common Stock at an effective price per share that is lower than the conversion price in effect on the date of such issuance. In addition, the Conversion Price is subject to proportional adjustment in the event of stock splits, stock dividends and similar corporate events.
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SEANIEMAC INTERNATIONAL, LTD. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2016
(Unaudited)
The principal balance of the Note may be prepaid at any time after 10 days’ prior written notice by the Company to Apollo Capital by paying Apollo Capital an amount equal to the Prepayment Percentage (as hereinafter defined) multiplied by the sum of the principal amount due, accrued interest and any other amounts due under the Note. The Prepayment Percentage is (i) 150% during the period beginning on the date the Note is issued and ending 90 days thereafter or (ii) 200% during the period beginning 91 days after the Note is issued and ending 180 days thereafter. After the expiration of the 180 days after the date the Note issued, the Company has no right of prepayment.
C. Iliad Warrants
On April 5, 2016 Iliad made a demand on the Company to issue 64,660,484 shares of the Company’s common stock (the “Delivery Shares”) issuable upon exercise of warrants issued to Iliad on December 2, 2013 (the “Iliad Warrant”) and for damages due to Company’s failure to deliver the Delivery Shares to Iliad pursuant to the terms of the Warrant, late fees in the amount of $2,000.00 per trading day (the greater of $2,000.00 and 2% of the product of the number of Delivery Shares not delivered to Investor (64,660,484) multiplied by the closing sales price of the Common Stock on the last trading day the Company could have delivered the Delivery Shares to Iliad without breaching the terms of the Warrant (which closing sale price was $0.0011 according to Iliad’s demand) have been accruing since April 1, 2016 (the “Late Fees”). The Company has been notified by Apollo that Apollo Capital Corp. believes that it acquired the Warrants when it acquired the Note on December 18, 2015 as discussed in Note 12 above despite Iliad’s demand for issuance of the Delivery Shares. The Company has elected to withhold issuance of the Delivery Shares until the dispute between Iliad and Apollo regarding ownership of the Warrants and the rights to the Delivery Shares has been resolved. The Company is, however, subject to possible late fees and damages as a result of its failure to issue the Delivery Shares to Iliad in the event Iliad is deemed the owner of the Warrant.
**
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Our Business
SeanieMac International, Ltd. (the “Company”) maintain a website for online gambling, including sports betting and casino gaming on the apollobet.com website following our acquisition of assets from Apollo Betting and Gaming Ltd (“Apollo Betting”) discussed below. Following our acquisition of Apollo Betting, we closed down the seaniemac.com website which we launched in May 2013.
Recent Developments
On February 10, 2016, the Company and its wholly owned subsidiary SeanieMac Holdings Ltd., (“Holdings”), entered into an agreement (the “Apollo Agreement”) with Apollo Betting, pursuant to which Holdings purchased Apollo Betting’s online gambling and betting business carried in the United Kingdom, via a purchase of Apollo Betting’s assets related to that business. The purchase has an effective date of February 1, 2016. The Company is a guarantor of Holding’s obligations under the Apollo Agreement.
In exchange for the assets, Holdings agreed to pay Apollo Betting a total of $2,000,000, as follows: (i) $80,000 was paid at the closing; (ii) $10,000 to be paid to Apollo Betting within two business days of the date on which Apollo Betting delivers to Holdings audited accounts of Apollo Betting for the year ended March 31, 2014; (iii) $10,000 to be paid to Apollo Betting within two business days of the date on which Apollo Betting delivers to Holdings audited accounts of Apollo for the year ended March 31, 2015; and (iv) $1,900,000 to be paid to Apollo Betting upon the migration of the acquired business onto a new operating platform which is capable of delivering the online betting services provided by Apollo Betting in substantially the same way as provided by Apollo Betting as of the closing, and the successful use of the new platform in connection with a bet placed by any person who is included on Apollo Betting’s database of customers as of the closing, with the amounts payable under this clause (iv) being paid from the combined net profits Holdings and Seaniemac Limited, which is also a wholly owned subsidiary of the Company.
On February 25, 2016, the Company issued to Apollo Capital Group, LLC (“Apollo Capital”) a Convertible Promissory Note (the “Apollo Note”) in the original principal amount of $35,500 (the “Purchase Price”), which Apollo Note bears interest at 12% per annum and is compounded daily. The Company sold the Apollo Note to Apollo Capital for $30,000 with $5,500 retained by Apollo Capital as an original issuance discount for due diligence and legal expenses related to the transaction. The principal amount and accrued interest under the Apollo Note is convertible into the Company’s common stock, at Apollo Capital’s option, at any time beginning 180 days after the date of issuance at a 60% discount of by the lowest trading price for the Company’s common stock during the 30 trading day period prior to conversion (the “Apollo Conversion Price”). All outstanding principal and accrued interest on the Apollo Note is due and payable on the maturity date, which date is August 25, 2016 (the “Apollo Maturity Date”). The Apollo Conversion Price is subject to adjustment in the event the Company sells or grants any option to purchase or sells or grants any right to reprice, or otherwise disposes of or issues (or announces any sale, grant or any option to purchase or other disposition), any common stock or common stock equivalents entitling any person to acquire shares of common stock at an effective price per share that is lower than the conversion price in effect on the date of such issuance. In addition, the Apollo Conversion Price is subject to proportional adjustment in the event of stock splits, stock dividends and similar corporate events.
The principal balance of the Apollo Note may be prepaid at any time after 10 days’ prior written notice by the Company to Apollo Capital by paying Apollo Capital an amount equal to the Prepayment Percentage (as hereinafter defined) multiplied by the sum of the principal amount due, accrued interest and any other amounts due under the Apollo Note. The Prepayment Percentage is (i) 150% during the period beginning on the date the Apollo Note is issued and ending 90 days thereafter or (ii) 200% during the period beginning 91 days after the Apollo Note is issued and ending 180 days thereafter. After the expiration of the 180 days after the date the Apollo Note issued, the Company has no right of prepayment.
So long as the Company has any obligation outstanding under the Apollo Note, the Company may not make distributions on its capital stock, repurchase shares of its common stock, borrow funds except debts existing as of the date of the Apollo Note, indebtedness to trade creditors or financial institutions incurred in the ordinary course of business or sell, lease or otherwise dispose of any significant portion of its assets outside the ordinary course of its business.
So long as the Company shall have any obligation under the Apollo Note, the Company shall not, without Apollo Capital’s written consent, lend money, give credit or make advances to any person, firm, joint venture or corporation, including, without limitation, officers, directors, employees, subsidiaries, and affiliates of the Company, except loans, credits or advances (a) in existence or committed on the date hereof and which the Company has informed Apollo Capital in writing prior to the date hereof, (b) made in the ordinary course of business, or (c) not in excess of $100,000.
The Company granted Apollo Capital a five business day right of first refusal to provide the Company with any and all of the Company’s future capital needs until Apollo Capital has converted the Apollo Note in full or until the Company’s obligations to Apollo Capital hereunder are otherwise satisfied in full. The Company will give Apollo Capital 10 business days’ prior written notice by email, receipt requested, of all capital needs during the period of such right of first refusal.
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