The one where they borrowed 1.5 million and claimed it was for bridge financing to close the Sound Concepts acquisition which we later found out wasn’t entirely truthful since they used that money for other things:
The original principal amount of the Note is $1,500,000, of which we received $1,350,000 in gross proceeds, as the Note contained an original issue discount (“OID”) of 10%, or $150,000. Other than in connection with the OID, the Note does not bear interest. The maturity date of the Note is April 19, 2019. The Note also provides for a mandatory prepayment, as follows. In the event that we consummate our potential “Public Offering,” then, within three business days after the closing thereof, we are to repay the Note in cash in an amount equal to its then-outstanding principal amount.
The Note is convertible into shares of our common stock only on or after the occurrence of an uncured “Event of Default.” Primarily, we will be in default if we do not repay the principal amount of the Note, as required. The other Events of Default are standard for the type of transaction represented by the SPA and the Note. The conversion price in effect on any date on which some or all of the principal of the Note is to be converted shall be a price equal to 70% of the lowest VWAP during the ten trading days immediately preceding the date on which the third party provided its notice of conversion. Upon an Event of Default, we will owe the third party an amount equivalent to 110% of the then-outstanding principal amount of the Note in addition to of all other amounts, costs, expenses, and liquidated damages that might also be due in respect thereof. We have agreed that, on or after the occurrence of an Event of Default, we will reserve and keep available that number of shares of our Common Stock that is at least equal to 200% of the number of such shares that potentially would be issuable pursuant to the terms of the SPA and the Note (assuming conversion in full of the Note and on any date of determination).
