|
Item 1.01.
|
Entry into a Material Definitive Agreement.
|
During the period June
6-12, 2019, Findex.com, Inc. (the “Company”) entered into a series of related Securities Exchange Agreements and Securities
Purchase Agreements with then Company debtholders by which it effectively restructured what had been an aggregate of $3,714,485
in outstanding debt on its balance sheet and leaving in its stead only a combination of a newly authorized series of convertible
preferred stock and warrants to acquire two separate but also recently authorized series’ of convertible preferred stock.
These transactions represented a deliberate and carefully planned initiative by the Company aimed at significantly increasing
the strength of its balance sheet by eliminating 81% of its previously existing debt and relief from the resulting and mounting
financial vulnerability and stress to which the Company had become increasingly exposed in recent years.
As of June 12, 2019, Findex.com,
Inc. had total liabilities of $4,577,859 on its balance sheet, and had been facing increasing financial pressures for years, and
challenges in raising much-needed working capital, because of it. Through a carefully structured and negotiated series of related
transactions constituting a major recapitalization of the company as of June 12, 2019, however, that figure, not yet audited but
confirmed by the company’s internal accounting representatives, has been reduced to $863,374. Further, all ongoing interest
expense relating to the subject debt has also been eliminated and will no longer be a factor in calculating the net income of
the company.
The aggregate $3,714,485
that had existed as outstanding debt obligations on the Company’s balance sheet as of the beginning of the restructuring
period consisted of a combination of the following:
|
▪
|
$458,729 in a promissory note payable to one separate, private investor for a cash investment, together with accrued interest, dating back as far as July, 2014;
|
|
▪
|
$1,367,450 in convertible promissory notes payable to eight separate, private investors for cash investments together with accrued interest;
|
|
▪
|
$845,491 in accrued but unpaid salary and/or wages payable to two Company employees for services rendered, together with accrued interest, dating back as far as January, 2014;
|
|
▪
|
$200,945 in accrued but unpaid fees payable to two Company directors for their services rendered, together with accrued interest, dating back as far as January, 2015; and
|
|
▪
|
$841,870 in convertible promissory notes payable to four separate, outside professionals and consultants for accrued but unpaid professional and consulting fees together with accrued interest, dating back as far as January, 2014.
|
Through the afore-referenced
series of transactions, and as more fully detailed below, all of such previously existing debt has been, as of June 12, 2019, exchanged
for, and effectively converted to, either shares of preferred stock or warrants to acquire shares of preferred stock. On a combined
basis, these transactions resulted in the removal of $3,714,485 in otherwise repayable debt obligations of the Company.
The Series RX-1 Preferred
Stock Transactions
Between June 6 and 12,
2019, pursuant to certain securities exchange agreements and securities purchase agreements between the Company and various private
investors, and in exchange for an aggregate $1,826,180 in debt owed to such parties as of such dates, inclusive of accrued interest,
(a portion of which debt had been convertible into Company common stock in accordance with its stated terms and the remainder of
which had not), the Company issued to such private investors a total of 1,418,615 shares of Company Series RX-1 preferred stock
(the “Series RX-1 Preferred Stock”). As previously disclosed in the Company’s current report on Form 8-K filed
with the SEC on May 31, 2019, 1,500,000 shares of the Series RX-1 Preferred Stock, par value $0.001 per share, had been previously
authorized by the Company’s board of directors on May 24, 2019 pursuant to its authority to designate serial preferred stock
from time to time under Article V Section B of the Company’s Articles of Incorporation (as amended to date, the “Company
Articles”), and a certificate of designations amending the Company Articles and reflecting the Series RX-1 was duly filed
with the Nevada Secretary of State on May 24, 2019 (as included as Exhibit 3.1 to the Company’s current report on Form 8-K
filed with the SEC on May 31, 2019, the “Series RX-1 Certificate of Designations”). Also as previously disclosed in
the Company’s current report on Form 8-K filed with the SEC on May 31, 2019, the Series RX-1 Preferred Stock carries the
following rights, preferences and privileges:
|
▪
|
automatic conversion into shares of Company common stock on a 100-for-1 basis immediately upon the Company either (i) issuing any shares of any series of preferred stock senior to or
parri passu
with the Series RX-1 Preferred Stock in liquidation, or (ii) subdividing the outstanding shares of Company common stock into a greater number of shares (a forward stock-split), or (iii) combining the outstanding shares of Company common stock into a smaller number of shares of Company common stock (a reverse stock-split);
|
|
▪
|
voluntary conversion to Company common stock at the same 100-for-1 conversion ratio any time prior to automatic conversion;
|
|
▪
|
voting on an as-converted-to-common-stock basis, together as a single class, with the Company common stock, on all matters requiring the approval, ratification or consent of holders of the common stock; and
|
|
▪
|
a senior liquidation preference entitling its holders to be paid $1.00 per share out of the assets of the Company in the event of any liquidation, dissolution, or winding-up of the Company, whether voluntary or involuntary, before any distribution or payment is made to any holders of any shares of the Company's common stock.
|
All of the foregoing notwithstanding,
the Series RX-1 Preferred Stock is redeemable by the Company at any time prior to conversion at a price of $1.00 per share.
Though subject to the corresponding
documents annexed hereto as Exhibit 10.1, the following table summarizes the Series RX-1 Preferred Stock Transactions:
Series RX-1 Preferred Stock Debt Holder
|
|
Aggregate Principal and Interest Consideration Exchanged/Paid
|
|
Total Number of Series RX-1 Preferred Shares Issued
|
|
Total Number of Common Shares Into Which Shares are Convertible (Before Any Potential Adjustment)
|
Catalyst Capital Group LLC
|
|
$
|
69,041
|
|
|
|
52,325
|
|
|
|
5,232,500
|
|
Conway, P.
|
|
|
458,729
|
|
|
|
324,262
|
|
|
|
32,426,200
|
|
Kuehne Developments
|
|
|
73,560
|
|
|
|
65,396
|
|
|
|
6,539,600
|
|
Kuehne, J.
|
|
|
36,583
|
|
|
|
32,367
|
|
|
|
3,236,700
|
|
Kuehne, N.
|
|
|
22,510
|
|
|
|
20,351
|
|
|
|
4,070,200
|
|
Landry, M.
|
|
|
22,580
|
|
|
|
20,483
|
|
|
|
2,048,300
|
|
Membrado, M.
|
|
|
37,251
|
|
|
|
33,873
|
|
|
|
3,387,300
|
|
Mito, M.
|
|
|
1,070,974
|
|
|
|
822,639
|
|
|
|
82,263,900
|
|
WorldWide Associates
|
|
|
34,952
|
|
|
|
26,568
|
|
|
|
2,656,800
|
|
Combined Total
|
|
$
|
1,826,180
|
|
|
|
1,418,615
|
|
|
|
141,861,500
|
|
The Series RX-2 Preferred
Stock Warrant Transactions
Between June 6 and 12,
2019, pursuant to certain securities exchange agreements and securities purchase agreements between the Company and certain of
its directors and current and former employees, and in exchange for an aggregate $490,658 in debt owed to such parties as of such
dates, inclusive of accrued interest, (a portion of which debt had been convertible into Company common stock in accordance with
its stated terms and the remainder of which had not), the Company issued to such individuals warrants to purchase a total of 981,316
shares of Company Series RX-2 preferred stock (the “Series RX-2 Preferred Stock”) at a price per share of $0.50 (collectively,
the “Series RX-2 Warrants”). As previously disclosed in the Company’s current report on Form 8-K filed with the
SEC on June 7, 2019, 1,000,000 shares of the Series RX-2 Preferred Stock, par value $0.001 per share, had been previously authorized
by the Company’s board of directors on May 31, 2019 pursuant to its authority to designate serial preferred stock from time
to time under Article V Section B of the Company Articles, and a certificate of designations amending the Company Articles and
reflecting the Series RX-2 was duly filed with the Nevada Secretary of State on June 3, 2019 (as included as Exhibit 3.1 to the
Company’s current report on Form 8-K filed with the SEC on June 7, 2019, the “Series RX-1 Certificate of Designations”).
The Series RX-2 Warrants
are exercisable at any time prior to the earlier of (i) the effectiveness of any capital reorganization of the Company, any reclassification
of the capital stock of the Company, any consolidation or merger of the Company with or into another corporation (other than a
consolidation or merger in which the Company is the surviving entity), or any transfer of all or substantially all of the assets
of the Company, or other similar occurrence involving the Company, or (ii) December 31, 2021.
As previously disclosed
in the Company’s current report on Form 8-K filed with the SEC on June 7, 2019, the Series RX-2 Preferred Stock carries the
following rights, preferences and privileges:
|
▪
|
automatic conversion into shares of Company common stock on a 100-for-1 basis immediately upon the effectiveness of any amendment to the Company Articles increasing the authorized number of shares of Company common stock from 900,000,000 to a number equal to or greater than 1,600,000,000;
|
|
▪
|
voting on an as-converted-to-common-stock basis, together as a single class, with the Company common stock, on all matters requiring the approval, ratification or consent of holders of the common stock; and
|
|
▪
|
a ranking in liquidation of the Company
pari passu
with the Company common stock on an as-converted basis, and junior to all other classes and series of equity securities of the Corporation which by their terms do not rank
pari passu
, though subordinate and junior to to all indebtedness of the Company.
|
Though subject to the corresponding
documents annexed hereto as Exhibits 10.2, 10.3 and 10.4, the following table summarizes the Series RX-2 Preferred Stock Warrant
Transactions:
Series RX-2 Preferred Stock Warrant Debt Holder
|
|
Aggregate Principal and Interest Consideration Exchanged/Paid
|
|
Total Number of RX- 2 Shares For Which Warrants Issued Are Exercisable
|
|
Total Number of Common Shares Into Which Shares are Convertible (Before Any Potential Adjustment)
|
|
Amount of Cash Potentially Realizable by the Company Upon Exercise of the Warrants Issued
|
Ireland, B.
|
|
$
|
29,003
|
|
|
|
58,006
|
|
|
|
5,800,600
|
|
|
$
|
29,003
|
|
Kuehne, J.
|
|
|
149,021
|
|
|
|
298,042
|
|
|
|
29,804,200
|
|
|
|
149,021
|
|
Schoenfeld, D.
|
|
|
51,924
|
|
|
|
103,848
|
|
|
|
10,384,800
|
|
|
|
51,924
|
|
Tucker, C.
|
|
|
87,009
|
|
|
|
174,018
|
|
|
|
17,401,800
|
|
|
|
87,009
|
|
Octiller International
|
|
|
81,651
|
|
|
|
163,302
|
|
|
|
16,330,200
|
|
|
|
81,651
|
|
Singer, G.
|
|
|
92,050
|
|
|
|
184,100
|
|
|
|
18,410,000
|
|
|
|
92,050
|
|
Combined Total
|
|
$
|
490,658
|
|
|
|
981,316
|
|
|
|
98,131,600
|
|
|
$
|
490,658
|
|
The Series RX-3 Preferred
Stock Warrant Transactions
Between June 6 and 12,
2019, pursuant to certain securities exchange agreements and securities purchase agreements between the Company and certain of
its outside professional consultants and employees, and in exchange for an aggregate $1,397,647 in debt owed to such parties as
of such dates, inclusive of accrued interest, (a portion of which debt had at one point in time been convertible into Company common
stock in accordance with its stated terms and the remainder of which had not), the Company issued to such individuals warrants
to purchase a total of 481,212 shares of Company Series RX-3 preferred stock (the “Series RX-3 Preferred Stock”) at
a price per share of $5.00 (collectively, the “Series RX-3 Warrants”). ”). As previously disclosed in the Company’s
current report on Form 8-K filed with the SEC on June 7, 2019, 500,000 shares of the Series RX-3 Preferred Stock, par value $0.001
per share, had been previously authorized by the Company’s board of directors on May 31, 2019 pursuant to its authority to
designate serial preferred stock from time to time under Article V Section B of the Company Articles, and a certificate of designations
amending the Company Articles and reflecting the Series RX-3 was duly filed with the Nevada Secretary of State on June 3, 2019
(as included as Exhibit 3.2 to the Company’s current report on Form 8-K filed with the SEC on June 7, 2019, the “Series
RX-1 Certificate of Designations”).
Except in the event that
certain intervening corporate events trigger acceleration, the rights of the recipients of Series RX-3 Warrants shall only vest
and become exercisable as follows:
(i) until
such time following the date of any Series RX-3 Warrant, if at all, that the gross profit of the Company as reported in the Company’s
consolidated and audited financial statements contained within its Annual Report on Form 10-K (the “Form 10-K”) filed
with the U.S. Securities and Exchange Commission (the “SEC”) for any then preceding fiscal year during which such Series
RX-3 Warrant is outstanding (“Reported Annual Gross Profit”), equals or exceeds $1,000,000, such Series RX-3 Warrants
shall not be exercisable for any shares of Series RX-3 Preferred Stock;
(ii) upon
achievement for the first time following the date of any Series RX-3 Warrant, if at all, of a Reported Annual Gross Profit equal
to or exceeding $1,000,000, then such Series RX-3 Warrant shall become exercisable for twenty-five percent (25%) of the number
of shares of Series RX-3 Preferred Stock for which it is stated to be exercisable in the aggregate as of the date of the filing
of the Form 10-K in which the corresponding financial statements have been included;
(iii) upon
achievement for the first time following the date of any Series RX-3 Warrant, if at all, of a Reported Annual Gross Profit equal
to or exceeding $2,000,000, then such Series RX-3 Warrant shall become exercisable for twenty-five percent (25%) of the number
of shares of Series RX-3 Preferred Stock for which it is stated to be exercisable in the aggregate as of the date of the filing
of the Form 10-K in which the corresponding financial statements have been included;
provided, however
, that, if the achievement
of the Reported Annual Gross Profit hurdle set forth in subsection (ii) above shall occur concurrently with the achievement of
the Reported Annual Gross Profit hurdle set forth in this subsection (iii), then and in such event, the vesting of the exercise
rights relative to shares of Series RX-3 Preferred Stock under such Series RX-3 warrant shall be cumulative (i.e. fifty percent
[50%]);
(iv) upon
achievement for the first time following the date of any Series RX-3 Warrant, if at all, of a Reported Annual Gross Profit equal
to or exceeding $4,000,000, then such Series RX-3 Warrant shall become exercisable for twenty-five percent (25%) of the number
of shares of Series RX-3 Preferred Stock for which it is stated to be exercisable in the aggregate as of the date of the filing
of the Form 10-K in which the corresponding financial statements have been included;
provided, however
, that, if the achievement
of the Reported Annual Gross Profit hurdle set forth in subsection (ii) and/or (iii) above shall occur concurrently with the achievement
of the Reported Annual Gross Profit hurdle set forth in subsection (iv), then and in such event, the vesting of the exercise rights
relative to shares of Series RX-3 Preferred Stock under such Series RX-3 Warrant shall be cumulative (i.e. either fifty percent
[50%] or seventy-five percent [75%], as applicable);
(v) upon
achievement for the first time following the date of any Series RX-3 Warrant, if at all, of a Reported Annual Gross Profit equal
to or exceeding $8,000,000, then such Series RX-3 Warrant shall become exercisable for twenty-five percent (25%) of the number
of shares of Series RX-3 Preferred Stock for which it is stated to be exercisable in the aggregate as of the date of the filing
of the Form 10-K in which the corresponding financial statements have been included;
provided, however
, that, if the achievement
of the Reported Annual Gross Profit hurdle set forth in subsection (ii), (iii), and/or (iv) above shall occur concurrently with
the achievement of the Reported Annual Gross Profit hurdle set forth in this subsection (v), then and in such event, the vesting
of the exercise rights relative to shares of Series RX-3 Preferred Stock under such Series RX-3 Warrant shall be cumulative (i.e.
either fifty percent [50%], seventy-five percent [75%], or one hundred percent [100%], as applicable).
Once vested pursuant to
the foregoing schedule, the Series RX-3 Warrants are exercisable in accordance with their terms at any time prior to the earlier
of (i) the effectiveness of any capital reorganization of the Company, any reclassification of the capital stock of the Company,
any consolidation or merger of the Company with or into another corporation (other than a consolidation or merger in which the
Company is the surviving entity), or any transfer of all or substantially all of the assets of the Company, or other similar occurrence
involving the Company, or (ii) December 31, 2029.
As previously disclosed
in the Company’s current report on Form 8-K filed with the SEC on June 7, 2019, the Series RX-3 Preferred Stock carries the
following rights, preferences and privileges:
|
▪
|
automatic conversion into shares of Company common stock on a 1,000-for-1 basis immediately upon the effectiveness of any amendment to the Company Articles increasing the authorized number of shares of Company common stock from 900,000,000 to a number equal to or greater than 1,600,000,000;
|
|
▪
|
voting on an as-converted-to-common-stock basis, together as a single class, with the Company common stock, on all matters requiring the approval, ratification or consent of holders of the common stock; and
|
|
▪
|
a ranking in liquidation of the Company
pari passu
with the Company common stock on an as-converted basis, and junior to all other classes and series of equity securities of the Corporation which by their terms do not rank
pari passu
, though subordinate and junior to all indebtedness of the Company.
|
Though subject to the corresponding
documents annexed hereto as Exhibits 10.5, 10.6 and 10.7, the following table summarizes the Series RX-3 Preferred Stock Warrant
Transactions:
Series RX-3 Preferred Stock Warrant Debt Holder
|
|
Aggregate Principal and Interest Consideration Exchanged/Paid
|
|
Total Number of RX- 3 Shares For Which Warrants Issued Are Exercisable
|
|
Total Number of Common Shares Into Which Shares are Convertible (Before Any Potential Adjustment)
|
|
Amount of Cash Potentially Realizable by the Company Upon Exercise of the Warrants Issued
|
Malone, M.
|
|
$
|
235,775
|
|
|
|
81,806
|
|
|
|
81,806,000
|
|
|
$
|
409,030
|
|
Malone, S.
|
|
|
609,716
|
|
|
|
211,733
|
|
|
|
211,733,000
|
|
|
|
1,058,665
|
|
Membrado, M.
|
|
|
552,156
|
|
|
|
187,673
|
|
|
|
187,673,000
|
|
|
|
938,365
|
|
Combined Total
|
|
$
|
1,397,647
|
|
|
|
481,212
|
|
|
|
481,212,000
|
|
|
$
|
2,406,060
|
|
The Combined Transactions
In total, and as a result
of these transactions, 1,418,615 shares of preferred stock, which, in the aggregate, are convertible into 141,861,500 shares of
Company common stock, and warrants to purchase an additional 1,462,528 shares of preferred stock, convertible in the aggregate
into 579,343,600 shares of Company common stock, were issued. Combined, the aggregate amount of cash potentially realizable by
the Company upon exercise of the warrants issued in this series of related restructuring transactions is $2,896,718.
At this time, the subject
transactions are not expected by management to carry any adverse tax implications for the Company.
Collectively, the issuances
of securities comprising the series of transactions described in this Item 1.01 can be summarized as follows:”
Series Preferred Stock
|
|
Total Number of Shares Issued
|
|
Total Number of Warrants Issued
|
|
Total Number of Shares For Which Warrants Issued Are Exercisable
|
|
Total Number of Common Shares Into Which Shares are Convertible (Before Any Potential Adjustment)
|
|
Amount of Cash Potentially Realizable by the Company Upon Exercise of the Warrants Issued
|
Series RX-1 Preferred Stock
|
|
|
1,418,615
|
|
|
|
—
|
|
|
|
—
|
|
|
|
141,861,500
|
|
|
$
|
—
|
|
Series RX-2 Preferred Stock
|
|
|
—
|
|
|
|
8
|
|
|
|
981,316
|
|
|
|
98,131,600
|
|
|
|
490,658
|
|
Series RX-3 Preferred Stock
|
|
|
—
|
|
|
|
6
|
|
|
|
481,212
|
|
|
|
481,212,000
|
|
|
|
2,406,060
|
|
Combined Total
|
|
|
1,418,615
|
|
|
|
14
|
|
|
|
1,462,528
|
|
|
|
721,205,100
|
|
|
$
|
2,896,718
|
|
The foregoing description
of the Series RX-1 Securities Exchange Agreements, Series RX-2 Securities Exchange Agreements, Series RX-2 Securities Purchase
Agreements, Series RX-2 Preferred Stock Purchase Warrant, Series RX-3 Securities Exchange Agreements, Series RX-3 Securities Purchase
Agreements, Series RX-3 Preferred Stock Purchase Warrant, and the transactions contemplated thereby does not purport to be complete
and is subject to, and qualified in its entirety by, the full text of each of the Series RX-1 Certificate of Designations (previously
included as an exhibit in the Company’s current report on Form 8-K filed with the SEC on May 31, 2019), Series RX-2 and Series
RX-3 Certificate of Designations (each previously included as exhibits in the Company’s current report on Form 8-K filed
with the SEC on June 7, 2019), Series RX-1 Securities Exchange Agreements, Series RX-2 Securities Exchange Agreements, Series RX-2
Securities Purchase Agreements, Series RX-2 Preferred Stock Purchase Warrant, Series RX-3 Securities Exchange Agreements, Series
RX-3 Securities Purchase Agreements, Series RX-3 Preferred Stock Purchase Warrant, which are attached hereto as Exhibits 10.1,
10.2, 10.3, 10.4, 10.5, 10.6 and 10.7, respectively.