8-K: Eva Live Secures $7.56M Convertible Note with Steep Terms

Eva Live Inc. has entered into a secured convertible promissory note agreement with Streeterville Capital, LLC for $7.56 million in principal, receiving $7 million in gross proceeds, subject to significant fees and potentially dilutive conversion terms.

Summary

• Eva Live Inc. (the "Company") entered into a Securities Purchase Agreement with Streeterville Capital, LLC (the "Investor") on February 23, 2026, for a secured convertible promissory note (the "Initial Note").
• The Initial Note has an original principal amount of $7,560,000.00, but the purchase price paid by the Investor is $7,000,000.00, reflecting an original issue discount (OID) of $560,000.00.
• The Company also agreed to pay $30,000.00 to the Investor for legal fees, accounting costs, due diligence, monitoring, and other transaction costs, which will be deducted from the funding.
• The Initial Note bears interest at a rate of eight percent (8%) per annum, compounding daily, and matures 24 months after the Purchase Price Date.
• The Investor has the right to convert any portion of the outstanding balance into common shares at a conversion price equal to 87% of the lowest daily Volume Weighted Average Price (VWAP) for the ten (10) trading days preceding the conversion, with a floor price of $0.90.
• The Company can prepay the note at 110% of the outstanding balance, but this right is lost if an Event of Default occurs or if a prepayment notice is rescinded late.
• The note is secured by a broad range of the Company's assets, including all equity interests in subsidiaries, customer accounts, intellectual property, goods, equipment, inventory, accounts receivable, cash, and deposit accounts.
• The Investor also has the right to purchase up to an additional $4,320,000.00 in principal amount of notes over 24 months, with similar terms.
• The Company must obtain stockholder approval for the issuance of conversion shares exceeding Nasdaq's 19.99% cap and file a Form S-3 Registration Statement within 90 days of the Effective Date, with penalties for delays.
• Various 'Trigger Events' (Major and Minor) can lead to an automatic increase in the Outstanding Balance by 10% or 5% respectively, up to three times for each type of event.
• An uncured Trigger Event becomes an 'Event of Default,' allowing the Investor to accelerate the note, making the full outstanding balance immediately due at a 'Mandatory Default Amount,' and accrue interest at 15% per annum.
• Maxim Group LLC served as the placement agent, receiving a cash fee of 5.75% of the aggregate gross proceeds and a right of first refusal for future offerings.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this as a high-cost, high-risk financing for Eva Live Inc., characterized by significant dilution potential, broad asset collateralization, and punitive default terms, indicating financial distress or limited access to more favorable capital. The terms place a heavy burden on the company and its existing shareholders.

Positives

• Eva Live Inc. successfully secured $7.0 million in gross proceeds, providing capital for working capital requirements, general corporate purposes, and the advancement of business objectives.
• The agreement includes a right for the Investor to purchase up to an additional $4,320,000.00 in principal amount of notes over 24 months, offering a potential source of future funding.

Negatives

• The Initial Note includes an original issue discount (OID) of $560,000.00, meaning the Company receives only $7.0 million for a $7.56 million principal obligation.
• An additional $30,000.00 is deducted from the funding for the Investor's transaction expenses, further reducing the net proceeds to the Company.
• The placement agent, Maxim Group LLC, received a cash fee of 5.75% of the gross proceeds, which is $402,500, further reducing the net cash received by the Company.
• The Company faces a significant prepayment penalty of 110% of the outstanding balance if it chooses to prepay the note.
• The conversion price is highly dilutive, set at 87% of the lowest daily VWAP over a 10-trading day period, with a floor price of $0.90, which can lead to substantial dilution for existing shareholders if the stock price declines.
• The note is secured by a broad range of the Company's assets, including all equity interests in subsidiaries, intellectual property, and cash, which limits future financing options and increases risk for the Company.
• Various 'Trigger Events' can automatically increase the Outstanding Balance by 10% (Major) or 5% (Minor), up to three times for each, significantly escalating the debt burden.
• Upon an 'Event of Default,' the Investor can accelerate the note, making the entire outstanding balance immediately due, and impose a default interest rate of 15% per annum.
• The Investor has a mandatory redemption right if the Nasdaq Official Closing Price falls below the Floor Price for 10 consecutive trading days, potentially forcing the Company to use scarce cash to repay the debt.

Risks

• Significant dilution for existing shareholders if the Investor converts the note into common shares, especially given the variable conversion price tied to the lowest daily VWAP.
• The Company's stock price falling below the Floor Price ($0.90) for 10 consecutive trading days could trigger the Investor's right to redeem portions of the note in cash, potentially straining the Company's liquidity.
• Failure to cause a Form S-3 Registration Statement to be declared effective by the SEC within 90 days, or failure to file the Rule 424(b)(5) Prospectus Supplement within 7 days of S-3 effectiveness, will result in automatic increases to the Outstanding Balance (2% initially, then 1% for each 30-day delay).
• The occurrence of various 'Trigger Events' (e.g., failure to pay, insolvency, breach of covenants, false representations, reverse stock split without notice, judgments over $500,000, not being DWAC Eligible) can lead to automatic increases in the Outstanding Balance and ultimately an 'Event of Default'.
• The broad security interest granted over nearly all of the Company's assets, including intellectual property and equity in subsidiaries, could hinder the Company's ability to secure future financing or dispose of assets.
• The 'Most Favored Nation' clause means that if the Company issues any future debt with more favorable terms, those terms will automatically apply to this note at the Investor's option, potentially increasing the cost or burden of this financing.
• The Company is obligated to obtain stockholder approval for the issuance of conversion shares exceeding Nasdaq Listing Rule 5635(d)'s 19.99% cap, and failure to do so could lead to further complications or defaults.

Future Outlook

The Company intends to use the net proceeds from the sale of the Initial Note for working capital requirements, general corporate purposes, and the advancement of business objectives. It is also obligated to file a Form S-3 Registration Statement within 90 days of the Effective Date and a Rule 424(b)(5) Prospectus Supplement within seven days of the S-3's effectiveness to register the resale of conversion shares.

Industry Context

StockSavvy.ai notes that this type of highly structured, secured convertible debt with significant discounts, variable conversion prices, and punitive default clauses is often utilized by companies facing challenges in accessing traditional equity or less dilutive debt markets. The broad security interest and potential for substantial dilution suggest a high cost of capital, indicative of perceived higher risk by the lender. This financing structure is typically a last resort for companies unable to secure more favorable terms.

Comparison to Industry Standards

• This financing structure, often colloquially referred to as 'toxic debt' or 'death spiral financing,' features terms significantly less favorable than standard corporate debt or equity offerings.
• A typical corporate bond would have a fixed interest rate and no conversion feature, or a standard convertible bond would have a fixed conversion price set at a premium to the current market price, offering less immediate dilution risk.
• The 8% original issue discount (OID) and 8% annual interest rate are high for a secured note, especially when combined with the other punitive terms.
• The 110% prepayment penalty is substantially higher than typical prepayment clauses in conventional debt, which might be a smaller percentage or decline over time.
• The conversion price, set at 87% of the lowest daily VWAP over a 10-day period, is highly aggressive. Standard convertible notes usually have a fixed conversion price or a conversion premium, not a discount to a fluctuating low market price, which almost guarantees significant dilution for existing shareholders if the stock price trends downwards.
• The extensive list of trigger events leading to automatic increases in principal (10% for Major, 5% for Minor) and a 15% default interest rate are far more punitive than typical debt covenants, which usually involve financial penalties or acceleration without automatic principal increases.
• The broad security interest granted over virtually all company assets, including intellectual property and subsidiary equity, is more akin to distressed asset financing than standard corporate lending, severely limiting the company's future financial flexibility compared to peers with unsecured or less broadly secured debt.

Legal Proceedings

• All claims and disputes arising under the Transaction Documents are subject to binding arbitration, to be conducted exclusively in Salt Lake County, Utah, under the Utah Uniform Arbitration Act.
• The Investor is entitled to seek specific performance and injunctive relief from a court or arbitrator to prevent or cure breaches by the Company, including preventing certain future equity issuances or fundamental transactions under specific conditions.

Stakeholder Impact

• **Shareholders**: Face significant potential for dilution due to the variable conversion price (87% of lowest VWAP) and the possibility of additional note purchases. The value of existing equity could be substantially eroded, especially if the stock price declines.
• **Creditors**: The note is secured by a broad range of company assets, including all equity interests in subsidiaries, customer accounts, intellectual property, and cash. This broad security interest subordinates other unsecured creditors and limits the assets available to them in case of default.
• **Company (Eva Live Inc.)**: Faces high financing costs, stringent covenants, and severe penalties for non-compliance or stock price declines. This could limit operational flexibility, restrict future financing options, and place the company under significant financial pressure.

Next Steps

• The Company must obtain stockholder approval for the issuance of the Initial Note, any Additional Notes, and the Conversion Shares exceeding the Nasdaq 19.99% issuance cap, by filing a PRE14C and subsequently a DEF14C with the SEC.
• The Company is required to cause a Form S-3 Registration Statement to be declared effective by the SEC within ninety (90) days of the Effective Date.
• The Company must file a Rule 424(b)(5) Prospectus Supplement to the Shelf Registration Statement within seven (7) days of the S-3's effective date.
• The Investor has the option to purchase up to $4,320,000.00 of additional notes over the next 24 months, which could provide further capital but also additional dilution.

Key Dates

Recommendation

The terms of this secured convertible promissory note are highly unfavorable for Eva Live Inc. and its existing shareholders. The significant original issue discount, high interest rate, punitive prepayment penalty, and especially the variable conversion price (87% of lowest VWAP) create substantial and potentially rapid dilution risk. The broad security interest granted over nearly all company assets severely limits future financial flexibility and subordinates other creditors. The numerous trigger events and high default interest rate expose the company to rapid escalation of its debt obligations. This financing structure is often indicative of a company in a distressed financial position with limited access to more favorable capital, making it a high-risk investment with significant downside for current equity holders. Investors should consider the high likelihood of substantial dilution and the company's constrained financial position.

Keywords

Eva Live Inc., Streeterville Capital, secured convertible note, debt financing, dilution, capital raise, SEC filing, 8-K, GOAI, Maxim Group, original issue discount, variable conversion price, asset collateralization