8-K: Amaze Holdings Secures $4.1M in Dilutive Convertible Notes

Amaze Holdings, Inc. has secured $4.1 million through senior secured convertible promissory notes, partially exchanging existing debt, with terms indicating significant potential for shareholder dilution.

Summary

• Amaze Holdings, Inc. (the Company) entered into a Securities Purchase Agreement on September 11, 2025, to issue Senior Secured Original Issue Discount Convertible Promissory Notes (New Convertible Notes) totaling $4,143,234.25 in aggregate principal amount.
• The total consideration for the New Convertible Notes was $4,043,234.24, comprising an exchange of approximately $3,043,234 of outstanding Prior Notes (plus accrued interest) and $1,000,000 in cash.
• The New Convertible Notes mature on March 11, 2026, bearing an annual interest rate of 7%, payable monthly. The Company can extend maturity by six months, increasing principal and accrued interest to 110%.
• The initial conversion price is $2.33 per share, subject to adjustment for subsequent lower price issuances or deemed issuances, as well as stock splits. A floor price of $1.50 applies, with cash payment for the economic difference if the conversion price falls below it.
• The New Convertible Notes are secured by a first-priority security interest in all properties and assets of the Company and its subsidiaries, and all issued and outstanding equity interests of entities owned by the Company.
• The Company's obligations under the notes are fully guaranteed by its subsidiaries.
• Investors have the right to participate in future financings (up to 25%) on the same terms and conditions, and may exchange their notes for securities in subsequent financings at 110% of the outstanding principal.
• The Company is required to prepay 30% of net cash proceeds from future financings (excluding certain thresholds), increasing to 50% if the common stock's closing price falls below 50% of the floor price.
• The Company agreed to seek shareholder approval for the issuance of shares upon conversion exceeding 19.9% of outstanding common stock within 90 days.
• A Registration Rights Agreement was executed, requiring the Company to file a registration statement for resale of conversion shares within 20 days and use best efforts for effectiveness within 10-45 days, with liquidated damages for delays.

Sentiment

Score: 3

Explanation: While the Company secured necessary financing, the terms are highly dilutive and restrictive, reflecting a challenging financial position. The variable conversion price, mandatory prepayments from future financings, and extensive security granted to investors indicate significant downside risk for existing equity holders and limited future financial flexibility.

Positives

• Secured $1,000,000 in new cash capital for working capital and general corporate purposes.
• Successfully restructured approximately $3,043,234 of existing debt (Prior Notes) into new secured convertible notes.
• The new notes are senior secured obligations, providing a clear debt structure for these investors.
• Investors have the right to participate in future financings, potentially providing additional capital.

Negatives

• The variable conversion price, subject to adjustment for subsequent lower price issuances, creates significant potential for substantial dilution for existing shareholders.
• A high default interest rate of 18% per annum applies upon an Event of Default.
• Mandatory prepayment clauses require the Company to use 30% (or 50% under certain conditions) of net proceeds from future financings to prepay the notes, limiting future capital flexibility.
• The Company is prohibited from entering into most Variable Rate Transactions, restricting future financing options.
• Extensive security interests are granted over all properties and assets of the Company and its subsidiaries, along with full guarantees from all subsidiaries, indicating a high-risk profile.
• Failure to obtain shareholder approval for conversions exceeding 19.9% within 90 days constitutes an Event of Default.
• Liquidated damages are payable for delays in filing or achieving effectiveness of the resale registration statement.
• The Company acknowledges that investor hedging activities could reduce the value of existing shareholders' equity interests.

Risks

• Dilution Risk: The variable conversion price, adjustable for lower price issuances, poses a significant risk of substantial dilution to existing shareholders.
• Shareholder Approval Risk: Failure to obtain shareholder approval for conversions exceeding 19.9% of outstanding common stock within 90 days will trigger an Event of Default.
• Financial Flexibility Risk: Mandatory prepayment obligations from future financings (30% or 50% under certain conditions) could severely limit the Company's ability to retain capital for growth or other needs.
• Default Risk: Numerous events, including non-payment, breach of covenants, delisting, restatement of financials, or failure to maintain public information, can trigger an Event of Default, leading to accelerated payment and higher interest rates.
• Market Price Volatility: The conversion price and prepayment triggers are linked to the common stock's trading price, making the Company vulnerable to market fluctuations.
• Operational Restrictions: Covenants restrict the Company and its subsidiaries from incurring certain indebtedness, creating liens (except permitted ones), making restricted payments, or transferring assets outside the ordinary course of business.
• Legal Proceedings: The 'Tim Michaels Matter' is referenced as an exception to the definition of Indebtedness, indicating ongoing or past legal disputes that could still pose a risk.
• Fraudulent Conveyance Risk: The guarantee and security interests are structured to avoid being deemed a 'Fraudulent Conveyance' in bankruptcy, but this remains a potential legal challenge.

Future Outlook

The Company is obligated to file a registration statement with the SEC within 20 calendar days to cover the resale of shares issuable upon conversion of the New Convertible Notes. It must also use its best efforts to obtain shareholder approval for conversions exceeding 19.9% of outstanding common stock within 90 days of the Purchase Agreement date. Failure to meet these deadlines or maintain compliance with various covenants could trigger Events of Default, leading to accelerated payment obligations and higher interest rates. The Company's future capital-raising efforts will be impacted by mandatory prepayment clauses and restrictions on Variable Rate Transactions.

Management Comments

• The Company acknowledges that the issuance of the Notes may result in dilution of the outstanding shares of Common Stock, which dilution may be substantial under certain market conditions.
• The Company further acknowledges that its obligations under the Transaction Documents, including, without limitation, its obligation to issue the Conversion Shares pursuant to the Transaction Documents, are unconditional and absolute and not subject to any right of set off, counterclaim, delay or reduction, regardless of the effect of any such dilution or any claim the Company may have against the Investor and regardless of the dilutive effect that such issuance may have on the ownership of the other shareholders of the Company.
• The Company understands and confirms that each Investor shall be relying on the foregoing covenant in effecting transactions in securities of the Company.
• The Company acknowledges that such aforementioned hedging activities do not constitute a breach of any of the Transaction Documents.

Industry Context

This financing structure, involving senior secured original issue discount convertible notes with variable conversion prices and extensive security, is characteristic of companies that may be facing challenges in accessing traditional capital markets. The terms, including potential for significant dilution and mandatory prepayments from future financings, suggest a company in need of capital that has accepted aggressive terms. The inclusion of anti-dilution provisions for investors (e.g., lower price adjustments) and restrictions on future financing types (Variable Rate Transactions) are common in such "death spiral" or highly structured convertible debt deals, often seen in smaller, high-growth, or financially distressed public companies. The requirement for shareholder approval for significant dilution indicates compliance with exchange listing rules, which often protect against excessive immediate dilution without shareholder consent.

Comparison to Industry Standards

• Convertible Note Terms: The variable conversion price, subject to adjustment for subsequent lower price issuances, is a highly dilutive feature often seen in distressed financing, unlike more standard fixed-price convertibles or those with more limited reset mechanisms. This is often compared to "death spiral" financing, where continuous dilution can occur if the stock price declines.
• Security and Guarantees: Granting a first-priority lien on all assets of the company and its subsidiaries, coupled with full subsidiary guarantees, is a very strong security package for the investors, typically seen when the company's creditworthiness is low or the debt is considered high-risk. This is more extensive than typical unsecured or partially secured corporate debt.
• Prepayment Clauses: Mandatory prepayment from future financing proceeds (30-50%) is a restrictive covenant that significantly limits the company's financial flexibility and ability to raise capital for growth without immediately repaying a portion of this debt. This is more stringent than typical debt covenants that might allow for more discretion in capital allocation.
• Investor Participation Rights: The right for investors to participate in future financings (up to 25%) and exchange notes at a premium (110%) is a strong investor protection and upside participation mechanism, often found in private placements for companies with perceived high growth potential but also high risk.
• Beneficial Ownership Limitation: The 9.99% beneficial ownership limitation is a standard provision to prevent investors from triggering certain regulatory reporting requirements (e.g., Schedule 13D filings) or corporate governance thresholds without explicit intent.
• Liquidated Damages for Registration: The liquidated damages for failure to timely register shares are common in private placement transactions to ensure investors have a clear path to liquidity.

Corporate Governance

Legal Proceedings

• The 'Tim Michaels Matter' (legal proceedings between the Company and its former CEO, Timothy Michaels) is referenced as an exception to the definition of Indebtedness, indicating its existence, but no new details or impact are provided in this filing.

Related Party Transactions

• The Purchase Agreement includes a representation that any 'Related Party Transactions' (transactions with officers, directors, 5% beneficial owners, or their affiliates) reflect market terms and rates and were negotiated in good faith and on an arms-length basis, and have been disclosed in SEC Reports. No new specific related party transactions are detailed in this filing.

Stakeholder Impact

• Shareholders: Face significant potential for dilution due to the variable conversion price of the New Convertible Notes, which adjusts downward with lower price issuances. Their equity value could be substantially eroded.
• New Investors (C/M Capital Master Fund, LP, Mercer Street Global Opportunity Fund LLC, WVP Emerging Manager Onshore Fund, LLC C/M Capital Series): Benefit from a senior secured position on all company and subsidiary assets, high default interest rates, and strong anti-dilution protection. They also gain participation rights in future financings and the ability to exchange notes at a premium.
• Company (Management/Operations): Gains immediate cash and restructures existing debt, providing short-term liquidity. However, it incurs substantial long-term obligations, including potential for significant dilution, restrictive covenants on future financing, and mandatory prepayments, which could hinder strategic flexibility and growth.
• Creditors (Prior Notes Holders): Those who exchanged their Prior Notes for the New Convertible Notes benefit from the enhanced security and potentially better terms of the new notes.

Next Steps

• The Company must file a Current Report on Form 8-K, including the Transaction Documents as exhibits, by the Disclosure Time (September 11, 2025, or next trading day).
• The Company must file a registration statement with the SEC covering the resale of the shares of Common Stock issuable under the New Convertible Notes Agreement within 20 calendar days after September 11, 2025.
• The Company must use its best efforts to cause the registration statement to be declared effective by the SEC within 10 days (limited review) or 45 days (full review) after the filing date.
• The Company must use its best efforts to seek shareholder approval for the issuance of shares of common stock upon conversion of the New Convertible Notes in excess of 19.9% of the issued and outstanding common stock no later than 90 days from September 11, 2025.
• The Company and its subsidiaries must comply with all covenants, including maintaining security interests, avoiding prohibited indebtedness/liens, and adhering to restrictions on asset transfers and certain transactions.

Key Dates

Recommendation

The terms of this financing are highly detrimental to existing equity holders. The issuance of senior secured convertible notes with a variable conversion price, which adjusts downward with lower price issuances, creates a significant "death spiral" risk, leading to continuous and substantial dilution. The mandatory prepayment clauses from future financings severely limit the Company's ability to raise and retain capital for growth. The extensive security interests granted over all company and subsidiary assets, coupled with the high default interest rate, indicate a precarious financial position. The Company's explicit acknowledgment of potential negative impacts from investor hedging further underscores the risks. A seasoned investor would view these terms as a strong signal of impending equity value erosion and would likely recommend selling.

Keywords

Convertible Notes, Secured Debt, Dilution, Shareholder Approval, SEC Filing, Debt Restructuring, Variable Rate Transaction, Subsidiary Guarantee, Pledge Agreement, Registration Rights, Amaze Holdings, AMZE, Financing, Capital Raise, Risk Management