10-K: Lingerie Fighting Championships Secures $62,000 Convertible Note from Auctus Fund

Lingerie Fighting Championships, Inc. has entered into a securities purchase agreement with Auctus Fund, LLC, resulting in a $62,000 convertible note and warrants.

Summary

• Lingerie Fighting Championships, Inc. (BOTY) has secured a $62,000 convertible promissory note from Auctus Fund, LLC.
• The note carries a 12% annual interest rate, with a default rate of 16%.
• The maturity date is twelve months from the issue date, October 10, 2023.
• The note is convertible into common stock at a price of $0.0002 per share, subject to adjustments.
• Auctus Fund also received warrants to purchase 92,441,997 shares of common stock as part of the agreement.
• The agreement includes provisions for adjustments to the conversion price and warrant shares in case of stock splits, dividends, or dilutive issuances.
• The note has a clause that allows the holder to convert the note into shares at par value if the conversion price is less than the par value of the common stock.
• The company is required to reserve five times the number of shares issuable upon full conversion of the note.
• The note includes a right of first refusal for the holder if the company receives a bona fide offer of capital or financing from a third party.
• The note includes a schedule of amortization payments to be made to the holder.

Sentiment

Score: 4

Explanation: The document outlines a financing agreement with some concerning terms, such as a high default interest rate and potential for significant dilution. While the company has secured funding, the terms are not particularly favorable, leading to a negative sentiment.

Positives

• The company has secured additional funding through a convertible note.
• The agreement includes a right of first refusal for the holder on future financing offers, potentially giving the holder more control.
• The note includes a schedule of amortization payments, which provides a structured repayment plan.

Negatives

• The note has a high default interest rate of 16%.
• The conversion price is subject to adjustments, which could lead to dilution.
• The company is required to reserve a significant number of shares for potential conversion, which could also lead to dilution.
• The note includes a number of restrictions on the company's activities, such as incurring additional debt or selling assets, without the holder's consent.

Risks

• The company may face challenges in meeting its obligations under the note, including the amortization payments.
• The conversion of the note and exercise of the warrants could significantly dilute existing shareholders.
• The company is subject to various restrictions and covenants under the note, which could limit its operational flexibility.
• The company may be subject to penalties and default interest if it fails to comply with the terms of the note.
• The company may be subject to legal action if it fails to deliver shares upon conversion or exercise of warrants.

Future Outlook

The document outlines the terms of the convertible note and warrants, but does not provide specific forward-looking statements about the company's future performance or financial guidance.

Industry Context

This type of financing is common for small, publicly traded companies seeking capital. The terms of the note, including the conversion price and warrants, are typical for such transactions.

Comparison to Industry Standards

• The 12% interest rate on the convertible note is relatively high, which is not uncommon for small companies with limited access to traditional financing.
• The conversion price of $0.0002 per share is very low, which is typical for companies with low stock prices.
• The inclusion of warrants is a common practice in these types of transactions, providing the investor with additional upside potential.
• The various clauses and restrictions in the note are standard for these types of agreements, designed to protect the investor's interests.

Stakeholder Impact

• Shareholders may experience dilution from the conversion of the note and exercise of the warrants.
• The company's operational flexibility may be limited by the restrictions and covenants in the note.
• The company's financial stability may be impacted by the repayment obligations under the note.

Next Steps

• The company needs to fulfill its obligations under the note, including making amortization payments and reserving shares for potential conversion.
• The company needs to monitor its compliance with the various covenants and restrictions in the note.
• The company needs to be prepared for potential dilution from the conversion of the note and exercise of the warrants.

Key Dates

Keywords

convertible note, warrants, securities purchase agreement, Auctus Fund, Lingerie Fighting Championships, common stock, conversion price, dilution, financing, debt