F-1/A: LOBO Technologies Amends F-1/A, Details Share Issuances

LOBO Technologies Ltd. filed an amendment to its F-1 registration statement, detailing recent unregistered share issuances and a convertible note agreement, while also clarifying director and officer indemnification.

Summary

• Amendment No. 2 to Form F-1 (File No. 333-292027) was filed on March 12, 2026, solely to amend Item 6 (Indemnification of Directors and Officers) and Item 7 (Recent Sales of Unregistered Securities) of Part II.
• The preliminary prospectus contained in Part I was omitted from this amendment.
• Indemnification for directors and officers is permitted under British Virgin Islands (BVI) law for actions taken honestly and in good faith with a view to the company's best interests, but the SEC considers indemnification for liabilities under the Securities Act of 1933 to be against public policy and unenforceable.
• In September 2023, initial shareholders approved a reorganization that increased the authorized share capital to 50,000,000 Ordinary Shares of $0.001 par value each.
• Also in September 2023, the company issued an additional 700,000 Ordinary Shares to shareholders on a pro-rata basis, resulting in an aggregate of 6,400,000 Ordinary Shares outstanding, which were exempt from registration.
• On December 10, 2024, the company entered into a Securities Purchase Agreement to issue a Convertible Note to an investor for a purchase price of $1,500,000, with an original principal amount of $1,635,000.
• The Convertible Note includes an original issue discount of $120,000 and $15,000 for investor fees, costs, and other transaction expenses.
• The note bears a simple interest rate of 7% per annum, with all outstanding principal and accrued interest due twelve months after the purchase price is delivered.
• As part of the agreement, the company also issued 850,000 Pre-delivery Shares at par value $0.001 per share to the investor.
• The company may prepay all or a portion of the Convertible Note at any time by paying 110% of the outstanding balance elected for pre-payment.
• While the Convertible Note is outstanding, the company agreed to maintain adequate public information and its Nasdaq listing.
• Upon a Major Trigger Event, the investor has the right to increase the note balance by 15%, and by 10% for a Minor Trigger Event.
• An Event of Default will cause the interest rate to accrue on the outstanding balance at 18% per annum or the maximum rate permitted by law, whichever is lesser.
• Upon full repayment of the Convertible Note, the investor must deliver back 850,000 Ordinary Shares (equal to the Pre-delivery Shares) at $0.001 each.
• The Convertible Note contains a floor price of $1.00 for future conversions into Ordinary Shares, allowing the investor to elect cash payment if the conversion price is below this floor.

Sentiment

Score: 5

Explanation: StockSavvy.ai views this filing as neutral. While it secures capital, the terms of the convertible note include significant investor protections and potential costs for the company, balancing the positive of funding with potential future dilution and financial obligations.

Positives

• Secured $1.5 million in funding through a convertible note, providing capital for operations.
• Increased authorized share capital to 50,000,000 Ordinary Shares, providing flexibility for future equity raises or incentives.
• Committed to maintaining Nasdaq listing, which is crucial for liquidity and investor confidence.

Negatives

• The convertible note includes an original issue discount of $120,000 and $15,000 for investor fees, reducing the net proceeds from the $1.5 million purchase price.
• A high prepayment penalty of 110% of the outstanding balance applies if the company chooses to prepay the note.
• Trigger Events can increase the note balance by 10% or 15%, potentially diluting existing shareholders or increasing the debt burden.
• An Event of Default on the convertible note would result in a substantial interest rate of 18% per annum.
• The $1.00 floor price for conversion means if the stock price drops below this, the investor can demand cash repayment instead of shares, potentially straining the company's liquidity.

Risks

• Potential dilution from future conversion of the Convertible Note into Ordinary Shares, especially if the stock price is low.
• Increased debt burden and interest expense from the Convertible Note, particularly if an Event of Default occurs (18% interest).
• Risk of cash drain if the stock price falls below the $1.00 conversion floor, forcing cash repayment instead of equity.
• The SEC's opinion that indemnification for Securities Act liabilities is against public policy, potentially leaving directors and officers exposed in certain legal scenarios.

Future Outlook

The filing primarily details past corporate actions and current financing terms rather than explicit forward-looking statements or guidance on future business performance. It does include the company's agreement to maintain its Nasdaq listing and adequate public information while the Convertible Note is outstanding.

Industry Context

StockSavvy.ai notes that the issuance of a convertible note with an original issue discount and significant investor protections (like a floor price and default interest rate) is common for smaller or emerging growth companies seeking capital, especially those in the pre-revenue or early-stage growth phase. The terms suggest a need for capital and reflect the investor's demand for downside protection and potential upside.

Comparison to Industry Standards

• The 7% simple interest rate on the convertible note is within a typical range for private debt financing for growth companies, though the 18% default rate is on the higher end, reflecting increased risk.
• The original issue discount of $120,000 on a $1.5 million purchase price (8% discount) is a common feature in such financing, compensating investors for risk and illiquidity.
• The $1.00 conversion floor price is a significant protection for the investor, ensuring they either get shares at a reasonable valuation or cash, which is a strong term often seen in deals with less established companies.

Corporate Governance

Stakeholder Impact

• Shareholders face potential dilution from the conversion of the Convertible Note. The $1.00 floor price offers some protection to the investor, but could force cash repayment, impacting company liquidity. The increase in authorized shares provides flexibility but also potential for future dilution.
• Creditors will note the Convertible Note adds to the company's debt obligations. The high default interest rate (18%) could be a concern if the company faces financial distress.
• Management and Directors may face increased personal risk due to the clarification on indemnification limits, particularly concerning Securities Act liabilities.

Next Steps

• The registration statement needs to become effective as soon as practicable after filing.
• The company will need to file further amendments to specifically state the registration statement shall become effective or await SEC determination.
• The company is undertaking to file post-effective amendments to include required prospectuses, reflect fundamental changes, and include material distribution plan information.
• The company must maintain adequate public information and its Nasdaq listing while the Convertible Note is outstanding.
• The Convertible Note principal and accrued interest become due and payable twelve months after the Purchase Price Date.

Key Dates

Recommendation

The company has secured capital through a convertible note, which is positive for its operations. However, the terms of this note, including the original issue discount, high default interest rate, and a conversion floor price that could force cash repayment, introduce considerable financial risks and potential for future shareholder dilution. While the funding is beneficial, the associated costs and risks warrant a cautious 'hold' stance until further operational and financial performance clarifies the long-term impact of this financing.

Keywords

LOBO Technologies, F-1/A, SEC filing, convertible note, share issuance, corporate governance, indemnification, unregistered securities, Nasdaq listing, capital raise