8-K: ONAR Holding Corporation Secures $500,000 in Initial Private Placement, Authorizes Up to $6 Million in Series E Preferred Stock Offering

ONAR Holding Corporation has announced an initial closing of $500,000 in a private placement of newly created Series E Convertible Preferred Stock, with the potential to raise up to $6 million in total.

Summary

• ONAR Holding Corporation (OTCQB: ONAR) has entered into Subscription Agreements for a private placement of Series E Preferred Stock.
• The initial closing on June 6, 2025, raised $500,000 from accredited investors for 500 shares of Series E Preferred Stock.
• The company has authorized up to 6,000 shares of Series E Preferred Stock, with a face value of $1,000 per share, allowing for total proceeds of up to $6,000,000.
• The Series E Preferred Stock accrues dividends at an 8% per annum rate, payable in additional shares of Common Stock upon conversion.
• Conversion of Series E Preferred Stock into Common Stock is at the holder's option, subject to an increase in authorized Common Stock by at least 150,000,000 shares.
• The conversion price is calculated as (Face Value + accrued dividends) divided by (closing market price of Common Stock * 75%).
• Anti-dilution provisions include a conversion price reset to the current market price if it falls below the Conversion Price on an annual anniversary (minimum $0.01), and adjustment if new equity is issued at a lower price.
• Holders are restricted from converting if it would result in beneficial ownership of 5% or more of the outstanding Common Stock.
• The Series E Preferred Stock ranks alongside Common Stock upon liquidation, as if fully converted.
• The offering was conducted without registration under the Securities Act of 1933, relying on Section 4(a)(2) and/or Rule 506 of Regulation D.

Sentiment

Score: 5

Explanation: The sentiment is neutral to slightly negative. While the capital raise provides necessary funding, the highly dilutive terms of the Series E Preferred Stock, particularly the 75% conversion discount and conversion price reset, present significant downside for existing common shareholders. The positive of securing capital is balanced by the negative implications of potential future dilution.

Positives

• The company successfully raised $500,000 in initial capital, providing immediate funding for operations or strategic initiatives.
• There is a potential to raise an additional $5,500,000, offering significant future funding flexibility.
• The 8% annual dividend rate on the preferred stock is attractive for investors in this class.
• The Series E Preferred Stock includes anti-dilution protections, such as a conversion price reset and adjustments for future dilutive equity issuances, safeguarding preferred holders' value.
• A 'Most Favored Nations' clause ensures that Series E Preferred Stock purchasers will receive similar rights if the company grants registration rights or raises additional capital within 18 months.

Negatives

• The conversion terms, including a 75% discount to the closing market price and an 8% dividend payable in common stock, pose a significant risk of dilution for existing common shareholders.
• The requirement for an increase of at least 150,000,000 additional authorized shares of Common Stock signals a substantial potential future issuance and dilution.
• The conversion price reset mechanism, which can lower the conversion price to the current market price (with a minimum of $0.01), could lead to a massive issuance of common shares if the stock price declines significantly.
• The 5% beneficial ownership cap per holder, while limiting individual conversions, does not prevent aggregate substantial dilution from multiple holders converting over time.
• The Series E Preferred Stock has not been registered under federal or state securities laws, and no market is expected to develop for these shares, limiting liquidity for preferred holders.

Risks

• Significant dilution risk for existing common stockholders due to the conversion of Series E Preferred Stock and the payment of 8% annual dividends in common stock.
• Potential for substantial dilution if the common stock price declines, exacerbated by the conversion price reset mechanism which can lower the conversion price to as low as $0.01.
• The Series E Preferred Stock is unregistered, and no market is expected to develop for it, posing liquidity risks for preferred shareholders.
• The company's ability to raise the full $6,000,000 is contingent on future closings and market conditions.
• The requirement to increase authorized common stock by 150,000,000 shares indicates a large potential future issuance that could depress common stock value.

Future Outlook

The company intends to potentially sell additional shares of Series E Preferred Stock to raise up to an aggregate of $6,000,000, less the initial proceeds, in one or more additional closings. The conversion of these preferred shares into common stock will occur following an increase in the number of authorized common shares by at least 150,000,000.

Management Comments

• "Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. ONAR HOLDING CORPORATION Dated: June 12, 2025 By: /s/ Claude Zdanow Name: Claude Zdanow Title: Chief Executive Officer"

Industry Context

This capital raise by ONAR Holding Corporation reflects a common strategy for smaller public companies, particularly those on OTC markets, to secure funding through private placements of convertible securities. Such offerings often come with terms designed to attract investors, like anti-dilution provisions and competitive dividend rates, but can lead to significant dilution for existing common shareholders, a typical trade-off in growth-stage or capital-intensive industries.

Comparison to Industry Standards

• The 8% dividend rate for preferred stock is within a typical range for non-investment grade or smaller companies seeking capital, often reflecting the higher risk profile compared to larger, more established firms.
• The inclusion of anti-dilution provisions and a conversion price reset mechanism is standard practice in convertible preferred stock offerings, designed to protect preferred investors from significant declines in the common stock price or future dilutive issuances.
• The 75% conversion price multiplier (effectively a 25% discount) is a common incentive offered to preferred investors, making the conversion more attractive, but it is on the higher side, indicating a strong need for capital or a lower perceived value of the common stock.
• The 5% beneficial ownership cap is a common regulatory and practical limitation to avoid triggering certain reporting requirements or control issues for individual investors, but it can lead to a fragmented conversion process.
• The reliance on Section 4(a)(2) and Rule 506 of Regulation D for unregistered sales is standard for private placements to accredited investors, avoiding the time and cost of a full public registration.

Corporate Governance

Stakeholder Impact

• **Shareholders (Common Stock)**: Face significant potential dilution due to the conversion of Series E Preferred Stock at a discounted price and the payment of dividends in common stock. The anti-dilution provisions for preferred holders mean common shareholders bear the brunt of any stock price decline.
• **Investors (Series E Preferred Stock)**: Benefit from an 8% annual dividend (paid in common stock), anti-dilution protections, and a favorable conversion mechanism. However, they face illiquidity as the shares are unregistered and no market is expected.
• **Company**: Gains immediate capital and access to further funding, which is crucial for operations and growth. This comes at the cost of future dilution of common equity.

Next Steps

• The company may sell additional shares of Series E Preferred Stock in one or more additional closings to raise up to the full $6,000,000.
• The company needs to increase the number of authorized shares of Common Stock by at least 150,000,000 shares to enable voluntary conversion of the Series E Preferred Stock by holders.

Key Dates

Recommendation

Keywords

ONAR Holding Corporation, Series E Preferred Stock, Private Placement, Capital Raise, Convertible Preferred Stock, SEC Filing, 8-K, Dilution, Anti-Dilution, Corporate Finance, Equity Offering, Accredited Investors, OTCQB