8-K: Two Hands Secures $75K Funding via Convertible Note

Two Hands Corporation has entered into a securities purchase agreement with Vanquish Funding Group LLC for a $94,300 convertible promissory note, resulting in $75,000 net funding.

Summary

• Two Hands Corporation entered into a securities purchase agreement with Vanquish Funding Group LLC on December 2, 2025.
• The company sold a convertible promissory note with a principal amount of $94,300 for a purchase price of $82,000.
• The transaction closed around December 4, 2025, with the company receiving net funding of $75,000.
• Vanquish's legal expenses of $2,500 and a due diligence fee of $4,500 were paid from the purchase price.
• The Note matures on February 1, 2026, and accrues interest at 10% per annum.
• The Note is convertible into common stock 180 days after December 2, 2025, at the holder's election.
• The conversion price is 75% of the lowest closing bid price during the 10 trading days prior to conversion.
• Conversion is capped at 4.99% beneficial ownership of the company's common stock for the holder.
• The holder can deduct $1,500 from the conversion amount for deposit fees in each conversion.
• Prepayment options exist at 115% (0-90 days), 120% (91-150 days), and 125% (151-180 days) following the issue date.
• The agreement includes a right of first refusal for financings up to $1,000,000 during the 12 months following closing.
• The Note was sold under the Section 4(a)(2) exemption from registration, as Vanquish is an accredited investor and there was no public offering.

Sentiment

Score: 3

Explanation: While funding was secured, the terms are highly unfavorable and dilutive, indicating potential financial distress or limited options for capital. The high effective cost of capital and significant dilution potential are negative.

Positives

• Secured $75,000 in net funding to support operations.

Negatives

• The company received $75,000 in net funding for a $94,300 principal note, indicating a significant discount and high effective cost of capital.
• Incurred $7,000 in fees ($2,500 legal, $4,500 due diligence) paid to Vanquish from the purchase price.
• The conversion price is set at 75% of the lowest closing bid price during the 10 trading days prior to conversion, which is highly dilutive for existing shareholders.
• Substantial prepayment premiums (115% to 125%) apply if the company wishes to repay the note early.
• The note has a relatively short maturity date of February 1, 2026.

Risks

• Significant potential for dilution of existing shareholders due to the convertible note's terms, particularly the 75% conversion price based on the lowest bid.
• High cost of capital implied by the discount, fees, and prepayment premiums.
• Short maturity period of the note (February 1, 2026) creates a near-term repayment or refinancing obligation.
• The right of first refusal for future financings could limit flexibility in seeking alternative capital sources.

Future Outlook

The company has secured immediate funding but faces potential future capital needs, as indicated by the right of first refusal granted to Vanquish Funding Group LLC for financings up to $1,000,000 over the next 12 months.

Management Comments

• The report was signed by Emil Assentato, Chief Executive Officer.

Industry Context

This type of convertible note financing, characterized by a significant discount, high fees, and dilutive conversion terms (75% of the lowest bid price), is often utilized by smaller, emerging growth companies that may have limited access to more conventional and less costly forms of capital. It typically signals an urgent need for funding and can be a precursor to substantial equity dilution, common in early-stage or financially constrained ventures.

Comparison to Industry Standards

• The terms of this financing are generally less favorable than those typically secured by more established companies with stronger financial positions. The effective cost of capital, considering the discount ($94,300 principal for $82,000 purchase price) and fees ($7,000), is high.
• The conversion price set at 75% of the lowest closing bid price is significantly dilutive compared to standard equity raises or convertible debt for companies with robust market access, which often feature conversion premiums.
• The substantial prepayment premiums (up to 125%) are also indicative of a lender taking a strong position in a high-risk financing scenario, unlike typical corporate debt structures for investment-grade companies.

Corporate Governance

Stakeholder Impact

• Shareholders face significant potential dilution due to the convertible note's terms, particularly the conversion price set at 75% of the lowest closing bid price.
• Creditors (Vanquish Funding Group LLC) benefit from highly favorable terms, including a discounted purchase price, fees, high interest, and substantial prepayment premiums.

Next Steps

• The Convertible Promissory Note matures on February 1, 2026, requiring repayment or conversion.
• The Note becomes convertible into common stock 180 days after December 2, 2025.

Key Dates

Recommendation

The terms of this convertible note are highly unfavorable for existing shareholders, indicating a high cost of capital and significant potential for dilution. The conversion price is set at 75% of the lowest closing bid price, which can lead to substantial dilution if the stock price declines. The company also incurred significant fees and a discount on the principal amount, suggesting limited access to more favorable financing options. This transaction points to potential financial strain and could negatively impact shareholder value, warranting a 'sell' recommendation.

Keywords

Two Hands Corporation, Vanquish Funding Group, Convertible Promissory Note, Debt Financing, Equity Dilution, SEC 8-K, Emerging Growth Company, Unregistered Securities Sale