8-K: Two Hands Secures $80K Funding via Dilutive Convertible Note

Two Hands Corporation obtained $80,000 in net funding through a convertible promissory note with Vanquish Funding Group LLC, featuring a 10% interest rate and highly dilutive conversion terms.

Summary

• Two Hands Corporation entered into a Securities Purchase Agreement (SPA) with Vanquish Funding Group LLC, effective January 16, 2026.
• The Company sold a convertible promissory note with a principal amount of $100,050 to Vanquish for a purchase price of $87,000.
• After deducting Vanquish's legal expenses of $2,500 and a due diligence fee of $4,500, Two Hands Corporation received net funding of $80,000.
• The Note matures on October 15, 2026, and accrues interest at 10% per annum.
• Conversion into common stock is permissible 180 days after January 16, 2026, at the holder's election.
• The conversion price is set at 75% of the lowest closing bid price during the 10 trading days prior to the conversion date.
• A beneficial ownership cap of 4.99% of the Company's issued and outstanding common stock applies to conversions.
• 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 SPA includes a right of first refusal for Vanquish on financings up to $1,000,000 during the 12 months following closing.

Sentiment

Score: 3

Explanation: While securing $80,000 in net funding provides immediate liquidity, the highly unfavorable terms of the convertible note, including a significant discount on principal, substantial fees, a dilutive conversion price (75% of lowest bid), and high prepayment penalties, indicate financial distress and a costly capital raise for the company and its shareholders. The long-term implications for shareholder value are negative.

Positives

• The Company secured $80,000 in net funding, providing immediate capital for operations.

Negatives

• The convertible note was sold at a significant discount, with a principal amount of $100,050 purchased for only $87,000.
• Substantial fees were paid from the purchase price, including $2,500 for Vanquish's legal expenses and $4,500 for a due diligence fee, reducing net proceeds.
• The conversion price is highly dilutive, set at 75% of the lowest closing bid price during the 10 trading days prior to conversion, which could significantly devalue existing shareholder equity.
• The note carries a 10% annual interest rate, adding to the Company's financial obligations.
• Prepayment penalties are substantial, ranging from 115% to 125% of the principal amount, making early repayment costly.
• Vanquish holds a right of first refusal on future financings up to $1,000,000 for 12 months, potentially limiting the Company's options for future capital raises.

Risks

• Significant potential for shareholder dilution due to the convertible nature of the note and the discounted conversion price.
• Increased financial obligation with a 10% annual interest rate on the $100,050 principal.
• High costs associated with potential prepayment of the note, ranging from 115% to 125% of the principal.
• Future financing flexibility may be constrained by Vanquish's right of first refusal on financings up to $1,000,000 for the next 12 months.

Future Outlook

The Company has secured short-term funding, but the highly dilutive conversion terms and the right of first refusal granted to Vanquish Funding Group LLC suggest potential future equity dilution and constraints on future financing options. The maturity date in October 2026 indicates a need for repayment or conversion within the next year.

Industry Context

This type of convertible note financing, characterized by a significant discount to principal, high fees, and dilutive conversion terms, is often utilized by smaller public companies or those facing liquidity challenges and limited access to traditional capital markets. While it provides immediate capital, it typically comes at a high cost to existing shareholders, reflecting the perceived risk by the lender.

Comparison to Industry Standards

• The terms of this convertible note, including the significant discount (approximately 13% from principal), substantial fees (totaling $7,000 or 8% of the purchase price), and a conversion price at 75% of the lowest bid price, are generally considered unfavorable for the issuer.
• Such terms are more commonly seen in financings for micro-cap companies or those in distressed situations, where access to less dilutive or cheaper forms of capital (e.g., traditional bank loans, institutional equity rounds) is limited.
• Compared to standard venture debt or institutional convertible notes, which typically feature less aggressive discounts, higher conversion premiums, and fewer restrictive covenants, these terms indicate a higher cost of capital for Two Hands Corporation.

Stakeholder Impact

• Shareholders face significant potential dilution due to the highly unfavorable conversion terms of the promissory note.
• The Company's financial position is impacted by the new debt obligation and associated interest payments.
• Future financing options may be influenced by the right of first refusal granted to Vanquish Funding Group LLC.

Next Steps

• The Company will need to manage the 10% annual interest payments on the note.
• The Company will face a decision regarding repayment or allowing conversion of the note by its maturity date of October 15, 2026.
• The Company may seek further financing, subject to Vanquish's right of first refusal for financings up to $1,000,000 over the next 12 months.

Key Dates

Recommendation

The terms of this financing are highly unfavorable and suggest significant financial weakness. While the company secured funding, the cost of capital is extremely high, and the dilutive conversion terms at 75% of the lowest bid price could severely impact existing shareholder value. This type of financing often precedes further dilution or financial difficulties, making the stock a high-risk investment with substantial downside potential for current shareholders.

Keywords

Two Hands Corporation, Vanquish Funding Group, convertible promissory note, debt financing, capital raise, dilution, SEC 8-K, unregistered securities, corporate finance