Category: Financial

Key Highlights

• Phillips Equities & Trust LLC provides a $500,000 senior secured convertible promissory note to CID Holdco subsidiaries.

• The note carries a 6% annual interest rate and matures in twelve months, with a variable conversion price at 80% of the lowest five-day VWAP.

• Conversion shares are capped at a 4.99% beneficial ownership limit, expandable to 9.99% with prior notice.

• Default interest rises to 12% annually if events of default occur under the agreement.

Deal Terms Unveiled

Phillips Equities & Trust LLC finalized a $500,000 senior secured convertible promissory note with subsidiaries of CID Holdco, marking a strategic financing move. The agreement, executed on June 23, 2026, positions the lender as a key creditor with priority over existing and future debt obligations. Proceeds are earmarked for working capital and approved corporate expenses.

Interest and Maturity Structure

The note bears a 6% annual interest rate, payable upon maturity twelve months after funding. Early repayment is prohibited without the lender’s written consent, reinforcing the note’s long-term commitment. Default scenarios trigger a 12% interest rate, escalating financial pressure on the borrower.

Conversion Mechanics

Phillips Equities holds the option to convert the note into common stock at 80% of the lowest five-day volume-weighted average price (VWAP). This variable conversion price introduces equity dilution risk, contingent on market performance. Conversion shares are subject to a 4.99% beneficial ownership cap, though the lender may increase this to 9.99% with 61 days’ notice.

Security and Subordination

The note is secured by a second-priority lien on all company assets, subordinated only to obligations owed to J.J. Astor & Co. Under a December 2025 loan agreement. Phillips Equities now holds the sole claim on these obligations after acquiring them from J.J. Astor. The company is barred from incurring new senior or pari passu debt without lender approval.

Registration and Compliance

A registration rights agreement mandates the filing of an S-1 registration statement within 45 days of funding. This ensures liquidity for the lender’s potential conversion shares. Nasdaq compliance rules cap share issuance at 19.99% of outstanding common stock unless stockholder approval is secured.

Exclusivity and Default Triggers

The note’s proceeds were exchanged for exclusivity rights tied to a pending asset sale, as outlined in a prior non-binding letter of intent. Events of default include missed payments, breach of covenants, or Nasdaq delisting, each carrying severe financial penalties. The lender may accelerate repayment upon default, compounding the borrower’s obligations.

Prior Debt Resolution

Concurrently, CID Holdco settled its obligations under a separate $500,000 convertible note with White Lion Capital LLC, dated April 17, 2026. The termination released all liens and security interests, clearing the path for the new financing arrangement.

This article is for informational purposes only and does not constitute financial advice. Please consult a licensed financial adviser before making investment decisions.