Interactive Strength, Inc. (NASDAQ:TRNR), a manufacturer specializing in electronic and electrical equipment, has reported unregistered equity securities sales and adjustments to its convertible note terms, according to a recent SEC filing. The Austin-based company, under the industrial classification of Electronic & Other Electrical Equipment, disclosed these financial maneuvers in a Form 8-K filed on November 21, 2024.
The filing details that on February 1, 2024, Interactive Strength entered into a Note Purchase Agreement with CLMBR Holdings LLC and Treadway Holdings LLC, selling a Senior Secured Convertible Promissory Note for $6 million. This note was convertible into common stock shares at a rate initially undisclosed.
On November 11, 2024, after market close, the terms of the note were amended. The Amended and Restated Note, replacing the original, now holds a principal amount of $4 million. The conversion price was set at $4.79 per share, matching the company's closing price on NASDAQ on the same day.
As of November 20, 2024, Treadway Holdings LLC has converted an additional $400,000 of the principal amount into 83,508 shares of common stock. This follows a previous conversion of $200,000 disclosed on Monday, November 15th. Additionally, between Monday, November 15th and Friday, November 19th, holders of the company’s Series A Convertible Preferred Stock converted 288,438 shares into 82,176 common stock shares.
The transactions were executed under the exemption from registration requirements as per Section 3(a)(9) of the Securities Act of 1933. This exemption applies as the transactions were exchanges with existing security holders and did not involve payment of commission for solicitation.
Following these conversions and other unrelated issuances, Interactive Strength reported having a total of 903,627 shares of common stock outstanding as of Wednesday, November 20, 2024. The company's actions reflect its continuing financial strategy and capital structure management. This information is based on the press release statement filed with the SEC.
In other recent news, Interactive Strength Inc. has been actively restructuring its financial position, reducing its outstanding loan balance through equity swaps with Vertical Investors, LLC. The company has lowered its debt by significant amounts in exchange for shares of common stock, with one transaction setting the price per share at $16.25. Interactive Strength Inc. has also amended the terms of a previously issued convertible promissory note, reducing the original principal amount of $6 million to a new principal of $4 million.
The company's recent equity transactions with Vertical Investors, LLC, including the conversion of Series A Preferred Stock and issuance of common and Series C Preferred Stock, were part of a series of debt reduction strategies. These moves are in line with the company's efforts to manage its financial obligations and maintain its listing status.
In addition to financial restructuring, Interactive Strength Inc. has been making significant strides in market expansion. The company has entered into a partnership with Armah Sports Group to install their CLMBR vertical climbing machines in several B_FIT gym locations across Saudi Arabia.
Furthermore, the company has secured exclusive distribution agreements for its CLMBR vertical climbing machines in several international markets, including Germany, Switzerland, Austria, the Gulf Cooperation Council countries, and Indonesia. These recent developments reflect Interactive Strength's ongoing efforts to optimize its balance sheet and financial flexibility.
InvestingPro Insights
Interactive Strength's recent financial maneuvers, as detailed in the SEC filing, can be better understood in the context of the company's current financial position. According to InvestingPro data, Interactive Strength has a market capitalization of just $2.24 million, reflecting its status as a micro-cap company. This small size is consistent with the company's need for creative financing solutions, such as the convertible notes described in the article.
Two relevant InvestingPro Tips shed light on the company's financial situation. Firstly, Interactive Strength is "trading at a low Price / Book multiple" of 0.39, which could indicate that the stock is undervalued relative to its assets. This low valuation might explain why the company is using equity-linked instruments like convertible notes for financing. Secondly, the tip that the company "suffers from weak gross profit margins" is supported by the data showing a negative gross profit margin of -125.31% for the last twelve months as of Q3 2024. This profitability challenge likely contributes to the company's need for additional funding through the issuance of convertible securities.
It's worth noting that InvestingPro offers 13 additional tips for Interactive Strength, which could provide further insights into the company's financial health and prospects. Investors interested in a more comprehensive analysis may find these additional tips valuable for their decision-making process.
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