8-K: Data443 Risk Mitigation Enters Financial Advisory Deal

Data443 Risk Mitigation, Inc. has entered into a Financial Service Agreement with Margaret Z. Holdings Limited to act as its financial advisor for a proposed de-SPAC business combination.

Summary

• Data443 Risk Mitigation, Inc. (the Company) has signed a Financial Service Agreement with Margaret Z. Holdings Limited, a British Virgin Islands company.
• Margaret Z. Holdings Limited will serve as the Company's financial advisor for 18 months in relation to a proposed de-SPAC business combination with Four Leaf Acquisition Corporation (FORL).
• Compensation includes a $1,000,000 promissory note, 1,200,000 shares of the combined public company (PubCo), a retention bonus tied to financial performance, and nominee receipt of FORL shares for Jason Remillard.
• The agreement also involves the issuance of 3,000,000 Class B Preferred Shares to Jason Remillard with super-voting rights and convertibility, and an allocation of 30,000,000 Company common shares to Margaret.
• These arrangements, involving CEO Jason Remillard, are considered related-party transactions and are subject to approvals and definitive documentation.
• The promissory note can be converted into PubCo shares under certain conditions if not repaid within 12 months.

Sentiment

Score: 5

Explanation: StockSavvy.ai views this as a neutral filing, detailing a material agreement for advisory services related to a de-SPAC transaction. While it outlines compensation and potential share issuances, it does not provide new financial performance data or strategic shifts beyond the transaction itself.

Positives

• Secures a financial advisor for a significant de-SPAC business combination.
• Defines clear compensation structure for the financial advisor, including success fees and bonuses.
• Potential for significant equity stake in the combined public company for the advisor.
• Includes provisions for a retention bonus tied to financial performance metrics ($5M revenue, $3M cash).

Negatives

• A $1,000,000 promissory note is due within 90 days of deal close, with a 15% default interest rate.
• The Class B Preferred Shares issued to Jason Remillard have super-voting rights that expire after 36 months.
• The retention bonus is contingent on continued exchange listing, revenue, and cash balance thresholds.
• The agreement involves related-party transactions due to CEO Jason Remillard's involvement.

Risks

• The proposed de-SPAC business combination may not be consummated, in which case the promissory note will not be issued.
• Failure to repay the $1,000,000 promissory note within 12 months could lead to conversion into PubCo shares at a potentially unfavorable price.
• The retention bonus is subject to strict financial performance and listing compliance, posing a risk of forfeiture.
• The super-voting rights of the Class B Preferred Shares are temporary and will expire.
• Disputes are subject to arbitration under SIAC rules, which may have implications for dispute resolution.
• The agreement is governed by Delaware law, which could impact legal interpretations and enforcement.

Future Outlook

The agreement is contingent on the successful completion of the de-SPAC business combination between Data443 Risk Mitigation, Inc. and Four Leaf Acquisition Corporation. The terms of the agreement, including compensation and share issuances, are dependent on this closing.

Management Comments

• The arrangements described in Item 1.01 that involve Mr. Remillard constitute related-party transactions.
• The issuance of the Class B Preferred Shares and other PubCo securities remains subject to the approval of FORL (including its special committee), the definitive documentation and constituent documents for the business combination, and applicable law and exchange rules.

Industry Context

StockSavvy.ai notes that the engagement of a financial advisor for a de-SPAC transaction is a common practice, especially for companies seeking to go public through this route. The structure of the compensation, including a promissory note and equity, is typical for such advisory roles, aiming to align the advisor's interests with the successful closing of the transaction.

Related Party Transactions

• The agreement involves Jason Remillard, CEO, founder, and sole director of Data443 Risk Mitigation, Inc., who is also CEO and Chairman of Four Leaf Acquisition Corporation (FORL) and controls FORL's sponsor.
• Nominee receipt of 1,500,000 FORL shares on behalf of Jason Remillard.
• Issuance of 3,000,000 Class B Preferred Shares to Jason Remillard (or his designee) with super-voting rights.

Stakeholder Impact

• Shareholders of Data443 Risk Mitigation: Potential dilution from equity compensation and share issuances, but also potential upside from a successful de-SPAC transaction.
• Shareholders of Four Leaf Acquisition Corporation: Potential dilution from the combined entity's share structure, and the success of the de-SPAC is critical.
• Jason Remillard: Receives significant equity and super-voting rights in the combined entity, subject to certain conditions and expiration.
• Margaret Z. Holdings Limited: Entitled to substantial cash and equity compensation for advisory services.
• Creditors: The financial health of the combined entity will impact repayment of any outstanding obligations.

Next Steps

• Completion of the de-SPAC business combination between Data443 Risk Mitigation, Inc. and Four Leaf Acquisition Corporation.
• Payment of the $1,000,000 promissory note within 90 days of the Date of Deal Close.
• Issuance of 1,200,000 shares of PubCo to Margaret Z. Holdings Limited upon closing.
• Potential conversion of the promissory note into PubCo shares if not repaid within 12 months.
• Payment of retention cash bonus installments at 3, 6, and 9 months post-closing, subject to conditions.

Key Dates

Recommendation

The filing details a material agreement for financial advisory services related to a de-SPAC transaction. While it outlines compensation and share structures, it does not provide new operational or financial performance data that would strongly indicate a buy or sell decision. The success of the de-SPAC is the primary driver, and this filing is a procedural step. Therefore, a 'hold' recommendation is appropriate pending further information on the de-SPAC progress and the combined entity's future performance.

Keywords

Data443 Risk Mitigation, Form 8-K, Financial Service Agreement, de-SPAC, Four Leaf Acquisition Corporation, Margaret Z. Holdings Limited, Jason Remillard, Promissory Note