SCHEDULE: SJC Lending Boosts TurnOnGreen Stake, Provides $1.5M Loan

SJC Lending, LLC increased its beneficial ownership in TurnOnGreen, Inc. to 8.6% and entered into an agreement to provide up to $1.5 million in financing through convertible promissory notes.

Summary

• SJC Lending, LLC and its manager, Steven Caspi, reported beneficial ownership of 15,847,507 shares of TurnOnGreen, Inc. common stock, representing approximately 8.6% of the outstanding shares.
• The aggregate purchase price for these shares was $682,706, acquired through open market purchases using working capital.
• SJC Lending, LLC entered into a Securities Purchase Agreement with TurnOnGreen, Inc. to provide up to $1.5 million in financing through convertible promissory notes, with an aggregate principal amount of up to $1,650,000.
• An initial tranche of $400,000 (principal $440,000) was funded on October 29, 2025.
• Additional tranches totaling $1.1 million ($1.21 million principal) are contingent on the filing and effectiveness of a registration statement for the conversion shares.
• The convertible notes carry an interest rate of 12% per annum, increasing to 20% on amounts over $300,000 upon an event of default.
• The conversion price is the greater of $0.035 per share or a 20% discount to the lowest VWAP over the 10 trading days prior to conversion.
• SJC Lending, LLC received a comprehensive security package, including security interests in intellectual property, substantially all assets of TurnOnGreen and its subsidiaries, and a pledge of subsidiary capital stock.
• SJC Lending, LLC also secured a one-year right of first refusal for future equity or convertible debt offerings by TurnOnGreen, Inc.

Sentiment

Score: 3

Explanation: While the company secured much-needed capital, the terms of the convertible notes, including high interest rates, significant dilution potential, and extensive collateral, suggest a difficult financing environment and potentially weak bargaining position for TurnOnGreen, Inc. This type of financing often signals underlying financial stress.

Positives

• TurnOnGreen, Inc. secured up to $1.5 million in new financing, providing crucial working capital.
• The initial tranche of $400,000 was immediately funded, addressing immediate capital needs.
• The financing structure includes additional tranches, offering a potential pipeline of funds upon meeting certain conditions.

Negatives

• The convertible notes carry a high interest rate of 12% per annum, escalating to 20% upon default for amounts over $300,000, indicating a high cost of capital.
• The conversion price includes a 20% discount to VWAP, which could lead to significant dilution for existing shareholders if the stock price declines.
• The financing is heavily collateralized, with security interests granted over intellectual property, substantially all assets of the company and its subsidiaries, and a pledge of subsidiary capital stock, indicating a high level of risk for the lender and potential constraints on the company.
• The original issue discount on the initial note (purchased for $400,000 with a $440,000 principal) represents an immediate 10% cost to the company.
• The right of first refusal granted to SJC Lending, LLC for future equity or convertible debt offerings could limit the company's flexibility in seeking alternative financing or strategic partners for one year.

Risks

• Dilution Risk: The conversion feature of the notes, particularly the 20% discount to VWAP, poses a significant risk of dilution to existing shareholders if the stock price falls.
• High Debt Cost: The 12% interest rate, escalating to 20% upon default, represents a substantial financial burden and could strain the company's cash flow.
• Default Risk: Failure to meet payment obligations or other covenants could trigger an event of default, leading to the higher interest rate and potential enforcement of the extensive collateral.
• Asset Encumbrance: The granting of security interests over intellectual property, substantially all assets, and subsidiary capital stock significantly encumbers the company's assets, potentially limiting its ability to secure future financing or dispose of assets.
• Financing Contingencies: Future tranches of the loan are subject to conditions, including the filing and effectiveness of a registration statement, which could delay or prevent the full funding if not met.
• Limited Future Financing Options: The one-year right of first refusal granted to SJC Lending, LLC could restrict the company's ability to raise capital from other sources on more favorable terms.

Future Outlook

The company anticipates filing a registration statement with the SEC to register for resale the shares issuable upon conversion of the Convertible Notes. The full funding of the convertible notes is contingent upon the filing and effectiveness of this registration statement, indicating a future capital infusion is planned but not guaranteed.

Industry Context

This financing arrangement suggests that TurnOnGreen, Inc., operating in the EV charging and power solutions sector, is seeking capital to support its operations or growth initiatives. The terms of the debt, including high interest rates and extensive collateral, may indicate challenges in securing less dilutive or less restrictive financing in the current market environment for emerging technology companies. The right of first refusal could impact future strategic partnerships or capital raises within the competitive EV infrastructure space.

Comparison to Industry Standards

• The 12% interest rate (20% on default) for convertible notes is significantly higher than typical corporate bond yields for established companies, reflecting a higher risk profile for TurnOnGreen, Inc. For example, investment-grade corporate bonds might yield 4-6%, while high-yield (junk) bonds typically range from 7-10%. This suggests TurnOnGreen is perceived as a higher-risk borrower, similar to early-stage startups or distressed companies.
• The extensive collateral package, including intellectual property, substantially all assets, and subsidiary stock, is more common in distressed debt situations or for companies with limited tangible assets and high growth potential but uncertain cash flows, unlike more mature companies like ChargePoint or EVgo which might secure debt with less restrictive covenants.
• The conversion price mechanism, including a 20% discount to VWAP, is a common feature in "death spiral" financing or highly dilutive debt, often seen in micro-cap or small-cap companies struggling to raise capital through traditional equity offerings. This contrasts with more favorable conversion terms often seen in venture debt or growth equity rounds for stronger companies.

Related Party Transactions

• SJC Lending, LLC, a significant beneficial owner (8.6%) of TurnOnGreen, Inc., is providing debt financing to the company through convertible promissory notes, constituting a related party transaction.

Stakeholder Impact

• Shareholders: Face significant potential dilution from the conversion of the notes, especially given the 20% discount to VWAP. The high interest rate also impacts the company's profitability, indirectly affecting shareholder value.
• Creditors: The extensive collateralization of assets by SJC Lending, LLC could reduce the recovery prospects for other unsecured creditors in a default scenario.
• Employees/Customers/Suppliers: The capital infusion could provide stability and support ongoing operations, which is positive. However, the restrictive terms and high cost of capital could limit future growth or operational flexibility.

Next Steps

• TurnOnGreen, Inc. needs to file a registration statement with the SEC to register for resale the shares issuable upon conversion of the Convertible Notes.
• SJC Lending, LLC will purchase additional tranches of convertible notes totaling $220,000 (principal) after the registration statement filing.
• SJC Lending, LLC will purchase further tranches totaling $990,000 (principal) after the SEC declares the registration statement effective, funded in monthly increments.

Key Dates

Recommendation

The terms of the financing, including the high interest rate, significant dilution potential from the convertible notes (especially with the 20% VWAP discount), and the extensive collateralization of company assets, indicate a company in a precarious financial position. While the capital raise provides a lifeline, it comes at a very high cost and suggests a lack of more favorable financing options. This type of financing often precedes further financial distress or significant shareholder value erosion. The right of first refusal also limits future strategic flexibility.

Keywords

TurnOnGreen Inc., SJC Lending LLC, Schedule 13D/A, beneficial ownership, convertible notes, debt financing, equity dilution, security agreement, pledge agreement, right of first refusal, electric vehicle charging, EV charging, Digital Power Corporation, TOG Technologies Inc.