The situation at Spiralfrog appears to be worsening, based on upcoming debt obligations.
Earlier this week, sources pointed Digital Music News to a quickly-arriving deadline involving upwards of $10 million in convertible notes, though specific figures could not be confirmed. That is part of a loan structure that relies heavily on senior secured notes, and contrasts with traditional equity financing, based on details shared in January by the company.
The financing structure represents an unusual and disadvantageous method for raising funds, simply because any failure to pay back debt results in forced equity handovers, or other forms of collateral surrender. Additionally, the senior secured notes often carry onerous interest terms.
Discussing the matter on Wednesday, Spiralfrog founder Joe Mohen confirmed to Digital Music News that “some convertible notes” were coming due at the end of April. “At that point, they will either mature or be converted into equity in the company,” Mohen relayed.