AZIO AI Enters Standby Equity Purchase Agreement; $3.5M Pre‑Paid Advance

What Happened

• On September 25, 2026, AZIO AI Holdings, Inc. (AZIO) entered into a Standby Equity Purchase Agreement (SEPA) with YA II PN, Ltd. The investor advanced a $3.5 million Pre‑Paid Advance evidenced by convertible promissory notes; $3.0M was disbursed at signing and $0.5M will be disbursed after the resale registration statement is effective. The notes accrue 6% annual interest (rising to 18% if an Event of Default occurs) and mature September 25, 2027 (extendable at the investor’s option).
• Under the SEPA AZIO can require the investor to buy up to $50 million of AZIO common stock over time, subject to trading‑volume limits, a Nasdaq “exchange cap” of 3,473,960 shares (19.99% of shares outstanding at the SEPA date) and a 4.99% beneficial ownership cap for the investor and its affiliates. AZIO issued the investor warrants for 1,735,758 shares at $0.01 exercise price and paid a $50,000 structuring fee.

Key Details

• Counterparty: YA II PN, Ltd.; SEPA effective September 25, 2026.
• Pre‑Paid Advance: $3.5M total (first tranche $3.0M disbursed; second tranche $0.5M after registration effectiveness).
• Conversion / pricing: Promissory notes convertible at 92% of the lowest daily VWAP over the five trading days before conversion (floor $0.26/share). Advances price the stock at 96% (same‑day VWAP) or 97% (three‑day VWAP) depending on AZIO’s election.
• Share and resale mechanics: Warrants for 1,735,758 shares issued; company agreed to file a resale registration statement covering up to 28,000,000 shares within 30 days (effectiveness target within 60/120 days per SEC review rules).

Why It Matters

• Liquidity: AZIO received immediate cash ($3.0M) and access to a potential $50M equity facility, providing near‑term funding flexibility without a bank loan.
• Dilution risk: Use of the facility, conversion of notes, and exercise of warrants will increase shares outstanding and could be dilutive. Pricing provisions (discounted VWAP and the 96%/97% advance pricing) mean new shares could be sold at a material discount to market at the time of each advance or conversion.
• Short‑term obligations and protections: The promissory notes mature in one year (Sept 25, 2027) and carry a steep default interest rate (18%), so outstanding debt could become more costly if covenants are breached. Nasdaq limits and the investor’s 4.99% ownership cap constrain how much immediate dilution can occur under the agreement.