Item 8.01 Other Events.
On September 27, 2016, Sky Rover Holdings, Ltd., a California corporation (Sky Rover) which is 100% owned by Lei (Lester) Pei, the Registrants CEO and principal shareholder, loaned an additional $2,000,000 to the Registrant, i.e. including Sky Rovers $1,000,000 loan to the Registrant in August, 2016, a total of $3,000,000 has been loaned to the Registrant by Sky Rover since August 1, 2016
The terms for the investment are as follows: Sky Rover was issued an unsecured convertible promissory note (the Note) which is due in three years (on September 27, 2019), and is convertible into the Registrants common shares at any time before the due date, at a conversion price of $.04 per share (subject to adjustment in the event of stock splits, forward splits, recapitalizations, a merger, etc.).
If and when Sky Rover converts the entire $2,000,000 Note at the present conversion price of $.04 per share to 50,000,000 shares, and assuming that Sky Rover also converts the $1,000,000 loan at the same conversion price of $.04 per share, Sky Rover would be issued a total of 75,000,000 restricted shares of the Registrants common stock. Those shares, plus the 6,000,000 shares Mr. Pei currently owns, would give him beneficial ownership of 81,000,000 of the Registrants 83,130,000 then-issued and outstanding shares (assuming that no other shares are issued before conversion), which would be approximately 97.4% of the then-outstanding shares.
The Note bears interest of 5% per annum, with interest payable quarterly, in cash or, at the Registrants option, the issuance to Sky Rover of restricted shares of the Registrants common stock at the conversion price of $.04 per share.
The Registrant intends to use the proceeds of the loan for working capital.
The above descriptions of the terms set forth in the Note are qualified in the entirety by reference to the Note and the Note Agreement, which are Exhibits to this Report on Form 8-K.
As of the date of the issuance of the Note, the Registrant had 75,000,000 authorized common shares, $.001 par value, which would not be enough authorized shares if both the $1,000,000 note and the $2,000,000 Note were both converted immediately. So, the Registrant, by consent of Mr. Pei, the majority shareholder, has caused the Registrant to increase its authorized common shares to 250,000,000, $.001; and Mr. Peis consent also authorized the issuance of up to 50,000,000 Preferred Shares, $.001 par value, with such rights, powers, designations, preferences, liquidation and conversion rights, and other terms, as are set forth in each issuance of Preferred Shares in a resolution of the Board of Directors.
As of the date of this Form 8-K, no Preferred Shares have been issued, and the Registrant has no current plans or agreements which would require the issuance of any Preferred Shares.