UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
DC 20549
FORM
8-K
CURRENT
REPORT PURSUANT
TO
SECTION 13 OR 15(D) OF THE
SECURITIES
EXCHANGE ACT OF 1934
Date
of
report (Date of earliest event reported): September 12, 2007
PAY88,
INC.
(Exact
Name of Registrant as Specified in Its Charter)
Nevada
(State
or
Other Jurisdiction of Incorporation)
|
000-51793
(Commission
File Number)
|
20-3136572
(IRS
Employer Identification No.)
|
1053
North Barnstead Road
Barnstead,
NH 03225
(Address
of Principal Executive Offices, Zip Code)
(603)
776-6044
(Registrant's
Telephone Number, Including Area Code)
(Former
Name or Former Address, if Changed Since Last Report)
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2. below):
o Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
o Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
o
Pre-commencement communications pursuant
to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o
Pre-commencement communications pursuant
to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Section
1 - Registrant’s Business and Operations
Item
1.01 Entry into a Material Definitive Agreement.
On
September 12, 2007, Pay88, Inc., a Nevada corporation (the “Company” or “we”)
entered into Subscription Agreements (the "Subscription Agreements") with 3
accredited investors ("Purchasers"), for the purchase and sale of $1,155,000
of
Secured Convertible Promissory Notes of the Company (the “Notes”) for the
aggregate purchase price of $750,000 (the “Note Financing”). The Company
received net proceeds from the issuance of the Notes of $694,237. Pursuant
to
the terms of the Subscription Agreement, we also issued to the Purchasers
warrants to purchase an aggregate of 2,310,000 shares of common stock of the
Company, subject to adjustments for certain issuances and transactions. In
accordance with the terms of the Subscription Agreement, additional Notes in
the
principal amount of $1,155,000 and the issuance of an aggregate of
2,310,000 additional warrants will be issued on or before the fifth business
day
after a registration statement covering the shares of common stock issuable
upon
conversion of the Notes is declared effective by the Securities and Exchange
Commission.
The
Notes
The
Notes
bear interest at the rate of prime plus 4% per annum, payable in either (a)
cash
equal to 110% of 8.33% of the initial principal amount of the Note or (b) absent
any event of default, in shares of our common stock at the lesser of (i) $1.00
per share or (ii) 80% of the average of the closing bid prices of our common
stock for the 20 trading days preceding the payment date. Said payments commence
on March 12, 2008 and all accrued but unpaid interest and any other amounts
due
thereon is due and payable on March 12, 2009, or earlier upon acceleration
following an event of default, as defined in the Notes.
All
principal and accrued interest on the Notes is convertible into shares of our
common stock at the election of the Purchasers at any time at the conversion
price of $1.00 per share, subject to adjustment for certain issuances,
transactions or events that would result in “full ratchet” dilution to the
holders.
The
notes
contain default events which, if triggered and not timely cured (if curable),
will result in a default interest rate of an additional 5% per annum. The Notes
also contain antidilution provisions with respect to certain securities
issuances, including the issuances of stock for less than $1.00 per share.
In
addition, we have to pay the Purchasers 120% plus accrued interest of the
outstanding principal amount if we are no longer listed on the Bulletin Board,
sell substantially all of our assets or Guo Fan is no longer our Chief Executive
Officer.
The
Warrants
As
part
of the financing, we also issued to each Purchaser an aggregate
of 1,155,000 Class A Common Stock Purchase Warrants and 1,155,000
Class B Common Stock Purchase Warrants. The Class A Warrants are exercisable
at
a price of $0.81 per share at any time until September 12, 2012 and the Class
B
Warrants are exercisable at a price of $1.13 per share at any time until
September 12, 2012. The warrants include a cashless exercise provision which
is
triggered after March 12, 2008 as well as “full ratchet” antidilution provisions
with respect to certain securities issuances.
The
option of each Purchaser, conversion of the Notes, or exercise the Warrants,
is
subject to the restriction that such conversion or exercise, does not result
in
the Purchaser beneficially owning at any one time more that 4.99% of our
outstanding shares of common stock.
Security
and Guarantees
Payment
of the Notes along with our other obligations to the Purchasers is secured
by
all the assets of the Company and of our wholly-owned subsidiary Chongqinq
Qianbao Technology Ltd., a limited liability company organized under the laws
of
the People’s Republic of China (“Qianbao”). Such obligations are also secured by
a pledge of all the shares we hold in Qianbao and 4,950,000 shares of Series
A
Preferred Stock (convertible into 13,860,000 shares of common stock) as well
as
personal guaranties of Guo Fan, the Chief Executive Officer and a director
of
the Company, and by Tao Fan, the Chief Executive Officer of Qianbao and Chief
Operating Officer and a director of the Company.
Registration
Statement
In
connection with the transaction, we agreed to prepare and file with the
Securities and Exchange Commission within 30 days following the closing a
registration statement on Form SB-2 for the purpose of registering for resale
all of the shares of common stock underlying the Notes. If we fail to file
such
registration statement within such time, or if the registration statement is
not
declared effective within 91 days from September 16, 2007, we must pay monthly
liquidated damages in cash equal to 2% of the principal amount of the Notes
and
purchase price of the Warrants. The Purchasers were also granted standard
piggyback registration rights along with certain demand registration
rights.
Pursuant
to the Subscription Agreements, we granted the Purchasers a right of first
refusal with respect to proposed sale of equity or debt securities by the
Company, subject to certain exceptions. The right is effective until the earlier
of one year from the effective date of the Registration Statement or the date
which the Notes are satisfied in full.
We
also
agreed that if at any time while the Notes or Warrants are outstanding, the
Company issues or agrees to issue any common stock or securities convertible
into common stock at a per share price or conversion price or exercise price
without the consent of the Purchasers, then the Company agrees on each such
occasion, additional shares of common stock issued to the Purchasers in
connection with the Notes and the Warrants and the shares that remain
outstanding at the time of the lower price issuance so that the average per
share purchaser price of the shares of common stock issued to each Purchaser
is
equal to such other lower price.
It
is
anticipated that prior to the filing of the registration statement, the holders
of the 5,000,000 shares of Series A Preferred Stock will convert their shares
pursuant to the terms thereof into 14,000,000 shares of common
stock.
We
plan
to use the net proceeds of the Notes to expand our operations.
Lock-Up
Agreements
As
a
condition to the issuance of the Notes, we have entered into agreements with
Guo
Fan and Tao Fan, affiliates of the Company, and three other individuals pursuant
to which each of them has agreed not to sell any shares of our common stock
prior to 365 calendar days after the registration statement covering registering
for resale all of the stock underlying the Notes has been declared effective,
or
until the Notes are no longer outstanding. The foregoing summary of said
agreements is qualified in its entirety by the form of that agreement which
has
been filed as Exhibit 10.5 to this Current Report.
The
foregoing description of the Notes, the Warrants, the Subscription Agreements,
the Security Agreement, the Guarantee, and the Lock Up Agreements does not
purport to be complete and is qualified in its entirety by reference to the
Subscription Agreement, the Notes, the Warrants, the Security Agreement, and
the
Guarantee, which are attached hereto as Exhibits 4.1, 4.2, 10.1, 10.2, 10.4
and
10.5, respectively, and incorporated herein by reference.
Item
2.03 Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
The
information contained in Item 1.01 of this Current Report is incorporated by
reference in this Section 2.03.
Item
3.02 Unregistered Sales of Equity Securities
The
information contained in Item 1.01 of this Current Report is incorporated by
reference into this Item 3.02. The securities described in Item 1.01 above
were
offered and sold in reliance upon exemptions from registration pursuant to
Section 4(2) under the Securities Act and Rule 506 promulgated thereunder.
The
Subscription Agreements executed in connection therewith contain representations
to support the Company's reasonable belief that each of the Purchasers had
access to information concerning its operations and financial condition, is
acquiring the securities for its own account and not with a view to the
distribution thereof, and is an "accredited investor" as such term is defined
in
Rule 501 (a) of Regulation D promulgated under the Securities Act. At the time
of their issuance, the securities described in Item 1.01 above will be deemed
to
be restricted securities for purposes of the Securities Act and the certificates
representing the securities shall bear legends to that effect.
The
Company also issued an aggregate of 8,000,000 shares of common stock to two
consultants in consideration for services rendered. These issuances were offered
and sold in reliance upon exemptions from registration pursuant to Section
4(2)
under the Securities Act and Rule 506 promulgated thereunder. 3,887,000 of
said
shares will be included in the Registration Statement described in item
1.01.
As
of the
date of this Current Report, the Company has 18,100,000 shares of common stock
issued and outstanding and 5,000,000 shares of Series A Convertible Preferred
Stock which are convertible into 14,000,000 shares of common stock.
Item
9.01 Financial Statements and Exhibits.
(d)
Exhibits.
|
Exhibit
No.
|
|
Description
|
| |
|
|
|
4.1
|
|
Form
of Convertible Note
|
| |
|
|
|
4.2
|
|
Form
of Class A and Class B Warrant
|
| |
|
|
|
10.1
|
|
Subscription
Agreement dated September 12, 2007, between Pay88,Inc. and the
Purchasers named on the signature page thereto.
|
| |
|
|
|
10.2
|
|
Security
Agreement dated September 12, 2007, by and between the Purchasers
named on the signature page thereto , Barbara
R. Mittman, as Collateral Agent for the
Purchasers and Pay88,Inc. and Chongqing Qianbao
Technology Ltd., as Debtors.
|
| |
|
|
|
10.3
|
|
Collateral
Agent Agreement dated September 12, 2007 by and between the
Purchasers named on the signature page thereto, Barbara
R. Mittman, as Collateral Agent for the
Purchasers and the Company and Chongqing
Qianbao
Technology Ltd., as Debtors.
|
| |
|
|
|
10.4
|
|
Form
of Guaranty
|
| |
|
|
|
10.5
|
|
Form
of Lock Up Agreement
|
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
| |
|
|
| |
PAY88,
INC. |
|
|
|
| Date: September 17, 2007 |
By: |
/s/ Guo
Fan |
| |
Name:
Guo Fan |
| |
Title: President
and Chief Executive Officer |