AI Era Corp. 8-K

What Happened

• AI Era Corp. (AERA) filed an 8-K reporting that on January 27–28, 2026 it issued two convertible promissory notes to Monroe Street Capital Partners LP and Crom Structured Opportunities Fund I, LP. Each note has a $154,500 principal balance (total principal $309,000) and was issued for $150,000 cash proceeds per investor (total net proceeds $300,000), reflecting a $4,500 original issue discount per note.
• Material terms: 12‑month maturity, 10% annual interest (the first 12 months of interest, $15,450 per note, is fully earned and non‑refundable at issuance), holder conversion right into common stock at 80% of the lowest traded price during the 20 trading days before conversion (subject to adjustments), a $1,750 conversion fee deducted per conversion, and a 4.99% beneficial ownership cap. Prepayment requires 5 trading days’ notice and payment of 120% of principal plus 120% of accrued interest and a $750 fee. Default accelerates the debt to 150% of principal plus accrued interest and increases principal by $1,000 monthly until repaid.
• The Company says net proceeds will be used for its SaaS artificial intelligence build‑out. The issuances relied on exemptions from registration under Section 4(a)(2) and Rule 506(b).

Key Details

• Investors: Monroe Street Capital Partners LP and Crom Structured Opportunities Fund I, LP. Dates: Jan 27–28, 2026.
• Amounts: $154,500 principal per note; $150,000 cash received per note; total principal $309,000; total cash proceeds $300,000; $4,500 original issue discount per note.
• Conversion: Holder option to convert anytime at 80% of the lowest traded price in the prior 20 trading days; $1,750 conversion fee; 4.99% beneficial ownership limit.
• Default/Prepayment: Prepayment at 120% of amounts due (plus fees) with 5 trading days’ notice; upon default debt accelerates to 150% of principal and principal grows by $1,000/month until repaid.

Why It Matters

• Financing and runway: The company raised $300,000 net to fund its SaaS AI build‑out, which provides short‑term cash but is limited in size.
• Dilution and conversion risk: The conversion mechanics (80% of the lowest recent traded price) could allow investors to convert into shares at a significant discount to market, increasing potential dilution for current shareholders. The 4.99% ownership cap limits immediate large takeovers via conversion but does not eliminate dilution over time.
• Harsh default terms and restrictions: Default penalties (150% acceleration and monthly principal increases) are punitive and could materially increase the company’s obligations if it misses payments. Covenants restrict dividends, buybacks, and certain transactions, limiting corporate flexibility without investor consent.
• Registration/exemption: Notes were sold in an unregistered private placement (Section 4(a)(2) / Rule 506(b)), so conversions and future share issuances may affect the company’s public float and trading dynamics.