8-K: AI Era Corp. Secures $225K in Convertible Note Financing

Sentiment:

Debt Financing 6 February 2026 5:01 PM

📋All filings for Ab International Group CORP

AI Era Corp. announced the issuance of two convertible promissory notes totaling $225,000 to Jefferson Street Capital LLC and Labrys Fund II, L.P. to fund its SaaS Artificial Intelligence build-out.

Capital raiseAI Era Corp. issued a convertible promissory note with a principal amount of $77,250 to Jefferson Street Capital LLC for a purchase price of $75,000.AI Era Corp. issued a convertible promissory note with a principal amount of $150,000 to Labrys Fund II, L.P. for a purchase price of $150,000.The total principal amount of capital raised through these notes is $227,250, with net proceeds to the company reduced by OID and various fees totaling $21,500.

Worse than expectedThe effective cost of capital is high, with an Original Issue Discount (OID) for the Jefferson Street Note and significant fees withheld from the Labrys Note proceeds, reducing the net cash received by the company.The conversion price mechanism (80% of the lowest traded price over 20 days) is highly dilutive for existing shareholders and is characteristic of financing obtained under unfavorable market conditions for the issuer.High default interest rates (18% and 22%) and a 150% repayment penalty upon default indicate a high-risk lending scenario and significant financial pressure on the company.The company is subject to numerous restrictive covenants that limit its operational and financial flexibility, which is generally a negative for corporate governance and strategic agility.

Summary

AI Era Corp. (AERA) entered into a Securities Purchase Agreement with Jefferson Street Capital LLC on February 2, 2026, issuing a convertible promissory note with a principal amount of $77,250 for a purchase price of $75,000, including a $2,250 original issue discount (OID).
The Jefferson Street Note bears interest at 10% per annum, with the first twelve months of interest ($7,725) guaranteed and earned in full as of the issue date, and matures on February 2, 2027.
AI Era Corp. also entered into a Securities Purchase Agreement with Labrys Fund II, L.P. on February 4, 2026, issuing a convertible promissory note with a principal amount and purchase price of $150,000.
The Labrys Note bears interest at 10% per annum, matures on February 4, 2027, and conversion rights commence 180 days after the issue date.
Both notes are convertible into shares of the company's common stock at a conversion price equal to 80% of the lowest traded price during the 20 trading days prior to the conversion date, subject to a 4.99% beneficial ownership limitation (Labrys can increase to 9.99%).
The proceeds from both financings are designated for the company's SaaS Artificial Intelligence build-out.
Upon an event of default, both notes become immediately due and payable at 150% of the outstanding principal plus accrued interest, along with collection costs.
The Jefferson Street Capital LLC transaction involved the buyer withholding $3,750 for its legal fees from the purchase price.
The Labrys Fund II, L.P. transaction involved the buyer withholding $5,000 for its legal fees, $2,000 for due diligence costs, and $10,500 for placement agent fees from the purchase price.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this as a necessary but costly capital raise, reflecting the company's need for funds for its AI build-out but at terms highly favorable to the lenders and potentially very dilutive for existing shareholders.

Positives

The company secured $225,000 in principal financing to fund its SaaS Artificial Intelligence build-out, which is a strategic area of development.
Noteholders receive piggy-back registration rights, potentially facilitating future liquidity for their conversion shares.

Negatives

The effective cost of capital is high, evidenced by a $2,250 Original Issue Discount (OID) on the Jefferson Street Note and $17,500 in various fees withheld from the Labrys Note proceeds.
The conversion price mechanism (80% of the lowest traded price over 20 trading days) is highly dilutive for existing shareholders.
Default interest rates are exceptionally high (18% for Jefferson Street, 22% for Labrys), indicating a high-risk profile perceived by lenders.
The company is subject to numerous restrictive covenants, including limitations on dividends, stock repurchases, asset sales, and affiliate transactions, which could limit operational flexibility.
The Jefferson Street Note includes a 'Most Favored Nation' clause, potentially obligating the company to offer equally favorable terms to Jefferson Street if better terms are offered to future investors.

Risks

Significant potential for dilution of existing shareholders due to the conversion terms of the promissory notes, which are tied to 80% of the lowest traded price.
High default interest rates (18% and 22% per annum) and a 150% repayment penalty upon default could severely impact the company's financial stability.
The company faces numerous events of default, including failure to pay, failure to issue conversion shares, breach of covenants, judgments over $100,000, bankruptcy, cessation of operations, and failure to comply with 1934 Act reporting requirements.
Risk of delisting, suspension, or failure to be quoted on a Principal Market, which would constitute an event of default.
The company covenants not to issue any shares or equivalents for 30 days after the Jefferson Street agreement date, potentially limiting immediate financing options.
The company covenants not to amend prior debt or Common Stock Equivalents without the Jefferson Street buyer's consent, restricting future financial restructuring.

Future Outlook

The company intends to use the proceeds from these convertible notes to fund its SaaS Artificial Intelligence build-out, indicating a strategic focus on developing its AI capabilities. The notes include provisions for future adjustments to conversion prices based on subsequent dilutive issuances, suggesting potential for ongoing financing needs.

Management Comments

Chiyuan Deng, Chief Executive Officer, signed the Securities Purchase Agreements and Convertible Promissory Notes on behalf of AI Era Corp.

Industry Context

StockSavvy.ai notes that securing capital for AI development is crucial in the competitive tech landscape, particularly for companies focused on SaaS solutions. However, the terms of this financing, including the high cost of capital and dilutive conversion features, suggest a challenging funding environment for AI Era Corp. compared to more established players.

Comparison to Industry Standards

StockSavvy.ai observes that convertible notes with conversion prices set at 80% of the lowest traded price over a period are typically seen in highly distressed or early-stage companies with limited access to traditional financing. This contrasts sharply with well-capitalized tech giants like Microsoft or Google, which can raise capital at significantly lower costs and with far less dilutive terms.
The high default interest rates (18-22%) further underscore the perceived risk by lenders, exceeding typical rates for stable, growth-stage companies in the software industry.
The extensive list of restrictive covenants and events of default is more common in high-risk debt instruments, indicating a lack of strong bargaining power for AI Era Corp. compared to industry benchmarks for healthy companies.

Corporate Governance

Change Type	Description	Effective Date	Impact Assessment
Restriction on Distributions	The company cannot pay dividends or make other distributions on capital stock (except common stock dividends in common stock) without the noteholder's written consent.	2026-02-02	Limits the company's ability to return capital to shareholders and may impact investor attractiveness.
Restriction on Stock Repurchases and Debt Repayments	The company cannot redeem, repurchase, or acquire its capital stock or repay pari passu or subordinated indebtedness without the noteholder's written consent.	2026-02-02	Restricts capital management flexibility and ability to manage debt structure.
Restriction on Asset Sales	The company cannot sell, lease, or dispose of any significant portion of its assets outside the ordinary course of business without the noteholder's written consent.	2026-02-02	Limits strategic asset divestitures and potential restructuring.
Restriction on Affiliate Transactions	The company cannot lend money, give credit, or make advances to affiliates (including officers, directors, employees) without the noteholder's written consent, with limited exceptions.	2026-02-02	Enhances oversight on related-party dealings, potentially improving transparency but limiting internal financial flexibility.
Prohibition on 3(a)(10) Transactions	The company is prohibited from entering into any transaction structured under Section 3(a)(10) of the Securities Act, with liquidated damages for non-compliance.	2026-02-02	Restricts a potential method for future capital restructuring or M&A activities.
Restriction on Business Nature and Asset Structure	The company cannot change the nature of its business or sell/divest/change the structure of material assets outside the ordinary course of business without the noteholder's written consent.	2026-02-02	Limits strategic shifts and significant corporate transformations without lender approval.
Restriction on Future Financings (Jefferson Street)	The company cannot issue any shares of Common Stock or Common Stock Equivalents for 30 calendar days after the agreement date.	2026-02-02	Temporarily restricts the company's ability to raise additional capital through equity or equity-linked securities.
Restriction on Amendment of Prior Transactions (Jefferson Street)	The company cannot amend or alter the provisions of any debt or Common Stock Equivalents issued prior to the agreement date without the Jefferson Street buyer's express written consent.	2026-02-02	Significantly limits the company's flexibility to renegotiate or restructure existing financial obligations.

Legal Proceedings

The Securities Purchase Agreements and Convertible Promissory Notes include detailed arbitration provisions for dispute resolution. For the Jefferson Street Note, the exclusive venue for arbitration is New Castle County, State of Delaware. For the Labrys Note, the exclusive venue for arbitration is the Commonwealth of Massachusetts.
The company irrevocably waives any right to a jury trial for disputes arising under these agreements.

Related Party Transactions

Labrys Fund II, L.P. withheld $2,000 from the purchase price to be paid to Labrys II Management, LLC for due diligence costs, indicating a relationship between the noteholder and the entity receiving the fee.

Stakeholder Impact

Shareholders: Face significant potential for dilution due to the highly unfavorable conversion terms of the notes (80% of lowest traded price), which could substantially reduce their ownership percentage and per-share value.
Note Holders (Jefferson Street Capital LLC and Labrys Fund II, L.P.): Benefit from high interest rates, substantial default penalties (150% of principal), and strong protective covenants, positioning them favorably in the capital structure.
Company (AI Era Corp.): Gains necessary capital for its AI development but at a high cost of financing and with numerous restrictive covenants that limit its operational and financial autonomy.
Employees: The success of the AI build-out, funded by this capital, could create opportunities, but the company's financial constraints and high-cost debt could also pose risks to long-term stability.

Next Steps

The company is expected to utilize the proceeds for its SaaS Artificial Intelligence build-out.
The company must maintain the required reserved amount of common stock for potential conversions of the notes.
The company must comply with all reporting requirements under the Securities Exchange Act of 1934.
The company must provide notice to Labrys Fund II, L.P. of any proposed future debt, equity, or equity equivalent security offerings.

Key Dates

Date	Description
2026-02-02	Issue Date of Convertible Promissory Note to Jefferson Street Capital LLC and date of Securities Purchase Agreement.
2026-02-04	Issue Date of Convertible Promissory Note to Labrys Fund II, L.P. and date of Securities Purchase Agreement.
2026-08-03	Approximate date (180 calendar days after issue date) when Labrys Fund II, L.P. gains the right to convert its note into common stock.
2026-08-04	Approximate date (6 calendar months after issue date) when Rule 144 may become available for the Labrys Note conversion shares, subject to conditions.
2027-02-02	Maturity Date for the Convertible Promissory Note issued to Jefferson Street Capital LLC.
2027-02-04	Maturity Date for the Convertible Promissory Note issued to Labrys Fund II, L.P.

Recommendation

strong sell

The terms of this financing, particularly the highly dilutive conversion price (80% of the lowest traded price) and the severe penalties upon default (150% of principal), are extremely unfavorable to existing shareholders. This structure suggests the company is in a distressed financial state, forced to accept predatory financing that will likely lead to significant shareholder value destruction. The extensive restrictive covenants further limit management's ability to operate effectively. Investors should consider exiting their positions to avoid further dilution and potential losses.

Keywords

AI Era Corp, AERA, Convertible Note, Debt Financing, SaaS, Artificial Intelligence, SEC Filing, Form 8-K, Dilution, Corporate Finance, Unsecured Debt

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