SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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): April 19, 2010
AVSTAR AVIATION GROUP, INC.
---------------------------
(Exact name of registrant as specified in its charter)
Colorado 0-30503 76-0635938
--------------------------------------------------------------------------------
(State or other jurisdiction (Commission File Number) (IRS Employer ID Number)
of incorporation
3600 Gessner, Suite 220, Houston, Texas 77063
--------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (713) 965-7582
------------------------------
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:
[ ] Written communications pursuant to Rule 425 under the Securities
Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
The information included in Item 2.03 of this Current Report on Form 8-K is
also incorporated by reference into this Item 1.01 of this Current Report on
Form 8-K.
ITEM 2.03 CREATION OF A DIRECT FINANCIAL OBLIGATION OR AN OBLIGATION UNDER AN
OFF-BALANCE SHEET ARRANGEMENT OF REGISTRANT
Commencing on April 19, 2010, AvStar Aviation Group, Inc. (the "Company")
entered into a series of transactions in which it issued five convertible
promissory notes (singly a "Note" and collectively the "Notes") to Asher
Enterprises, Inc. ("Holder") in consideration of certain amounts loaned by
Holder to the Company. The following table gives the designations to which the
Notes are referred hereinafter, the dates of the Notes, the original principal
amounts of the Notes, and the scheduled maturity dates of the Notes:
Designation Issuance Original Principal Maturity
of Note Date of Note Amount of Note Date of Note
------- ------------ -------------- ------------
First 4/19/2010 $50,000 1/21/2011
Second 6/1/2010 $25,000 3/31/2011
Third 8/31/2010 $40,000 6/2/2011
Fourth 10/21/2010 $35,000 7/25/2011
Fifth 12/20/2010 $45,000 9/22/2011
-------
TOTAL $195,000
The Company believes that the execution and delivery of the First Note was
probably not material enough to require the filing of this Report, but that the
Notes (taken as a whole) were materials enough to require the filing of this
Report after the execution and delivery of either the Second or Third Note.
While the terms of the Notes vary somewhat, these terms are generally the same
from Note to Note. The following is a description of the terms of the Notes.
Each of the Notes bears regular interest at a rate of 8% per annum, with a
default rate of 22% per annum. The Notes are unsecured, and each of them is due
and payable on or before their respective maturity dates. At any time prior to
the payment in full of the entire balance of a Note, Holder has the option of
converting all or any portion of the unpaid balance of the Note into shares of
the Company's common stock at a conversion price discussed hereafter.
Nevertheless, Holder is not entitled to convert any portion of a Note to the
extent that the shares to be issued in connection therewith would cause Holder's
beneficial ownership of the Company's common stock to exceed 4.99% of the
outstanding shares of the Company's common stock. Each conversion price for the
Notes features a "variable" conversion price, and the First and Second Notes
also feature a "fixed" conversion price of $.002, which will apply if it is less
than the related variable conversion price. The variable conversion price is a
percentage discount from an average of the three lowest closing bid prices of
the Company's common stock for the 10 most recent trading days preceding the
date of exercise. The percentage discounts for the variable conversion prices
provided for in the Notes range from 42% for the First Note, 50% for the Second,
Third and Fourth Notes, and 55% for the Fifth Note. Because of the operation of
the floating conversion price and the limitation on the ability of Holder to
convert as described above, the Company is unable to determine at any time that
number of shares into which Holder could convert one or more of the Notes.
The Notes (and related documentation) contain customary representations and
warranties, customary affirmative and negative covenants, customary anti-
dilution provisions, and customary events of default that entitle Holder to
accelerate the due date of the unpaid principal amount of, and all accrued and
unpaid interest on, the Notes. A default on any of the Notes could lead to
certain penalties, including an obligation to (a) pay all of the following, plus
an additional 50% of (i) default interest, (ii) other monetary penalties, and
(iii) the outstanding balance on the related Note, and (b) to issue shares of
the Company's common stock to satisfy the amount computed in accordance with (a)
immediately preceding.
Commencing October 25, 2010, Holder began converting some of the Notes. As
of the date of the Report, Holder had converted an aggregate principal amount of
the Notes equal to $87,000 into 49,871,292 shares of the Company's common stock,
leaving an aggregate outstanding principal amount of the Notes equal to $108,000
as of April 1, 2011. The First and Second Notes have been fully converted,
while the Third Note has been partially converted.
ITEM 3.02. UNREGISTERED SALES OF EQUITY SECURITIES.
The information included in Item 2.03 of this Current Report on Form 8-K is
also incorporated by reference into this Item 3.02 of this Current Report on
Form 8-K.
In addition to the issuances to the Holder described above, in November
2010 the Company issued an aggregate of 12.0 million shares of its common stock
to two investors' relations firms for services to be provided.
The issuances described in the preceding paragraph and the issuances to
Holder of the Notes and the 49,871,292 shares of its common stock in connection
with the conversion of some of the Notes are claimed to be exempt pursuant to
Section 4(2) of the Securities Act of 1933 (the "Act") and Rule 506 of
Regulation D under the Act. No advertising or general solicitation was employed
in offering these securities. The offering and sale was made only to three
persons, and subsequent transfers were restricted in accordance with the
requirements of the Act.
The securities issued in connection with the acquisition were not
registered under the Securities Act of 1933, as amended, and may not be offered
or sold in the United States in the absence of an effective registration
statement or exemption from registration requirements.
SIGNATURE
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.
AVSTAR AVIATION GROUP, INC.
Date: April 13, 2011 /s/ Clayton I. Gamber
-------------------------
Clayton I. Gamber,
Chief Executive Officer & Presiden
