8-K 1 v061883_8k.htm

UNITED STATES 
 
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 
 
December 28, 2006

Date of Report (Date of earliest event reported)
 
Kid Castle Educational Corporation 
 
(Exact name of registrant as specified in its charter)
 
 
 
 
 
Florida 
 
333-39629 
 
59-2549529
(State or other jurisdiction
of incorporation)
 
(Commission
File Number)
 
(I.R.S. Employer
Identification No.)
 
8th Floor, No. 98 Min Chuan Road
Hsien Tien, Taipei, Taiwan R.O.C.
(Address of Principal Executive Offices and Zip Code)
 
(011) 886-2-2218-5996
(Registrant’s telephone number, including area code)
 
N/A
(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))
 
 
Item 1.01 Entry into Material Definitive Agreement
 
Effective December 28, 2006 we entered into a loan settlement and conversion agreement with Suang-Yi Pai, our Chairman of the Board, and Min-Tan Yang, our Chief Executive Officer, relating to the settlement of certain loans made by Messrs. Pai and Yang to the company. In the fourth quarter of 2005, Yang invested approximately $1,050,000 in the company, and third parties procured by Pai invested approximately $750,000 in the company. The third parties later assigned their investment to Pai. The original understanding was that the investment would be for the company’s common stock, with the price of the stock to be based on a mutually agreed value of the company at the end of 2005 after Pai and Yang had an opportunity to fully investigate the company’s financial status. Due to delays in that process, the company, Pai and Yang agreed to treat their investment as a short-term loan, due in three months, with a per annum interest rate of 7%. The maturity dates of the loans were extended in February, May and August 2006. As of December 28, 2006, the outstanding principle on the loans was $407,725 for Mr. Pai and $840,789 for Mr. Yang, and $1,248,514 combined.
 
Pursuant to the loan settlement and conversion agreement, the parties have agreed to convert a portion of the loans to stock at a conversion price of $0.15 per share and to issue promissory notes for the remaining amount. The promissory notes are due in one year and have an annual interest rate of 7%. The outstanding principal amount of the current loans, the amounts converted to stock and the amounts of the residual promissory notes for Messrs. Pai and Yang are as follows:
 

 
Principal
Outstanding as
of December 31, 2006
(US$)
Residual
Promissory
Note
(US$)
Principal
converted to
Common Stock
(US$0.15/ share)
 
Shares of
 Common
Stock
Pai
407,725
107,680
300,045
2,000,297
Yang
840,789
240,789
600,000
4,000,000
Total
1,248,514
348,469
900,045
6,000,297
 
The loan settlement and conversion agreement and issuance of stock and residual promissory notes to Messrs. Pai and Yang was approved by a committee of the board of directors comprised of directors who were not interested in the transaction and who constitute a majority of the board. In approving the transaction, the independent committee relied in part on a valuation of the company prepared by an outside financial advisor. A copy of the agreement and the residual promissory notes issued to Messrs. Pai and Yang are attached exhibits to this report.
 

Item 3.02  Unregistered Sales of Equity Securities

On December 28, 2006, we issued common stock to Suang-Yi Pai, our Chairman of the Board, and Min-Tan Yang, our Chief Executive Officer, pursuant to the loan settlement and conversion agreement disclosed in Item 1.01 of this report. Pursuant to the loan settlement and conversion agreement, Mr. Pai converted $300,045 of the principal amount of our outstanding debt held by him into 2,000,297 shares of our common stock and Mr. Yang converted $600,000 of the principal amount of our outstanding debt held by him into 4,000,000 shares of our common stock. The conversion was based on a price of $0.15 per share. The stock was issued without registration under the Securities Act of 1933 in reliance on the exemption under Section 4(2) of the act. For further information please refer to Item 1.1 of this report and a copy of the loan settlement and conversion agreement attached as an exhibit to this report.


Item 9.01  Financial Statements and Exhibits

(d)  Exhibits

Exhibit No.
Description
10.01
Loan Settlement and Conversion Agreement
10.02
Promissory Note (Yang)
10.03
Promissory Note (Pai)
 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned, who is duly authorized.

Dated: December 28, 2006
     
  By:   /s/ Min-Tan Yang
 
Name: Min-Tan Yang
 
Title: Chief Executive Officer