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

 

Date of Report (Date of earliest event reported): November 29, 2018

 

BORQS TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

 

British Virgin Islands   001- 37593   N/A

(State or other Jurisdiction

of Incorporation)

  (Commission File Number)   (IRS Employer
Identification No.)

 

Building B23-A,

Universal Business Park

No. 10 Jiuxianqiao Road

Chaoyang District, Beijing, China

  100015
(Address of Principal Executive Offices)   (Zip Code)

 

Registrant’s telephone number, including area code:      (86) 10-5975-6336

 

(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:

 

☐ 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))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company ☒

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

 

   

 

 

Item 1.01 Entry into a Material Definitive Agreement

 

On November 29, 2018, Borqs Technologies, Inc. (the “ Company ”) and its indirect wholly owned subsidiary BORQS Beijing Ltd. (“ BORQS Beijing ”) entered into a loan agreement (the “ Loan Agreement ”) with HHMC Microelectronics Co., Ltd. (“ HHMC ’), pursuant to which HHMC would loan BORQS Beijing $2,572,213 without interest. The loan is payable on December 31, 2018. BORQS Beijing also agreed to pledge all equity interest it owns of other entities, dividends thereof and its account payables. The Company and Pat Chan, the Company’s Chairman and Chief Executive Officer, agreed to provide a guarantee of BORQS Beijing’s obligations under the Loan Agreement.

 

The Loan Agreement was entered into for the purpose of extending the date to repay amounts due under certain procurement and sales service agreement (the “ Procurement Agreement ”), dated November 20, 2017, with HHMC pursuant to which HHMC would make advances to Borqs International Holding Corp., a direct wholly-owned subsidiary of the Company, up to a maximum of $5,000,000 to purchase components from third party vendors. The Procurement Agreement had an initial maturity term of three months, which was subsequently extended to May 28, 2018. The amounts loaned under the Loan Agreement represent all amounts due under the Procurement Agreement, and the Loan Agreement supersedes the terms and conditions of the Procurement Agreement in all respects.

 

The foregoing descriptions of the Loan Agreement are only a summary and are qualified in their entirety by reference to the Loan Agreement, a copy of which is filed herewith as Exhibit 10.1.

 

Item 2.03. Creation of a Direct Financial Obligation or an Obligation Under an Off Balance-Sheet Arrangement of a Registrant .

The disclosure set forth in Item 1.01 above is hereby incorporated by reference into this Item 2.03.

 

Item 8.01 Other Events

 

As previously reported, the Company was in arbitration pending before the International Chamber of Commerce with Samsung Electronics Co., Ltd. (“ Samsung ”) to resolve a dispute regarding royalties payable to the Company under a software license agreement the Company had with Samsung. Samsung alleged that, for the period starting the fourth quarter of 2010 through mid-2012, the Company was overpaid royalties in the amount of approximately $1.67 million due to a clerical error in Samsung’s accounting department that enabled the Company to receive royalties on sales of Samsung handsets that did not contain its software. Samsung was seeking repayment of the $1.67 million plus accrued interest of 12% per annum and as well as reimbursements of reasonable fees including attorney fees and arbitration costs.

 

After arbitration hearings held in May 2018, on November 27, 2018, the International Chamber of Commerce notified the Company of its decision and issuance of an arbitration award (the “ Award ”), which the Company received on November 29, 2018. Pursuant to the Award, the Company has the obligation to pay Samsung an aggregate of $2,546,401 plus an interest of 9% per annum starting May 16, 2018 until full payment is paid. Samsung was also awarded its attorney’s fees and expenses in the aggregate amount of approximately $1.73 million. The Company is currently in discussion with Samsung to structure a payment schedule for its obligations under the Award. The Company is also considering to file a separate complaint against Samsung for infringing its intellectual property that has been used in certain Samsung mobile phone models other than the models in China.

 

Item 9.01. Financial Statements and Exhibits.

   

(d)           Exhibits

 

10.1 Loan Agreement, effective November 29, 2018, by and among BORQS Beijing Ltd., HHMC Microelectronics Co., Ltd., Borqs Technologies, Inc. and Pat Chan.

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SIGNATURE

 

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 hereunto duly authorized.

 

  Borqs Technologies, Inc.
     
Date:  December 6, 2018 By: /s/ Anthony K. Chan
    Anthony K. Chan
    Chief Financial Officer

 

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Exhibit 10.1

 

LOAN AGREEMENT

 

Lender: HHMC Microeletronics Co., Limited Beijing Branch (referred to as “ Party A ”)
  Unified Social Credit Code: 91110117MA01B29432
  Person in Charge: Jingquan Liu
   
Borrower: Borqs Beijing Ltd. (referred to as “ Party B ”)
  Unified Social Credit Code: 91110108666251455B
  Legal Representative: Pat Sek Yuan Chan
   
Guarantor: 1. Borqs Technologies, Inc. (1 and 2 collectively, “ Party C ”)
  Location: Tower A, Building B23, Universal Business Park, No. 10 Jiuxianqiao Road, Chaoyang District Beijing, 100015 China.
  Chairman of the Board: Pat Sek Yuan Chan
  2. Pat Sek Yuan Chan

 

For reasons of business operation, Party B applies for Loan from Party A. Upon the unanimous consent of both parties, Party B shall provide Party A with equity, dividends, accounts receivable and other assets (hereinafter referred to as “ Collateral ”) held by Party B as collateral for the loan to Party A. Satisfied the above conditions, Party A shall provide the agreed amount of the Loan to Party B. Before Party B pays off the Loan, Party A is the pledgor. Whereby it is mutually agreed as follows:

 

I. Type of Loan: US Dollar

 

II. Use of Loan: Company’s Own Use

 

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III. Loan Amount: USD 2,572,213.00

 

IV. Maturity Date: December 31, 2018.

 

V. Repayment

 

1. Repayment Source: Party B self-raised funds

 

2. Repayment Method: Through bank transfer, repayment in cash.

 

3. Party B shall make one-time payment to Party A on Loan Maturity Date. For the Loan that have not been paid on Loan Maturity Date, shall pay the Capital Occupation Fee (based on the highest standard prescribed by law) to Party A.

 

VI. Collateral

 

1. Collateral (including but not limited): The equity of domestic and foreign companies, dividends thereof, accounts receivable and other assets owned by Party B.

 

2. Pledge Term: When Party B pays off the principal and interest of the Loan.

 

VII. Warranties

 

1. On Loan Maturity Date, if Party B fails to repay the Loan to Party A, Party B unconditionally agrees to use the Collateral to offset the principal and interest of the Loan, and undertake all the costs of Party A’s realization of the pledge.

 

2. Party B guarantees the legality of the use of the Loan and promises that any legal disputes during the period of the Loan are not related to the Loan provided by Party A.

 

VIII. Liability for Breach Contract

 

1. Responsibility of Party A: if Party A fails to provide the Loan according to the agreed time, Party A shall pay liquidated damages to Party B according to the amount of breach of contract and the days of extension. The calculation method of liquidated damages shall refer to the calculation method of the Capital Occupation Fee caused by Party B as Party B has not make a repayment in full or on schedule.

 

2. Responsibility of Party B: if Party B cannot repay the Loan when it is due, Party A realizes the pledge according to law, Party B shall cooperate actively.

 

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IX. Guarantee Liability

 

1. Borqs Technologies, Inc. (“Borqs”) and its Chairman of the Board Pat Sek Yuan Chan agree to guarantee Party B’s Loan to Party A with their assets, including but not limited to, shares of Borqs owned by such parties All external accounts receivable, etc. Borqs Technologies, Inc. represents that the signing and execution of this Agreement is its true intention, Borqs has obtained all necessary consents, approvals and authorizations and there are no legal defects. Borqs has sufficient discretion for accounts receivable and there are no defects, disputes, litigation, arbitration or any third party rights that have not been notified to Party A. If Party B fails to repay the Loan to Party A upon the maturity of the Loan, Borqs will unconditionally assume the full repayment obligation of the joint and several liability within the scope of guarantee, including the principal of the Loan, the Capital Occupation Fee and the full cost of realizing the pledge.

 

2. Pat Sek Yuan Chan only uses shares of Borqs owned by him to guarantee Party B’s Loan. Pat Sek Yuan Chan warrants that the signing and execution of this Agreement is his true intention and there are no legal defects. If Party B fails to repay the Loan sufficiently to Party A upon the maturity of the Loan, Pat Sek Yuan Chan will unconditionally assume the full repayment obligation of the joint and several liability within the scope of guarantee. Including: the principal of the Loan; the Capital Occupation Fee, and the full cost of realizing the pledge.

 

X. Miscellaneous

 

1. All matters not covered in this Agreement and all disputes arising from this Agreement shall be settled through amicable negotiations between the parties. In the event that the parties fail to resolve disagreements through amicable negotiations, any party has the right to file a lawsuit in the People’s Court where Party A is located.

 

2. This Agreement is effective after being signed and stamped by the parties. In case of unfinished matters, supplementary provisions shall be made through mutual consultation between the parties, and the supplementary provisions shall have the same legal effect as this Agreement.

 

3. This Agreement shall be signed in four (4) counterparts, each of Party A and Party B shall hold one counterpart, Party C shall hold two counterparts as an original copy with same legal effect.

 

[Signature Page Follows]

 

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Lender: HHMC Microeletronics Co.,Limited Beijing Branch (Company Seal)

 

Authorized Person Signature and Stamp:

 

Borrower: Borqs Beijing Ltd. (Company Seal)

 

Authorized Person Signature and Stamp:

 

Guarantor: 1. Borqs Technologies, Inc.(Company Seal)

 

Authorizer or Personally Signature and Stamp

 

By: /s/ Pat Sek Yuan Chan  
  Pat Sek Yuan Chan  
  Chairman and Chief Executive Officer  

 

Guarantor: 2. /s/ Pat Sek Yuan Chan  
  Pat Sek Yuan Chian  

 

Date of Signing: November 29, 2018

 

[Signature Page to Loan Agreement]

 

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