Item 1.01 Entry into a Material Definitive Agreement
On August 10, 2020, Grow Capital, Inc. (the "Company"), a Nevada corporation,
entered into an exchange agreement (the "Exchange Agreement") with PERA LLC, a
Nevada limited liability company ("PERA") and the members of PERA (the
"PERA Members"), with an effective date as of August 3, 2020 (the "Effective
Date"). Pursuant to the Exchange Agreement, in exchange for unregistered
restricted shares of the Company's common stock, par value $0.001 (the "GC
Common Stock"), the Company will acquire 100% of the outstanding membership
interests of PERA (the "Exchange"). Upon the closing of the Exchange (the
"Closing"), the PERA Members will convey all of the right, title and interest in
and to all of the issued and outstanding membership interests in PERA (the "PERA
Ownership Interests") in exchange for the right to receive a number of shares of
GC Common Stock equal to an exchange ratio (the "Exchange Ratio"). The Exchange
Ratio is calculated by dividing (a) the Exchange Shares (as defined below) by
(b) the total number of shares of PERA Ownership Interests outstanding
immediately prior to the Effective Date.
"Exchange Shares" means the number of shares of GC Common Stock obtained by
dividing (a) $10,000,000 by (b) the 10-day volume weighted average price per
share ("VWAP") calculated immediately before the date that the previously
announced reverse stock split of GC Common Stock became effective on OTCQB, July
30, 2020.
In addition, if PERA meets certain yearly targeted gross revenues for each of
year one, two, and three following the Closing, the PERA owners may earn a
cumulative total of up to $5,000,000 of shares of GC Common Stock to be
determined using the applicable 10-day VWAP stock price of the Company's common
stock preceding each earn-out period calculation date as set forth in the
Exchange Agreement in connection with all of the three years, subject to certain
catch up provisions if such yearly period targets are not met in the applicable
period.
The Company intends to issue all of the GC Shares in reliance on the exemption
from registration set forth in Section 4(a)(2) of the Securities Act of 1933, as
amended. At the Closing the Company will enter into a registration rights
agreement (the "Registration Rights Agreement") with the PERA Members to
register the GC Common Stock to be issued in connection with the Exchange.
Pursuant to the Registration Rights Agreement, the Company has granted certain
demand and piggy-back registration rights whereby the Company will register the
resale of the GC Common Stock issued in the Exchange.
The Exchange is subject to certain closing conditions, including, among other
conditions, (i) the receipt of any necessary regulatory approvals and third
party consents, (ii) the Company and the PERA Members entering into the
Registration Rights Agreement, (iii) there being no material adverse change in
the business, condition (financial or otherwise), capitalization, assets,
operations or financial performance of PERA or the Company, and (iv) certain
other customary conditions. The Exchange Agreement is terminable by either the
Company or PERA if the Closing has not occurred by September 30, 2020, and the
terminating party is not in breach.
The PERA Members include certain limited liability companies owned by (i) Terry
Kennedy, the CEO of the Company, (ii) Jonathan Bonnette, the CTO of the Company
and the CEO of Bombshell Technologies, Inc., a subsidiary of the Company, (iii)
Joel Bonnette, the President of Bombshell Technologies, Inc. and
--------------------------------------------------------------------------------
2
--------------------------------------------------------------------------------
brother of Jonathan Bonnette, and (iv) Carl Sanko, a director and Secretary of
the Company, and (v) Jared Bonnette, brother of Jonathan Bonnette.
The Company issued a press release announcing the Exchange on August 11, 2020, a
copy of which is filed as Exhibit 99.1 to this Current Report on Form 8-K. The
foregoing description of the Exchange Agreement is a summary and is qualified in
its entirety by reference to the Exchange Agreement filed as Exhibit 10.1 to
this Current Report on Form 8-K and incorporated herein by reference.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits.
Exhibit No.
10.1 Exchange Agreement, effective August 3, 2020, by and between the Grow
Capital, Inc., and PERA LLC, and the shareholders of PERA LLC.
99.1 Press Release of Grow Capital, Inc. , dated August 11, 2020
--------------------------------------------------------------------------------
3
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
© Edgar Online, source Glimpses