Item 1.01 Entry into a Material Definitive Agreement.
Stock Purchase Agreement
On March 12, 2020 (the “Closing Date”),
Clancy Systems International, Inc. (the “Company”) entered into that certain Stock Purchase Agreement, dated as of
March 9, 2020 (the “Stock Purchase Agreement”) by and among the Company, Arke Tech S.A.P.I DE C.V., a Mexican corporation
(“Seller”), and Hyperion Digital Group S. DE R.L. DE C.V., a Mexican corporation (“Hyperion”).
Pursuant to the Stock Purchase Agreement, the Company agreed to purchase the outstanding equity stock of Hyperion held by the Seller
for (i) $75,000 payable to Seller, (ii) $75,000 payable to a consultant engaged by Seller, and (iii) issuance of a promissory note
in the principal amount of $1,350,000 (the “Note”). The Stock Purchase Agreement also provides for the issuance of
2,293,488 shares of common stock having an agreed upon price/value of $0.043 per share, to Seller and 1,194,883 shares of common
stock having an agreed upon price/value of $0.043 per share, to Seller’s consultant.
Promissory Note
Pursuant to the Stock Purchase Agreement,
the Company issued Seller the Note, dated as of March 9, 2020, which is payable monthly over three years, beginning ninety days
after closing, and bears interest at 4.5% per annum. The monthly payments made be made, at the option of the Company, in shares
of the Company common stock. The Note is secured by the shares of Hyperion transferred to the Company pursuant to that certain
Pledge and Security Agreement between the Company and Seller, dated as of March 9, 2020 (the “Security Agreement”).
Earnout Agreement
In connection with the Stock Purchase Agreement,
the Company and Seller entered into that certain Earnout Agreement, dated as of March 9, 2020 (the “Earnout Agreement”).
The Earnout Agreement allows the Seller to earn additional shares of common stock of the Company during the three years post-closing
upon certain EBITDA milestones. The Seller is eligible for an Earnout payment equal to 250% of the Company’s EBITDA (in US
dollars) for the twelve month period following closing, provided that such EBITDA must be at least $500,000. The Seller is eligible
for second Earnout payment equal to 250% of the Company’s EBITDA (in US dollars) for the second twelve month period following
closing, provided that such EBITDA must be at least $1,500,000. The Seller is eligible for a final Earnout payment equal to 150%
of the Company’s EBITDA (in US dollars) for the third twelve month period following closing, provided that such EBITDA must
be at least $2,000,000. The Earnout payments will be made in shares of common stock of the Company at a price equal to the average
closing price of such securities on the principal trading market during the twenty (20) trading days prior to the last date of
each applicable earnout period.
The above description of the Stock Purchase
Agreement, Note, Security Agreement, and Earnout Agreement does not purport to be complete and is qualified in its entirety by
reference to the Stock Purchase Agreement, Note, Security Agreement and Earnout Agreement, which are attached here to as Exhibits
2.1, 2.2, 2.3 and 2.4 to this Current Report on Form 8-K.