Item 2.01. Completion of Acquisition
or Disposition of Assets.
Cranbury Acquisition
On July 31, 2017, we
consummated the transactions contemplated by a Share Exchange Agreement (the “
Cranbury Exchange Agreement
”),
by and between the Company, Cranbury Associates, LLC (“
Cranbury
”), and the sole member of Cranbury (the “
Cranbury
Member
”). In connection with the closing of the transactions contemplated by the Cranbury Exchange Agreement (the “
Cranbury
Exchange
”), we acquired 100% of the outstanding membership interests of Cranbury from the Cranbury Member in consideration
for 784,313 shares of restricted common stock, valued at $400,000 on the closing date (the “
Cranbury Shares
”),
and a promissory note in the amount of $100,000 (described below). The Cranbury Exchange has an effective date of May 1, 2017.
The Cranbury Share Exchange Agreement included standard and customary representations, warranties and indemnification rights. The
Cranbury Shares are to be held in escrow in order to secure the indemnification requirements of the Cranbury Member pursuant to
the terms of the Cranbury Exchange Agreement, until January 1, 2018.
As additional consideration
for agreeing to the terms of the transaction, we agreed to issue the Cranbury Member an additional $100,000 of shares of restricted
common stock (based on the closing sales price of the Company’s common stock on July 31, 2018), in the event the revenue
generated by Cranbury exceeds $2.0 million during the 12 calendar months ended July 31, 2018 (the “
Cranbury Earn-Out
”
and the “
Cranbury Earn-Out Shares
”).
Cranbury, established
in 2010, sells training and educational materials to governmental institutions and private sector markets in Brazil, Mexico, Columbia,
Trinidad, and other international regions. The Company markets and represents approximately 40 major publishers in international
markets.
We provided a Promissory
Note (the “
Cranbury Note
”) to the Cranbury Member at closing, which evidences the principal amount of $100,000
owed to such Cranbury Member. The Cranbury Note accrues interest at the rate of 6% per annum (10% upon the occurrence of an event
of default), beginning August 31, 2017, and is payable at the rate of $4,153 per month, beginning November 1, 2017, through the
maturity date of such note, November 30, 2019. The Cranbury Note contains standard and customary events of default and may be prepaid
at any time without penalty.
As part of the Cranbury
Exchange, on and effective July 31, 2017, we entered into a Consulting Agreement with Ethan Atkin, the Cranbury Member (the “
Consulting
Agreement
”). Pursuant to the Consulting Agreement, which has a term of one year, we agreed to pay Mr. Atkin, $3,750 per
month and Mr. Atkin agreed to provide us 120 hours of services the first three months of the term and 100 hours per month thereafter,
in connection with the integration of Cranbury’s operations into those of the Company, the training of a new head of international
sales at the Company, and introductions to contacts of Mr. Atkin and Cranbury in connection with Cranbury’s operations and
the change in control and management. The agreement includes standard and customary work for hire, confidentiality, and trade secret
provisions. In the event that the Consulting Agreement is terminated by Mr. Atkin, terminated by the Company for cause, or terminated
due to Mr. Atkin’s death or disability, prior to 180 days after the closing date, the earn-out is terminated and no earn-out
Shares are due.
The Cranbury Shares
issued pursuant to the Cranbury Exchange Agreement are subject to a lock-up agreement (the “
Lock-Up Agreement
”),
which prohibits the sale of any such shares for a period of one year and restricts the sale of any of the shares in any thirty
day period, for an additional one year thereafter, to 10% of the total Cranbury Shares, on a rolling basis.
* * * * * *
The foregoing descriptions
of the Cranbury Exchange Agreement, Cranbury Note, Consulting Agreement and Lock-Up Agreement, do not purport to be complete and
are qualified in their entirety by reference to the Cranbury Exchange Agreement, Cranbury Note, Consulting Agreement and Lock-Up
Agreement, copies of which are attached as
Exhibits 2.1, 10.1, 10.2, and 10.3
, to this Current Report on Form 8-K,
and incorporated in this
Item 2.01
by reference.