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Item
1.01
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Entry
into a Material Definitive Agreement.
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Convertible
Note Amendments and Related Conversions
Between
February 24 and March 18, 2020, Leader Capital Holdings Corp., a Nevada corporation (the “Company”), entered into
three convertible promissory notes (each, a “Note” and collectively, the “Notes”) with three qualified
investors (the “Noteholders”) for an aggregate principal amount of $230,000 pursuant to convertible promissory note
purchase agreements (each, an “NPA” and collectively, the “NPAs”) in reliance upon an exemption from registration
under the U.S. federal securities laws provided by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities
Act”), and/or Regulation D promulgated thereunder as a transaction by an issuer not involving a public offering. The
Notes bear interest at a rate of 6% per annum, which will be repaid on an annual basis and will mature two years from issuance;
provided, however, that if the Company defaults in payment of a Note by more than 15 days from when it is due, then the Company
shall pay a late fee in the amount of 1% per month on the principal balance of such Note, and provided further, that if a Note
is converted any accrued interest would be forfeited. The entire outstanding principal balance under each Note is convertible
into shares of common stock of the Company at the option of the holder at a conversion price equal to (i) $1.00 per share if converted
on or before the one year anniversary of the issuance date or (ii) $1.50 per share if converted at any time after the one year
anniversary of the issuance date. If converted on or prior to the one year anniversary date, any shares of common stock issued
will be entitled to piggyback registration rights.
On
August 17, 2020, the Company entered into amendments to the Notes and the NPAs (each, an “Amendment”) with each of
the Noteholders, wherein, at the sole option of the applicable Noteholder, all or part of the unpaid outstanding principal of
such Noteholder’s Note would be convertible into shares of restricted common stock of the Company at a conversion price
equal to $0.40 per share. On August 18, 2020, two of the Noteholders submitted conversion notices to the Company converting all
of the outstanding balances of their Notes into an aggregate of 325,000 shares of the Company’s common stock (the “Conversion
Shares”).
The foregoing descriptions
of the NPAs, the Notes and the Amendments in this Current Report on Form 8-K (this “Current Report”)
do not purport to be complete descriptions of the rights and obligations of the parties thereunder and are qualified in
their entirety by reference to the full text of the form of NPA, form of Note and form of Amendment, copies of which are
attached as Exhibit 10.1, Appendix A to the form of NPA and Exhibit 10.2, respectively, and are incorporated herein by
reference.
Acquisition
of Nice Products Inc.
On
August 17, 2020 (the “Closing Date”), the Company, through its wholly-owned subsidiary JFB Internet Service Limited,
a company incorporated and existing under the laws of Hong Kong (the “Buyer”), acquired all of the issued and outstanding
capital stock (the “Acquisition”) of Nice Products Inc., a company organized under the laws of the British Virgin
Islands (“NPI”), pursuant to the terms and conditions of that certain Stock Purchase Agreement, dated as of the Closing
Date (the “Purchase Agreement”), among the Company, the Buyer, NPI, the selling shareholders of NPI identified therein
(each a “Seller,” and, collectively, the “Sellers”) and the representative of the Sellers identified therein
(the “Sellers’ Representative”).
As
a result of the Acquisition, the Company now owns, indirectly through the Buyer, 100% of NPI. NPI, through its wholly-owned subsidiaries,
LOC Weibo Co., Ltd. and Beijing DataComm Cloud Media Technology Co., Ltd., companies organized under the laws of the Republic
of China and the laws of the People’s Republic of China, respectively, engages primarily in the development of ecological-system
applications, integration of big data and promotion of OTT applications.
The
aggregate purchase price for the Acquisition was $4,850,000, less certain discounts, expenses and reductions for outstanding NPI
debt owed to the Company and/or its affiliates, resulting in a net purchase price of $3,366,044, payable in 8,415,111 shares of
the Company’s common stock to the Sellers in accordance with their respective pro rata percentage.
Upon
the consummation of the Acquisition, among other things, the Sellers: (a) resigned from their positions as directors and/or officers
of NPI, (b) released NPI from any claims and (c) entered into employment agreements with the Buyer. Jun-Yuan Chen, a Seller and
the Sellers’ Representative under the Purchase Agreement, was already an employee of the Buyer prior to the Acquisition,
and therefore, did not enter into an employment agreement with the Buyer at the closing of the Acquisition.
In
accordance with the terms of the Purchase Agreement, for a period of 5 years from the Closing Date, the Sellers agreed to not
compete with NPI’s business in the following territories: (a) Greater China (including Hong Kong, Macau and Taiwan) and
(b) any other country or other territory in which NPI or the Buyer has provided services, offered or promoted services or otherwise
conducted business at any time in the past 2 years. During the same 5 year period, the Sellers are also subject to customary non-solicitation
and non-disparagement obligations.
In
addition, the Sellers agreed to indemnify the Company, the Buyer, and each of their affiliates (including, after the closing,
NPI), subject to certain limitations, for any Losses (as defined in the Purchase Agreement) arising out of breaches by the
Sellers of their respective covenants and certain other matters specified in the Purchase Agreement. Subject to certain exclusions,
such right to indemnification will be available only after the aggregate amount of indemnifiable Losses exceeds $1,000.
The
Purchase Agreement contains additional representations and warranties, covenants and conditions, in each case, customary for transactions
of this type.
The
foregoing description of the Purchase Agreement in this Current Report does not purport to be a complete description of the rights
and obligations of the parties thereunder and is qualified in its entirety by reference to the full text of the Purchase Agreement,
a copy of which is attached hereto as Exhibit 2.1 and is incorporated herein by reference.