Item 1.01 Entry into a Material Definitive
Agreement.
Asset Purchase
Agreement
On December 31, 2021, our indirect,
wholly owned subsidiary, Shift8 Networks, Inc., a Texas corporation (“Shift8”), executed and closed on an Asset Purchase Agreement
(the “Purchase Agreement”) with Skynet Telecom LLC, a Texas limited liability company (“Seller”), and Paul Golibart
and Jerry Ou, each an individual resident in the State of Texas (each, an “Owner” and collectively, the “Owners”).
The Company also executed the Purchase Agreement.
Pursuant to the Purchase Agreement,
Shift8 acquired the customer base, certain equipment, certain intellectual property, inventory, contract rights, software and other licenses
and miscellaneous assets used in connection with the operation of Seller’s communications business, including but not limited to
subscriber-based Interconnected Voice Over Internet Protocol communication services (“I-VoIP”), Unified Cloud Communications
Services (“UCCS”), and IP-PBX based systems of telephony (collectively, the “Purchased Assets”).
The aggregate purchase price
for the Purchased Assets was $5,800,000, subject to adjustment as provided in the Purchase Agreement (the “Purchase Price”).
An amount of $4,100,000 in cash, subject to a Net Working Capital Adjustment as defined in the Purchase Agreement, was paid by Shift8
on the Closing Date. Included within the $4.1 million cash payment were amounts paid by Shift8 directly to creditors of the Seller as
set forth in payoff letters. An additional $600,000 (the “Earn-out Amount”) was retained by Shift8 at the Closing and will
be paid to Seller in accordance with the Purchase Agreement. An additional $100,000 (the “Holdback Amount”) was retained
by Shift8 at the Closing and will be paid to Seller in accordance with the Purchase Agreement. Finally, $1,000,000 (the “Share
Payment”) will be paid by Shift8 to Seller by issuance of restricted shares of the Company’s common stock to the Owners.
The Share Payment will be made via the issuance of shares on the earlier of (i) the effective date of that certain Registration Statement
on Form S-1 (File No. 333-258733) filed by the Company with the Securities and Exchange Commission on August 11, 2021 (in which case
the stock will be valued at the price set forth in the prospectus that is a part of such Registration Statement, without underwriter
discounts) and (ii) 180 days after December 31, 2021 (in which case the stock will be valued at the average of the last transaction price
on the OTCQB for each of the 10 trading days immediately preceding such issuance date).
Certain Seller assets
were excluded from Shift8’s purchase, including, but not limited to, cash held by the Seller, real property owned by the Seller
and Owners, and certain contracts.
In connection with the
Purchase Agreement, each of the Owners entered into Registration Rights Agreements and Lock-up Agreements with the Company. Pursuant to
the Registration Rights Agreements, the Company shall give each Owner reasonable written notice of its intention to file a registration
statement to register any of the shares issued by the Company other than registration statements on the Form S-1 referred to above or
on Forms S-4 or S-8. The Owners have the right, subject to certain limitations, to require the Company to include some or all of the shares
issued in the Share Payment in any such registration statement. Pursuant to the Lock-up Agreements, the Owners’ ability to sell
or transfer their shares will be restricted during the period from December 31, 2021 until the earlier of (a) 180 days after the effective
date of a registration statement under the Securities Act of 1933, as amended (“Securities Act”), that includes securities
to be sold on behalf of the Company to the public in an underwritten public offering under the Securities Act or (b) 12 months from December
31, 2021.
Employment
Agreements
In connection with the Purchase
Agreement, Shift8 entered into Employment Agreements with each of Paul Golibart and Jerry Ou as, respectively, Vice President Business
Development – Texas and Vice President Operations – Texas (each an “Employee”).
The Employment Agreements provide
for a 12-month term (“Initial Term”) commencing on December 31, 2021, unless sooner terminated in accordance with the Employment
Agreement. The term will automatically be extended for successive periods of one month each (“Extension Term”) unless either
party provides the other with written notice of non-renewal at least 10 days before the expiration of the Initial Term or the then current
Extension Term. The Company will pay each Employee a salary of $100,000 during the Initial Term and a salary of $8,333.33 during each
Extension Term (collectively the “Base Salary”).
The foregoing summaries of the
Purchase Agreement and Employment Agreements contains only brief descriptions of the material terms of the agreements and such descriptions
are qualified in their entirety by reference to the full text of the agreements, filed herewith as Exhibits 10.1, 10.2 and 10.3.