Item
2.01 Completion of Acquisition or Disposition of Assets.
On
October 4, 2022, GBS Inc. (the “Company”) acquired Intelligent Fingerprinting Limited, a company registered in England and
Wales (“IFP”), pursuant to which, among other things, the Company entered into the definitive agreements described
below (the “Acquisition”).
Share
Exchange Agreement
In
connection with the Acquisition, on October 4, 2022, the Company entered into a Share Exchange Agreement (the “Share Exchange Agreement”)
with IFP, the holders of all of the issued shares in the capital of IFP (collectively, the “Sellers”) and the
“Sellers’ Representatives” named therein (the “Sellers’ Representatives”).
Pursuant
to the Share Exchange Agreement, among other things, the Company acquired from the Sellers all of the issued shares in the capital of
IFP, and as consideration therefor the Company issued and sold to the Sellers upon the closing of the Acquisition (the “Closing”)
an aggregate number of (i) 2,963,091 shares of the Company’s common stock, par value $0.01 per share (the “Common Stock”),
and (ii) 2,363,003 shares of the Company’s series C convertible preferred stock, par value $0.01 per share (the “Preferred
Stock”). Up to an additional 1,649,273 shares of Preferred Stock have been reserved for potential future issuance by the Company,
consisting of (i) 500,000 shares of Preferred Stock, representing approximately 10% of the total Acquisition consideration, that are
being held back from the Sellers for one year after the Closing to secure potential indemnification claims by the Company against the
Sellers and (ii) 1,149,273 shares of Preferred Stock to certain lenders to IFP (the “Lenders”) who may, at each such Lender’s
respective option, convert such Lender’s respective loans to IFP into shares of Preferred Stock, contingent upon approval of the
Company’s stockholders of the conversion of Preferred Stock into Common Stock, as described below (the “Lender Preferred
Shares”). Each Preferred Share would be convertible into three shares of Common Stock, contingent upon approval by the Company’s
stockholders.
Also
pursuant to the Share Exchange Agreement, the Company has an obligation to provide IFP with cash in an amount such that IFP is able to
pay cash payments to certain current and former United Kingdom and United States-based employees and directors (the “IFP Bonus
Recipients”), in aggregate amounts of £239,707 and $83,043, respectively (the “Cash Bonuses”), plus any applicable
employer’s National Insurance contributions. The Cash Bonuses are being paid to the IFP Bonus Recipients in two equal instalments,
with the first payment made immediately following the Closing and the second payment to be made on the six-month anniversary of such
date.
Also
pursuant to the Share Exchange Agreement, the Company has agreed to make available to the employees of IFP (the “IFP Employees”)
a Company stock option plan in form and substance satisfactory to the Company in relation to up to 1,000,000 shares Common Stock following
the Closing on the basis that an equal number of Company stock options will be granted to the IFP Employees and Company employees up
to an aggregate amount of 2,000,000 Company stock options.
Each
of the Company, IFP and the Sellers made certain customary representations and warranties and agreed to certain covenants in the Share
Exchange Agreement.
Certificate
of Designation for Series C Convertible Preferred Stock
The
rights, preferences and privileges of the Preferred Stock are set forth in the Certificate of Designation of Preferences, Rights and
Limitations of Series C Convertible Preferred Stock that the Company filed with the Secretary of State of the State of Delaware on October
4, 2022, as further described below (the “Certificate of Designation”).
Each
share of Preferred Stock (other than the Lender Preferred Shares) would automatically convert into Common Stock upon approval of the
Company’s stockholders of the conversion of Preferred Stock into Common Stock, and each Lender Preferred Share would convert
into Common Stock at the option of the applicable holder of such Lender Preferred Shares following approval of the Company’s
stockholders of the conversion of Preferred Stock into Common Stock. In the event Company stockholder approval is not received, the
Preferred Stock would remain outstanding and not convert into Common Stock. The number of shares of Common Stock into which the Preferred
Stock is convertible is subject to adjustment in the case of any stock dividend, stock split, combinations or other similar recapitalization
with respect to the Common Stock. The Preferred Stock does not have any voting rights (other than as required by law) and does not carry
dividends or a liquidation preference.
Proxy
Statement and Company Stockholders’ Meeting
Pursuant
to the Share Exchange Agreement, the Company must file as soon as reasonably practicable a preliminary proxy statement with respect to
holding an annual or special meeting of the Company’s stockholders (the “Company Stockholders’ Meeting”) with
respect to the approval of the conversion of the Preferred Stock into Common Stock in accordance with the Certificate of Designation
(the “Company Stockholder Approval Matters”). Following the clearance of the proxy statement by the SEC, the Company is required
as promptly as reasonably practicable after the Company is informed by the Securities and Exchange Commission of such clearance to mail
the proxy statement and call the Company Stockholders’ Meeting.
The
terms of the Share Exchange Agreement also require the board of directors of the Company (the “Board”), provided that nothing
in the Share Exchange Agreement shall limit or restrict any director of Company from fulfilling his or her fiduciary duties or powers
as members of the Board, to (i) recommend to the Company’s stockholders that they approve the Company Stockholder Approval Matters
and (ii) use commercially reasonable efforts to solicit from the Company’s stockholders proxies in favor of the Company Stockholder
Approval Matters.
Registration
Rights Agreement
Concurrently
with the Acquisition, the Company and the Sellers entered into separate registration rights agreements granting the Sellers customary
registration rights with respect to the shares of Common Stock and Preferred Stock acquired by the Sellers from the Company in the Acquisition.
Investors’
Rights Agreement
Concurrently
with the Acquisition, the Company and each of The Ma-Ran Foundation and The Gary W. Rollins Foundation, each of which is also a Seller
(together, the “Investors”), entered into an investors’ rights agreement (the “Investors’
Rights Agreement”), pursuant to which, among other things, the Investors received, subject to satisfaction of certain specified
minimum securities holding requirements in the Company, certain governance rights effective as of the Closing, including the right to
designate up to two directors to the Company’s board of directors and certain approval rights with respect to actions taken by
the Company.
Voting
Agreements
Concurrently
with the Acquisition, the Company and the Sellers entered into a voting agreement (the “Sellers Voting Agreement”) pursuant
to which, among other things, each Seller has agreed to vote such Seller’s respective shares of Common Stock until the completion
of the annual meeting of the Company’s stockholders for the Company’s fiscal year ended June 30, 2023, in favor of (i) each
proposal contained in the Company’s definitive proxy statement on Schedule 14A filed with the SEC on May 6, 2022, (ii) any proposal
presented to the stockholders which is expressly contemplated by the Share Exchange Agreement, including, for the avoidance of doubt,
a proposal to adopt a stock option plan in accordance with the terms set out in Section 6.9(c) of the Share Exchange Agreement, (iii)
any proposal presented to the stockholders with a unanimous Board’s recommendation to vote in favor of such proposal that has the
primary intent of taking one or more actions that would be necessary or advisable for the Company to remain in compliance with the applicable
listing requirements of the Nasdaq Stock Market, including, for the avoidance of doubt, any reverse stock split, and (iv) any proposal
to adjourn or postpone any meeting of the Company’s stockholders at which any of the foregoing matters requiring such Stockholder’s
approval are submitted for consideration and vote of the Company’s stockholders to a later date if there are not sufficient votes
for approval of such matters on the date on which the meeting is held to vote upon any of the foregoing matters requiring stockholders’
approval.
In
addition, the Company, the Sellers’ Representatives and the officers and directors of the Company who owned shares of Common Stock
at the time of the Closing entered into separate voting agreements pursuant to which, among other things, such officers and directors
of the Company agreed to vote their respective shares of Common Stock in favor of the approval of the conversion of the Preferred Stock
into Common Stock in accordance with the Certificate of Designation until the completion of the annual meeting of the Company’s
stockholders for the Company’s fiscal year ended June 30, 2023 (the “Company Voting Agreements”) (the “Company-IFP
Loan Agreement”).
Loan
Agreements
Effective
contemporaneously with the Closing, the Company entered into an amendment to the bridge facility agreement between the Company and IFP,
dated as of June 16, 2022, pursuant to which, among other things, the $500,000 loan from the Company to IFP pursuant thereto will remain
outstanding following the date of the Closing until the second anniversary of the date of the Closing.
In
addition, the Company entered into various loan agreements in the aggregate amount of £1,254,270.26, including accrued interest,
pursuant to which IFP is the borrower and the Company became a guarantor of IFP’s obligations thereunder (the “IFP Loan
Agreements” and, together with the Company-IFP Loan Agreement, the “Loan Agreements”). Under the Loan Agreements,
the loans thereunder will remain outstanding following the Closing and (x) the loans and certain accrued interest will convert into
shares of IFP, which shares of IFP may be immediately transferred to the Company in exchange for shares of Common Stock and Preferred
Stock (as set forth in the Share Exchange Agreement) following approval of the Company Stockholder Approval Matters or (y) the loans
and certain accrued interest will become repayable on the second anniversary of the date of the Closing. The loans bear interest at 17%
per annum on a compounded basis, increasing to 22% per annum on a compounded basis with effect from the date that falls 12 months following
the date of the Closing, if the Company Stockholder Approval Matters have not been approved by the Company’s stockholders by such
date. The IFP Loan Agreements provide for customary affirmative and negative covenants and events of default.
The
foregoing descriptions are not complete and are qualified in their entirety by reference to the full text of the Share Exchange Agreement,
the Certificate of Designation, the Investors’ Rights Agreement, the Registration Rights Agreements, the Sellers Voting
Agreement, the Company Voting Agreement and the Loan Agreements, which are attached to this report as Exhibits 2.1 and 3.1 and Exhibits
10.1 through 10.13, respectively, each of which is incorporated herein by reference.