Item
1.01. Entry into a Material Definitive Agreement.
On
February 21, 2022, NuZee, Inc. (the “Company”) entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”)
by and between the Company and Dripkit, Inc., a Delaware corporation (“Dripkit”), pursuant to which the Company agreed to
acquire substantially all of the assets and certain specified liabilities (the “Assumed Liabilities”) of Dripkit (the “Acquisition”).
Each Stock Recipient (as defined below) will execute a joinder to the Asset Purchase Agreement
at the closing of the Acquisition (the “Closing”) for purposes of those certain representations and warranties
of the Stock Recipients set forth in the Asset Purchase Agreement.
Pursuant
to the Asset Purchase Agreement, the aggregate purchase price for the Acquisition is $860,000 (the “Purchase Price”), plus
the assumption of the Assumed Liabilities (other than the principal amount of Dripkit’s Small Business Association Economic Injury
Disaster Loan (the “EIDL”)). At the Closing, the Company will pay the Purchase
Price as follows: (a) $355,000 in cash will be paid to Dripkit, subject to certain adjustments and holdbacks as further described below
and (b) a number of shares (the “Stock Consideration”) of the Company’s common stock, par value $0.00001 per share,
calculated as further described below, will be issued to Dripkit’s existing investors (the “Stock Recipients”).
At
Closing, the cash portion of the Purchase Price will be reduced by the following amounts: (a) a purchase price advance of $22,000, representing
a bridge loan from the Company in February 2022 to provide Dripkit with operational financing prior to the Closing, (b) an indemnity
holdback of $35,500, which will be held back by the Company for 18 months for the purpose of satisfying any indemnification claims made
by the Company pursuant to the Asset Purchase Agreement, and (c) a cash bulk sales holdback of $40,000 (the “Cash Bulk Sales Holdback
Amount”).
The
Stock Consideration will be calculated by dividing (a) the difference of $505,000 minus the principal and interest amount of the EIDL
as of the Closing by (b) the midpoint of the open and closing sale price of the Company’s common stock on the Nasdaq Capital Market
as of the date immediately prior to the Closing, and rounding down to the nearest whole share number. In addition, the Company will hold
back $40,000 worth of the Stock Consideration as the Stock Bulk Sales Holdback Amount (together with the Cash Bulk Sales Holdback Amount,
the “Bulk Sales Holdback Amount”). The Bulk Sales Holdback Amount will be used to satisfy any sales and use taxes owed by
Dripkit to the State of New York as of the Closing, and any amounts remaining after offsetting the cost of any such sales and use taxes
will be distributed to Dripkit (in the case of the Cash Bulk Sales Holdback Amount) and/or delivered to the Stock Recipients (in the
case of the Stock Bulk Sales Holdback Amount).
The
Asset Purchase Agreement contains customary representations, warranties, covenants and indemnities from Dripkit. Pursuant to the Asset
Purchase Agreement, Dripkit has agreed not to engage in or assist any others in engaging in the business of selling single serve coffee-related
products (the “Business”) or solicit customers of the Business for a period of 36 months commencing
on the Closing. At the Closing, each Stock Recipient will execute a lock-up agreement that generally prohibits, subject to customary
exceptions, the sale, pledge, transfer or other disposition of the Company’s common stock for a period of twelve months after the
Closing.
The
Asset Purchase Agreement may be terminated under certain circumstances, including by either party at any time prior to the Closing by
written notice to the other party if the other party has not fulfilled its closing conditions set forth in the Asset Purchase Agreement
by March 1, 2022.
The
Asset Purchase Agreement has been filed with this Current Report on Form 8-K to provide
investors with information regarding its terms. Except for its status as the contractual document that established and governs the legal
relations among the parties thereto with respect to the transactions described above, it is not intended to provide any other factual,
business or operational information about the parties. The representations, warranties and covenants contained in the Asset
Purchase Agreement were made only for purposes of the Asset Purchase Agreement as
of the specific dates therein, were solely for the benefit of the parties to the Asset Purchase
Agreement, may be subject to important qualifications and limitations agreed to by the parties
in connection with negotiating their terms, and may be subject to standards of materiality applicable to the contracting parties
that differ from what may be viewed as material to investors. Additionally, the representations,
warranties, covenants, conditions and other terms of the Asset Purchase Agreement may be
subject to subsequent waiver or modification. Moreover, information concerning the subject matter of the representations, warranties
and covenants may change after the date of the Asset Purchase Agreement, which subsequent
information may or may not be fully reflected in the Company’s public disclosures.
The
foregoing description of the Asset Purchase Agreement is only a summary and is qualified in its entirety by reference to the full text
of the Asset Purchase Agreement, a copy of which is filed as Exhibit 2.1 to this Current Report on Form 8-K and is incorporated herein
by reference.