Item 2.01 Completion of Acquisition or Disposition of
Assets.
On December 14, 2020, Wrap Technologies, Inc., a
Delaware corporation (the “Company”), through its wholly owned subsidiary Wrap
Reality, Inc. (“Buyer”), entered into an Asset Purchase Agreement
(the “Asset Purchase
Agreement”) with NSENA
Inc, a Delaware corporation (“NSENA”) and Ethan Moeller
(“Moeller”), the majority stockholder of NSENA to
acquire all of NSENA’s right, title, and interest in,
to, and under all of its tangible and intangible assets,
properties, and rights of every kind and nature and wherever
located, except for the specific
excluded assets, that relate to, or are used or held for use
in connection with NSENA’s
business (the “Transaction”). In addition, the Company also agreed to
hire three NSENA persons as employees (including Moeller)
(“Key
Employees”) and engage
two NSENA consultants (“Consultants”), (Key Employees and Consultants
collectively the “Key Persons”), at the consummation of the Transaction.
On December 14, 2020, the Company, Buyer, Seller and Key Persons
completed the transactions as contemplated by the Asset Purchase
Agreement (the “Closing”).
Pursuant
to the terms of the Asset Purchase Agreement, at the Closing, Buyer
paid to NSENA cash consideration of $210,000 and agree to pay
$100,000 on March 15, 2021, $100,000 on June 15, 2021 and $75,000
on September 15, 2021. In addition, the Buyer assumed $15,000 of
liabilities related to funds received by NSENA but unearned on
existing revenue related contract arrangements. As additional
earn-out consideration the Buyer has agreed to pay NSENA 10% of net
revenues (or a lesser amount equal to 50% of direct profit) from
specific identified prospects that become revenue customers before
September 30, 2021 but only on amounts collected between Closing
and June 30, 2022.
At Closing each of the Key Employees executed an
At-Will Employment, Confidential Information, Non-Compete/
Non-Solicitation, Invention Assignment, and Arbitration Agreement
(the “Non-Compete
Agreement”) and the Key
Employees were issued service-based stock options exercisable for
an aggregate of 150,000 shares of the Company’s common stock
exercisable for ten years at $5.46 per share, vesting over two
years unless accelerated by certain events. Mr. Moeller was granted
an additional ten-year performance-based stock option on 100,000
shares of common stock based on achieving certain virtual reality
revenue targets by December 1, 2024. Each of the two Consultants
were granted service-based stock options exercisable for 20,000
shares of the Company’s common stock for five years at $5.46
per share, vesting over two years unless accelerated by certain
events.
The
foregoing description of the terms of the Asset Purchase Agreement
and Non-Compete Agreements do not purport to be complete and is
subject to, and is qualified in its entirety by reference to the
agreements which are filed as Exhibits 2.1 and 2.2, respectively,
to this report.
The Asset
Purchase Agreement has been filed as Exhibit 2.1 to this
report to provide investors and securities holders with information
regarding its terms. It is not intended to provide any other
factual information about the parties to the Asset Purchase
Agreement or the business acquired. The Asset Purchase
Agreement contains representations and warranties that the
parties to the Asset Purchase Agreement made solely for
the benefit of each other. The assertions embodied in such
representations and warranties are qualified by information
contained in confidential disclosure schedules that the parties
exchanged in connection with signing the Asset Purchase
Agreement. In addition, these representations and warranties (i)
may be intended not as statements of fact, but rather as a way of
allocating risk to one of the parties if those statements prove to
be inaccurate, (ii) may apply materiality standards different from
what may be viewed as material to investors and securities holders,
and (iii) were made only as of the date of the Asset Purchase
Agreement or as of such other date or dates as may be
specified in the Asset Purchase Agreement. Moreover,
information concerning the subject matter of such representations
and warranties 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. Investors and
securities holders are urged not to rely on such representations
and warranties as characterizations of the actual state of facts or
circumstances at this time or any other time.