Item 1.01
Entry Into A Material Definitive Agreement
On April 7, 2016, the Company formed XPAL Technology, Inc., a Colorado corporation (XTI) as a wholly-owned subsidiary. On April 20, 2016, XTI entered into a Stock Purchase Agreement (the Agreement) with Tennrich International Corp. to acquire 1,200,000 shares, equal to 80% of the common stock, of XPAL Power, Inc., a California corporation (XPAL). The purchase price was $6,500,000, payable over time, and payable in cash or shares of the Company. The Agreement, as amended through August 8, 2016, provides for a payment schedule.
The payment schedule is as follows:
a.
On or before August 10, 2016, the Company may pay $250,000 USD.
b.
On or before August 31, 2016, the Company may pay $750,000 USD.
c.
On or before September 30, 2016, the Company may pay $1,000,000 USD.
d.
On or before October 30, 2016, the Company may pay $1,000,000 USD.
e.
On or before November 30, 2016, the Company may pay $1,000,000 USD.
f.
On or before April 20, 2017, the Company may pay $2,500,000 USD, and this final sum accrues interest at the annual rate of 3.5% from April 20, 2016 to the date of payment.
2
In the alternative, the Company was granted the right to tender shares of the Company at a stipulated value of $1 plus a 25% penalty, or 6,500,000 shares plus an additional 1,625,000 shares as a penalty, for a total of 8,125,000 shares of the common stock of the Company. These shares have been issued in escrow to secure the payment of the $6,500,000.
Excluded from the purchase was the Sellers 51% interest in WIMO, LLC, and related licensing revenue due under XPALs WIMO patent (WIMO). WIMO owns various valuable technology patents, with most revenue presently generated by Patent Number 9092077 Writing device having writing tip and stylus tip.
Pursuant to a contemporaneous Management Agreement, the Company has been granted the right to manage Tennrichs 51% stake in WIMO, in consideration of 10% of all WIMO revenues (consisting of patent royalties). In addition, the Company has the right, until April 20, 2018, to acquire Tennrichs 51% stake in WIMO in consideration of payment to Tennrich of $2,000,000 less the dollar amount received by Tennrich from April 20, 2016 up to the date of purchase. The Company has the right to pay the option amount in its common stock valued at $1.10 per share.
XTI and Tennrich have entered into a shareholders agreement, restricting the right of either party to sell any XPAL shares without first offering such shares to the other shareholder. Furthermore, each of XTI and Tennrich are entitled to elect one director to the XPAL Board of Directors. The shareholders agreement provides that unanimous board approval is required for significant corporate transactions, payment of dividends, the election or discharge of any officer, or any loan, guarantee or capital expenditure exceeding $100,000.
XPAL has offices located in Irvine, California and has secured valuable licensing rights to produce and market rechargeable power modules under the Energizer brand. Additionally, the Company has other proprietary products, including the Spare One brand emergency cell phone, presently distributed by AT&T, Powerskin rechargeable power modules, and other trademark and patent rights. The Company is also the exclusive distributor of the Stacked wireless charging systems developed by Tennrich.
A copy of the Stock Purchase Agreement, and amendments thereto, is included as Exhibit 2.1 to this Current Report on Form 8-K and is hereby incorporated by reference. All references to the Stock Purchase Agreement in this Current Report are qualified in their entirety to such document.