Item 2.01.
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Completion of Acquisition or Disposition of Assets.
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On September 4, 2018,
Xspand Products Lab, Inc. (the “
Company
”) completed its acquisition (the “
Closing
”) of all
of the voting membership interests of Edison Nation Holdings, LLC (“
Edison Nation
”) from all of the members
of Edison Nation (the “
Members
”) pursuant to that certain Membership Interest Purchase Agreement (the “
Purchase
Agreement
”) with Edison Nation and its Members dated June 29, 2018.
At the Closing, the
Company, Edison Nation and the Members entered into the Fifth Amended and Restated Operating Agreement (the “
LLC Agreement
”)
of Edison Nation. Also at the Closing, the Company entered into a registration rights agreement (the “
Registration Rights
Agreement
”) with certain Members, which provided those Members with demand and piggyback registration rights in respect
of any registrable shares of the Company’s common stock, par value $0.001 (the “
Common Stock
”) received
pursuant to the terms of the Purchase Agreement.
At Closing, the Company
paid consideration of: (i) $700,000 in cash to Edison Nation ($550,000 of which was subsequently used to purchase the membership
interests of Access Innovation, LLC, which membership interests were then distributed to the Members), and (ii) $250,000 in cash
to be used to pay off a portion of the indebtedness owed by Edison Nation to holders of certain senior convertible debt. Also at
Closing, in order to pay off the remaining Edison Nation indebtedness, the Company: (i) assumed the remaining balance of the aforementioned
senior convertible debt through the issuance to the holders of 4%, 5-year senior convertible notes (the “
New Convertible
Notes
”), in the aggregate principal amount plus accrued interest on the senior convertible debt through the Closing date
of $1,436,158.68, which are convertible into 287,231 shares of Common Stock, at the option of the holder of such New Convertible
Notes (subject to certain adjustments as provided in the Purchase Agreement and the terms of the New Convertible Notes), and (ii)
issued 557,083 shares of Common Stock in satisfaction of the indebtedness represented by promissory notes payable by Edison Nation
to Venture Six, LLC and Wesley Jones.
As a result of the
acquisition, the Company became the 100% owner of the voting membership interests of Edison Nation (subject to the limited approval
rights held by the Preferred Members set forth in the LLC Agreement) and its wholly-owned subsidiaries, Edison Nation, LLC, SafeTV
Shop, LLC and Everyday Edisons, LLC (the “
Acquired Subsidiaries
”), including all of the rights and interests
in Edison Nation’s inventor platform and marketplace, any related intellectual property and the other properties and assets
of Edison Nation and the Acquired Subsidiaries, other than (i) Access Innovation, LLC, the membership interests of which were distributed
to the Members promptly following the Closing as described above, (ii) Edison Nation Medical, LLC, the membership interests of
which were assigned to the Members at Closing, and (iii) the intellectual property rights relating to certain products transferred
to Allstar Marketing Group, LLC at Closing. In addition, the Members retained non-voting, preferred membership interests (subject
to certain limited approval rights) (the “
Preferred Membership Interests
”), which entitle them to a put right
(the “
Put Right
”) to cause the Company, in its sole discretion, to either (i) redeem all of the Preferred Membership
Interests from the Preferred Members in exchange for the aggregate issuance of up to 990,000 shares of Common Stock (the “
Put
Right Shares
”), or (ii) pay the Put Price (as defined in the LLC Agreement) in cash. The Company’s indemnification
rights arising out of the Members’ breaches of representations and warranties, breaches of covenants, and with respect to
certain excluded liabilities under the Purchase Agreement are limited to a right of offset against, and to reduce, the Put Price
or the number of Put Right Shares issuable upon exercise of the Put Right, as applicable.
The
foregoing descriptions of the New Convertible Notes, the Purchase Agreement, and the Registration Rights Agreement do not purport
to be complete and are subject to, and qualified in their entirety by, the full text of the form of New Convertible Note, the Purchase
Agreement, the LLC Agreement and the Registration Rights Agreement, which are filed, respectively, as
Exhibit 2.1
,
10.1
,
10.2
and
10.3
to this Current Report on Form 8-K and are incorporated by reference in their entirety.