Forward Industries, Inc. (NASDAQ:FORD) Files An 8-K Entry into a Material Definitive Agreement
Item 1.01 Entry into a Material Definitive Agreement.
On August 17, 2020, Forward Industries, Inc. (the “Company”) entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) by and among the Company, Kablooe, Inc., a New York corporation and a wholly-owned subsidiary of the Company (“Newco”), Kablooe Design, Inc. a Minnesota corporation (“Kablooe”) and Tom KraMer, the sole shareholder and president of Kablooe, and completed the acquisition of substantially all the assets and assumed certain liabilities of Kablooe under the Asset Purchase Agreement (the “Asset Purchase”). The acquired assets included certain accounts receivable, sales and client relationships, contracts, intellectual property, partnership and vendor agreements, and the other assets, other than excluded assets, each as specified in the Asset Purchase Agreement.
In consideration for the Asset Purchase, Kablooe received a cash payment of approximately $350,000 and 300,000 shares of the Company’s common stock, par value $0.01 per share. Additionally, to the Asset Purchase Agreement, Kablooe is entitled to receive up to $500,000 in earn out payments if Newco achieves certain EBITDA-based milestones set forth therein for the five years following the Asset Purchase, a $50,000 retention payment if Mr. KraMer remains employed by Newco and the EBITDA milestone is met for the fourth year following the Asset Purchase, and an additional $50,000 retention payment if Mr. KraMer remains employed by Newco and the EBITDA milestone is met for the fifth year following the Asset Purchase. Additionally, the Company assumed approximately $270,000 of liabilities (inclusive of the liability described under Item 2.03 below). The estimated total consideration for the Asset Purchase, assuming full payment of the earn out and retention payments, is approximately $1.6 million.
The offer of the shares of common stock to the Asset Purchase Agreement was exempt from registration under the Securities Act to Section 4(a)(2) of the Securities Act and Rule 506(b) promulgated thereunder.
The closing of the Asset Purchase was subject to customary closing conditions and covenants, including the execution of Assignment and Assumption Agreement and other instruments and documents required by the Asset Purchase Agreement. The Asset Purchase Agreement contains customary representations and warranties of each party for a transaction of this type.
The foregoing description of the Asset Purchase Agreement and the Asset Purchase does not purport to be complete and is qualified in its entirety by reference to 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.
Item 2.01. Completion of Acquisition or Disposition of Assets.
To the extent required by Item 2.01, the information contained in Item 1.01 of this Current Report on Form 8-K regarding the Asset Purchase is incorporated herein by reference.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
In connection with the Asset Purchase, the Company assumed approximately $270,000 of liabilities, including a $170,550 loan. The loan: (i) bears interest at 6% per annum, (ii) matures in August 2021, (iii) requires monthly interest and principal amortization payments and (iv) is secured by funds held in escrow pending the forgiveness of a Paycheck Protection Program loan received by Kablooe. The loan contains customary events of default, including, but not limited to, failure to make a payment when due, defaults on other indebtedness, and occurrence of certain change of control events.
To the extent required by Item 2.03, the information contained in Item 1.01 of this Current Report on Form 8-K regarding the consideration paid and to be paid and liabilities assumed by the Company to the Asset Purchase Agreement is incorporated herein by reference.
Item 3.02 Unregistered Sales of Equity Securities.
To the extent required by Item 3.02, the information contained in Item 1.01 of this Current Report on Form 8-K regarding the offer of shares of the Company’s common stock to the Asset Purchase Agreement is incorporated herein by reference.
Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
In connection with the Asset Purchase, Tom KraMer was appointed as the Chief Executive Officer of and entered into a five-year Employment Agreement with Newco. to his Employment Agreement, Mr. KraMer will be paid an annual base salary of $250,000 and will be eligible to receive cash or equity bonuses based on fiscal year performance targets to be established by the Compensation Committee of the Company’s Board of Directors in its discretion.
Item 9.01 Financial Statements and Exhibits