Grom Social Enterprises Inc (GROM)

[Big Brother]

10-Q out

Share Exchange Agreement to acquire Grom Holdings, Inc.

On May 15, 2017, the Company entered into a Share Exchange Agreement (the “SE Agreement”), with Grom Holdings, Inc. (“Grom”), a Delaware corporation, wherein the Company agreed to acquire all of the issued and outstanding securities of Grom. The Company will issue an aggregate of 110,853,883 shares of its Common Stock when the transaction closes. As a result of the issuance of shares of the Company’s Common Stock in exchange for the outstanding shares of Grom, upon closing the stockholders of Grom will become stockholders of the Company and the Grom shareholders will own approximately 92% of the Company’s then issued and outstanding shares of Common Stock.

The SE Agreement also requires that the Company amend its Articles of Incorporation to increase its capitalization to 200,000,000 shares of Common Stock authorized, as well as to change its name to “Grom Social Enterprises, Inc.” or such other name as may be acceptable to both our Board of Directors and the Florida Secretary of State. The holders of a majority of the Company’s issued and outstanding Common Shares have adopted resolutions approving such amendments, which will only be filed and become effective if all of the conditions to the effectiveness of the SE Agreement are satisfied.

The closing of the transaction is subject to various conditions, most of which have been satisfied as of the date of this Report. While no assurances can be provided, management of the Company anticipates that the transaction will be effective in August 2017, upon the filing of a Statement of Share Exchange and Articles of Exchange with the Florida and Delaware Secretary of State.

Upon closing, Grom will become a wholly owned subsidiary of our Company. All of the members of the Company’s Board of Directors, who are also the Board of Directors of Grom, will remain and Darren Marks will become the Company’s Chief Executive Officer and President and Melvin Leiner will become the Company’s Executive Vice President and Secretary. The Company’s current officers will become officers of a newly formed wholly owned subsidiary, where the Company’s existing LED business will operate.

Upon completion of the transaction with Grom, the Company will assume all of Grom’s assets, liabilities and plan of operation. As a result, the Company will also require additional financing to full implement its anticipated expansion. There can be no assurance that any future financing can be secured on reasonable terms, or at all.

The Company’s current stockholders will be diluted by the issuance of shares of the Company’s Common Stock in the transaction and may also be diluted by future issuances of securities and sales of the Company’s securities to satisfy its working capital needs.