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Item 1.01
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Entry into a Material Definitive Agreement
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Curiosity Ink Acquisition
On August 19, 2021, Grom Social Enterprises, Inc.,
a Florida corporation (the “Company” or “Grom”), consummated the acquisition (“Acquisition”) of Curiosity
Ink Media LLC, a Delaware limited liability company (“Curiosity Ink” or “CIM”), in accordance with the terms of
the Membership Interests Purchase Agreement dated July 29, 2021 (“Purchase Agreement”) among the Company, Curiosity Ink and
the owners of all of Curiosity Ink’s outstanding membership interests (“Sellers”). The execution of the Purchase Agreement
was previously reported on a Current Report on Form 8-K filed with the Securities and Exchange Commission on August 4, 2021. The Company
purchased from Sellers in the aggregate 80% of Curiosity Ink’s outstanding membership interests (the “Purchased Interests”)
for consideration comprising (A) $5,000,000 in value paid at closing through the issuance to Sellers of an aggregate of 1,771,883 unregistered
(i.e., restricted) shares of the Company’s Common Stock, valued at $2.89 per share based on the 20-day volume-weighted average
price (VWAP) of the Common Stock at close of trading on August 18, 2021; and (B) up to an additional $17,500,000 in value payable in the
future in a combination of 50% cash (“Contingent Cash”) and 50% shares of Company Common Stock (“Contingent Shares”)
if Curiosity Ink achieves certain specific earnings targets post-closing. The number of Contingent Shares will be based on the VWAP of
Company’s Common Stock as of the relevant determination date(s). As a result of the Acquisition, the Company owns 80% and the Sellers
collectively own 20% of Curiosity Ink.
On the closing date, the Company entered into
a new CIM limited liability company agreement with Sellers (“CIM LLC Agreement”) detailing their mutual agreement with regard
to the management, operation and regulation of CIM and its membership interests owned by such parties. Under the CIM LLC Agreement, CIM’s
business and affairs are managed, operated and controlled exclusively by or under the direction of the Board of Managers, the majority
(3) of which are selected by the Company and the remainder (2) by Sellers Russell Hicks and Brent Watts. Any determination by or consent
and decision of the Board of Managers may be made only by the affirmative vote of a majority of CIM’s Board of Managers
In addition, pursuant to the terms of the Purchase
Agreement on the closing date the Company paid or delivered to Curiosity Ink, as a capital contribution: (i) $400,000 in cash and (ii)
Grom’s $278,000 principal amount 8% convertible promissory note (“Convertible Note”), which cash and Convertible Note
Curiosity Ink then effectively transferred to Messrs. Hicks and Watts in order to satisfy and pay in full the outstanding loans and/or
advances previously made by such Sellers to Curiosity Ink (aggregating $678,000) at earlier dates. Such transferred Convertible Notes,
now held by Messrs. Hicks and Watts, have an 18-month term, are convertible at the option of the holder into shares of Company Common
Stock at a conversion price of $3.28 per share, and may be prepaid by the Company at any time, in whole or in part, without penalty or
premium. The Convertible Notes are subordinated by their terms to the Company’s senior indebtedness.
Employment Agreements
In connection with the closing of the Acquisition,
on August 19, 2021, the Company entered into Employment Agreements with Mr. Hicks (to serve as President and Chief Content Officer of
Curiosity Ink) and Mr. Watts (to serve as Chief Creative Officer of Curiosity Ink) for initial annual base salaries of $220,000 and $220,000,
respectively, minimum 5% annual increases, and annual bonus opportunities of up to 80% of base salary. The term of these Employment Agreements
is initially three years, with an automatic renewal for an additional two-year term and then for successive one-year terms unless notice
of termination is given by either party at least 60 days prior to the end of the then current term. Grom also granted to Mr. Hicks 74,000
and Mr. Watts 67,250 non-qualified options (“NQOs”) to purchase Grom Common Stock at an exercise price of $2.98 per share,
which NQOs vest one-third on each of the first, second and third anniversary of the closing date. If either Employment Agreement is terminated
by the Company without cause or by the executive for good reason (each as defined therein), then the executive will be entitled to receive
a lump sum cash severance payment of between 25% and 100% of base salary depending on the timing of the termination. The Employment Agreements
also contain customary work product, confidentiality, non-competition and non-solicitation provisions.
The foregoing descriptions of the Acquisition,
Purchase Agreement, CIM LLC Agreement, Convertible Notes, Employment Agreements and NQOs do not purport to be complete and are qualified
in their entirety by reference to the full text of such documents, copies of which are attached to this Report as Exhibits 4.1, 10.1-10.6
and 99.1 and incorporated herein by reference.