UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

___________________

 

FORM 8-K

__________________

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

 

Date of Report (date of earliest event reported): January 30, 2019

 

Newgioco Group, Inc.

(Exact name of Registrant as specified in its charter)

 

Delaware 000-50045 33-0823179
(State or other jurisdiction of Incorporation or organization) (Commission File Number) (I.R.S. Employer Identification No.)

 

130 Adelaide Street West, Suite 701

Toronto, Ontario M5H 2K4, Canada

(Address of Principal Executive Offices)

 

+39 391 306 4134

(Registrant’s Telephone Number, Including Area Code)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

☐ Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 
 

 

Item 2.01. Completion of Acquisition or Disposition of Assets.

 

On January 30, 2019 (the “Closing Date”), Newgioco Group, Inc. (the “Company”), closed the transactions contemplated by the Share Purchase Agreement (the “Purchase Agreement”) dated January 17, 2019 with the selling shareholders set forth therein (the “Sellers”) and acquired all of the issued and outstanding ordinary shares of Virtual Generation Limited, a company organized under the laws of Republic of Malta (“VG”) that owns and has developed a virtual gaming software platform (“VGS”), together with all the ordinary shares of Naos Holding Limited, a company organized under the laws of Republic of Malta (“Naos”) that owns 3,999 of the 4,000 issued and outstanding ordinary shares of VG. The Sellers include Mr. Luca Pasquini, the Company’s Chief Technology Officer and a member of the Company’s board of directors, and Mr. Gabriele Peroni, the Company’s Vice President of Business Development, each of whom owns 800 ordinary shares of Naos (20% of the issued and outstanding shares of Naos).

 

VG is a Gaming Laboratories International (GLI) certified virtual sports and gaming software developer with a portfolio of products including: greyhound and horse racing; league play football (i.e., soccer), keno; and American Roulette. In addition, VG’s platform allows for customization for country specific sports generation including applications in Latin American and African markets as well as unique U.S. Tribal Games tailored for the U.S. Tribal gaming market.

 

VG’s operations, which have been running on the Company’s ELYS betting platform have grown in the highly competitive virtual sports market from approximately 67,000 tickets in 2014 to over 20 million bet tickets traded in 2018. VG now operates in 12 countries including: Italy; Peru; Nigeria; Paraguay; Albania; Honduras; Colombia; Mexico; Dominican Republic; Uganda; Nicaragua; and Turkey.

 

Pursuant to the Purchase Agreement, on the Closing Date, the Company paid the Sellers the previously agreed to Four Million Euro (€4,000,000) in consideration for all the ordinary shares of VG and Naos, which was paid on the Closing Date as follows:

 

(i) a cash payment of One Hundred and Eight Thousand Euro (€108,000);
(ii) the issuance of shares of the Company’s common stock valued at Eighty-Nine Thousand Euro (€89,000); and
(iii) the delivery of a non-interest bearing promissory note (the “Promissory Note”) providing for the payment of (a) an aggregate of €2,392,000 in cash in 23 equal and consecutive monthly instalments of €104,000 with the first such payment due and payable on the date that is one (1) month after the Closing Date; and (b) an aggregate of €1,411,000 in shares of the Company’s common stock in seventeen (17) equal and consecutive monthly instalments of €83,000 as determined by the average of the closing prices of such shares on the last ten (10) trading days immediately preceding the determination date of each monthly issuance, commencing on March 1, 2019.

 

In addition, pursuant to the terms of the Purchase Agreement, the Company agreed to pay the Sellers as an earn-out payment in shares of the Company’s common stock within 1 month from the end of the business year 2019 equal to an aggregate amount of €500,000, if the amounts of bets made by the users through the VGS platform related to the 2019 fiscal year of the Company is at least 5% higher than the amounts of bets made by the users through the VGS platform related to the 2018 fiscal year of the Company.

 

The Purchase Agreement contains customary representations, warranties and covenants of the Company and the Sellers. Subject to certain customary limitations, the parties thereto have agreed to indemnify each other against certain losses related to, among other things, breaches of their representations and warranties and the failure to perform their covenants or obligations under the Purchase Agreement.

 

The foregoing summary of the Purchase Agreement and Promissory Note do not purport to be complete and is qualified in its entirety by reference to the full text of the Purchase Agreement, which is incorporated by reference herein and the form of Promissory Note that is filed herewith as Exhibit 10.2 and is incorporated by reference herein.

The representations, warranties and covenants contained in the Purchase Agreement were made only for purposes of such agreement and as of specific dates, were solely for the benefit of the parties to the Purchase Agreement, and may be subject to limitations agreed upon by the contracting parties. Accordingly, the Purchase Agreement is incorporated herein by reference only to provide investors with information regarding the terms of the Purchase Agreement, and not to provide investors with any other factual information regarding the Company or its business, and should be read in conjunction with the disclosures in the Company’s periodic reports and other filings with the Securities and Exchange Commission.

 

Item 2.03. Creation of a Direct Financial obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

 

The disclosure set forth in Item 2.01 of this Current Report on Form 8-K is incorporated into this Item 2.03 by reference.

 

Item 8.01. Other Events.

 

On February 4, 2019, the Company issued the press release attached hereto as Exhibit 99.1 announcing the closing of the transactions contemplated by the Purchase Agreement.

 

Item 9.01. Financial Statements and Exhibits.

 

(a) Financial statements of businesses acquired.

 

The financial statements required by Item 9.01(a) of Form 8-K will be filed with the Securities and Exchange Commission if deemed to be required within the requisite filing period.

 

(b) Pro forma financial information

 

The pro forma financial information required by Item 9.01(b) of Form 8-K will be filed if deemed to be required within the requisite filing period.

 

(d) Exhibits.

 

10.1   Share Purchase Agreement, dated January 17, 2019, by and among Newgioco, Inc. and the stockholders of Virtual Generation Limited and Naos Holding Limited party thereto (Incorporated by reference to the Form 8-K filed with the Securities and Exchange Commission on January 22, 2019 (File No. 000-50045).
     
10.2   Form of Promissory Note, dated January 30, 2019, in the principal amount of €2,392,000 .
     
99.1   Newgioco Group, Inc. press release, dated February 4, 2019
     

 

 

 
 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

Date: February 4, 2019 Newgioco Group, Inc.
   
  By: /s/ Michele Ciavarella
  Name: Michele Ciavarella
  Title: Chief Executive Officer

 

 

 

Exhibit 10.2

 

NEWGIOCO GROUP, INC.

FORM OF PROMISSORY NOTE

For good and valuable consideration, NEWGIOCO GROUP, INC., hereby promises to pay the aggregate amount of €2,392,000 in cash to the persons as set out on Schedule “A” hereto in the manner and form prescribed in Section 2 hereof and to issue €1,411,000 in shares of common stock of Newgioco Group, Inc. to the persons as set out on Schedule “A” hereto as calculated in accordance with Section 2 hereof and to pay all other amounts owing hereunder, both before and after default, maturity and judgments, on such dates and in such manner as hereinafter set out.

Interpretation

Definitions. The following words and phrases whenever used in this Note shall have the following meanings, unless there is something in the context otherwise inconsistent therewith.

“ Business Day ” shall mean a day (other than a Saturday or Sunday) on which banks are open for ordinary banking business in City of New York, USA;

“ Corporation ” shall mean Newgioco Group, Inc., a corporation existing under the laws of State of Delaware;

“ Determination Date ” shall have the meaning ascribed thereto in Section 2.4;

“ Event of Default ” shall mean any of the following events:

—seeking to adjudicate it as bankrupt or insolvent; or

—seeking liquidation, dissolution, winding up, reorganization, arrangement, protection, relief or composition of it or any of its property or debt or making a proposal with respect to it under any law relating to bankruptcy, insolvency, reorganization or compromise of debts or other similar laws (including, without limitation, any application for reorganization under the United States Bankruptcy Code or any reorganization, arrangement or compromise of debt under the laws of its jurisdiction of incorporation);

—seeking appointment of a receiver, trustee, agent, custodian or other similar official for it or for any substantial part of its properties and assets unless such proceeding has not been outstanding for more than sixty (60) days and is being actively and diligently contested in good faith by appropriate proceedings as determined by the Holder in its sole discretion and no judgment or order has been made granting any relief being sought in such proceeding;

“ Holder ” shall mean each of those parties set out in Schedule “A” hereto, or such other person who becomes a holder of this Note;

“ Note ” shall mean this promissory note and Schedule “A” appended hereto;

“ Shares ” means shares of common stock of the Corporation;

“ SPA ” shall mean the share purchase agreement dated January 17, 2019 between the Corporation and the persons listed on Schedule “A” hereto.

Currency. All amounts payable pursuant to this Note shall be payable in Euros.

Non-Business Days. If any day which the payment of cash or the issuance of shares is due and payable under this Note is payable or by which any other action is required to be taken hereunder is not a Business Day, such payment of cash or issuance of shares shall be made or such other action shall be required to be taken on the next succeeding day that is a Business Day.

Herein, hereto, etc. The words “herein”, “hereto”, “hereof” and similar words refer, unless the context clearly indicates the contrary, to the whole of this Note and not to any particular section, subsection or clause thereof. The word “Section” refers to the particular section of this Note unless otherwise indicated.

Number and Gender. Words importing the singular number only shall include the plural and vice versa, words importing the use of any gender shall include all genders and words importing persons shall include firms and corporations and vice versa.

Payments

Payments of Cash. The Corporation shall pay the aggregate amount of €2,392,000 in cash in twenty-three (23) equal and consecutive monthly installments of €104,000 with the first such monthly payment being due and payable on March 1, 2019 and €20,800 of each such monthly installment shall be paid to each Holder.

No Payment of Interest. The outstanding principal due and payable under this Note shall not bear interest.

Method of Cash Payment. Any payment of cash hereunder shall be payable by cheque sent to a Holder or by wire transfer of immediately available funds to a bank account designated by a Holder for such purpose in writing. The receipt of such cheque or wire transfer shall satisfy and discharge all liability for such cash payment to the extent of the sum represented thereby.

Payments of Shares. The Corporation shall pay the aggregate amount of €1,411,000 in Shares issued in seventeen (17) equal and consecutive monthly instalments of €83,000 in Shares with twenty (20%) per cent of such Shares being issued to each Holder. The number of such Shares to be issued by the Corporation shall be determined by the average of the closing prices of the Shares on the last ten (10) trading days immediately preceding the determination date (the “ Determination Date ”) of each monthly issuance which shall be the first day of each month commencing on March 1, 2019. The applicable exchange rate to convert United States dollars into euro shall be as quoted by the Corporation’s bank at the close of business on such Determination Date.

Method of Share Payment. Any payment of Shares hereunder may be made by the delivery to a Holder of a share certificate of the Corporation. All such share certificates shall bear a restrictive legend as set out in section 5.4(d) of the SPA and may not be traded until the later of the removal of such restrictive legend and the expiration of the Hold Period, as such term is defined in the SPA.

Instructions to Transfer Agent . On each date that Shares are to be issued to a Holder pursuant to this Note:

· the Corporation shall transmit the appropriate instructions by e-mail to the Corporation’s transfer agent and the share certificates representing such Shares shall be delivered by such transfer agent to each Holder within ten (10) days of the Determination Date; and
· the Corporation shall provide each Holder with a copy of such instructions to the transfer agent together with a calculation showing the determination of the number of such Shares to be so issued.

Payment of Cash in Lieu of Shares . In the event that, or for any reason whatsoever, the issuance of Shares as provided for by this Note is not possible and/or not executed, the Corporation shall pay to each Holder the cash equivalent as set out in Section 2.4 of the Note and such payment of cash shall fully satisfy the obligation of the Corporation pursuant to Section 2.4 of this Note.

Events of Default; Acceleration of Payment

Acceleration and Enforcement. Upon the occurrence and during the continuance of an Event of Default, a Holder may demand payment of all unpaid cash and unissued Shares to be paid or issued pursuant to the Note.

Notice. The Corporation shall promptly notify the Holder of any facts that may give rise to an Event of Default or any facts that may give rise to any event which, with notice or lapse of time or both, would constitute an Event of Default under this Note.

Waiver. Upon the occurrence and during the continuance of any Event of Default hereunder, a Holder shall have the power to waive any Event of Default.

No Security. This Note is an unsecured debt obligation of the Corporation.

Notice

Notice shall be served on a Holder or on the Corporation, respectively, by delivering it by hand or sending it by e-mail or other means of recorded electronic transmission addressed as set out below. Each Holder and the Corporation agrees to send written notification to the other parties of any change of address. Any notice so delivered shall be deemed to have been given on the date of delivery to the person to whom it is addressed or if sent by e-mail or other means of recorded electronic transmission, shall be deemed to have been given when sent if sent by 4:30 p.m. on a Business Day, otherwise it shall be deemed to have been received on the following Business Day.

E-mail notice to the Corporation:
E-mail notice to Luca Pasquini:
E-mail notice to Alessandro Bronzuoli:
E-mail notice to Gabriele Peroni:
E-mail notice to Stefano Volo:
E-mail notice to Giovanni Pasquinelli:

Amendment

This Note may be modified or amended only if the parties hereto so agree in writing.

Assignment

The Corporation may not assign or transfer any of its obligations hereunder without the prior written consent of each Holder. A Holder may not assign or transfer any benefit under this Note without the prior written consent of the Corporation.

Governing Law

This Note shall be governed by and construed in accordance with the laws of the State of Delaware.

Severance

The invalidity or unenforceability of any provision of the Note or any covenant herein contained shall not affect the validity or enforceability of any other provision or covenant hereof or herein contained and the Note shall be construed as if such invalid or unenforceable provision or covenant were omitted.

 
 

 

IN WITNESS WHEREOF NEWGIOCO GROUP, INC. has caused this Note to be executed.

Dated as of this 30 th day of January, 2019.

NEWGIOCO GROUP, INC.

_ /s/ Michele Ciavarella _______________

Name: Michele Ciavarella
Title: Chief Executive Officer

 

Each of the undersigned hereby acknowledge and agree to the terms and conditions of this Note.

Dated as of this 30 th day of January, 2019.

 

/s/ Luca Pasquini   /s/ Alessandro Bronzuoli
Luca Pasquini   Alessandro Bronzuoli

 

/s/ Gabriele Peroni   /s/ Stefano Volo
Gabriele Peroni   Stefano Volo

 

/s/ Giovanni Pasquinelli    
Giovanni Pasquinelli    

 

 
 

 

Schedule “A”

Payment of Cash

 

 

 

Name of Holder

________________

Total

Entitlement

To Cash

______________

Monthly Entitlement

To Cash

____________

     
Luca Pasquini €478,400 €20,800
Alessandro Bronzuoli €478,400 €20,800

Gabriele Peroni

 

€478,400 €20,800
Stefano Volo €478,400 €20,800
Giovanni Pasquinelli €478,400 €20,800
     

 

 

Issuance of Shares

 

 

 

Name of Holder

________________

 

Total

Entitlement To Shares

______________

 

 

Monthly Entitlement

To Shares

____________

     
Luca Pasquini €282,200 €16,600
Alessandro Bronzuoli €282,200 €16,600

Gabriele Peroni

 

€282,200 €16,600
Stefano Volo €282,200 €16,600
Giovanni Pasquinelli €282,200 €16,600
     

The exact number of Shares shall be determined in accordance with Section 2.4 of this Note.

 

 

 

 

 

A-1

Newgioco Completes Acquisition of Virtual Generation Limited

 

Accretive Acquisition Accelerates Global Expansion and

Reinforces Portfolio of Market-Leading Gaming Technology Platforms

 

 

New York – February 4, 2019 – Newgioco Group, Inc. (“Newgioco” or the “Company”) (OTCQB: NWGI), today announced that the Company has completed the acquisition of Virtual Generation Limited (“VG”), a leading developer of virtual gaming software, together with Naos Holding Limited, a private holding company (''Naos''), effective January 30, 2019 for approximately $4.5 million in a combination of cash and stock.

 

“Adding VG’s virtual gaming technology to our portfolio of innovative gaming technology platforms reinforces our industry-leading position in the leisure gaming market and instantaneously expands our global footprint from where Newgioco currently operates to include 12 new countries in South America, Central Asia and Africa where VG currently operates,” stated Michele (Mike) Ciavarella, Chief Executive Officer of Newgioco. “With virtually no overlap between the markets we each currently serve, we are creating additional revenue opportunities to cross-sell VG’s software and our own ELYS platform, diversify our revenues and strengthen our gaming platforms as we pursue the newly emerging U.S. sports betting market.”

 

Newgioco plans to utilize the VG platform for racing, keno, American Roulette and other casino games, within its ELYS platform. Simultaneously, Newgioco plans to introduce the VG product line into the regulated Italian market, utilizing Newgioco's existing Italian ADM platform certification.

 

“We are intimately knowledgeable about the power of the assets we have purchased as VG’s platform has been operating on our ELYS platform for some time,” added Mr. Ciavarella. “We are eager to pursue and engage with customers on a number of near-term opportunities, including the tribal gaming market in the U.S. We expect this acquisition to be immediately accretive to our first quarter 2019 financial results.”

 

VG's software is a random number generator (RNG) certified by Gaming Laboratories International (GLI) and includes a growing portfolio of products including horse racing and greyhound racing, league play football (soccer), keno and American roulette. VG currently operates in Italy, Albania, Turkey, Mexico, Peru, Paraguay, Nicaragua, Honduras, Colombia, Dominican Republic, Nigeria and Uganda.

 

Financial Details of the Transaction

 

The Company paid the sellers €4 million in consideration for all the ordinary shares of VG and Naos comprised of a cash payment of €108,000, the issuance of shares of the Company’s common stock valued at €89,000, a promissory note providing for the payment of (a) €2,392,000 in cash in 23 equal and consecutive monthly installments of €104,000 with the first payment due and payable one month after the Closing Date and €1,411,000 in shares of the Company’s common stock in 17 equal and consecutive monthly installments of €83,000 as determined by the average of the closing prices of such shares on the last 10 trading days immediately preceding the determination date of each monthly issuance, commencing on March 1, 2019.

 

In addition, the Company agreed to pay the Sellers as an earn-out payment in shares of the Company’s common stock within one month from the end of the business year 2019 equal to an aggregate amount of €500,000, if the amounts of bets made by the users through the VGS platform related to the 2019 fiscal year of the Company is at least 5% higher than the amounts of bets made by the users through the VGS platform related to the 2018 fiscal year of the Company.

 

About Virtual Generation Limited

 

Virtual Generation Ltd. is a software development company specializing in the production and distribution of highly advanced platforms for virtual betting. Virtual Generation uses advanced and complete betting management software, unsurpassed, flexible and customizable, adaptable to different types of companies and markets. VG was founded in 2014 and has grown from processing 67,000 bet tickets in its first year to over 20 million bet tickets in 2018 for its online and land-based B2B customers in 12 countries in Europe, Latin America and Africa.

 

 

About Newgioco Group, Inc.

 

Newgioco Group, Inc., headquartered in Toronto, Canada, is a vertically-integrated leisure gaming technology company, with fully licensed online and land-based gaming operations and innovative betting technology platforms that provide bet processing for casinos and other gaming operators. The Company conducts its business under the registered brand Newgioco primarily through its internet-based betting distribution network on its website, www.newgioco.it as well as retail neighborhood betting shops situated throughout Italy.

 

The Company offers its clients a full suite of leisure gaming products and services, such as sports betting, virtual sports, online casino, poker, bingo, interactive games and slots. Newgioco also owns and operates innovative betting platform software providing both B2B and B2C bet processing for casinos, sports betting and other online and land-based gaming operators. Additional information is available on our corporate website at www.newgiocogroup.com.

 

Forward-Looking Statements

 

This press release contains certain forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are identified by the use of the words "could," "believe," "anticipate," "intend," "estimate," "expect," "may," "continue," "predict," "potential," "project" and similar expressions that are intended to identify forward-looking statements and includes statements such as plans to utilize the proven VG platform for racing, keno, American Roulette and other casino games, within its ELYS platform, plans to introduce the VG product line into the regulated Italian market and the acquisition of VG being immediately accretive to Newgioco in 2019 These forward-looking statements are based on management's expectations and assumptions as of the date of this press release and are subject to a number of risks and uncertainties, many of which are difficult to predict that could cause actual results to differ materially from current expectations and assumptions from those set forth or implied by any forward-looking statements. Important factors that could cause actual results to differ materially from current expectations include our ability to use the VG platform for racing, keno, American Roulette and other casino games, within its ELYS platform, our ability to introduce the VG product line into the regulated Italian market and our ability to implement the VG acquisition so that it is immediately accretive to Newgioco in 2019, and the risk factors described in Newgioco's Annual Report on Form 10-K and subsequent filings with the U.S. Securities and Exchange Commission, including subsequent periodic reports on Forms 10-Q and 8-K. The information in this release is provided only as of the date of this release, and we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events, except as required by law

 

For further information, please contact:

Hayden IR

Cameron Donahue (651) 653-1854 or Brett Maas (646) 536-7331

nwgi@haydenir.com