SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 15, 2019
ESPORTS ENTERTAINMENT GROUP, INC.
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of
incorporation or organization)
|(Commission File Number)||
170 Pater House, Psaila Street
Birkirkara, Malta, BKR 9077
(Address of principal executive offices)
356 2757 7000
(Registrant’s telephone number, including area code)
(Former name or former address, if changed since last report)
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:
|☐||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))|
Securities registered pursuant to Section 12(b) of the Act:
|Title of each class||Trading Symbol(s)||Name of each exchange on which registered|
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 1.01 Entry Into a Material Definitive Agreement.
In November, 2019, Esports Entertainment Group, Inc. (the “Company”) entered into Waiver Agreements (the “November 2019 Waiver Agreements”) with the investors (the “Investors”) in its November 2018 private placement offering (the “November 2018 Offering”) of certain Senior Secured Convertible Promissory Notes (each a “2018 Note,” collectively, the “2018 Notes”) and warrants (the “2018 Warrants”) to purchase shares of the Company’s common stock, par value $0.001 per share (“Common Stock”). The November 2019 Waiver Agreements are in addition to the waiver agreements previously entered into by the Company and the Investors in July 2019 as reported by the Company in its Current Report on Form 8-K filed with the Securities and Exchange commission on July 22, 2019.
Pursuant to the terms of the November 2019 Waiver Agreements, the Investors (i) agreed to extend the maturity dates of the 2018 Notes to February 14, 2020 and (ii) waived any and all defaults with respect to the Company’s compliance with any covenant or agreement contained in the 2018 Notes, 2018 Warrants or the Securities Purchase Agreements that were executed in connection with the November 2018 Offering.
In consideration for the November 2019 Waiver Agreements, the Company agreed to issue each Investor an additional warrant to purchase such number of shares of Common Stock equal to 5% of the shares of Common Stock issuable upon exercise of their 2018 Warrants (the “Additional Warrants”). The Additional Warrants will have an exercise price of $0.75 per share and shall be in form substantially the same as the 2018 Warrants; provided that no cashless exercise provision, ratchet provision or piggyback registration provision shall be contained in the Additional Warrants.
Notwithstanding the foregoing, the November 2019 Waiver Agreements executed with two Investors contained certain other provisions as described below.
Pursuant to the November 2019 Waiver Agreement that was executed with one of the Investors the Company agreed to a partial repayment of such investor’s 2018 Note in the sum of $30,000.
Pursuant to the November 2019 Waiver Agreement that was executed with the second Investor, the Company agreed to a partial repayment of such investor’s 2018 Note in the sum of $75,000, With respect to the Maturity Date extension, this Investor agreed to extend the maturity date of its 2018 Note to February 1, 2020, unless the Company has provided notice on or before February 1, 2020 in good faith that the Underwritten Offering (as defined therein) will conclude on or prior to February 14, 2020, in which case the Maturity Date will be February 14th, 2020. This Investor did not receive any Additional Warrants.
The foregoing descriptions of the 2019 Waiver Agreements does not purport to be complete and is qualified in its entirety by its full text, the forms of which are filed hereto as Exhibits 10.1, 10.2 and 10.3, respectively, and incorporated herein by reference.
On December 6, 2019, the Company entered into certain securities purchase agreements (the “Purchase Agreements”) with four accredited investors (the “December Investors”) whereby the Company issued to the December Investors convertible promissory notes (the “Notes”) in the aggregate principal amount of $550,000 (which amount includes a 10% original issue discount) and Warrants to purchase an aggregate of 916,667 shares of the Company’s Common Stock (“Warrants”) for aggregate gross proceeds of $500,000.
The Notes accrue interest at a rate of 5% per annum and is initially convertible into shares of the Company’s common stock at a conversion price of $0.60 per share, subject to adjustment (the “Conversion Price”). The Notes contains a mandatory conversion mechanism whereby unpaid principal and accrued interest on the Note, upon the closing of a Qualified Offering (as defined therein) converts into shares of the Company’s Common Stock at the lower of (i) the Conversion Price and (ii) 80% of the offering price in the Qualified Offering. The Notes contains customary events of default (each an “Event of Default”) and mature on December 6, 2020. If an Event of Default occurs, the outstanding principal amount of the Notes, plus accrued but unpaid interest, liquidated damages and other amounts owing with respect to the Notes will become, at the Investor’s election, immediately due and payable in cash at the “Mandatory Default Amount”. The Mandatory Default Amount means the sum of 130% of the outstanding principal amount of the Notes plus accrued and unpaid interest, including default interest of 18% per annum, and all other amounts, costs, expenses and liquidated damages due in respect of the Notes.
The Warrants are exercisable at a price of $0.75 per share, subject to adjustment from the date of issuance through December 6, 2022.
Joseph Gunnar & Co., LLC (the “Placement Agent”) acted as placement agent in connection with the foregoing and received cash compensation of $50,000 and warrants to purchase 311,667 shares of the Company’s Common Stock at an initial exercise price of $0.75 per share, subject to adjustment (“Agent Warrants”). The Agent Warrants may be exercised on a “cashless” basis and expire December 6, 2024.
The foregoing descriptions of the Purchase Agreement, Note, and Warrants do not purport to be complete and are qualified in their entirety by their full text, the forms of which have been previously filed and are incorporated herein by reference.
Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of the Registrant.
Item 1.01 is hereby incorporated by reference.
Item 3.02. Unregistered Sales of Equity Securities.
Item 1.01 is hereby incorporated by reference.
The Additional Warrants and the securities issued pursuant to the Offering were not registered under the Securities Act, but qualified for exemption under Section 4(a)(2) and/or Regulation D of the Securities Act. The securities were exempt from registration under Section 4(a)(2) of the Securities Act because the issuance of such securities by the Company did not involve a “public offering,” as defined in Section 4(a)(2) of the Securities Act, due to the insubstantial number of persons involved in the transaction, size of the offering, manner of the offering and number of securities offered. The Company did not undertake an offering in which it sold a high number of securities to a high number of investors. In addition, the November 2018 Investors and the December Investors had the necessary investment intent as required by Section 4(a)(2) of the Securities Act since the November 2018 Investors and the December Investors agreed to, and received, the securities bearing a legend stating that such securities are restricted pursuant to Rule 144 of the Securities Act. This restriction ensures that these securities would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, the Company has met the requirements to qualify for exemption under Section 4(a)(2) of the Securities Act.
Item 9.01. Exhibits.
|10.1||Form of Waiver Agreement|
|10.2||Form of Securities Purchase Agreement (incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on August 20, 2019)|
|10.3||Form of Convertible Promissory Note (incorporated herein by reference to Exhibit 10.2 to the Current Report on Form 8-K filed with the SEC on August 20, 2019)|
|10.4||Form of Warrant (incorporated herein by reference to Exhibit 10.3 to the Current Report on Form 8-K filed with the SEC on August 20, 2019)|
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.
|ESPORTS ENTERTAINMENT GROUP, INC.|
|Dated: December 20, 2019||By:||/s/ Grant Johnson|
Chief Executive Officer
Esports Entertainment Group, Inc.
170 Pater House, Psaila Street
Birkirkara, Malta, BKR 9077
November ___, 2019
VIA ELECTRONIC MAIL
Re: Waiver Letter – Securities Purchase Agreement and related documents
You are being sent this letter (this “Letter Agreement”) as an investor (“Investor”) in the November 2018 bridge offering (the “Offering”) conducted by Esports Entertainment Group, Inc. (the “Company”) pursuant to a securities purchase agreement (the “Securities Purchase Agreement”), whereby the Company sold 5% Senior Convertible Notes (the “Notes”) and warrants to purchase common stock of the Company (the “Warrants” and together with the Securities Purchase Agreement and the Notes, the “Offering Documents”).
Pursuant to waiver agreements executed and delivered in July, 2019 (the “July Waiver Agreement”), all Investors in the Offering agreed to, inter alia: (i) allow the Company to raise additional capital in an amount up to $1,000,000, in a new offering of notes and warrants having terms not more favorable to investors than those of the Offering (the “New Offering”) and ii) waive compliance with certain items and potential defaults as described therein.
As you are aware, the Company is currently in the process of pursuing a public offering of its securities to raise up to $11,500,000 (the “Underwritten Offering”) and list its securities onto the NASDAQ (the “Uplisting”). The Company has filed a registration statement on Form S-1 (the “Registration Statement”) related to the Underwritten Offering which is being led by Maxim Group LLC and Joseph Gunnar & Co (together the “Underwriters”). The Company believes that the Underwritten Offering and Uplisting are in the best interests of our Company and its stockholders. If the Company’s securities are listed on NASDAQ, the Company believes that the liquidity in the trading of our Common Stock could be significantly enhanced, which could result in an increase in the trading price and may encourage investor interest and improve the marketability of its Common Stock to a broader range of investors.
In order to facilitate a successful Underwritten Offering and Uplisting, all Investors in the Offering are being requested to (i) extend the Maturity Date of the Notes to February 14, 2020 (the “Maturity Date Extension”) and (ii) waive through the date hereof any and all defaults known or unknown with respect to the Company’s compliance with any covenant or agreement contained in any of the Offering Documents (the “Waiver”). The Maturity Date Extension and Waiver are collectively referred to herein as the “Extension and Waiver”).
In consideration for your entering into this Letter Agreement and agreeing to the Extension and Waiver, the Company has agreed to issue to each Investor an additional Warrant (the “Additional Warrant”) to purchase such number of shares of the Company’s Common Stock equal to 5% of the Warrant Shares initially issuable to such Investor under the Warrant issued to such Investor in the Offering. The Additional Warrant shall have an exercise price of $0.75 per share and shall be in form substantially the same as the Warrants issued in the Offering, provided that no cashless provision, ratchet provision or piggyback registration provisions shall be contained in the Additional Warrants.
By your execution below, this Letter Agreement shall serve as written confirmation that you have agreed to the Waiver and Extension contained herein.
This Letter Agreement and any and all exhibits hereto contain the entire understanding between and among the parties and supersedes any prior understandings and agreements among them respecting the subject matter of this Letter Agreement. This Letter Agreement shall be governed and have exclusive jurisdiction as provided under Section 5.10 of the Securities Purchase Agreement. This Letter Agreement may be executed in any number of counterparts, each of which shall be an original but all of which together shall constitute one and the same instrument. In case any provision of this Letter Agreement shall be held to be invalid, illegal or unenforceable, such provision shall be severable from the rest of this Letter Agreement, and the validity legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. By your execution below, you are confirming that you have had the opportunity to review this Letter Agreement with your counsel
The parties hereby consent and agree that if this Letter Agreement shall at any time be deemed by the parties for any reason insufficient, in whole or in part, to carry out the true intent and spirit hereof or thereof, the parties will execute or cause to be executed such other and further assurances and documents as in the reasonable opinion of the parties may be reasonably required in order more effectively to accomplish the purposes of this Letter Agreement.
Please indicate confirmation of the terms provided herein by executing and returning this letter in the space provided below.
|Very truly yours,|
|ESPORTS ENTERTAINMENT GROUP, INC.|
|Chief Executive Officer|
ACCEPTED AND AGREED:
|For Individuals||For Entities|
|Name of Investor||Name of Investor|
|Signature of Investor||Signature of Authorized Person|
|Print Name of Authorized Person|
|Print Title of Authorized Person|