Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant
On June 2, 2023, Nightfood Holdings, Inc. (the
“Company”) consummated the transactions pursuant to a Securities Purchase Agreement (the “Purchase Agreement”)
dated as of June 1, 2023 (the “Effective Date”) and issued and sold to Mast Hill Fund, L.P. (“Mast Hill”), a Promissory
Note (the “Note”) in the principal amount of $200,000.00 (actual amount of purchase price of $170,000 plus an original issue
discount (“OID”) in the amount of $30,000).
Also pursuant to the Purchase Agreement, in connection
with the issuance of the Note:
| ● | Sean Folkson, the Company’s Chairman of the Board and
Chief Executive Officer, pursuant to a Pledge Agreement dated the Effective Date (the “Pledge Agreement”), pledged to Mast
Hill, and granted to Mast Hill a security interest in, all common stock and common stock equivalents of the Company owned by Mr. Folkson; |
| ● | the Company, Nightfood Inc. and MJ Munchies, Inc., each wholly-owned
subsidiaries of the Company (collectively, the “Subsidiaries” and with the Company, the “Debtors”) entered into
a Security Agreement dated the Effective Date (the “Security Agreement”), pursuant to which each of the Debtors granted Mast
Hill a perfected security interest in all of their property to secure the prompt payments, performance and discharge in full of all of
the Debtors’ obligations under the Note and the other transaction documents entered into in connection with the Purchase Agreement
and the Note (the “Transaction Documents”); |
| ● | The Company granted piggy-back registration rights to Mast
Hill; and |
| ● | The Subsidiaries entered into a Subsidiary Guarantee dated
the Effective Date (the “Guarantee”), pursuant to which the Subsidiaries unconditionally and irrevocably guaranteed to Mast
Hill the prompt and complete payment and performance by the Company and the Subsidiaries when due, of the obligations under the Transaction
Documents. |
The Company paid to (a) J.H. Darbie & Co., Inc. 298,875 warrants at
an exercise price of $0.05688 per share (the “Darbie Warrants”), pursuant to the Company’s existing agreement with J.H.
Darbie & Co., Inc., in relation to the transactions contemplated by the Purchase Agreement. The Company is currently determining the
fees payable to Spencer Clarke LLC (which may include cash and/or warrants), pursuant to the Company’s existing agreement with Spencer
Clarke LLC, in relation to the transactions contemplated by the Purchase Agreement.
The Company used the net proceeds from the sale
of the Note for required debt service.
The maturity date of the Note is the 12-month
anniversary of the Effective Date, and is the date upon which the principal amount, the OID, as well as any accrued and unpaid interest
and other fees, shall be due and payable.
Mast Hill has the right, at any time on or following
an Event of Default (as defined in the Note) under the Note, to convert all or any portion of the then outstanding and unpaid principal
amount and interest (including any default interest) into common stock, at a conversion price of $0.10, subject to customary adjustments
as provided in the Note for stock dividends and stock splits, rights offerings, pro rata distributions, fundamental transactions and dilutive
issuances. In addition, Mast Hill is entitled to deduct $1,750.00 from the conversion amount upon each conversion, to cover Mast Hill’s
fees associated with each conversion. Any such conversion is subject to customary conversion limitations set forth in the Note so Mast
Hill beneficially owns less than 4.99% of the Common Stock.
At any time prior to the date that an Event of
Default occurs under the Note, the Company may prepay the outstanding principal amount and interest then due under the Note. On any
such event, the Company shall make payment to Mast Hill of an amount in cash equal to the sum of (a) 100% multiplied by the principal
amount then outstanding plus (b) accrued and unpaid interest on the principal amount to the prepayment date plus (c) $750.00 to reimburse
Mast Hill for administrative fees.
In addition, if, at any time prior to the full
repayment or full conversion of all amounts owed under the Note, the Company receives cash proceeds from any source or series of related
or unrelated sources from the issuance of equity (subject to exclusions described in the Note), debt or the issuance of securities pursuant
to an Equity Line of Credit (as defined in the Note) of the Company, Mast Hill shall have the right in its sole discretion to require
the Company to apply up to 50% of such proceeds after the Minimum Threshold to repay all or any portion of the outstanding principal amount
and interest then due under the Note.
The Note contains customary Events of Default
for transactions similar to the transactions contemplated by the Purchase Agreement and the Note, which entitle Mast Hill, among other
things, to accelerate the due date of the unpaid principal amount of, and all accrued and unpaid interest on, the Note, in addition to
triggering the conversion rights. Any principal amount or interest on the Note which is not paid when due shall bear interest at the rate
of the lesser of (i) 16% per annum and (ii) the maximum amount permitted by law from the due date until the same is paid. Upon the occurrence
of any Event of Default, the Note shall become immediately due and payable, and the Company shall pay to Mast Hill an amount equal to
the principal amount then outstanding plus accrued interest (including any default interest) through the date of full repayment multiplied
by 150%, as well as all costs of collection.
The Note contains restrictions on the Company’s
ability to (a) incur additional indebtedness, (b) make distributions or pay dividends, (c) redeem, repurchase or otherwise acquire its
securities, (d) sell its assets outside of the ordinary course, (e) enter into certain affiliate transactions, (f) enter into 3(a)(9)
Transactions or 3(a)(10) Transactions (each as defined in the Note), or (g) change the nature of its business.
Commencing as of the Effective Date, and until
such time as the Note is fully converted or repaid, the Company shall not effect or enter into an agreement to effect any Variable Rate
Transaction (as defined in the Purchase Agreement).
The Purchase Agreement contains customary representations
and warranties made by each of the Company and Mast Hill. It further grants to Mast Hill certain rights of participation and first refusal,
and most-favored nation rights, all as set forth in the Purchase Agreement.
The Company is subject to customary indemnification
terms in favor of Mast Hill and its affiliates and certain other parties.
The foregoing is a brief description of the Purchase
Agreement, the Note, the Pledge Agreement, the Security Agreement, the Guarantee and the Darbie Warrants, and is qualified in its entirety
by reference to the full text of such documents.