This prospectus relates to the proposed resale or
other disposition from time to time of up to 24,805,661 shares of common stock, $0.0001 par value per share, and 4,647,003 warrants
to purchase shares of common stock of Allied Esports Entertainment, Inc., f/k/a Black Ridge Acquisition Corp. (“AESE”)
by the selling securityholders identified in this prospectus. We are not selling any shares of common stock or warrants (collectively,
the “Securities”) under this prospectus and will not receive any of the proceeds from the sale or other disposition
of Securities by the selling securityholders.
The selling securityholders
or their pledgees, assignees or successors-in-interest may offer and sell or otherwise dispose of the Securities described in
this prospectus from time to time through public or private transactions at prevailing market prices, at prices related to prevailing
market prices or at privately negotiated prices. The selling securityholders will bear all commissions and discounts, if any,
attributable to the sales of the Securities. We will bear all other costs, expenses and fees in connection with the registration
of the Securities. See “Plan of Distribution” beginning on page 27 for more information about how the selling securityholders
may sell or dispose of their Securities.
Our common stock is listed on the Nasdaq Capital
Market under the symbol “AESE.” On September 18, 2019, the last reported per share price of our common stock on the
Nasdaq Capital Market was $5.70 per share.
Our warrants are not currently
listed on any exchange, and AESE is in the process of listing the warrants for trading on the OTCQB Venture Market under the symbol
“AESEW.” There is no assurance that such listing will be accepted by the OTCQB Venture Market. See Risk Factors on
page 14.
The Allied Esports Business
Gaming is one of the largest and fastest growing markets in
the entertainment sector, with an estimated 2.2 billion gamers playing esports globally, and esports is the major driver for the
growth. Esports, short for “electronic sports,” is a general label that comprises a diverse offering of competitive
electronic games that gamers play against each other. Some of the popular esports games currently being played include Fortnite,
League of Legends, Dota 2, Counter-Strike, Call of Duty, Overwatch and FIFA. Although you can play games on your own against the
computer or console, one of the ways esports is different than video games of old is the community and spectator nature of esports—competitive
play against another person—either one-on-one or in teams—that is viewed by an online and in-person audience, is a
central feature of esports. Since players play against each other online, a global network has developed as these players compete
against each other worldwide. Additionally, game developers have greatly increased the watchability of games, which has made the
spectator aspect of gaming much more prevalent and further driven expansion of the gaming market. The expanded reach of high-speed
Internet service and the computer technology advances in the last decade have greatly accelerated the growth of esports. Esports
has now become so popular that many schools offer scholarships in esports; the best-known esports teams are getting mainstream
sponsorship and are being bought or invested in by celebrities, athletes and professional sports teams. The highest-profile esports
gamers have massive online audiences as they stream themselves playing against other players online, and generate millions of dollars
in sponsorship money and subscription fees to their online streaming channels. It is projected that by 2022, 645 million people
will be watching esports globally, and that global esports revenue will grow to approximately $1.8 billion.
WPT successfully implemented a three-pillar strategy for over
16 years of its 18 year history. We believe this model can continue and also be applied to Allied Esports and the esports industry
over time. Allied Esports intends that the same pillars—in-person experiences, multiplatform content, and interactive services—will
be utilized by Allied Esports independently and in connection with its strategic partners.
In August 2019, Allied
Esports entered into a series of strategic transactions with certain affiliates of Simon, including entering into an
agreement with Simon Management Associates II, LLC, pursuant to which Allied Esports will organize and stage an esports event
program called the Simon Cup at certain Simon centers in the U.S. and online, as well as entering into an agreement with
Simon Equity Development, LLC pursuant to which it made a $5 million equity investment into the Company. In August 2019 the
Company also launched a strategic partnership with TV Azteca, a premier television network in Mexico. TV Azteca made a $5
million equity investment into the Company as part of its partnership.
In-person Experiences
Allied Esports will continue delivering first-in-class live
experiences to customers at Allied Esports’ arenas worldwide. Starting with the flagship esports arena, the HyperX Esports
Arena Las Vegas, as well as seven affiliate arenas in Santa Ana and Oakland, California, China and Australia, Allied Esports offers
esports fans state-of-the-art facilities to compete against other players in esports competitions, host live events with esports
superstars that stream to millions of viewers worldwide, produce and distribute incredible esports content with its on-site production
facilities and studios and provide a perfect facility for hosting corporate events, tournaments, game launches or other events.
Additionally, Allied Esports has two mobile esports arenas, which are 18-wheel semi trailers that convert into first class esports
arenas and competition stages with full content production capabilities and interactive talent studios. Through this worldwide
network of arenas, Allied Esports believes it can offer customers an unmatched ability to participate in simultaneous global esports
events, and offer sponsors and partners a truly scalable global platform and audience to promote their businesses and products.
Allied Esports’ flagship HyperX Esports Arena Las Vegas serves as a marquee destination for esports fans globally, which
it hopes will become the Madison Square Garden or Yankee Stadium of esports.
Flagship Arenas. In March 2018, Allied Esports opened
its first flagship arena, the HyperX Esports Arena Las Vegas, at the Luxor Casino on the Vegas strip, whose pyramid is one of the
most visible landmarks in Las Vegas. This arena has 80 to 100 gaming stations, two bars, food service, private rooms, a production
facility, and space for up to 1,000 people for events. The arena is custom-built for esports tournaments, and has a broadcast-ready
television studio to broadcast live events and produce content. Allied Esports monetizes the arena through renting the space for
live events; merchandise sales; daily usage fees from day-to-day gamers using the gaming stations; food and beverage; and sponsorship
(i.e., our HyperX naming rights relationship). In the first half of 2019, the HyperX Esports Arena Las Vegas has held the following
events:
Proprietary events by Allied Esports:
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Allied Esports CES Showdown
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Day One: The Division 2
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PlayTime with KittyPlays I
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PlayTime with KittyPlays 2
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Nation Vs. Nation: USA vs. Mexico – English Broadcast
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Allied Esports Rainbow Six Siege Vegas Minor
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Glory Road: MKLeo vs. Samsora
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Saturday Night Speedway
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Other events hosted by Allied Esports
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Nintendo Super Smash Bros Ultimate North America Open – Online Broadcast
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Sony NAB Keynote Address Remote Integration Demonstration
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BIG3 Draft for CBS Sports Network
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NBA 2K League “THE TURN”
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Dragon Ball Legends Showdown
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NHL Gaming World Championship
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Red Bull Evo After Party
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Affiliate Arenas. One of Allied Esports’ strategic
advantages is its global network of esports arena partners, which enables it to host events, and promote competitions around the
world, with those competitions culminating in live events held at the flagship arena in Las Vegas. Allied Esports achieved this
through its Affiliate Program, which consists of strategic partnerships with third-party esports operators around the globe. Allied
Esports will charge these affiliates an upfront fee, and will receive a minimal annual revenue share of gross revenue, generally
starting in the second year of the relationship. Allied Esports’ brand visibility and reputation have already resulted in
affiliate arrangements with arenas in Santa Ana and Oakland, California, five locations in China (Beijing, Gui’an, Hangzhou,
Shenzhen and Tianjin), and a multi-year agreement with Fortress Esports Pty Ltd, a new gaming, esports and entertainment venue
enterprise in Australia, which plans to open its first affiliate arena in Melbourne in 2020. This network of affiliate arenas allows
Allied Esports to scale up its brand penetration worldwide on a rapid basis, driving more gamers into the Allied Esports ecosystem,
with minimal costs to Allied Esports. Furthermore, the content that can be produced by these affiliate arenas can be on-sold by
Allied Esports, with minimal production costs.
Mobile Arenas. The mobile arenas are 18-wheeler trucks
that expand out into fully-functional esports arenas with event hosting, broadcasting and production capabilities. The mobility
of the trucks makes them ideal for sponsors to reach a large audience in multiple locations at an economical cost. The trucks serve
as mobile billboards for Allied Esports’ brand as well, giving it brand presence wherever they appear. Allied Esports currently
has two mobile arena trucks, with the first truck based in Germany and serving the European market, and a second truck based in
Las Vegas and serving the U.S. market.
Strategic Investor Events. In addition to Allied Esports
utilizing in-person experiences at its flagship, mobile and affiliate arenas, Allied Esports is leveraging its experience to develop
events and content with its strategic investors, Simon and TV Azteca.
Allied Esports is working with TV Azteca to create in-person
experiences in Mexico. These events create content that will be used to populate the TV Azteca digital channel being developed
by TV Azteca and Allied Esports, as described below.
Simon and Allied Esports are collaborating to create a new product
offering focused on delivering esports experiences through integrated gaming venues and production facilities in select Simon centers
around the U.S. The in-center venues will be designed for tournament play and daily use with the capability to be expanded into
common areas for larger esports activations and live events. The two companies plan to announce additional details for The Simon
Cup, a co-branded esports competition and gaming tournament festival this fall combining online and in-person play at select Simon
centers in the New York and Los Angeles markets, with the winners of the regionals moving on to HyperX Esports Arena Las Vegas
for the final. As a premier esports facility, Allied Esports believes utilizing the arena will drive participants to the Simon
Cup qualifying events and increase revenue for the Company.
Multiplatform Content: Leveraging Arenas and Strategic
Partnerships To Develop Content
Allied Esports’ worldwide network of esports arenas provides
Allied Esports with a platform to develop an incredible amount of content to distribute via digital live streams, broadcast and
cable, and social media outlets. Allied Esports believes that its arenas will draw top-level esports talent (such as professional
streamer Ninja, who was the featured talent at a successful event at Allied Esports’ Las Vegas arena in April 2018) for purpose
of hosting events and developing content, which it can distribute live, post-production into fully-produced episodic content, or
repackage for social media distribution. Allied Esports intends to monetize the content in multiple ways, including direct sales
of the content, sponsorship revenue, and subscription and/or advertising fees for viewers of the content.
We believe Allied Esports’ ecosystem of arenas gives it
the reach, reputation and experience to produce world-class live events, in partnership with some of the most prominent names in
the esports industry. These live events provide Allied Esports with the material to produce exciting content that can be distributed
via three different formats, each of which has its own revenue generation model: live streaming, post-produced episodic content,
and short-form repackaged content.
Live Streaming. Live streaming is by far the most popular
esports content delivery channel today, as it offers the best interactive experiences for the audience. As discussed above, the
vast improvements in technology and Internet service and speed have made live streaming with large audiences widely available.
Well-known gamers live stream themselves playing their favorite games on any of the popular streaming services (Twitch being the
favorite in the western hemisphere esports world) to a worldwide audience. The streamers derive revenue from ad sales, sponsorship,
subscription fees and gift payments from watchers. Through Allied Esports’ ecosystem of esports arenas, Allied Esports can
offer streamers a large platform to put on live events that can be simultaneously streamed on both the streamer’s Twitch
channel and on Allied Esports’ Twitch channel. An example is a streaming event Allied Esports held with one of the most prominent
streamers in esports, Tyler Blevins, AKA Ninja, in April 2018. Famous for his streaming channel where he plays the popular esports
game Fortnite, Ninja held a live event at the Las Vegas flagship arena that set records for Twitch live streams, with over 667,000
peak concurrent viewers and 2.4 million unique viewers. To put those audience numbers in perspective, those numbers are significantly
higher than viewership of the average regular season NBA game in 2019. Allied Esports was able to sell multiple sponsorships for
the event and earned significant revenue from the food and beverage, merchandise sales and usage fees from the gaming stations.
Although huge audiences can be garnered through these live event streams, there are limitations on the streams, as they have a
one-and-done nature; repeat viewing is not popular for these events, which limits the sponsorship opportunities. Furthermore, due
to the live nature of these events and streams, it is difficult to create a narrative or tell a story to compel viewership past
an initial viewing. This leads to Allied Esports’ development of post-produced episodic content.
Post-Produced Content. Allied Esports intends to develop
esports entertainment programming around its live experiences and, using its experienced editing and production teams, create serial,
episodic content and segments that tell compelling storylines around its gaming talent, in person experiences, and gaming events
around the world. Allied Esports developed this technique through the WPT, who took the slow-paced game of poker and dramatized
it and created storylines that made for exciting and compelling viewing. This post-produced content can be valuable real estate
for sponsors, as Allied Esports can integrate sponsors seamlessly into the show in a way that feels organic to the viewers. Allied
Esports can focus on different storylines, create excitement via editing and music inclusion, and generally elevate the production
quality from that achievable in a live stream. Allied Esports can then monetize this episodic content via sponsorship (as described
above), advertising, selling the content itself to third party distributors, or even use it as a marketing tool to drive customers
to come to Allied Esports’ arenas, buy its merchandise or otherwise interact with Allied Esports.
Repackaged Content. The vast library of content Allied
Esports will develop from events can be cut into smaller clips that can be used as marketing and promotion of the Allied Esports
brand on social media. Allied Esports can also edit content to create new content, such as “best of” shows, shows focusing
on one particular game as played by multiple well-known streamers, regional shows focusing on talent from a particular country,
and so on.
Allied Esports’ global esports arena ecosystem will create
opportunities for live events which provide material to develop great content, all of which Allied Esports can monetize in multiple
ways. The huge customer base Allied Esports develops through these in-person experiences, live streams and content distribution
will give it a customer base to launch interactive services.
Strategic Investor Content. Allied Esports will work
with its strategic investors, Simon and TV Azteca, to create valuable in-person experiences and esports entertainment content to
enhance our value proposition. Allied Esports and TV Azteca will work to develop content and programming formats to develop a digital
esports entertainment channel (described below), and content produced from the Simon events will be developed and distributed on
digital and non-digital media outlets to maximize the exposure and reach of our joint enterprises.
Allied Esports’ global esports arena ecosystem, anchored
by Simon and TV Azteca, will create opportunities for live events which provide material to develop great content, all of which
Allied Esports can monetize in multiple ways. The huge customer base Allied Esports develops through these in-person experiences,
live streams and content distribution will give it a customer base to launch interactive services.
Interactive Services: Developing an Esports Entertainment
Platform
Allied Esports intends to develop its own online platform where
esports players and fans can watch, play and win with other members of the esports community and top esports personalities. The
online platform will enable fans to compete against each other as well as participate in esports programs starring their favorite
players. Subscriptions will provide members with exclusive access to numerous unique and proprietary experiences, products and
services that are not available outside of Allied Esports’ ecosystem, such as exclusive online content, member-only tournaments,
prizes and cash awards, exclusive live event and merchandise access, exclusive opportunities to be part of our entertainment programming,
VIP treatment at Allied Esports’ arenas, and much more. As described above, Allied Esports intends to use the authenticity
and reach driven by its in-person experiences and content viewership to drive platform adoption by esports fans. Allied Esports’
executive team has years of experience developing online platforms—its CEO, Frank NG, has managed and run online platforms
with approximately 700 million registered users in China for over 14 years, and its COO, David Moon, has produced, published and
operated numerous game services for over 20 years, including helping build NHN Corporation’s global footprint to over 1 million
concurrent users. Furthermore, WPT has developed and operated its subscription platform for poker fans, ClubWPT, since 2010, and
developed and operated a social poker product, PlayWPT, starting in 2016.
Allied Esports intends to sequentially roll out platform features
to support core strategic initiatives with its strategic investors, Simon and TV Azteca. The initial release of the platform will
focus on supporting regular programs of esports experiences at Simon’s premiere centers across the U.S. The platform will
subsequently be released in Mexico in partnership with TV Azteca, to support the participation, viewing, and monetization of esports
events and programs, as well as the provision of a 24-hour digital esports entertainment channel. Allied Esports believes focusing
on these two projects initially is the most efficient way to build brand equity that will propel Allied Esports’ platform
in the future.
For more information regarding AESE’s businesses, please
carefully consider the information contained in our periodic reports filed with the SEC, which are incorporated by reference in
this prospectus. Before making an investment decision, you should carefully consider such information as well as other information
we include or incorporate by reference in this prospectus.
The WPT Business
The Company owns the World Poker Tour® (WPT®) –
a premier name in internationally televised gaming and entertainment with brand presence in land-based poker tournaments, television,
online and mobile. Leading innovation in the sport of poker since 2002, WPT helped ignite the global poker boom with the creation
of a unique television show based on a series of high-stakes poker tournaments. WPT’s Tour Events are held on a weekly basis
at locations throughout the world and have awarded more than one billion in prize dollars in its 17 year history. WPT has broadcast
globally in more than 150 countries and territories, and is currently producing its 17th season, which airs on FOX Sports Regional
Networks in the United States. Season XVII of WPT is sponsored by its online poker service, ClubWPT.com. WPT offers a suite
of online poker service which it operates by itself and through its partners offering consumers the ability to access gaming content
on a year-round 24/7 basis. ClubWPT.com is a unique online membership site that offers inside access to the WPT, as well as a sweepstakes-based
poker club available in 5 countries, 35 states across the United States and Washington D.C., with innovative features and state-of-the-art
creative elements inspired by WPT’s 16 years of experience in gaming entertainment. In addition, WPT licenses its brand to
social gaming sites through partners like Zynga as well as to educational learning platforms such as LearnWPT. These online products
are scalable and offer geographic access that might be limited if WPT relied on tour stop participation alone. Additionally, WPT
benefits from managing its own distribution business which currently has more than 1000 hours of broadcast-ready content, and offers
demographically similarly programming to its poker content, such as esports, golf and MMA. WPT uses this large suite of programming
as leverage to seek preferred airtimes on its various distribution channels where it may promote its online products or offer airtime
to sponsors in territories they seek to enter. WPT also participates in strategic brand license, partnership, sponsorship opportunities
and music licensing. As described below, WPT applies a three-pillar model of in-person experiences, developing multiplatform content
and providing interactive services, to the sport of poker.
In-person Experiences: Worldwide Poker Tournaments
World Poker Tour Events. The WPT is a sports league of
affiliated poker tournaments that are held at prestigious casinos and poker rooms around the world. WPT licenses the WPT brand
to these casinos and card rooms so that they can brand their poker tournaments as WPT events, and these events are integrated into
WPT’s tour. These events form the backbone of WPT’s brand identity and have turned the WPT into one of the most recognizable
names in gaming. WPT has developed different types of tours, generally distinguishable by the size of the buy-in for competitors
in the applicable tour’s events. The WPT Main Tour events generally have the biggest buy-ins (usually between $3,500 and
$10,000), are held at the largest and most prestigious casinos and card rooms, and are attended by many of the top professional
poker players in the world. The WPT DeepStacks Tour events are smaller than Main Tour events, with buy-ins ranging from $300 to
$1,000, and are meant to cater to the lower- to medium-stakes players. In addition, through a third-party licensing arrangement,
WPT licenses its name to a third party operating the WPT League, which are small bar-league poker events held at bars and clubs
on a social basis. These live events create touchpoints to a large community of poker players to whom WPT can market other WPT
live events, advertise and market its sponsor’s products, and push towards its interactive products. Furthermore, the live
events create the content WPT uses to monetize its brand, as set forth below.
Multiplatform Content: The World Poker Tour Television
Shows
The Content. At certain of WPT’s Main Tour stops,
WPT films the final table of six participants competing for some of the poker world’s largest tournament prize pools. We
then edit the footage from these tour stops into a one-hour or two-hour episode, resulting in a series of one-hour or two-hour
episodes which are distributed for telecast to both domestic audiences via our broadcast agreement with FSN, and international
television audiences via numerous international distribution agreements. WPT has an agreement with Poker Go, a prominent poker-centric
online platform, pursuant to which WPT live streams many of its events to Poker Go’s customer base. Many of WPT’s live
events that are not broadcast on FSN are live streamed on Poker Go, which ensures almost all of WPT’s events are broadcast
on some format. In addition, WPT films and produces special episodes based on a variety of non-traditional poker tournaments and/or
cash games, which it also distributes for telecast along with the episodes based on WPT’s regular tour stops. Furthermore,
WPT produces specialized shows meant to promote and market its ClubWPT membership site, such as its “King of the Club”
shows in which ClubWPT members won the right, by winning certain tournaments on the ClubWPT platform, to play against each other
for cash and prizes in a single-table tournament that was filmed and broadcast on FSN. WPT also filmed and is preparing for distribution
another series of shows to promote ClubWPT, in which ClubWPT members who qualified on the ClubWPT platform get the chance to play
against former WPT Main Tour champions for cash and prizes. These episodes premiered on FSN in August and September
2019.
WPT previously produced and broadcasted on FSN a series of shows
called WPT Alpha8, based on a series of high-stakes poker tournaments with buy-ins of $100,000. In the Alpha8 events, the most
elite high-stakes players in the world played in poker tournaments against one another in glamorous casinos and card rooms around
the world, with the final eight players of each tournament filmed for production of the television episodes. The inaugural season
of WPT Alpha8 began in 2013 and aired for three seasons, ending in 2016 and continues to be distributed internationally. WPT has
continued to expand its global footprint by entering into an agreement with TV Azteca, pursuant to which WPT and TV Azteca are
creating modified content using footage from WPT’s current library of content and translating the shows and integrating localized
hosts for distribution in the territory of Mexico. This strategy of localizing WPT content has previously proven successful, namely
in France, and we believe this localized content in the territory of Mexico will become a significant driver for a jointly-owned
social gaming platform. WPT recently launched in beta this August 2019. Early interest in the show is high, with viewership already
exceeding 3 million viewers of a single episode. In addition to the strategic advantage of the “World Poker Tour” and
WPT-related brands, WPT is able to create significant efficiencies in its content programming through its affiliation and use of
Allied eSports’ Esports Arena Las Vegas venue. This change, which just began for Season 17, has significantly reduced production
costs by reducing transportation and set up fees and has allowed for more content to be produced at a significantly more efficient
cost. Moreover, by reducing the physical location needs from its casino partners that would otherwise be featured in a WPT televised
event, WPT has greatly expanded the number of potential casino customers that can meet the requirements for hosting a WPT televised
final table. Finally, WPT creates, owns and publishes its own music for WPT shows. In addition to receiving royalties for the
music integrated into these programs, WPT has created a database of over 4,000 musical pieces which may be licensed for itself
or for other third-party producers.
WPT Distribution Footprint. All of WPT’s content
airs on FSN in the U.S., and in 21 different territories worldwide pursuant to licensing and distribution arrangements with various
networks Virtually all of its 17-season poker library is fully available for distribution, providing hundreds of hours of top-tier
broadcast grade poker sports content. WPT has greatly expanded the reach of its content by licensing it for broadcast on many digital
platforms as well, such as PlutoTV, Unreel Entertainment, Samsung TV Plus, and many others. WPT does not receive fees from FSN
for the domestic distribution of our content. Instead, WPT uses the WPT show to heavily promote its ClubWPT product and other online
products and partnerships, such as Zynga’s WPT social poker game. WPT does provide FSN with a guaranteed revenue share from
ClubWPT’s operations in exchange for significant promotion and distribution of the programs featuring ClubWPT marketing.
This arrangement ensures that FSN has an incentive to keep WPT’s show on the air and to market and promote the show, as they
share in the show’s success to the extent ClubWPT’s revenue increases. Since the ClubWPT customer base and broadcast
television viewers are similar in demographics, the symbiotic relationship between FSN and WPT works well to keep WPT’s brand
widely known and accessible to millions of people in the U.S. Internationally, some of WPT’s distribution partners pay WPT
fees to broadcast content, but usually, WPT’s larger revenues are based on international distribution deals resulting from
advertising time and sponsorship sales, as well as the intrinsic value of spreading WPT’s brand awareness worldwide. We expect
the international reach of WPT-related shows to grow meaningfully starting in the third quarter of 2019 as a result of WPT’s
strategic relationship agreement with TV Azteca. WPT receives additional fees from our digital distribution agreements, but again
see these as brand-building exercises and as avenues to get more people exposure for WPT’s online products, sponsors and
advertisers. In addition to its World Poker Tour content, WPT also distributes various sports and lifestyle programming through
its distribution business. As a result, WPT now controls over 1000 hours of programming from which it may generate distribution
fees, license fees, sponsorship revenue and music licensing revenue, as well as serving as a vehicle to promote its online gaming
products worldwide. The ability to “bundle,” or offer large amounts of content, provides WPT distribution leverage
in negotiating the amount of airings or preferred airing times of its content.
Sponsorship Revenue. Sponsorship revenue is the prime
economic driver of the distribution of WPT content. WPT partners with prestigious brands, such as Dr. Pepper (soft drinks), Hublot
(high-end timepieces), Rockstar (energy drinks), Baccarat (fine crystal), Party Poker (online gaming in Europe), and offer them
the ability to become the “Official ________ of the World Poker Tour”. WPT is able to seamlessly integrate its sponsors
into the WPT television show by displaying sponsors on poker tables, on television sets, and specialized segments that are brought
to viewers by the applicable sponsor. By integrating WPT’s sponsors into the show, WPT provides a powerful marketing tool
in that viewers are seeing the sponsor as part of the show they are watching, as opposed to an advertisement that they may mute
or skip if possible. WPT’s live events also offer WPT sponsors a great advertising platform to market directly to WPT players
via signage, product sampling suites, flyers, and similar marketing endeavors.
Interactive Services: Poker Platforms.
WPT’s live events all over the world and distribution
of its content via broadcast, streaming and social media, allow WPT to generate significant marketing opportunities for both its
sponsors and its own products. WPT has taken advantage of this marketing arm to promote several interactive products: ClubWPT,
its subscription-based online poker club that WPT owns and operates, which also offers social poker; PlayWPT, a web and mobile
social poker product that is operated by a third party utilizing software and branding that WPT licenses to such provider; Zynga
Poker, who operates one of the world’s largest social poker products, to whom WPT has licensed its brand for certain WPT-branded
poker tournaments on their platform; and HongKong Triple Sevens Interactive Co., Ltd, who licenses WPT’s Alpha8 brand to
operate a social poker product they are in the process of developing.
ClubWPT. WPT’s subscription-based online club,
ClubWPT.com, is operated in accordance with the principles of sweepstakes law and is available in 36 U.S. states and territories.
A free alternative means of entry is offered for participants who wish to play in the tournaments but do not wish to purchase the
other membership benefits. VIP members can play poker to win a share of $100,000 in cash and prizes every month, including seats
in live WPT poker tournaments. Other benefits include access to every season of the WPT television series and all related content,
discounted tickets to live events through ScoreBig, everyday savings for everyday things via the ClubWPT Entertainment Savers Guide,
and other member benefits. In January of 2019, WPT added freemium social poker and casino gaming on the platform. Since that time,
daily active revenue has risen steadily, and we anticipate the freemium products on the platform will be a meaningful driver of
ClubWPT revenue going forward. The subscription fee for ClubWPT remains the same each month and players are not allowed to wager
actual money online. One must be eighteen or older to participate.
Zynga Poker. WPT entered into a 3-year licensing agreement
with Zynga, Inc. in 2018 pursuant to which Zynga agreed to pay WPT $3 million per year in exchange for the right to license the
WPT name and brand for WPT-branded poker tournaments on the Zynga social poker platform. Zynga has sponsored certain of WPT’s
television episodes, and WPT has worked with Zynga on marketing initiatives to promote both the WPT and the WPT tournaments on
Zynga Poker. Zynga placed the WPT logo prominently on a NASCAR race car, and continues to work with WPT to promote the WPT brand
and the WPT-branded tournaments on the Zynga platform. Zynga’s promotion of its WPT-themed product means that millions of
its consumers are exposed to the WPT brand annually.
PlayWPT and Alpha8 Social Poker. WPT’s 3-year license
agreements for PlayWPT and the Alpha8 social poker product that each commenced in 2018 provide WPT with a share of all revenue
generated on those respective platforms, with annual minimums of the greater of $500,000 or 20% of revenue generated for PlayWPT,
and the greater of $200,000 or 20% of revenue generated for the Alpha8 social poker product. These arrangements offer WPT significant
annual payments based on the value and prestige of WPT’s brands and WPT’s ability to market and promote the platforms.
In addition to the three-pillar approach to monetizing the WPT
brands as described above, WPT has also been able to combine these approaches in a regional manner to create localized versions
of the WPT in other parts of the world. For example, WPT has an agreement with Adda52, one of the largest online poker operators
in India, pursuant to which Adda52 utilizes WPT brands to put on WPT-branded tournaments, create and sell WPT merchandise, sponsor
and distribute WPT content, and otherwise market and promote their own products using the WPT name. WPT had a similar arrangement
for the Asia-Pacific region with WPT’s former parent company, Ourgame, and is negotiating similar arrangements with parties
in other parts of the world, such as Latin America. These brand licensing arrangements not only provide WPT with revenue derived
from upfront payments and revenue share, but they broaden WPT’s brand reach in localized ways to parts of the world that
WPT would be hard-pressed to effectively market to on its own. WPT believes that this increased reach will have long-term benefits
to WPT’s brand image and profitability.
Description of
the Private Placements
Merger Consideration
On August 9, 2019, the Company consummated
its merger transaction (the “Merger”) contemplated by the Agreement and Plan of Merger, dated as of December 19, 2018
and amended by the Amendment dated August 5, 2019 (the “Merger Agreement”), by and among the Company, Black Ridge Merger
Sub Corp., Allied Esports Media, Inc. (“AEM”), Noble Link Global Limited, Ourgame International Holdings Limited, and
Primo Vital Limited, pursuant to which, among other things, AEM became a wholly-owned subsidiary of the Company and the Company
assumed ownership of the businesses of Allied Esports (“Allied Esports”) and the World Poker Tour® (“WPT”).
Upon consummation of the Merger, the Company
issued to the former owners of Allied Esports and WPT (i) an aggregate of 11,602,754 shares of Company common stock and (ii) an
aggregate of 3,800,003 Company warrants, which warrants have a term of five years, an exercise price of $11.50 per share, and are
exercisable commencing September 9, 2019. Additionally, the former owners of Allied Esports and WPT are entitled to receive their
pro rata portion of an aggregate of an additional 3,846,153 shares of common stock if the last sales price of the common stock
reported on the Nasdaq Capital Market equals or exceeds $13.00 per share (as adjusted for stock splits, dividends, and the like)
for 30 consecutive trading days at any time during the five-year period after the consummation of the Mergers.
To provide a source of funds for payment
to the Company with respect to certain post-closing rights to indemnification under the Merger Agreement, an aggregate of 1,160,278
shares of common stock and 379,996 warrants issuable at closing of the Merger was placed into escrow with Continental Stock Transfer
& Trust Company, acting as escrow agent. Claims for indemnification may be asserted once damages exceed a $500,000 threshold
and will be reimbursable to the full extent of the damages from dollar one; provided that such reimbursement will not exceed the
amount of shares and warrants in escrow. The shares and warrants in escrow will be released on the date that is one year from the
closing date of the Merger, less that portion of the shares and warrants applied in satisfaction of, or reserved with respect to,
indemnification claims made prior to such date, if any.
The recipients of the shares of common
stock and warrants entered into lock-up agreements, pursuant to which they have agreed to not, subject to certain exceptions, transfer,
sell, tender or otherwise dispose of the shares of common stock and warrants they received in the Merger for a period from the
closing of the Mergers as follows: (i) with respect to 50% of their common stock and warrants, the earlier of one year after the
closing of the Merger or the date on which the closing price of common stock exceeds $12.50 per share for any 20 trading days within
a 30-trading day period following the closing of the Merger and, (ii) with respect to the remaining 50% of their common stock and
warrants, one year after closing of the Mergers, or earlier in each case if, subsequent to the Merger, the Company consummates
a subsequent liquidation, merger, stock exchange, or other similar transaction which results in all stockholders having the right
to exchange their shares of common stock for cash, securities, or other property. These lock-up agreements will continue to apply
to the shares of common stock and warrants.
In connection with the Merger, the Company
executed and delivered a Registration Rights Agreement in favor of the former owners of Allied Esports and WPT, pursuant to which,
among other things, BRAC agreed to register for resale under the Securities Act the common stock and warrants issued in the Merger.
Investment Bankers
In connection with the consummation of
the Merger, the following service providers of the Company were entitled to cash payments, and agreed to accept shares of the Company’s
common stock in lieu of such cash payments: EarlyBirdCapital, Inc., MIHI LLC, Roth Capital Partners, LLC, Northland Capital Markets,
The Oak Ridge Financial Services Group, Inc., Dougherty & Company LLC, and D.A. Davidson & Co, Inc. The Company is registering
for resale the share of common stock issued to such service providers.
Bridge Loans
The former owners of WPT and Allied Esports
issued a series of secured convertible promissory notes on October 11, 2018 and May 15, 2019 in the aggregate original principal
amount of $14,000,000. These notes were assumed by the Company effective upon the closing of the Mergers as follows.
$10 million of secured convertible promissory
notes (the “Initial Notes”) were purchased on October 11, 2018. The Initial Notes were due and payable on the first
to occur of (i) the one-year anniversary of the issuance date, or (ii) upon conversion of the Notes into equity as part of the
Merger. As security for purchasing the Initial Notes, the investors received a security interest in Allied Esports’ assets
(second to any liens held by the landlord of the Las Vegas arena for property located in that arena), as well as a pledge of the
equity of all of the entities comprising WPT. The liens and pledge described above would terminate upon the closing of the Merger.
On May 15, 2019, $4 million of another
series of secured convertible promissory notes (the “Additional Notes,” and together with the Initial Notes, the “Notes”)
were purchased. Ms. Man Sha purchased a $1 million Additional Note, and is the wife of Mr. Ng Kwok Leung Frank, a director and
CEO of the Company. As part of the Additional Notes, the terms of the Initial Notes were amended such that the terms of the Additional
Notes applied to the Initial Notes. The Notes accrue annual interest at 12%; provided that no interest is payable in the event
the Notes are converted into Company common stock. The Notes were due and payable on the first to occur of (i) the one-year anniversary
of the issuance date, or (ii) the date on which a demand for payment is made during the time period beginning on the closing of
the Merger (the “Closing”) and ending on the date that is three (3) months after the Closing. If any Note is paid by
the Company or AEM, the investor will receive one year of interest. As security for purchasing the Notes, the investors received
a security interest in Allied Esports’ assets (second to any liens held by the landlord of the Las Vegas arena for property
located in that arena), as well as a pledge of the equity of all of the entities comprising WPT, and a guaranty of Ourgame and
the Company. The debt is convertible into shares of common stock that are freely tradeable without restriction at $8.50 per share.
On August 5, 2019, the Company entered
into an amendment and acknowledgement agreement (the “Acknowledgement Agreement”), pursuant to which Allied Esports
and WPT amended the terms the Notes. Pursuant to the Acknowledgement Agreement, the bridge holders agreed to defer repayment of
the Notes to one year and two weeks following the Closing (the maturity date of the Notes, the “Maturity Date”). In
consideration of agreeing to the deferred repayment, the bridge holders will be paid an additional six months of interest (i.e.,
a total of 18 months interest) to the extent any bridge holder elects not to convert their Note to common stock. The Company agreed
to assume the debt under the Notes as part of the Mergers, and agreed that the debt will be secured by all the assets of the Company
following the Closing. The Notes are convertible at any time by a holder between the Closing and the Maturity Date, into shares
of common stock that are freely tradable without restriction, at $8.50 per share.
If the Note holders elect to convert their
notes into common stock, they would be entitled to receive additional shares of common stock (the “Earn-out Shares”)
equal to the product of (i) 3,846,153 shares, multiplied by (ii) the note holder’s investment amount, divided by (iii) $100,000,000,
if, at any time within five years after the closing date of Merger, the last exchange-reported sale price of common stock trades
at or above $13.00 for thirty (30) consecutive calendar days.
Each Note holder received a warrant to
purchase shares of common stock in an amount equal to the product of (i) 3,800,000 shares, multiplied by (ii) the Note holder’s
investment amount, divided by (iii) $100,000,000. The warrants have a term of five years, an exercise price of $11.50 per share,
and are exercisable commencing September 9, 2019
The warrants issued to the Note holders
and shares of common stock into which the Notes may be converted are being registered for resale by the Company.
Share Purchase Investors
The Company previously entered into Share
Purchase Agreements (the “Purchase Agreements”) with the following investors: TV AZTECA, S.A.B. de C.V., Simon Equity
Development LLC, Morris Goldfarb, Kepos Capital LP, Pennington Capital, Ron Geiger IRA, and Lyle Berman, the Company’s Chairman
of the Board (the “Investors”). Pursuant to the Purchase Agreements, the Investors purchased an aggregate of $18,000,000
of shares of common stock in open market or privately negotiated transactions at a price not to exceed the per share amount held
in the Company’s trust account (which was approximately $10.30 per share) (the “Maximum Price”). The Investors
agreed not to convert any shares purchased in the open market or in privately negotiated transactions at the Company’s meeting
of stockholders held August 9, 2019 that approved, among other things, the Merger. If the Investors were unable to purchase their
full amount of shares in the open market or in privately negotiated transactions, the Company agreed to sell to them newly issued
shares upon closing of the Merger at the Maximum Price to fulfill their purchase obligations. In addition, the Purchase Agreements
provided that upon the closing of the Merger, the Company would issue to the Investors 1.5 shares of its common stock for every
10 shares purchased by the Investors, and that the Company would file a registration statement with the SEC as promptly as practicable
following closing of the Merger to register the resale of any shares of common stock purchased by the Purchasers that are not
already registered and cause such registration statement to become effective as soon as possible. Black Ridge, the Company’s
sponsor (as described below), transferred 720,000 shares of common stock to the Investors. The shares offered for resale by the
Investors (excluding those shares purchased in open market purchases) were issued pursuant to the Purchase Agreements.
Sponsor
Prior to the Merger, the Company was a special purchase acquisition
company, and Black Ridge Oil & Gas, Inc. was its sponsor (“Black Ridge”). In connection with initially capitalizing
and founding the Company, Black Ridge purchased 445,000 units of the Company. Each unit was entitled to one share of common stock,
one warrant to purchase common stock, and a right to one-tenth of a share of common stock upon the consummation of a business combination
by the Company. On August 9, 2019 in connection with the Merger, such units were automatically converted into 445,000 shares of
common stock, 445,000 warrants to purchase common stock, and 445,000 rights to purchase one-tenth of a share of common stock. The
rights were simultaneously converted into an additional 44,500 shares of common stock. The warrants have a term of five years,
an exercise price of $11.50 per share, and are exercisable commencing September 9, 2019.
Black Ridge received an additional 60,000 units upon conversion
of convertible promissory notes issued by the Company to Black Ridge, which had an aggregate outstanding principal amount of $600,000
and accrued no interest, at a rate of $10 per unit. On the Closing Date in connection with the Merger, the notes were converted
into 60,000 shares of common stock, 60,000 warrants to purchase common stock, and 60,000 rights to purchase one-tenth of a share
of common stock. The rights were simultaneously converted into an additional 6,000 shares of common stock. The warrants have a
term of five years, an exercise price of $11.50 per share, and are exercisable commencing September 9, 2019.
Black Ridge further transferred 720,000 shares of the Company’s
common stock to the Investors, and 600,000 shares to Primo Vital Limited for no consideration, in order to facilitate the consummation
of the Merger.
The Company and Black Ridge are parties to an existing registration
rights agreement, pursuant to which the Company provided to Black Ridge piggyback registration rights to register for resale the
foregoing shares of common stock.
Black Ridge’s shares of common stock (other than the 66,000
shares issued upon conversion of the Company’s promissory notes issued to Black Ridge) are kept in an escrow account maintained
in New York, New York by Continental Stock Transfer & Trust Company, acting as escrow agent. Subject to certain limited exceptions,
these shares may not be transferred, assigned, sold or released from escrow until (1) with respect to 50% of the shares, the earlier
of one year after the date of the consummation of Merger or the date on which the closing price of our common stock equals or exceeds
$12.50 per share (as adjusted for share splits, share dividends, reorganizations and recapitalizations) for any 20 trading days
within any 30-trading day period commencing after our initial business combination and (2) with respect to the remaining 50% of
the shares, one year after the date of the consummation of Merger, or earlier, in either case, if, subsequent to the Merger, the
Company consummates a liquidation, merger, stock exchange or other similar transaction which results in all of our stockholders
having the right to exchange their shares of common stock for cash, securities or other property. The limited exceptions include
transfers, assignments or sales (i) to the Company’s or Black Ridge’s officers, directors, consultants or their affiliates,
(ii) to an entity’s members upon its liquidation, (iii) to relatives and trusts for estate planning purposes, (iv) by virtue
of the laws of descent and distribution upon death, (v) pursuant to a qualified domestic relations order, (vi) to us for no value
for cancellation in connection with the consummation of our initial business combination, or (vii) in connection with the consummation
of a business combination at prices no greater than the price at which the shares were originally purchased, in each case (except
for clause (vi) or with our prior consent) where the transferee agrees to the terms of the escrow agreement and to be bound by
these transfer restrictions.
In addition to being the Company’s sponsor prior to the
Merger, Black Ridge has continued to provide to the Company administrative, accounting, reporting and investor relation services.
In consideration of such services, the Company has agreed to pay Black Ridge an aggregate of $423,852.97 over the term of the agreement,
commencing August 9, 2019 and terminating December 31, 2019.
Exempt Issuances
The foregoing issuances of warrants and shares of common stock
were not registered under the Securities Act of 1933, as amended (the “Securities Act”) at the time of sale, and therefore
may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.
For these issuances, the Company relied on the exemption from federal registration under Section 4(a)(2) of the Securities Act
and/or Rule 506 promulgated thereunder, based on the Company’s belief that the offer and sale of such common stock and warrants
did not involve a public offering.
The foregoing description is qualified in its entirety
by the terms of the applicable agreements, each of which has been incorporated by reference as an exhibit to the registration statement
of which this prospectus is a part. See “Where You Can Find More Information” and “Incorporation of Certain Information
by Reference.”
Corporate Information
Our address is 17877 Von Karman Avenue, Suite 300,
Irvine, California, 92614. Our telephone number is (949) 225-2600, and our website address is https://www.alliedesportsent.com.
The information contained on, or that can be accessed through, our website is not part of this prospectus.
PLAN
OF DISTRIBUTION
We are registering those
shares and warrants (and shares issuable upon exercise of such warrants) issued to the selling securityholders (the “Selling
Securityholders”) as described under “Prospectus Summary – Description of the Private Placements” above
to permit the resale of these shares of common stock and warrants (the “Securities”) from time to time after the date
of this prospectus. We will not receive any of the proceeds from the sale by the Selling Securityholders of the Securities. We
will bear all fees and expenses incident to our obligation to register the Securities.
The Selling Securityholders
and any of their pledgees, donees, transferees, assignees or other successors-in-interest may sell all or a portion of the Securities
held by them and offered hereby from time to time directly or through one or more underwriters, broker-dealers or agents. If the
Securities are sold through underwriters or broker-dealers, the Selling Securityholders will be responsible for underwriting discounts
or commissions or agent’s commissions. The Securities may be sold in one or more transactions at fixed prices, at prevailing
market prices at the time of the sale, at varying prices determined at the time of sale or at negotiated prices. These sales may
be effected in transactions, which may involve crosses or block transactions, pursuant to one or more of the following methods:
·
on any national securities exchange or quotation service on which the securities may be listed or quoted at the time of sale;
·
in the over-the-counter market;
·
in transactions otherwise than on these exchanges or systems or in the over-the-counter market;
·
through the writing or settlement of options, whether such options are listed on an options exchange or otherwise;
·
ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;
·
block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block
as principal to facilitate the transaction;
·
purchases by a broker-dealer as principal and resale by the broker-dealer for its account;
·
an exchange distribution in accordance with the rules of the applicable exchange;
·
privately negotiated transactions;
·
short sales made after the date the Registration Statement is declared effective by the SEC;
·
broker-dealers may agree with a Selling Stockholder to sell a specified number of such shares at a stipulated price per share;
·
a combination of any such methods of sale; and
·
any other method permitted pursuant to applicable law.
Because certain of the Selling Securityholders may
be deemed to be “underwriters” within the meaning of the Securities Act, they will be subject to the prospectus delivery
requirements of the Securities Act including Rule 172 thereunder. The Selling Securityholders may also sell the Securities under
Rule 144 promulgated under the Securities Act of 1933, as amended, if available, rather than under this prospectus. In addition,
the Selling Securityholders may transfer the Securities by other means not described in this prospectus. If the Selling Securityholders
effect such transactions by Securities to or through underwriters, broker-dealers or agents, such underwriters, broker-dealers
or agents may receive commissions in the form of discounts, concessions or commissions from the Selling Securityholders or commissions
from purchasers of the Securities for whom they may act as agent or to whom they may sell as principal (which discounts, concessions
or commissions as to particular underwriters, broker-dealers or agents may be in excess of those customary in the types of transactions
involved). The Selling Securityholders may also loan or pledge Securities to broker-dealers that in turn may sell such Securities.
The Selling Securityholders have advised us that there is no underwriter or coordinating broker acting in connection with the proposed
sale of the Securities by the Selling Securityholders.
Broker-dealers engaged by the Selling Securityholders
may arrange for other broker-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the Selling
Securityholders (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser) in amounts to be negotiated,
but, except as set forth in a supplement to this prospectus, in the case of an agency transaction will not be in excess of a customary
brokerage commission in compliance with FINRA Rule 2440; and in the case of a principal transaction a markup or markdown in compliance
with FINRA IM-2440 or the successor to such FINRA rules.
The Selling Securityholders may pledge or grant a
security interest in some or all of the Securities owned by them and, if the Selling Securityholders default in their performance
of their secured obligations, the pledgees or secured parties may offer and sell the Securityholders from time to time pursuant
to this prospectus or any amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act
amending, if necessary, the list of Selling Securityholders to include the pledgee, transferee or other successors in interest
as Selling Securityholders under this prospectus. The Selling Securityholders also may transfer and donate the Securities in other
circumstances in which case the pledgees, assignees or successors-in-interest will be the selling beneficial owners for purposes
of this prospectus.
To the extent required by the Securities Act and
the rules and regulations thereunder, the Selling Securityholders and any broker-dealer participating in the distribution of the
Securities may be deemed to be “underwriters” within the meaning of the Securities Act, and any commission paid, or
any discounts or concessions allowed to, any such broker-dealer may be deemed to be underwriting commissions or discounts under
the Securities Act. At the time a particular offering of the Securities is made, a prospectus supplement, if required, will be
distributed, which will set forth the type(s) and aggregate amount of Securities being offered and the terms of the offering, including
the name or names of any broker-dealers or agents, any discounts, commissions and other terms constituting compensation from the
Selling Securityholders and any discounts, commissions or concessions allowed or re-allowed or paid to broker-dealers.
Under the securities laws of some states, the Securities
may be sold in such states only through registered or licensed brokers or dealers. In addition, in some states the Securities may
not be sold unless such Securities have been registered or qualified for sale in such state or an exemption from registration or
qualification is available and is complied with.
There can be no assurance that the Selling Securityholders
will sell any or all of the Securities registered pursuant to the registration statement, of which this prospectus forms a part.
The Selling Securityholders and any other person
participating in such distribution will be subject to applicable provisions of the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder, including, without limitation, to the extent applicable, Regulation M of the Exchange
Act, which may limit the timing of purchases and sales of any Securities by the Selling Securityholders and any other participating
person. To the extent applicable, Regulation M may also restrict the ability of any person engaged in the distribution of the shares
of common stock and/or warrants to engage in market-making activities with respect to the Securities. All of the foregoing may
affect the marketability of the shares of common stock and/or warrants and the ability of any person or entity to engage in market-making
activities with respect to the Securities.
We will pay all expenses of the registration of the
Securities, estimated to be $18,040.42 in total, including, without limitation, SEC filing fees and expenses of compliance with
state securities or “blue sky” laws; provided, however, the Selling Securityholders will pay all underwriting discounts
and selling commissions, if any. We will indemnify Black Ridge Oil & Gas, Inc. (“Black Ridge”), Simon Equity Development
LLC and TV Azteca against liabilities, including some liabilities under the Securities Act in accordance with the registration
rights, or such parties may be entitled to contribution. We may be indemnified by Black Ridge against civil liabilities, including
liabilities under the Securities Act that may arise from any written information furnished to us by Black Ridge specifically for
use in this prospectus, in accordance with the related registration rights agreements or we may be entitled to contribution.
Once sold under the
registration statement, of which this prospectus forms a part, the Securities will be freely tradable in the hands of persons other
than our affiliates.
We may indemnify the Selling Stockholders and their
affiliates against certain liabilities, including some liabilities under the Securities Act of 1933 and the Securities Exchange
Act of 1934, each as amended, in accordance with the Share Purchase Agreements entered into with the Selling Stockholders in July
and August 2019.
Certain Selling Securityholders and any broker-dealers
or agents that are involved in selling the Securities may be deemed to be “underwriters” within the meaning of the
Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any
profit on the resale of the securities purchased by them may be deemed to be underwriting commissions or discounts under the Securities
Act. Each Selling Securityholder has informed us that it does not have any written or oral agreement or understanding, directly
or indirectly, with any person to distribute the securities.