Item
1.01 Entry into a Material Definitive Agreement.
Helix
Holdings, LLC Purchase Agreement
On
January 22, 2021, Esports Entertainment Group, Inc. (the “Company”), entered into an equity purchase agreement (the
“Helix Purchase Agreement”), by and among the Company, Helix Holdings, LLC, a limited liability company incorporated
under the laws of Delaware (“Helix”), and the equity holders of Helix (the “Helix Equity Holders”), whereby
the Company can acquire from the Helix Equity Holders all of the issued and outstanding membership units of Helix (the “Helix
Units”), making Helix a wholly owned subsidiary of the Company.
As
consideration for the Helix Units, the Company agreed to pay the Helix Equity Holders $17,000,000 (the “Helix Purchase Price”),
to be paid fifty percent (50%) in shares of common stock of the Company, par value $0.0001 per share (the “Common Stock”)
(the “Helix Share Consideration”), and fifty percent (50%) in cash (the “Helix Cash Consideration”. The
per share price of the Common Stock issuable as Helix Share Consideration shall be the Closing Base Price minus the Discount.
“Closing Base Price” means the volume weighted average price (“VWAP”) of the Common Stock during the thirty
(30) trading days immediately preceding the date of the closing under the Helix Purchase Agreement (the “Closing”).
“Discount” equals the greater of (A) and (B) minus the lesser of (A) and (B) multiplied by 0.25 where (A) is the VWAP
of the common stock during the thirty (30) trading days immediately preceding October 26, 2020 (which was $4.54 per share) multiplied
by 1.25(which is $5.675); and (B) is the Closing Base Price.
The
Closing under the Helix Purchase Agreement is subject to the simultaneous closing under an equity purchase agreement (the “GGC
Purchase Agreement”) among the Company, ggCircuit LLC, an Indiana limited liability company(“GGC”) and the equity
holders of GGC (the “GGC Equity Holders”), the principal terms of which are described below. The Closing is also subject
to (i) the completion of an opinion (the “Fairness Opinion”) respecting the fairness of the consideration to be paid
by the Company and received by the Helix Equity Holders and the GGC Equity Holders pursuant to the Helix Purchase Agreement and
the GGC Purchase Agreement from a financial point of view; (ii) an audit, as of and for the two years ending December 31, 2019,
and a financial review, for the nine month periods ended September 30, 2019 and 2020, of Helix and affiliated entities; and (iii)
the approval of the Company’s shareholders to the issuance of the Helix Share Consideration and GGC Share Consideration(as
defined below) in satisfaction of NASDAQ Rule 5635(a).
The
parties to the Helix Purchase Agreement may terminate the Helix Purchase Agreement, among other reasons, if (i) the Fairness Opinion
does not support an aggregate purchase price for Helix and GGC of $43,000,000 and, based thereon, the Company is no longer willing
to pay the Helix Purchase Price, or (ii) the Closing has not occurred on or before May 14, 2021 or such later date as may be mutually
agreed to by the parties. The Company can also terminate the Helix Purchase Agreement if (i) upon completion of its legal, financial,
tax and commercial due diligence of Helix and affiliated entities, it is not satisfied, with the results thereof; (ii) the audit
and/or review of Helix and affiliated entities cannot be completed due to fraud, material accounting errors or otherwise or if
the results of the audit or the review are materially and adversely different from the financial information provided by Helix
and the Helix Equity Holders to the Company prior to the execution of the Helix Purchase Agreement.
In
connection with the negotiation of the Helix Purchase Agreement, the Company advanced an aggregate of $400,000 to Helix during
2020 in the form of loans (the “Loans”). Upon execution of the Helix Purchase Agreement, the Company paid Helix an
additional $400,000 to be used for operating expenses pending the Closing (the “Operating Expense Payments”). If the
Closing takes place on or prior to May 14, 2021, the Company will receive a full credit against the Helix Purchase Price for the
Loans and if the Closing takes place prior to April 30, 2021 the Company will receive a full credit against the Helix Purchase
Price for the Operating Expense Payments. If Closing takes place after April 30, 2021, but on or prior to May 14, 2021, the Company
shall receive a credit against the Helix Purchase Price for 60% of the Operating Expense Payments. If the transaction does not
close, depending on the reason, a portion of the Loans and the Operating Expense Payments may be forgiven.
The
Helix Purchase Agreement contains customary representations, warranties, covenants, indemnification and other terms for transactions
of a similar nature.
ggCIRCUIT
LLC Purchase Agreement
On
January 22, 2021, the Company entered into the GGC Purchase Agreement whereby the Company can acquire from the GGC Equity Holders all of the issued
and outstanding membership units of GGC (the “GGC Units”), making GGC a wholly owned subsidiary of the Company.
As
consideration for the GGC Units, the Company agreed to pay the GGC Equity Holders $26,000,000 (the “GGC Purchase Price”)
to be paid fifty percent (50%) in shares of Common Stock (the “GGC Share Consideration”), and fifty percent (50%)
in cash (the “GGC Cash Consideration”) The per share price of the Common Stock issuable as GGC Share Consideration
shall be the Closing Base Price minus the Discount. “Closing Base Price” means the volume weighted average price (“VWAP”)
of the Common Stock during the thirty (30) trading days immediately preceding the date of the closing under the GGC Purchase Agreement
(the “Closing”). “Discount” equals the greater of (A) and (B) minus the lesser of (A) and (B) multiplied
by 0.25 where (A) is the VWAP of the common stock during the thirty (30) trading days immediately preceding October 26, 2020 (which
was $4.54 per share) multiplied by 1.25(which is $5.675); and (B) is the Closing Base Price.
The
Closing under the GGC Purchase Agreement is subject to the simultaneous closing under the Helix Purchase Agreement. The Closing
is also subject to (i) the completion of the Fairness Opinion; (ii) an audit, as of and for the two years ending December 31,
2019, and a financial review, for the nine month periods ended September 30, 2019 and 2020, of GGC and affiliated entities; and
(iii) the approval of the Company’s shareholders to the issuance of the GGC Share Consideration and Helix Share Consideration
in satisfaction of NASDAQ Rule 5635(a).
The
parties to the GGC Purchase Agreement may terminate the GGC Purchase Agreement, among other reasons, if (i) the Fairness Opinion
does not support an aggregate purchase price for Helix and GGC of $43,000,000 and, based thereon, the Company is no longer willing
to pay the GGC Purchase Price, or (ii) the Closing has not occurred on or before May 14, 2021 or such later date as may be mutually
agreed to by the parties. The Company can also terminate the GGC Purchase Agreement if (i) upon completion of its legal, financial,
tax and commercial due diligence of GGC and affiliated entities, it is not satisfied, with the results thereof; (ii) the audit
and/or review of GGC and affiliated entities cannot be completed due to fraud, material accounting errors or otherwise or if the
results of the audit or the review are materially and adversely different from the financial information provided by GGC and the
GGC Equity Holders to the Company prior to the execution of the GGC Purchase Agreement.
In
connection with the negotiation of the GGC Purchase Agreement, the Company advanced an aggregate of $600,000 to GGC during 2020
in the form of loans (the “Loans”). Upon execution of the GGC Purchase Agreement, the Company paid GGC an additional
$600,000 to be used for operating expenses pending the Closing (the “Operating Expense Payments’). If the Closing
takes place on or prior to May 14, 2021, the Company will receive a full credit against the GGC Purchase Price for the Loans and
if the Closing takes place prior to April 30, 2021 the Company will receive a full credit against the GGC Purchase Price for the
Operating Expense Payments. If Closing takes place after April 30, 2021, but on or prior to May 14, 2021, the Company shall receive
a credit against the GGC Purchase Price for 60% of the Operating Expense Payments. If the transaction does not close, depending
on the reason, a portion of the Loans and the Operating Expense Payments may be forgiven.
The
GGC Purchase Agreement contains customary representations, warranties, covenants, indemnification and other terms for transactions
of a similar nature.
Item
1.01 of this Current Report on Form 8-K contains only a brief description of the material terms of and does not purport to be
a complete description of the rights and obligations of the parties to the Helix Purchase Agreement and the GGC Purchase Agreement,
and such description is qualified in its entirety by reference to the full text of the Helix Purchase Agreement and the GGC Purchase
Agreement, copies of which are filed as Exhibits 10.1 and 10.2, respectively, to this Current Report on Form 8-K and are incorporated
herein by reference.