Item 1.01. Entry into Material Definitive Agreement.
Jefferson
Street Capital Stock Purchase Agreement & 12% Convertible Promissory Note
On
August 23, 2021, Simplicity Esports and Gaming Company (the “Company”) entered into that certain securities purchase agreement
(the “SPA”), dated as of August 23, 2021, by and between the Company and Jefferson Street Capital LLC (“Jefferson”).
Pursuant to the terms of the SPA, (i) the Company agreed to issue and sell to Jefferson the Note (as hereinafter defined); (ii) the Company
agreed to issue to Jefferson the Warrant (as hereinafter defined); and (iii) the Company agreed to issue to Jefferson 3,125 commitment
shares; and (iv) Jefferson agreed to pay to the Company $300,000.00 (the “Purchase Price”).
Pursuant
to the terms of the SPA, on August 23, 2021, the Company issued a 12% convertible promissory note (the “Note”) with a maturity
date of August 23, 2023 (the “Maturity Date”), in the principal amount of $333,333.33. Pursuant to the terms of the Note,
the Company agreed to pay to Jefferson $333,333.33 (the “Principal Amount”), with a purchase price of $300,000 plus an original
issue discount in the amount of $333,333.33 (the “OID”), and to pay interest on the Principal Amount at the rate of 12% per
annum, with the understanding that the first six months of interest is guaranteed and the remaining 18 months of interest is deemed earned
in full if any amount is outstanding under the Note after 180 days from August 23, 2021.
Any
Principal Amount or interest on the Note that is not paid when due will bear interest at the rate of the lesser of (i) 20%, or (b) the
maximum rate allowed by law.
Jefferson
may, at any time while the shares issuable upon conversion of the Note are subject to an effective registration statement, or if no registration
statement covering such shares is effective, at any time after 180 days from August 23, 2021, so long as there are amounts outstanding
under the Note, convert all or any portion of the then outstanding and unpaid Principal Amount and interest into shares of the Company’s
common stock at a conversion price of $11.50 per share; provided, however, that upon failure to make any payment under the Note, the
conversion price will be $10.00 per share, as the same may be adjusted as provided in the Note. The Note has a 4.99% equity blocker;
provided, however, that the 4.99% equity blocker may be waived (up to 9.99%) by Jefferson, at Jefferson’s election, on not less
than 61 days’ prior notice to the Company.
On
August 23, 2021, Jefferson paid the purchase price of $300,000 in exchange for the Note. The Company intends to use the proceeds for
its operational expenses and to pay off certain debt.
The
Company may prepay the Note at any time in accordance with the terms of the Note. While any portion of the outstanding Principal Amount
and interest are due and owing, if the Company receives cash proceeds from any source or series of related or unrelated sources, including
but not limited to, the issuance of equity or debt, the conversion of outstanding warrants of the Company, the issuance of securities
pursuant to an equity line of credit of the Company or the sale of assets, the Company must inform Jefferson of such receipt, following
which Jefferson may, in its sole discretion, require the Company to immediately apply up to 50% of the proceeds therefrom to repay all
or any portion of the outstanding Principal Amount and interest then due under the Note; provided, however, that the first $3,000,000
of equity financing received by the Company will be excepted from this requirement.
The
SPA and the Note contain customary events of default relating to, among other things, payment defaults, breach of representations and
warranties, and breach of provisions of the Note or SPA.
The
description of the SPA and the Note does not purport to be complete and is qualified in its entirety by reference to the SPA and the
Note, copies of which are filed as Exhibits 10.1 and 10.2, respectively, hereto and are incorporated herein by reference.
Jefferson
Street Capital Registration Rights Agreement
On
August 23, 2021, the Company also entered into a registration rights agreement (the “Registration Rights Agreement”) with
Jefferson pursuant to which the Company is obligated to file a registration statement to register the resale of the shares issuable pursuant
to the SPA. Pursuant to the Registration Rights Agreement, the Company must (i) file the registration statement within 90 calendar days
from August 23, 2021, and (ii) use reasonable best efforts to cause the registration statement to be declared effective under the Securities
Act of 1933, as amended (the “Securities Act”), within 120 calendar days after August 23, 2021.
The Company also agreed that it would not file any other registration statement, including those on Form S-8 or Form S-4, for other securities,
for a period of 12 months from August 23, 2021, unless it has the prior written approval from Jefferson.
The
Registration Rights Agreement contains customary indemnification provisions.
The
description of the Registration Rights Agreement does not purport to be complete and is qualified in its entirety by reference to the
Registration Rights Agreement, a copy of which is filed as Exhibit 10.3 hereto and is incorporated herein by reference.
Jefferson
Street Capital Common Stock Purchase Warrant
Also
on August 23, 2021, pursuant to the terms of the SPA, the Company issued to Jefferson a common stock purchase warrant (the “Warrant”)
for the purchase of 156,250 shares of the Company’s common stock. The per share exercise price under the Warrant is, subject to
adjustment as described therein, as follows: (i) 110% of the per share offering price of the offering made in connection with any “up-listing”
of the Company’s common stock; or (ii) prior to the determination of the per share offering price of the offering made in connection
with any “up-listing” of the common stock and following such time if the “up-listing” contemplated in the Warrant
is not completed by November 1, 2021, the exercise price shall be $10.73. The Warrant is exercisable during the period commencing on
August 23, 2021 and ending at the close of business on August 23, 2024.
The
description of the Warrant does not purport to be complete and is qualified in its entirety by reference to the Warrant, a copy of which
is filed as Exhibit 10.4 hereto and is incorporated herein by reference.