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.
Item 8.01 Other Events.
On January 25, 2020, the Company issued a press release announcing the Purchase
Agreement. A copy of the press release is provided as Exhibit 99.1 to this
Current Report.
Item 9.01. Exhibits.
(d) Exhibits
Exhibit No. Exhibit
10.1 Equity Purchase Agreement, dated January 22, 2021, by and between
Esports Entertainment Group, Inc. and Helix Holdings, LLC
10.2 Equity Purchase Agreement, dated January 22, 2021, by and between
Esports Entertainment Group, Inc. and ggCIRCUIT LLC
99.1 Press Release
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