Item 1.01Entry into a Material Definitive Agreement.
On August 26, 2022, KeyStar Corp., a Nevada corporation ("KeyStar," "we," "us"
or "our") entered into an Asset Purchase Agreement (the "Purchase Agreement") by
and among KeyStar, ZenSports, Inc., a Delaware corporation ("ZenSports"), Mark
Thomas ("Mark"), Etan Mizrahi-Shalom ("Etan"), Adil Sher ("Adil"), and John
Dulay ("John" and together with Mark, Etan, and Adil, the "Key Persons") to
acquire certain assets of ZenSports (the "Transaction"). The Transaction closed
on August 26, 2022.
Prior to entering into the Transaction, on June 16, 2022, we hired Mark as our
Chief Product Officer, Etan as our Chief Technology Officer, John as our
Director of Operations and Adil as our Chief Mobile Engineer. Mark, Etan and
John were hired as employees, and Adil was engaged as an independent contractor.
Prior thereto, the Key Persons were corporate officers and executives of
ZenSports, and Mark is still the Chief Executive Officer and sole member of the
board of directors of ZenSports and Etan is still the Chief Technology Officer
of ZenSports. The Key Persons, as a group, are collectively the record and
beneficial owner of a majority of the issued and outstanding shares of capital
stock of ZenSports.
In connection with the Transaction, on August 31, 2022, we paid an aggregate of
$1,000,000 in bonuses to the Key Persons (the "Bonuses"), of which $500,000 was
paid to Mark, $300,000 was paid to Etan and $100,000 was paid to each of John
and Adil. To pay part of the Bonuses, we borrowed an additional $735,120.60
under that certain Amended and Restated Discretionary Non-Revolving Line of
Credit Demand Note in the principal amount of not more than $2,000,000 we
entered into with Excel Family Partners, LLLP on August 16, 2022 (the "Note").
After borrowing the additional $735,120.60 under the Note, and an additional
$67,308.97 under the Note in connection with payments we made to vendors and
consultants, the aggregate outstanding principal balance of all loans under the
Note through August 31, 2022 is $1,042,123.36. We used proceeds from the Private
Offering (described in Item 3.02 of this Current Report on Form 8-K (this
"Report")) to pay the remaining amount of the Bonuses and the employer portion
of payroll taxes owed as a result of the Bonuses.
ZenSports is in the business of offering gambling and entertainment
opportunities through technology and a physical casino, and we purchased a
portion of ZenSports' assets. The assets we didn't purchase include, among other
assets, ZenSport's legal entity name "ZenSports, Inc." and those assets related
to ZenSports' physical casino called the Big Wheel Casino, located in Lovelock,
Nevada.
Pursuant to the terms and conditions of the APA, the aggregate purchase price
paid to ZenSports consisted of: (i) cash in the amount of $481,054; (ii)
5,850,000 shares of our common stock, valued at $1.00 per share, which is the
same consideration paid by unrelated and non-affiliated investors in our private
offering of common shares which we also closed on August 26, 2022 (the "Stock
Consideration"); and (iii) 650,000 additional shares of our common stock subject
to set off or recoupment by us until August 25, 2023 in connection with any
indemnified losses we may incur pursuant to Section 8.2 of the Purchase
Agreement (the "Holdback Stock," and together with the Stock Consideration, the
"Transaction Shares"). Any indemnified losses we may incur pursuant to Section
8.2 may be satisfied only through a recoupment of all or part of the Holdback
Stock on a one (1) share of Holdback Stock for each one dollar $1.00 of
indemnified losses. The offer, sale and issuance of the Transaction Shares were
deemed to be exempt from registration under the Securities Act of 1933, as
amended (the "Securities Act") in reliance on Section 4(a)(2) of the Securities
Act and/or Rule 506(b) of Regulation D promulgated thereunder, as transactions
by an issuer not involving a public offering.
In connection with the Transaction and issuance of the Transaction Shares, we
also entered into a Registration Rights Agreement (the "Registration Rights
Agreement") with ZenSports (together with any other party that may become a
party to the Registration Rights Agreement, "Holders"). Pursuant to the
Registration Rights Agreement, subject to the terms and conditions set forth
therein, we are obligated, among other things, to use our reasonable best
efforts to prepare and file on the six-month anniversary of our common stock
becoming listed on the New York Stock Exchange, The NYSE American, The Nasdaq
Global Market, The Nasdaq Global Select Market, The Nasdaq Capital Market or any
successor or substantially equivalent national securities exchange a
registration statement covering the sale or distribution from time to time of
our common stock held by Holders. We are also obligated to provide for the
registration of such registrable securities for resale by Holders in accordance
with any reasonable method of distribution elected by Holders, and to use our
reasonable best efforts to cause such registration statement to be declared
effective by the Securities and Exchange Commission as promptly as is reasonably
practicable after
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the filing thereof. Holders also have customary piggyback registration rights if
we propose to file a registration statement under the Securities Act with
respect to an offering of our common stock, whether or not for sale for our own
account. Holders' registration rights are subject to certain limits and
restrictions, including our right to withdraw or delay a registration under
. . .
Item 2.01Completion of Acquisition or Disposition of Assets.
To the extent required by Item 2.01 of Form 8-K, the information set forth in
Item 1.01 above is incorporated by reference into this Item 2.01.
Item 2.03Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
To the extent required by Item 2.03 of Form 8-K, the information set forth in
Item 1.01 above is incorporated by reference into this Item 2.03.
Item 3.02Unregistered Sales of Equity Securities.
To the extent required by Item 3.02 of Form 8-K, the information set forth in
Item 1.01 above is incorporated by reference into this Item 3.02.
On August 26, 2022, we closed on a private offering of our common stock where we
sold an aggregate of 750,000 shares of our common stock to 11 investors at a
price of $1.00 per share for an aggregate purchase price of $750,000 (the
"Private Offering"). Each of the investors had access to information concerning
us and our business prospects and represented to us in connection with their
purchase that they: (i) acquired the securities for investment only and not with
a view to or for sale in connection with any distribution thereof; (ii) were an
accredited investor within the meaning of Rule 501 of Regulation D under the
Securities Act; (iii) could bear the risks of the investment; and (iv) could
hold the securities for an indefinite period of time. The offer, sale and
issuance of the shares were deemed to be exempt from registration under the
Securities Act in reliance on Section 4(a)(2) of the Securities Act and/or Rule
506(b) of Regulation D promulgated thereunder, as transactions by an issuer not
involving a public offering.
Following the Transaction and the Private Offering, we have 37,050,000 shares of
common stock issued and outstanding, including the Holdback Stock.
Item 9.01Financial Statements and Exhibits
(a)Financial Statements of Business Acquired.
KeyStar intends to file the financial statements of ZenSports, Inc. required by
Item 9.01(a) as part of an amendment to this Report no later than 71 calendar
days after the required filing date for this Report.
(b)Pro Forma Financial Information.
KeyStar intends to file the pro forma financial information required by Item
9.01(b) as part of an amendment to this Report no later than 71 calendar days
after the required filing date for this Report.
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(d)Exhibits.
Exhibit No. Description
2.1 Asset Purchase Agreement by and among KeyStar Corp., ZenSports,
Inc., Mark Thomas, Etan Mizrahi-Shalom, Adil Sher and John Dulay,
dated August 26, 2022.
4.1 Registration Rights Agreement by and between KeyStar Corp. and
ZenSports, Inc., dated as of August 26, 2022.
10.1 Amended and Restated Discretionary Non-Revolving Line Of Credit
Demand Note dated August 16, 2022 made by KeyStar Corp.
(incorporated by reference to Exhibit 10.1 to the KeyStar Corp's.
Current Report on Form 8-K filed on August 23, 2022).
104 Cover Page Interactive Data File (embedded within the Inline XBRL
document)
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