Item
1.01 Entry into a Material Definitive Agreement.
Modifications
to Bridge Notes
As
previously disclosed, the former owners of certain of the subsidiaries of Allied Esports Entertainment, Inc. (the “Company”)
issued a series of secured convertible promissory notes to several accredited investors (the “Bridge Noteholders”)
on October 11, 2018 and May 15, 2019 in the aggregate original principal amount of $14,000,000 (collectively, the “Bridge
Notes”). The Bride Notes were subsequently assumed by the Company, and payments were deferred until August 23, 2020 (the
“Bridge Maturity Date”). Prior to the transactions set forth below, Bridge Notes in an aggregate amount of $9 million
remained outstanding.
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1.
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Secured
Convertible Note Modification (Extension) Agreements between the Company and the Extending
Bridge Noteholders (as defined below)
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On
June 8, 2020, the Company and the holders (the “Extending Bridge Noteholders”) of two Bridge Notes in the aggregate
principal amount of $2,000,000 (together, the “Extended Bridge Notes”), each entered into a Secured Convertible Note
Modification (Extension) Agreement with the Company (together, the “Bridge Note Extensions”) pursuant to which, among
other things, the Extending Bridge Noteholders agreed to extend the maturity date of their respective Extended Bridge Note until
February 23, 2022. Interest on the Extended Bridge Notes will continue to accrue at 12.0% per year and may be prepaid without
penalty. The remaining provisions of the Extended Bridge Notes remain unchanged and in effect.
One
of the Extending Bridge Noteholders is Man Sha, the spouse of Frank Ng, the Company’s Chief Executive Officer and a
Director.
The
foregoing summary description of the terms and conditions of the Bridge Note Extensions does not purport to be complete and is
qualified in its entirety by reference to thereto, a form of which is filed as Exhibit 10.1 to this Current Report on Form 8-K
and is incorporated herein by reference.
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2.
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Secured
Convertible Note Modification Agreement No. 3 between the Company and Knighted Pastures LLC
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Knighted
Pastures LLC (“Knighted”) previously converted $5 million of principal of the Bridge Notes into Company common stock
as reported on the Company’s Current Reports on Form 8-K filed on April 30, 2022 and May 22, 2020. On June 8, 2020, the
Company and Knighted entered into Secured Convertible Note Modification Agreement No. 3 (“Amendment No. 3), pursuant to
which Knighted agreed to defer payment of all interest payable to Knighted on the Bridge Maturity Date ($1,421,096) until February
23, 2022. Such amount will accrue interest at the annual rate of 12% and may be prepaid without penalty. The remaining amounts
due under Knighted’s Note, as amended, is no longer convertible into shares of common stock.
The
foregoing summary description of the terms and conditions of Amendment No. 3 does not purport to be complete and is qualified
in its entirety by reference to thereto, a form of which is filed as Exhibit 10.2 to this Current Report on Form 8-K and is incorporated
herein by reference.
Senior
Secured Loan
On
June 8, 2020, the Company and certain accredited investors (the “Investors”) entered into a Securities Purchase Agreement
(the “Purchase Agreement”), pursuant to which the Investors made, in a private placement transaction, a net $9,000,000
loan (after payment of a $600,000 original issue discount) to the Company (the “Loan”). The Purchase Agreement contains
customary representations and warranties, and the Company agreed it would not take on additional debt from third parties without
the Investors’ written approval, subject to certain exceptions for ordinary course trade debt. The Company also agreed to
use 35% of the proceeds from future financings in excess of $3 million (or $5 million if approved by the Investors) to pay down
the outstanding balance on the Loan. The Company reserves its rights under the Purchase Agreement to consummate, subject to certain
exceptions, a debtor or equity offering of up to $5 million in the future.
The Loan is evidenced by Senior Secured Convertible
Promissory Notes (the “Notes”) in the original aggregate principal amount of $9.600,000 and bearing guaranteed interest
at a rate of 8% per annum. The Notes have a two-year term, with aggregate principal payable in equal monthly installments of $436,364
commencing 60 days after the date of the Loan with accrued interest thereon. Monthly payments of interest are due on such dates
as well. Each payment may be paid at the Company’s option in cash, or if all equity conditions set forth in the Note are
satisfied or waived, in shares of common stock (“Note Shares”) at a price equal to 87% of the lowest VWAP in the 10
days prior to the payment date. Each such payment (in cash or shares) will be equal to 110% of the monthly installment.
The
equity conditions include, but are not limited to, (a) there existing no events of default, (b) all amounts due have been timely
paid, (c) the shares may be resold pursuant to a registration statement or pursuant to an exemption under Rule 144 of the Securities
Act, (d) the shares are registered for trading on a trading market, (e) there is a sufficient number of authorized but unissued
shares and otherwise unreserved shares to issue all shares required under the various Loan documents, (f) the holder does not
possess any material non-public information at the time of issuance, and (g) the Company’s shares have met certain minimum
volume and closing price thresholds. The issuance of shares is also prohibited to the extent the issuance would cause the Investor
to exceed the Beneficial Ownership Limitation (described below) or would cause the Investors to receive more than 19.99% of the
shares of outstanding common stock as of the date of the Loan unless the Company obtains shareholder approval of the Loan in advance
of such issuance.
The Notes are convertible at each Investor’s
option, in whole or in part, and from time to time, into shares of the Company’s common stock (“Conversion Shares”)
at $3.30 per share (subject to adjustment to convert at the same price as any issuances of Company common stock at a lower issuance
price, subject to certain exceptions); provided, however, that the parties may not effect any such conversion that
would result in an Investor (together with its affiliates) owning in excess of 4.99% of the number of shares of the Company’s
common stock outstanding immediately after giving effect to the conversion in question (the “Beneficial Ownership Limitation”).
Each Investor, upon notice to the Company, may increase or decrease its Beneficial Ownership Limitation, provided that the Beneficial
Ownership Limitation may not exceed 9.99%.
Conversion
of the Note is also limited if it would cause the Investors to receive more than 19.99% of the shares of outstanding common stock
as of the date of the Loan unless the Company obtains shareholder approval of the Loan in advance of such issuance.
In
connection with the Loan, the Company issued to Investors five-year warrants (the “Warrant”) to purchase up to 1,454,546
(the “Warrant Shares”) at $4.125 per share (subject to adjustment to the exercise price to match the same price as
any issuances of Company common stock at a lower issuance price, subject to certain exceptions). The
parties may not effect any exercise of a Warrant that would result in an Investor (together with its affiliates) owning in excess
of 4.99% of the number of shares of the Company’s common stock outstanding immediately after giving effect to the exercise
in question (the “Beneficial Ownership Limitation”). Each Investor, upon notice to the Company, may increase or decrease
the its Beneficial Ownership Limitation, provided that the Beneficial Ownership Limitation may not exceed 9.99%.
The Company and Investors also entered into a Security
Agreement (the “Security Agreement”) and a Registration Rights Agreement (the “Registration Rights Agreement”).
Pursuant to the Security Agreement, the Company and its subsidiaries granted Investors a lien on all assets in a pari passu
position with the holders of the Bridge Notes.
Pursuant to the Registration Rights Agreement,
the Company agreed to, among other terms, file one or more registration statements covering the resale of the Note Shares, the
Conversion Shares and Warrant Shares within 30 days of signing the Registration Agreement. The Company also agreed to use its best
efforts to have such registration statement declared effective by the Securities and Exchange Commission within sixty days of the
date of the transaction, and to file additional registration statements as necessary to register all of such securities for resale
under the Securities Act of 1933, as amended.
In
connection with the Loan, certain of the Company’s subsidiaries also guaranteed the Company’s obligations under the
Notes pursuant to a Subsidiary Guarantee.
The foregoing summary description of the terms
and conditions of the foregoing agreements does not purport to be complete and is qualified in its entirety by reference to the
Purchase Agreement, the Note, the Warrant, the Security Agreement, the Registration Agreement and Subsidiary Guarantee, copies
of which are filed as Exhibits 10.3, 10.4, 4.1, 10.5, 10.6, and 10.7, respectively, to this Current Report on Form 8-K and are
incorporated herein by reference.