Item 1.01 Entry into a Material Definitive
Agreement
On
November 18, 2021, Gaming Technologies, Inc. (the “Company”) entered into a securities purchase agreement
(the “Purchase Agreement”) with an accredited investor for the sale of the Company’s convertible notes and warrants.
Pursuant to the terms of the Purchase Agreement, on November 18, 2021, the Company received aggregate gross proceeds of $1,500,000 and
issued (i) a 10% Original Issue Discount Senior Secured Convertible Note in the principal amount of $1,666,666.67 (the “Note”)
and (ii) warrants (the “Warrants”) to purchase an aggregate of 727,273 shares of the Company’s common stock.
The
Note. The aggregate principal amount of the Note is $1,666,666.67, and the Company received gross proceeds of $1,500,000 after
giving effect to the original issue discount of 10%. The Note bears interest at a rate of 10% per year, payable monthly commencing after
the third month, and mature 12 months from issuance. The principal and interest are convertible at any time at the option of the holder
into shares of the Company’s common stock at a conversion price equal to the lower of (x) $2.75 per share, and (ii) the price of
the common stock of the Company in a Qualified Offering (subject to adjustment as provided in the Note). A “Qualified Offering”
is an equity or equity-linked financing for the account of the Company or any of its subsidiaries or debt financing that results in cumulative
aggregate proceeds to the Company of at least $8,000,000. The principal and interest on the Note will be amortized on a straight-line
basis commencing sixth months after the closing.
The
conversion price of the Note is subject to adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations,
reclassifications or similar events affecting the common stock and also upon any distributions of assets, including cash, stock or other
property to the Company’s stockholders. With certain customary exceptions, if, at any time while the Note is outstanding, the Company
sells or grants any option to purchase or sells or grants any right to reprice, or otherwise disposes of or issues (or announces any sale,
grant or any option to purchase or other disposition), any common stock or common stock equivalents entitling any person to acquire shares
of common stock at an effective price per share that is lower than the then conversion price of the Note (such lower price, the “Base
Conversion Price,” then the conversion price of the Note will be reduced to equal the Base Conversion Price.
The
Company will have the right at any time to prepay in cash all or a portion of the Note at 115% (or 120% on or after the first three months
from the closing) of the principal amount thereof plus any unpaid accrued interest to the date of repayment. In such event, the holder
shall have the right to convert the Note prior to the date of any such prepayment.
The Company will be required
to offer to prepay in cash the aggregate principal amount of the Note at 115% (or 120% on or after the first three months from the closing)
of the principal amount thereof plus any unpaid accrued interest to the date of repayment, on the sale of all or substantially all of
the assets of the Company and its subsidiaries, upon a Change of Control (as defined in the Note), or on a Qualified Offering. In such
event, the holder shall have the right to convert the Note prior to the date of any such prepayment.
Upon
an Event of Default (as defined therein) interest shall accrue at 1 1/2% per month and the 125% of principal and interest through maturity
shall be due and payable. At the holder’s option the holder shall be entitled to be paid in cash or common stock with the conversion
price of the common stock equal to a 30% discount to the average of the three lowest closing prices of the common stock for the 10 prior
trading days.
The
Warrants. The Warrants are exercisable at an exercise price equal to the lower of (x) $2.75 per share and (y) the price of the
common stock of the Company in a Qualified Offering (as defined in the Purchase Agreement), subject to adjustment as described below,
and the Warrants are exercisable for five years after the issuance date. The Warrants are exercisable for cash at any time and are exercisable
on a cashless basis at any time there is no effective registration statement registering the shares of common stock underlying the Warrants.
The exercise price of the Warrants is subject to adjustment in the event of certain stock dividends and distributions, stock splits, stock
combinations, reclassifications or similar events affecting the common stock and also upon any distributions of assets, including cash,
stock or other property to the Company’s stockholders. The exercise price of the Warrants is also subject to “full ratchet”
price adjustment if the Company issues common stock or equivalents at a price per share lower than the then-current exercise price of
the Warrant, as described above for the conversion price of the Note.
Ancillary
Agreements. In connection with the Company’s obligations under the Nots, the Company and its subsidiary Gaming Technology
Limited (the “Subsidiary”) each entered into a security agreement with the holder, pursuant to which the Company and the Subsidiary
granted a security interest on all assets of the Company and the Subsidiary, including the stock of the Subsidiary, for the benefit of
the holders, to secure, and the Subsidiary guaranteed, the Company’s obligations under the Note, the Warrant and the other transaction
documents. In addition, the holder was granted customary piggyback registration rights for the shares of common stock issuable upon conversion
of the Note and exercise of the Warrant and rights of participation.
At
any time within the 18 months closing, upon any issuance by the Company or any of its subsidiaries of debt or common stock or common stock
equivalents for cash consideration, indebtedness or a combination of units thereof, other than in an underwritten public offering (a “Subsequent
Financing”), the investor will have the right to participate up to its investment amount in the Note, but not more than 25% of the
Subsequent Financing, on the same terms, conditions and price provided for in the Subsequent Financing.
Until
the Company has consummated a Qualified Offering which results in an up-listing of the Common Stock onto a national securities exchange.
if the Company engages in any future financing transactions with a third-party investor (not including such a Qualified Financing, except
to the extent it relates to conversion, exercise and anti-dilution provisions of the Note and Warrants), if the holder determines that
the terms of the subsequent investment are preferable in any respect to the terms of the securities of the Company issued to the Holder
pursuant to the terms of the Purchase Agreement, the holder will have the right to amend and restate such securities to include the preferable
term or terms.
