UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 3.02 Unregistered Sale of Equity Securities.
As previously disclosed under Item 1.01, Item 3.02 and Item 5.03 of Form 8-K in Current Reports on Form 8-K filed by Esports Entertainment Group, Inc. (the “Company” “we” or “us”) on April 20, 2023 and May 1, 2023, we and the holder (the “Holder”) of our Senior Convertible Note, agreed to exchange and exchanged, $15,230,024 in aggregate principal amount of our Senior Convertible Note then outstanding into 15,230 shares of new Series C Convertible Preferred Stock, which Series C Convertible Preferred Stock is convertible into a number of shares of common stock determined by a formula to be applied at the time of conversion, which formula was described in such Form 8-K reports and in the Series C Convertible Preferred Stock Certificate of Designations attached as an exhibit to such Form 8-K reports, and described below.
Since our Current Report on Form 8-K filed with the SEC on December 4, 2023, for the period from December 4, 2023, through December 6, 2023, we and the Holder effected equity conversions under the Series C Convertible Preferred Stock. Pursuant to the equity conversions, the Holder converted approximately $2,510,000 in aggregate principal amount and approximately $36,000 in accrued dividends of the Series C Convertible Preferred Stock into an aggregate of 118,800,000 shares of our common stock (the “Conversions”), at conversion prices equal to 90% of the lowest VWAP (as defined in the Series C Convertible Preferred Stock Certificate of Designations) of the 10 trading days ending and including the date of conversion, in accordance with Section 31(g) of the Series C Convertible Preferred Stock Certificate of Designations and the previously disclosed settlement and waiver agreement, dated October 6, 2023 (“October Settlement Agreement”) with the Holder, (each, an “Alternate Conversion Price”).
Under the October Settlement Agreement, in the event that the conversion price then in effect, as may be adjusted under the Settlement Agreement, is greater than 90% of the lowest VWAP of the common stock during the ten (10) consecutive trading day period ending and including the trading day of an applicable conversion notice, the accrued and unpaid dividends on the outstanding shares of preferred stock shall automatically increase, pro rata, by the applicable Alternate Conversion Floor Amount (as defined in the Series C Certificate of Designations and Series D Certificate of Designations) or, at the Company’s option, the Company shall deliver the applicable Alternate Conversion Floor Amount to the holder on the applicable date of conversion. Related to these conversions, we have increased such dividends by an aggregate of approximately $727,000 to the holder of the Series C Convertible Preferred Stock. No such amounts are due under the Series D Convertible Preferred Stock.
The Company’s shares of common stock issued in connection with the Conversions were not registered under the Securities Act of 1933, as amended (the “Securities Act”), and were issued to an existing Holder of the Company’s securities without commission or additional consideration in reliance on the exemption from registration provided by Section 3(a)(9) of the Securities Act.
Approximately $3,504,000 in aggregate amount of the Series C Convertible Preferred Stock remains outstanding. We intend to continue to effect additional equity conversions under the same terms in the foreseeable future.
Item 7.01 Regulation FD Disclosure
As previously disclosed, on September 15, 2023, the Company entered into an Equity Distribution Agreement (the “Agreement”), pursuant to which the Company established an “at the market” equity offering program (“ATM”) to sell up to an aggregate of $7,186,257 of shares of common stock. The shares are being issued pursuant to the Company’s shelf registration statement on Form S-3 (File No. 333-252370) and Form S-3 MEF (File No. 333-274542) and the Company filed a prospectus supplement, dated September 15, 2023, with the Securities and Exchange Commission (“SEC”) in connection with the offer and sale of the shares pursuant to the Agreement with the placement agent named therein.
Since our Current Report on Form 8-K filed with the SEC on December 4, 2023, for the period of December 4, 2023, through December 6, 2023, the Company sold an aggregate of 127,290,000 shares through the ATM for gross proceeds of approximately $2,450,000, and has up to approximately $1,734,000 in shares of common stock remaining that can be sold under the ATM at December 6, 2023. The net proceeds from these sales under the ATM equity offering program (“ATM Sales”) of approximately $2,357,000 were allocated 50% to the Company, and 50% to the holder of the Company’s outstanding Series C Convertible Preferred Stock and Series D Convertible Preferred Stock (the “Holder”) and will be used to redeem first, the Series D Convertible Preferred Stock and second, the Series C Convertible Preferred Stock, as applicable (“Redemption Proceeds”), unless the Holder elects to change such allocations (or waive such redemption, in whole or in part, with respect to one or more ATM Sales), pursuant to the October Settlement Agreement. Fees paid to the agent related to these ATM Sales were approximately $94,000.
As of December 6, 2023, there were approximately $1,650,000 of Redemption Proceeds instructed for deposit into a non-interest-bearing escrow account (“Escrow Account”) for the Holder pursuant to the previously disclosed escrow agreement (“Escrow Agreement”) executed concurrently with the October Settlement Agreement. Under the terms of the October Settlement Agreement and Escrow Agreement, the Redemption Proceeds will not be released to the Holder until the Redemption Proceeds equal or exceed $250,000 from additional ATM Sales, and the Escrow Agent has received written instruction from either the Company or the Holder to release the Redemption Proceeds. As of December 6, 2023, there was approximately $322,000 of the Redemption Proceeds disbursed from the Escrow Account to the Holder for redemption of 312 shares of Series D Convertible Preferred Stock.
As of December 6, 2023, there were 425,971,795 shares of common stock, par value $0.001 issued and outstanding.
Forward-Looking Statements
The information contained herein includes forward-looking statements, as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements generally can be identified by words such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “projects,” “will be,” “will continue,” “will likely result,” and similar expressions. These statements relate to future events or to our future financial performance, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. You should not place undue reliance on forward-looking statements since they involve known and unknown risks, uncertainties and other factors which are, in some cases, beyond our control and which could, and likely will, materially affect actual results, levels of activity, performance or achievements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in our most recent Annual Report on Form 10-K and those discussed in other documents we file with the SEC, including, our ability to maintain compliance with Nasdaq Listing Rules and maintain the listing of our securities on Nasdaq, our obligations under our outstanding preferred stock and the settlement agreement, and our ability to continue as a going concern. Any forward-looking statement reflects our current views with respect to future events and is subject to these and other risks, uncertainties and assumptions relating to our operations, results of operations, growth strategy and liquidity. We assume no obligation to publicly update or revise these forward-looking statements for any reason, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future, unless required by law.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Date: December 7, 2023 | ||
| ESPORTS ENTERTAINMENT GROUP, INC. | ||
| By: | /s/ Michael Villani | |
| Name: | Michael Villani | |
| Title: | Chief Financial Officer | |