Item 1.01 Entry into a Material Definitive Agreement.
On September 20, 2022, Mobile Global Esports Inc. (the "Company") entered into a
Securities Purchase Agreement (the "SPA") with an institutional and accredited
investor (the "Investor") providing for the issuance and sale by the Company to
the Investor in a private placement of an aggregate of (i) 1,886,793 shares (the
"Shares") of the Company's common stock ("Common Stock"), and (ii) warrants (the
"Warrants") to purchase an aggregate of 1,886,793 shares (the "Warrant Shares")
of Common Stock, at a combined purchase price of $2.65 per Share and related
Warrant (the "Private Placement"). The closing occurred on September 23, 2022.
The aggregate gross proceeds to the Company were approximately $5.0 million,
before deducting the placement agent's fees and expenses and other offering
expenses payable by the Company. The Company intends to use the net proceeds to
develop championship esports events in India and its game platform.
The Warrants (i) have an exercise price of $2.90 per share, (ii) are exercisable
immediately, (iii) are exercisable for five years from the effective date of the
registration statement described below, and (iv) have a provision preventing the
exercise thereof if, as a result of such exercise, the holder, together with its
affiliates and any other persons whose beneficial ownership of Common Stock
would be aggregated with the holder, would be deemed to beneficially own more
than 4.99% of the Common Stock (the "Ownership Limitation") immediately after
giving effect to such exercise. The holder, upon notice to the Company, may
increase or decrease the Ownership Limitation; provided that (a) the Ownership
Limitation may be increased only to a maximum of 9.99% of the Common Stock; and
(b) any increase in the Ownership Limitation will not become effective until the
61st day after delivery of such notice. The exercise price of the Warrants and
number of shares of the Common Stock into which the Warrants are exercisable are
subject to adjustment, including for stock subdivisions or combinations.
On September 20, 2022, the Company also entered into a registration rights
agreement with the Investor (the "Registration Rights Agreement"), under which
the Company will be obligated, subject to certain conditions, to file with the
Securities and Exchange Commission (the "SEC") within 30 days after September
20, 2022 one or more registration statements (any such registration statement, a
"Resale Registration Statement") to register the Shares and the Warrant Shares
for resale under the Securities Act of 1933, as amended (the "Securities Act").
The Company's failure to satisfy certain filing and effectiveness deadlines with
respect to a Resale Registration Statement and certain other requirements in the
Registration Rights Agreement may subject the Company to payment of monetary
penalties.
Pursuant to an engagement agreement (the "Engagement Agreement") dated September
20, 2022 between the Company and WestPark Capital, Inc. (the "Placement Agent"),
the Company agreed to (i) pay the Placement Agent a cash fee equal to 9.0% of
the aggregate capital raised by the Company in the Private Placement, (ii)
reimburse the Placement Agent for $75,000 of its legal expenses, and (iii) issue
the Placement Agent (or its designees) a warrant to purchase 339,623 shares of
common stock (the "Placement Agent Warrant") with an exercise price of $2.915
per share. The Placement Agent Warrant was issued in connection with the closing
of the Private Placement and has the same terms as the Warrants, except its
exercise price. The Engagement Agreement includes indemnity and other customary
provisions for engagements of this nature.
The SPA contains certain restrictions on the Company's ability to conduct sales
of its equity securities. In particular, subject to certain customary
exemptions, from September 20, 2022 until 90 days after the date the initial
Resale Registration Statement is declared effective by the SEC (such date, the
"Effective Date"), the Company shall not (i) issue, enter into any agreement to
issue or announce the issuance or proposed issuance of any shares of Common
Stock or securities convertible, exercisable or exchangeable for Common Stock or
(ii) file any registration statement other than as contemplated by the
Registration Rights Agreement. The SPA also prohibits the Company from (a)
entering into or effecting a Variable Rate Transaction (as defined in the SPA)
until the one year anniversary of the Effective Date, and (b) undertaking a
reverse or forward stock split or reclassification of the Common Stock without
the prior written consent of the Investor until the 180 day anniversary of the
Effective Date.
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The issuance and sale of the Shares, Warrants and Warrant Shares (collectively,
the "Securities") was not, and were not upon issuance, registered under the
Securities Act. The Securities were issued and sold in reliance upon an
exemption from registration afforded by Section 4(a)(2) of the Securities Act
and Rule 506(b) promulgated under Securities Act. This report is not and shall
not be deemed to be an offer to sell or the solicitation of an offer to buy any
of the Securities.
In connection with the Private Placement, the Company's directors, officers and
10% stockholders entered into a lock-up agreement pursuant to which such
parties, among other things, agreed not to offer or sell any shares of Common
Stock or securities convertible, exercisable or exchangeable for Common Stock
until 90 days after the Effective Date.
The foregoing summary of the SPA, the Warrants, the Registration Rights
Agreement, the Engagement Agreement and the Placement Agent Warrant does not
purport to be complete and is qualified in its entirety by reference to the
copies of such documents, which are filed as exhibits to this report and are
incorporated herein by reference.
Item 8.01 Other Events.
On September 21, 2022, the Company issued a press release announcing the pricing
of the Private Placement, a copy of which is attached as an exhibit to this
report and is incorporated by reference herein.
On September 23, 2022, the Company issued a press release announcing the closing
of the Private Placement, a copy of which is attached as an exhibit to this
report and is incorporated by reference herein.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
Exhibit Description
4.1 Form of Warrant issued pursuant to the Securities Purchase Agreement
dated September 20, 2022, between the registrant and an institutional
and accredited investor.
4.2 Form of Warrant issued to WestPark Capital, Inc. pursuant to the
Engagement Agreement dated September 20, 2022 between the registrant and
WestPark Capital, Inc.
10.1 Form of Securities Purchase Agreement dated September 20, 2022,
between the registrant and an institutional and accredited investor.
10.2 Form of Registration Rights Agreement dated September 20, 2022,
between the registrant and an institutional and accredited investor.
10.3 Engagement Agreement dated September 20, 2022 between the registrant
and WestPark Capital, Inc.
99.1 Press Release issued by the registrant on September 21, 2022.
99.2 Press Release issued by the registrant on September 23, 2022.
104 Cover Page Interactive Data File (embedded within the Inline XBRL
document)
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