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 September 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.
