Simplicity Esports and Gaming : Ionic Ventures Securities Purchase Agreement and 12% Convertible Promissory Note (Form 8-K)

Ionic Ventures Securities Purchase Agreement and 12% Convertible Promissory Note

On September 28, 2021, Simplicity Esports and Gaming Company (the “Company”) entered into a securities purchase agreement (the “Ionic SPA”), dated as of September 28, 2021, with Ionic Ventures, LLC (“Ionic”), pursuant to which the Company issued a 12% promissory convertible note (the “Ionic Note”) with a maturity date of September 28, 2023 (the “Ionic Maturity Date”), in the principal sum of $1,555,555.56. In addition, the Company issued 14,584 shares of its common stock to Ionic as a commitment fee pursuant to the Ionic SPA. Pursuant to the terms of the Ionic Note, the Company agreed to pay to Ionic $1,555,555.56 and to pay interest on the principal balance at the rate of 12% per annum (provided that the first six months of interest shall be guaranteed and the remaining 18 months of interest shall be deemed earned in full if any amount is outstanding under the Ionic Note after 180 days from September 28, 2021). The Ionic Note carries an original issue discount of $155,555.56. Accordingly, Ionic paid the purchase price of $1,400,000.00 in exchange for the Ionic Note. The Company intends to use the proceeds for working capital. Ionic may convert the Ionic Note into the Company’s common stock (subject to the beneficial ownership limitations of 4.99% in the Ionic Note; provided however, that the limitation on conversion may be waived (up to 9.99%) by Ionic upon, at the election of Ionic, not less than 61 days’ prior notice to the Company) at any time at a conversion price equal to $11.50 per share, as the same may be adjusted as provided in the Ionic Note.

The Company may prepay the Ionic Note at any time prior to maturity in accordance with the terms of the Ionic Note. The Ionic Note contains customary events of default relating to, among other things, payment defaults, breach of representations and warranties, and breach of provisions of the Ionic Note or the Ionic SPA.

Upon the occurrence of any Event of Default (as defined in the Ionic Note), which has not been cured within the time prescribed in the Ionic Note, it shall become immediately due and payable and the Company shall pay to Ionic, in full satisfaction of its obligations hereunder, an amount equal to the principal amount then outstanding plus accrued interest multiplied by 125%.

Ionic Ventures Common Stock Purchase Warrant

Pursuant to the terms of the Ionic SPA, on September 28, 2021, the Company also issued to Ionic a three-year warrant (the “Ionic Warrant”) to purchase 729,167 shares of the Company’s common stock at an exercise price equal to (i) 110% of the per share offering price of the offering made in connection with any uplisting of the Company’s common stock; or (ii) prior to the determination of the per share offering price of the offering made in connection with any uplisting of the common stock and following such time if the uplisting contemplated in clause (i) is not completed by November 1, 2021, $10.73.

Ionic Ventures Registration Rights Agreement

Pursuant to the terms of the Ionic SPA, on September 28, 2021, the Company also entered into a registration rights agreement, dated September 28, 2021, by and between the Company and Ionic (the “Ionic Registration Rights Agreement”). Pursuant to the terms of the Ionic Registration Rights Agreement, the Company agreed to prepare and file with the SEC a registration statement covering the resale of all shares issued or issuable pursuant to the Ionic SPA, including shares issued upon conversion of the Ionic Note or upon exercise of the Ionic Warrant. The Company agreed to use its commercially reasonable efforts to have the registration statement filed with the SEC within 30 days following September 28, 2021 and to have the registration statement declared effective by the SEC within 60 days following September 28, 2021.

The Ionic Registration Rights Agreement contains customary indemnification provisions.

The description of the Ionic SPA, the Ionic Note, the Ionic Warrant, and the Ionic Registration Rights Agreement does not purport to be complete and is qualified in its entirety by reference to the Ionic SPA, the Ionic Note, the Ionic Warrant, and the Ionic Registration Rights Agreement, copies of which are filed as Exhibits 10.1, 10.2, 10.3 and 10.4, respectively, hereto and are incorporated herein by reference.

Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

The disclosure set forth under Item 1.01 of this Current Report on Form 8-K with respect to the Ionic Note is incorporated herein by reference.

Financial Statements and Exhibits.

(d) Exhibits.

Exhibit No.		Description
10.1		Securities Purchase Agreement, dated as of September 28, 2021, by and between the registrant and Ionic Ventures, LLC.
10.2		Convertible Promissory Note, dated as of September 28, 2021, issued by the registrant in favor of Ionic Ventures, LLC.
10.3		Common Stock Purchase Warrant dated as of September 28, 2021.
10.4		Registration Rights Agreement, dated as of September 28, 2021, by and between the registrant and Ionic Ventures, LLC.