Item 1.01 Entry into a Material Definitive Agreement.
On May 5, 2023 (the "Closing Date"), Elys
Game Technology, Corp. (the "Company") closed a private placement offering of up to 1,500 units and entered into a Subscription
Agreement (the "Agreement") with a single accredited investor, Gold Street Capital Corp. (the "Investor"), which
is a company owned by Gilda Pia Ciavarella, a related party and spouse of the Company’s Executive Chairman, Michele Ciavarella.
Each Unit sold to the Investor was sold at a per unit price of $1,000 and was comprised of (i) a 12% convertible debenture in the principal
amount of $1,000 (the “Debentures”), and (ii) warrants to purchase shares of the Company’s common stock (the “Warrants”).
The purpose of the private placement is to provide
working capital for general corporate purposes in advance of launching the Company’s online channel and mobile app product for U.S.
and Canadian markets.
The Investor purchased a total of 1,500 units and
the Company issued Debentures for the total principal amount of $1,500,000 (the "Principal Amount") to the Investor and warrants
to purchase 3,138,075 shares of common stock of the Company.
The Debentures mature three years from their date
of issuance and bear interest at a rate of 12% per annum compounded annually and payable on the maturity date. Each Debenture is convertible,
at the option of the holder, at any time, into such number of shares of common stock of the Company equal to the principal amount of the
Debenture plus all accrued and unpaid interest at a price equal to $0.48 per share or the Nasdaq consolidated closing bid price (calculated
to the nearest one-hundredth of one cent) of the Company common stock on the Nasdaq stock market on the Closing Date, subject to adjustment
as provided in the Debenture, at any time up to the Maturity Date. The Debentures are initially convertible into 3,138,075 shares of common
stock, subject to anti-dilution adjustment as provided in the Debentures. The holder is guaranteed to receive a minimum of five months
of interest in the event of an early repayment (“Redemption”) by the Company.
In addition, the Company may accelerate this right
of conversion on at least ten (10) business days prior written notice to the Holder if there is an effective Registration Statement registering,
or a current prospectus available for, the resale of the common shares issuable on the conversion and (i) the closing price of the Company’s
common shares exceeds two hundred (200%) per cent of the Conversion Price for five (5) trading days in a thirty (30) day period or (ii)
the Company wishes to redeem or pre-pay the Debentures prior to the Maturity Date.
If at any time that the common shares issuable to
the Investor on conversion of the Debentures in whole or in part would be free trading without resale restrictions or statutory hold periods,
the Debentures are redeemable by the Company at any time or times prior to the Maturity Date on not less than ten (10) Business Days prior
written notice from the Company to the Investor of the proposed date of Redemption (the “Redemption Date”), without bonus
or penalty, provided, however, that prior to the Redemption Date, the Investor has the right to convert the whole or any part of the principal
and accrued and unpaid interest of the Debentures into common shares of the Company.
The Warrants are exercisable at an exercise price
equal to $0.48 per share or the Nasdaq consolidated closing bid price (calculated to the nearest one-hundredth of one cent) of the Company
common stock on the Nasdaq stock market on the Closing Date, subject to adjustment as provided in the Warrant and expire three years after
the issuance date. Each Warrant is exercisable on a cashless basis in the event that there is not an effective registration statement
registering the shares underlying the Warrant at the time of exercise.
The Company may accelerate the right to exercise the
Warrants on at least ten (10) business days prior written notice to the Holder if there is an effective Registration Statement registering,
or a current prospectus available for, the resale of the common shares issuable on exercise of the Warrants and the closing price of the
Company’s common shares exceeds two hundred (200%) per cent of the Exercise Price for five (5) trading days in a thirty (30) day
period.
The Warrants and Debentures provide that if the Company
issues or sells common stock of securities convertible or exercisable into common stock for a price lower than the exercise price of conversion
price that the exercise price and conversion price will be reduced to such price, subject to a floor price of $0.35 and subject to certain
exempt issuances set forth in the Debenture and Warrant.
The number of shares of common stock that may be issued
upon conversion of the Debentures and exercise of the Warrants is subject to an Exchange Cap (as defined in the Debenture and Warrant)
unless shareholder approval to exceed the Exchange Cap is approved. The parties agree to amend the Debentures and Warrants as necessary
in order to comply with the requirements of the Nasdaq Capital Markets.
The Debentures are secured by a senior security interest
in all of the assets of Elys Game Technology, Corp. pursuant to a Security Agreement. The Company’s primary assets consist of certain
business operations and licenses in multiple jurisdictions, trademarks and other intellectual property, betting technology and products
as further described in the Company’s annual report on Form 10-K filed with the SEC on April 17, 2023. Following an event of default
under the Debenture, the Investor will have all available rights under the Security Agreement and applicable law to enforce their rights
as a secured creditor, including to sell, assign, transfer, pledge, encumber or otherwise dispose of the secured assets, and to exercise
any other available rights and remedies upon the occurrence of an event of default as described in the Debenture.
The Debentures can be declared due and payable upon
an “Event of Default.” As more fully described in the Purchase Agreement, each of the following, among other things, constitutes
an “Event of Default” under the Debenture:
| (a) | default in the payment of any principal or interest on the Debenture as
and when the same shall become due and payable, and continuance of such default for a period of five (5) Business Days after the date
on which written notice of such failure, requiring the Corporation to remedy the same, shall have been given by the Holder; |
| (b) | the institution of bankruptcy or insolvency proceedings against the Corporation,
or the institution of proceedings seeking reorganization or winding-up of the Corporation or any other bankruptcy, insolvency or analogous
laws, or the issuing of sequestration or process of execution against the Corporation or any substantial part of its property, or the
appointment of a receiver or manager of the Corporation or of any substantial part of its property, and, in each case, the continuance
of any such proceedings unstayed, undischarged and in effect for a period of fifteen (15) days from the date thereof; |
| (c) | or the institution by the Corporation of proceedings to be adjudicated bankrupt
or insolvent, or the consent by it to the institution of bankruptcy or insolvency proceedings against it, or the filing by it, or the
passing of a resolution authorizing the filing by it, of a petition or answer or consent seeking reorganization or relief under bankruptcy
laws or any other bankruptcy, insolvency or analogous laws, or the consent by it to the filing of any such petition or to the appointment
of a receiver of the Corporation or of any substantial part of its property, or the making by it of a general assignment for the benefit
of creditors, or the Corporation’s admitting in writing its inability to pay its debts generally as they become due or taking corporate
action in furtherance of any of the aforesaid purposes. |
The Company paid no finders fees in connection with
the subscription.
The foregoing descriptions of the Subscription Agreement,
Debenture, Warrant and Security Agreement are qualified in their entirety by reference to the full text of the forms of Subscription Agreement,
Debenture, Warrant and Security Agreement copies of each of which are attached hereto as Exhibits 10.1, 10.2, 10.3 and 10.4, respectively.
