Item 1.01 Entry into a Material Definitive Agreement.
On September 3, 2020 (the "Effective Date"), Esports Entertainment Group, Inc.
(the "Company"), entered into an Assignment of Intellectual Property Rights
Agreement (the "IP Assignment Agreement"), by and among the Company, AHG
Entertainment Associates, LLC ("AHG") and Flip Sports Limited ("Flip") whereby
the Company acquired all intellectual property rights in connection with the
software developed by Flip and owned by AHG related to AHG's online games and
rewards platform and all other online software (the "Software"). This includes
all works in relation to the same, including, but not limited to the source code
of the Software and all technical and functional information and documentation
required to operate the Software, all artwork, content and materials used in
connection with the Software and any other works in respect of which AHG is the
legal and beneficial owner and which are being used in connection with the
Software (the "Works" together with the intellectual property rights in the
Software the "Assigned Intellectual Property").
The IP Assignment Agreement is subject to Transfer of Undertakings (Protection
of Employment) Regulations 2006 (the "Transfer Regulations") pursuant to U.K.
labour law, protecting employees whose business is being transferred to another
business. Accordingly, as of the Effective Date, all employees of Flip (the
"Flip Employees") will become employees of the Company or one of its operating
subsidiaries pursuant to the same terms of employment such employees maintained
with Flip.
As consideration for the Assigned Intellectual Property, the Company agreed to
pay AHG an aggregate of $1,100,000 (the "Purchase Price") payable as follows:
(a) USD$100,000 in cash on the Effective Date ("Cash Consideration"); and (b)
that certain number of shares the Company's restricted common stock, equal to
USD$1,000,000 (the "Share Consideration") at a price per share equal to the
30-day weighted average of the Company's common stock immediately prior to the
issuance in accordance with the following payment schedule (i) that certain
number of shares equal to USD$500,0000 issued to AHG on the Effective Date
("Closing Shares"); and (ii) that certain number of shares equal to USD$500,000
of restricted common stock (the "Post Closing Shares") issued to AHG on the
sixth (6) month anniversary of the Effective Date ("Final Payment Date"),
subject to the continued employment of certain key employees of Flip as
identified in the IP Assignment Agreement (the "Key Employees"). The cash
equivalent amount of the Post Closing Shares shall be reduced by $100,000 per
Key Employee no longer with the Company on the Final Payment Date.
In consideration for and as a condition to AHG entering into the IP Assignment
Agreement, the Company and AHG entered into an Agreement for the License of
Software on a Source Code Basis (the "License Agreement") whereby the Company
granted AHG a perpetual license to the Software subject to restrictions as to
its use as well ongoing development and support services.
From the Effective Date until the 4th anniversary of the Effective Date of the
IP Assignment Agreement, AHG may (i) use, reproduce and exploit the AHG Software
Copy (as defined in the License Agreement) on an exclusive basis within the
jurisdictions outlined therein; (ii) after the 4th anniversary of the Effective
Date use, reproduce and exploit the AHG Software Copy on a non-exclusive basis
anywhere in the world; and (iii) at any time after the Effective Date change,
copy, alter, add to, take from, adapt or translate the Software in order to
create, use and exploit versions of the Software created for AHG and the Company
in accordance with the terms of License Agreement.
AHG will not use, reproduce or exploit the Software for any purpose that may be
reasonably deemed to be in competition with the Company's business of online
real money gambling.
In consideration of the development of Software customized by the Company
pursuant to certain modifications as set forth in the License Agreement, as well
the installation of such Software and the knowledge transfer services
("Knowledge Transfer") provided by the Company in order to assist AHG in its
project of creating custom Software to adapt to its own needs, AHG shall pay the
Company the sum of thirty thousand pounds (30,000 GBP) per month from the
Effective Date until such development and Knowledge Transfer are completed. In
consideration for the Company providing any further support services, AHG shall
pay to the Company such fee as may be agreed in writing between the parties from
time to time based on a developer day rate of £500 per day.
Item 1.01 of this Current Report on Form 8-K contains only a brief description
of the material terms of the IP Assignment Agreement and the License Agreement
and does not purport to be a complete description of the rights and obligations
of the parties to the IP Assignment Agreement and License Agreement, and such
descriptions are qualified in their entirety by reference to the full text of
the IP Assignment Agreement and License Agreement, which will be filed as
exhibits no later than with the Company's Form 10-Q for the quarter ending
September 30, 2020.
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