| Item 1.01 | Entry into a Material Definitive Agreement |
On April 27, 2023 (the
“Closing Date”), BitNile Metaverse, Inc., a Nevada corporation (the “Company”) entered into a Securities
Purchase Agreement (the “SPA”) with certain accredited investors (the “Investors”) providing for
the issuance of (i) Senior Secured Convertible Notes (individually, a “Note” and collectively, the “Notes”)
with an aggregate principal face amount of $6,875,000, which Notes are convertible into shares of common stock, par value $0.001 per share
(the “Common Stock”) of the Company (the “Conversion Shares”); and (ii) five-year warrants (the
“Warrants”) to purchase an aggregate of 63,027,136 shares of common stock, par value $0.001 per share (the “Common
Stock”) of the Company (the “Warrant Shares”).
Pursuant to the SPA,
the Company and certain of its subsidiaries (the “Subsidiaries”) and Arena Investors, LP, as the collateral agent on
behalf of the Investors (the “Agent”) entered into a security agreement (the “Security Agreement”),
pursuant to which the Company (i) pledged the equity interests in the Subsidiaries and (ii) granted to the Investors a security interest
in, among other items, all of the Company’s deposit accounts, securities accounts, chattel paper, documents, equipment, general
intangibles, instruments and inventory, and all proceeds therefrom (the “Assets”), as set forth in the Security Agreement.
In addition, pursuant to the Security Agreement, the Subsidiaries granted to the Investors a security interest in its Assets and, pursuant
to a Subsidiary Guaranty (the “Subsidiary Guaranty”), jointly and severally agreed to guarantee and act as surety for
the Company’s obligation to repay the Notes and other obligations under the other transaction documents.
The Notes are further
secured by a guaranty (the “AAI Guaranty”) provided by Ault Alliance, Inc. (“AAI”), an affiliate
of the Company, as well as by Milton C. Ault, the Executive Chairman of AAI, and his spouse.
Pursuant to the SPA,
the Company and the Investors entered into a registration rights agreement (the “Registration Rights Agreement”), pursuant
to which the Company agreed to file a registration statement to register the Conversion Shares and Warrant Shares within fifteen (15)
days after the Company files its quarterly report on Form 10-Q for the fiscal quarter ending June 30, 2023 (the “Filing Deadline”)
and to have such registration statement effective within ninety (90) days of the Filing Deadline.
The Company may not issue
Conversion Shares and/or Warrant Shares to the extent such issuances would result in an aggregate number of shares of Common Stock exceeding
19.99% of the total shares of Common Stock issued and outstanding as of the Closing Date, in accordance with the rules and regulations
of The Nasdaq Stock Market (the “Exchange”) unless the Company first obtains stockholder approval (the “Stockholder
Approval”). Pursuant to the SPA and if required by the Exchange, the Company agreed to file a proxy statement to obtain the
Stockholder Approval.
Pursuant to the SPA,
the Company and certain of its shareholders also entered into (i) a voting agreement (the “Voting Agreement”), pursuant
to which such shareholders agreed to vote their shares of Common Stock in favor of the Stockholder Approval and (ii) a lockup agreement
(the “Lockup Agreement”), pursuant to which such shareholder agreed not to sell any shares of Common Stock until 30
days after the Notes are no longer outstanding.
Description of the Senior Secured Convertible
Notes
The Notes have a principal
face amount of $6,875,000 and bear no interest (unless an event of default occurs) as they were issued with an original issuance discount.
The maturity date of the Notes is April 27, 2024. The Notes are convertible, subject to certain beneficial ownership limitations, into
Conversion Shares at a price per share equal to the lower of (i) $0.1091 or (ii) the greater of (A) $0.0168 and (B) 85% of the lowest
volume weighted average price of the Common Stock during the ten (10) trading days prior to the date of conversion (the “Conversion
Price”). The Conversion Price is subject to adjustment in the event of an issuance of Common Stock at a price per share lower
than the Conversion Price then in effect, as well as upon customary stock splits, stock dividends, combinations or similar events.
The Notes contain standard
and customary events of default including, but not limited to, failure to make payments when due under the Note, failure to comply with
certain covenants contained in the Note, or bankruptcy or insolvency of the Company. The Company may prepay all or a portion of the Notes
at premium of 15% to such amount as set forth in the Note. The purchase price for the Notes was $5.5 million.
Description of the
Warrants
The Warrants entitle the Investors to purchase
an aggregate of 63,027,136 Warrant Shares for a period of five years, subject to certain beneficial ownership limitations at an exercise
price of $0.1091 (the “Exercise Price”). The Exercise Price of each Warrant is subject to adjustment in the event of
an issuance of Common Stock at a price per share lower than the Exercise Price then in effect, as well as upon customary stock splits,
stock dividends, combinations or similar events. The Warrants may be exercised on a cashless basis at any time there is not an effective
registration statement registering for resale the Warrant Shares.
The foregoing descriptions of the Notes, the Warrants,
the SPA, the Security Agreement, the Registration Rights Agreement, the AAI Guaranty, the Subsidiary Guaranty, the Voting Agreement and
the Lockup Agreement do not purport to be complete and are qualified in their entirety by reference to their respective forms which are
annexed hereto as Exhibits 4.1, 4.2, 10.1, 10.2, 10.3, 10.4, 10.5, 10.6 and 10.7, respectively, to this
Current Report on Form 8-K and are incorporated herein by reference. The foregoing does not purport to be a complete description
of the rights and obligations of the parties thereunder and such descriptions are qualified in their entirety by reference to such exhibits.