Contract analysis

I. Executive Summary This memorandum analyzes the availability of the exemption from registration under Section 5 of the Securities Act of 1933, as amended (the "Securities Act"), for the proposed issuance by Redstone Gaming Corp. ("RGC"), a Nevada corporation publicly traded on the Nasdaq Capital Market (ticker: RDGM), of warrants (the "Warrants") to purchase 1,650,000 shares of RGC common stock, par value $0.001 pe

II. Background and Transaction Overview A. The Proposed Mezzanine Financing RGC is a Nevada corporation engaged in the ownership and operation of gaming and entertainment facilities in Nevada, Arizona, and New Mexico. RGC's common stock is listed on the Nasdaq Capital Market under the ticker symbol "RDGM." As of September 30, 2022, RGC reported last-twelve-month ("LTM") revenue of approximately $387,600,000 and LTM E

III. Section 4(a)(2) Statutory Exemption A. Statutory Framework

Section 4(a)(2) of the Securities Act provides an exemption from the registration requirements of Section 5 for "transactions by an issuer not involving any public offering." This exemption, commonly referred to as the "private placement" exemption, is one of the most widely used exemptions from registration and has been the subject of extensive judicial interpretation and SEC guidance. The seminal judicial interpret

IV. Regulation D — Rule 506(b) Safe Harbor A. Overview of Rule 506(b) While we believe the warrant issuance independently qualifies for the Section 4(a)(2) exemption as analyzed in Section III above, we recommend that RGC also structure the transaction to comply with the safe harbor provided by Rule 506(b) of Regulation D. Rule 506(b) provides a non-exclusive safe harbor under Section 4(a)(2), meaning that compliance

V. Integration Analysis A. Integration Doctrine Overview Under the SEC's integration doctrine, multiple offerings that are part of a single plan of financing may be "integrated" — that is, treated as a single offering for purposes of determining compliance with the registration requirements of the Securities Act and the conditions of any claimed exemption. If two or more offerings are integrated, and the combined off

VI. Transfer Restrictions and Legends A. Warrant Certificate Legend As discussed in Section IV.E above, Rule 502(d) of Regulation D requires that the issuer exercise reasonable care to ensure that purchasers are not underwriters, including by placing a restrictive legend on certificates or other documents evidencing the securities. Accordingly, we recommend that the following legend (or substantially similar language

VII. Registration Rights Considerations The draft Warrant Agreement is expected to include customary registration rights provisions granting Fund IV the right to demand that RGC file a registration statement with the SEC covering the resale of the common stock issuable upon exercise of the Warrants. The inclusion of registration rights is a standard feature of equity kicker arrangements in mezzanine financings and se

VIII. Role of the Placement Agent Ashford Peak Advisory Group, LLC ("Ashford Peak") is a Delaware limited liability company and a registered broker-dealer with the Financial Industry Regulatory Authority ("FINRA") and the SEC, with its principal office located at 590 Madison Avenue, 34th Floor, New York, NY 10022. Ashford Peak was engaged by RGC as of October 14, 2022, pursuant to a Placement Agent Agreement, to act

IX. Gaming Regulatory Intersection This memorandum focuses on the federal securities law analysis applicable to the issuance of the Warrants. However, because RGC operates in the heavily regulated gaming industry, it is appropriate to briefly cross-reference the gaming regulatory analysis set forth in the separate Nevada Gaming Regulatory Analysis Memorandum prepared by C&H and delivered to the engagement team on Dec