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Esports Entertainment Group, Inc. (GMBL) SEC Filing 10-K Annual Report for the fiscal year ending Wednesday, June 30, 2021

Esports Entertainment Group, Inc.

CIK: 1451448 Ticker: GMBL

 

Exhibit 99.1

 

Esports Entertainment Group, Inc. Reports Fiscal 2021

Third Quarter Financial Results

 

Third quarter Revenues of $5.4 Million, up 129% from previous quarter

Driven by completion of Lucky Dino asset purchase on 1st March

Performance bolstered by launch of SportNation.com and Vie.bet on Maltese Gaming Authority license during the quarter

Investment continued in building out Technology team and platform development as well as to achieve scale in back-office functions

Cash Jumps $11.3Million in 3Q21, Ending the Quarter at $16.9 Million with No Debt

 

– April 15, 2021 – Esports Entertainment Group, Inc. (NASDAQ: GMBL) (the “Company” or “EEG”), a diversified operator of esports, igaming and traditional sports betting businesses with a global footprint, today announced financial results for its fiscal 2021 third quarter ended March 31, 2021.

 

Fiscal 2021 Third Quarter Financial Results Highlights

Net revenue for 3Q21 of $5.4 million, up $5.4 million on 3Q20, (and up 129% as compared with 2Q21 net revenue of $2.4 million)

Gross profit (Net revenue less Cost of revenue) for 3Q21 of $3.1 million, up $3.1 million on 3Q20, (and up 199% as compared with $1.0 million in 2Q21)

Gross margin as a percentage of net sales in 3Q21 was 57.0%, (compared to 43.5% in 2Q21)

Sales and Marketing expenses of $2.4 million in 3Q21, up from $0.1m in 3Q20 (and compared to $1.9 million in 2Q21)

General and administrative expenses of $6.3 million in 3Q21, up from $0.5m in 3Q20 (and compared to $4.9 million in 2Q21)

Operating loss of $5.6 million in 3Q21, up from a loss of $0.6m in 3Q20 (and improved by 3% from a loss of $5.8 million in 2Q21)

Net loss of $12.4 million or $0.73 per basic common share in 3Q21, up from a net loss of $6.3m in 3Q20 or $1.02 per basic common share (and compared to a net loss of $7.3 million or $0.57 per basic common share in 2Q21)

Adjusted EBITDA* of -$2.1 million in 3Q21, compared to adjusted EBITDA of -$0.5m in 3Q20, and 44% improved from -$3.8 million adjusted EBITDA in 2Q21

Capital expenditures for 3Q21 of $0.7 million, up from $0.0m million in 3Q20 (and compared to $0.4m in 2Q21), as investment in Platform development continues

Stockholders’ equity at the end of 3Q21 increased by $50.0 million or 438% to $61.4 million from $11.4 million at the end of Fiscal 2020.

 

Operational Highlights

Completed asset purchase of Online Casino Operator Lucky Dino

Completed acquisition of Esports Gaming League (EGL), a provider of live and online events and tournaments

 

 

 

 

Closed $30 million registered direct offering priced at $15 per share

Vie.bet and SportNation.com brands launched on Malta Gaming Authority license, enabling operations in 150 jurisdictions globally

Filed New Jersey Gaming License Application

Signed exclusive Esports Tournament Partnerships with several pro-Sports teams, including the Baltimore Ravens, New England Patriots and Denver Broncos

 

*Adjusted EBITDA is a non-GAAP financial measure. Reconciliation is provided in the tables of this press release.

 

Management’s Comments

 

Our first quarter results were mainly driven by our acquisition of Lucky Dino combined with organic growth coming from our existing brands of Sportnation , EGL and Vie.gg.

 

We continue to execute on our organic growth strategy as well as acquire additional strategic esports and igaming assets.

 

Our recently announced partnerships with blue-chip professional sports organizations, are strong endorsements of this strategy. The imminent close of the previously announced GG circuit/Helix acquisition, combined with the recently announced intention to acquire Holodeck Media, will enable us to exponentially expand our technology-driven esports wagering, tournament play and igaming focused entertainment company.

 

We remain committed to the previously communicated full year fiscal 2021 revenue guidance, of $18m, and the Fiscal 2022 revenue guidance of $70m.

 

Our future is bright and we are very excited to continue our rapid expansion and growth driven by our unique assets and market position.

 

 

Fiscal 2021 Third Quarter Financial Results

 

Net revenues were $5.4 million for the three months ended March 31, 2021, as compared to $0.0million for the three months ended March 31, 2020, and were up by 129% (+$3.0m) when compared net revenues of $2.4m during the three-month period ended December 31, 2020. 9 months year-to-date revenues through 31st March, 2021 were $8.0m.

 

The quarter-on-quarter increase is primarily driven by the completion of the Lucky Dino Gaming Limited asset purchase on 1st March 2021, aided by the launch of both SportNation.com and Vie.bet into new jurisdictions under its Malta Gaming Authority (MGA) license

 

With the acquisition of Lucky Dino Gaming, Unique Active Players (“UAPs”) in the month of March across iGaming brands, rose to above 40,000, with Average Revenue per Player surpassing $80.

 

Total operating expenses for the three months ended March 31, 2021 totaled $11.0 million, an increase from the $0.6 million recorded for the three months ended March 31, 2020, and up from $8.1 million in the three-month period ending December 31, 2020. The increase was primarily attributable to the increased payroll, stock compensation, marketing, legal and professional services fees related to increased business activity.

 

Total net loss for the three months ended March 31, 2021 was $12.4 million, up from a loss of $6.3m in the three-month period ended March 31, 2020. This was principally driven by increased Equity Based Compensation, Transaction related costs, Depreciation and Change in the Fair value of Warrant liabilities, totaling $7.4 million between them.

 

 

 

 

*Adjusted EBITDA for the three months ended March 31, 2021 was -$2.1 million, up from -$0.6m in the three-month period ended March 31, 2020, but improved on the -$3.8m adjusted EBITDA in the three-month period ended December 31, 2020.

 

Financial Results Conference Call

 

EEG will host a conference call at 4:30 p.m. ET to answer questions about the Company’s operational and financial highlights for the third quarter of fiscal year 2021 and other recent developments.

 

Event: Esports Entertainment Group Third Quarter Fiscal Year 2021 Conference Call
Date: Monday, May 17, 2021
Time: 4:30 p.m. Eastern Time
Live Call: + 1-800-437-2398 (U.S. Toll-Free) or + 1-323-289-6576 (International)
Webcast: http://public.viavid.com/index.php?id=144979

 

Non-GAAP Financial Measures

 

To supplement its consolidated financial statements, which are prepared and presented in accordance with Generally Accepted Accounting Principles (GAAP), the Company uses adjusted EBITDA, a non-GAAP financial measure. The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. The Company uses this non-GAAP financial measure for financial and operational decision making and as a means to evaluate period-to-period comparisons. The Company believes that it provides useful information about operating results, enhances the overall understanding of past financial performance and future prospects, and allows for greater transparency with respect to key metrics used by management in its financial and operational decision making. The non-GAAP financial measure used by the Company in this press release may be different from the methods used by other companies.

 

We define and calculate Adjusted EBITDA as net loss before the impact of interest income or expense, income tax expense or benefit, depreciation and amortization, and further adjusted for the following items: stock-based compensation, transaction-related costs, non-core litigation, settlement and related costs, remeasurement of warrant liabilities, and certain other non-recurring, non-cash or non-core items, as described in the reconciliation below.

 

Adjusted EBITDA excludes certain expenses that are required in accordance with U.S. GAAP because they are non-recurring items (for example, in the case of transaction-related costs), non-cash expenditures (for example, in the case of depreciation, amortization, and stock-based compensation), or are not related to our underlying business performance (for example, in the case of interest income and expense and litigation settlement and related costs).

 

 

 

 

Esports Entertainment Group, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

 

   March 31,   June 30, 
   2021   2020 
         
ASSETS          
           
Current assets          
Cash  $16,880,683   $12,353,307 
Restricted cash   3,428,366    - 
Accounts receivable, net   153,011    - 
Receivables reserved for users   1,486,024    - 
Loans receivable   2,000,000    - 
Other receivables   920,115    - 
Deposit on business acquisition   -    500,000 
Prepaid expenses and other current assets   1,423,581    263,345 
Total current assets   26,291,780    13,116,652 
           
Equipment, net   80,904    8,041 
Operating lease right-of-use asset   546,012    - 
Intangible assets, net   27,810,029    2,000 
Goodwill   16,992,199    - 
Other non-current assets   1,290,353    6,833 
           
TOTAL ASSETS  $73,011,277   $13,133,526 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY          
           
Current liabilities          
Accounts payable and accrued expenses  $5,305,176   $811,549 
Liabilities to customers   3,218,798    - 
Deferred revenue   145,091    - 
Liabilities to be settled in stock   -    927,855 
Notes payable - current   158,141    - 
Operating lease liability - current   240,725    - 
Contingent consideration   300,000    - 
Total current liabilities   9,367,931    1,739,404 
           
Notes payable   186,898    - 
Deferred income taxes   1,729,138    - 
Operating lease liability   322,205    - 
           
TOTAL LIABILITIES   11,606,172    1,739,404 
           
Commitments and contingencies (Note 13)          
           
Stockholders’ equity          
Preferred stock $0.001 par value; 10,000,000 shares authorized, none issued and outstanding   -    - 
Common stock $0.001 par value; 500,000,000 shares authorized, 20,166,740 and 11,233,223 shares issued and outstanding as of March 31, 2021 and June 30, 2020, respectively   20,167    11,233 
Additional paid-in capital   104,417,852    31,918,491 
Accumulated deficit   (42,077,212)   (20,535,602)
Accumulated other comprehensive loss   (955,702)   - 
Total stockholders’ equity   61,405,105    11,394,122 
           
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY  $73,011,277   $13,133,526 

 

 

 

 

Esports Entertainment Group, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

 

   Three Months Ended March 31,   Nine Months Ended March 31, 
   2021   2020   2021   2020 
                 
Net revenue  $5,398,708   $-   $7,983,293   $- 
                     
Operating costs and expenses:                    
Cost of revenue   2,321,620    -    4,249,889    - 
Sales and marketing   2,399,200    84,249    4,891,688    184,175 
General and administrative   6,291,388    466,809    14,082,111    1,728,695 
Total operating expenses   11,012,208    551,058    23,223,688    1,912,870 
                     
Operating loss   (5,613,500)   (551,058)   (15,240,395)   (1,912,870)
                     
Other income (expense):                    
Interest expense   -    (23,479)   -    (2,285,792)
Net amortization of debt discount and premium on convertible debt   -    (674,946)   -    (1,225,205)
Change in fair value of derivative liabilities   -    (6,952,798)   -    (5,865,451)
Change in fair value of warrant liability   (5,358,313)   -    (4,729,924)   - 
Change in fair value of contingent consideration   (1,305,804)   -    (1,305,804)   - 
Loss on extinguishment of debt   -    -    -    (2,795,582)
Gain on warrant exchange   -    1,894,418    -    1,894,418 
Other non-operating income (loss)   (165,464)   32    (265,486)   (25,779)
                     
Loss before income taxes   (12,443,080)   (6,307,831)   (21,541,610)   (12,216,261)
                     
Income tax   -    -    -    - 
                     
Net loss  $(12,443,080)  $(6,307,831)  $(21,541,610)  $(12,216,261)
                     
Basic and diluted loss per common share  $(0.73)  $(1.02)  $(1.54)  $(2.04)
Weighted average number of common shares outstanding, basic and diluted   16,950,275    6,183,944    13,974,197    5,989,619 

 

 

 

 

Adjusted EBITDA

 

The table below presents our Adjusted EBITDA reconciled to our net loss, the closest U.S. GAAP measure, for the periods indicated:

 

Esports Entertainment Group, Inc.

Adjusted EBITDA

Reconciliation to GAAP Results

 

   Three months ended March 31,   Nine months ended March 31, 
   2021   2020   2021   2020 
                 
Net loss  $(12,443,080)  $(6,307,830)  $(21,541,610)  $(12,216,261)
Adjusted for:                    
Depreciation and amortization   882,951    2,486    1,687,161    18,013 
Interest (income) expense, net   -    23,479    -    2,285,792 
Stock-based compensation (1)   743,527    -    3,055,118    448,434 
Transaction-related costs (2)   1,340,245    -    1,435,788    - 
Litigation, settlement, and related costs (3)   508,689    -    508,689    - 
Change in fair value of warrant liability   5,358,313    -    4,729,924    - 
Change in fair value of contingent consideration   1,305,804    -    1,305,804    - 
Loss on extinguishment of debt   -    -    -    2,795,582 
Gain on warrant exchange   -    (1,894,418)   -    (1,894,418)
Net amortization of debt discount and premium on convertible debt   -    674,946    -    1,225,205 
Change in fair value of derivative liabilities   -    6,952,798    -    5,865,451 
Other non-operating costs   165,464    33    265,486    25,779 
Adjusted EBITDA  $(2,138,087)  $(548,506)  $(8,553,640)  $(1,446,423)

 

(1) The amounts for the three months ended March 31, 2021 includes stock-based compensation expenses resulting from the issuance of equity awards to employees, non-employee directors and non-employee consultants for services.

 

(2) Includes transaction advisory, consulting, accounting and legal expenses for acquisition related activities

 

(3) Includes primarily external legal costs related to litigation and litigation settlement costs deemed unrelated to our core business operations.

 

 

 


The following information was filed by Esports Entertainment Group, Inc. (GMBL) on Monday, May 17, 2021 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-K Annual Report statement of earnings and operation as management may choose to highlight particular information in the press release.

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Inside Esports Entertainment Group, Inc.'s 10-K Annual Report:

Financial Statements, Disclosures and Schedules

Inside this 10-K Annual Report

Document And Entity Information
Consolidated Balance Sheets
Consolidated Balance Sheets (Parenthetical)
Consolidated Statements Of Cash Flows
Consolidated Statements Of Changes In Stockholders Equity (Deficit)
Consolidated Statements Of Comprehensive Loss
Consolidated Statements Of Operations
Account Payable And Accrued Expenses
Account Payable And Accrued Expenses (Tables)
Account Payable And Accrued Expenses - Schedule Of Account Payable And Accrued Expenses (Details)
Business Acquisitions
Business Acquisitions (Details Narrative)
Business Acquisitions (Tables)
Business Acquisitions - Schedule Of Fair Value Of Acquired Intangible Assets (Details)
Business Acquisitions - Schedule Of Preliminary Purchase Price Allocation Of Acquisition (Details)
Business Acquisitions - Schedule Of Unaudited Pro Forma Operating Results (Details)
Business Acquisitions - Summary Of Changes In Fair Value Of Contingent Considerstion (Details)
Commitments And Contingencies
Commitments And Contingencies (Details Narrative)
Equipment
Equipment (Details Narrative)
Equipment (Tables)
Equipment - Schedule Of Equipment (Details)
Equity
Equity (Details Narrative)
Equity (Tables)
Equity - Schedule Of Stock Option Activity (Details)
Equity - Schedule Of Warrant Activity (Details)
Equity - Schedule Of Weighted Average Assumptions Valued Using Black-Scholes Option Pricing Model (Details)
Fair Value Measurements
Fair Value Measurements (Tables)
Fair Value Measurements - Schedule Of Fair Value Of Assets And Liabilities (Details)
Fair Value Measurements - Schedule Of Fair Value Of Financial Instruments (Details)
Fair Value Measurements - Schedule Of Warrants Outstanding (Details)
Goodwill And Intangible Assets
Goodwill And Intangible Assets (Details Narrative)
Goodwill And Intangible Assets (Tables)
Goodwill And Intangible Assets - Schedule Of Future Amortization Of Intangible Assets (Details)
Goodwill And Intangible Assets - Schedule Of Goodwill (Details)
Goodwill And Intangible Assets - Schedule Of Intangible Assets (Details)
Income Taxes
Income Taxes (Details Narrative)
Income Taxes (Tables)
Income Taxes - Schedule Deferred Tax Assets (Details)
Income Taxes - Schedule Of Income (Loss) Before Income Taxes (Details)
Income Taxes - Schedule Of Provision (Benefit) From Income Taxes (Details)
Income Taxes - Schedule Of Reconciliation Of Income Tax Expense Computed At The U.S. Federal Statutory Rate (Details)
Leases
Leases (Details Narrative)
Leases (Tables)
Leases - Schedule Of Assets And Liabilities Related To Operating Leases (Details)
Leases - Schedule Of Maturity Of Operating Lease Liability (Details)
Leases - Schedule Of Weighted Average Remaining Lease Terms And Discount Rates (Details)
Long-Term Debt
Long-Term Debt (Details Narrative)
Long-Term Debt (Tables)
Long-Term Debt - Schedule Of Future Payments Of Long-Term Debt (Details)
Long-Term Debt - Schedule Of Long-Term Debt (Details)
Nature Of Operations
Other Non-Current Assets
Other Non-Current Assets (Tables)
Other Non-Current Assets - Schedule Of Other Non-Current Assets (Details)
Other Receivables
Other Receivables (Details Narrative)
Other Receivables (Tables)
Other Receivables - Schedule Of Other Receivables (Details)
Prepaid Expenses And Other Current Assets
Prepaid Expenses And Other Current Assets (Tables)
Prepaid Expenses And Other Current Assets - Schedule Of Prepaid Expenses And Other Current Assets (Details)
Public Offering And Conversion Of Debt
Public Offering And Conversion Of Debt (Detail Narrative)
Related Party Transactions
Related Party Transactions (Details Narrative)
Revenue And Geographic Information
Revenue And Geographic Information (Tables)
Revenue And Geographic Information - Schedule Of Disaggregated By Revenue (Details)
Revenue And Geographic Information - Schedule Of Long-Lived Assets By Geography (Details)
Revenue And Geographic Information - Schedule Of Revenues With Customers Disaggregated By Geographical Area (Details)
Subsequent Events
Subsequent Events (Details Narrative)
Subsequent Events (Tables)
Subsequent Events - Schedule Of Contingent Consideration (Details)
Subsequent Events - Schedule Of Pro Forma Information (Details)
Summary Of Significant Accounting Policies
Summary Of Significant Accounting Policies (Details Narrative)
Summary Of Significant Accounting Policies (Policies)
Summary Of Significant Accounting Policies (Tables)
Summary Of Significant Accounting Policies - Schedule Of Estimated Useful Life Of Asset (Details)
Summary Of Significant Accounting Policies - Schedule Of Weighted Average Diluted Common Shares Outstanding (Details)
Ticker: GMBL
CIK: 1451448
Form Type: 10-K Annual Report
Accession Number: 0001493152-21-025333
Submitted to the SEC: Wed Oct 13 2021 5:11:39 PM EST
Accepted by the SEC: Wed Oct 13 2021
Period: Wednesday, June 30, 2021
Industry: Amusement And Recreation Services

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