Esports Entertainment Group, Inc. (GMBL) 10K Annual Reports & 10Q SEC Filings

– 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

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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)

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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)

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

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

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

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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)

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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)

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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

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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

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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

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Completed asset purchase of Online Casino Operator Lucky Dino

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

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

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

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Filed New Jersey Gaming License Application

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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 31^st 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 1^st 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 - Cash Flow Highlight
The Company therefore requested and received a waiver for (i) any known breaches or potential breaches of financial covenants in effect related to the available cash test and minimum cash flow test through December 25, 2021, (ii) any known breach resulting from the existing lien on the shares of Prozone Limited obtained in the acquisition of the Bethard Business (see discussion of the acquisition of the Bethard Business as a subsequent event in Note 19) and (iii) any known breach which would result from the issuances of up to 200,000 shares common stock in connection with the Company's proposed purchase of certain equity interests in Game Fund Partners Group LLC (as further discussed as a subsequent event in Note 19).

Financial - Expense Highlight
The increase was primarily attributable to $7.2 million in affiliate costs related to iGaming services, $2.3 million for sponsorship agreements with professional sports clubs and our service partners, and $0.2 million for other advertising and promotion expenses including event promotion.
Financial - Debt Highlight
The Company also received net proceeds of $32.5 million (gross proceeds of $35.0 million less debt issuance costs of $2.5 million) from the issuance of the Senior Convertible Note dated June 2, 2021 that was offset by the repayment of a note payable of $0.1 million.
Financial - Cash Flow Highlight
The discounted estimates of future cash flows include significant management assumptions such as revenue growth rates, operating margins, weighted average costs of capital, and future economic and market conditions.
Financial - Shares Highlight
The Company identified additional financing sources it believes are currently available to fund its operations and drive future growth that include (i) the ability to access capital using the at-the-money ("ATM") equity offering program available to the Company whereby the Company may sell up to approximately $20,000,000 shares of its common stock (discussed in Note 19 - Subsequent Events), (ii) the ability to sell shares of common stock of the Company through a shelf registration statement on Form S-3 (File No. 333-252370) declared effective by the Securities and Exchange Commission (SEC) on February 5, 2021, and (iii) the ability to raise additional financing from other sources.
Financial - Shares
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Financial - Expense
This was offset by an...Read more
M & A - Other
42 Net cash used in...Read more
Revenue - Product
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Financial - Expense
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Financial - Expense
Other expense decreased $1.9 million...Read more
Revenue - Product
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M & A - Other
On October 12, 2021, one...Read more
Revenue - Product
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Other - Other
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Financial Statements, Disclosures and Schedules

Inside this 10-K Annual Report

Material Contracts, Statements, Certifications & more

Esports Entertainment Group, Inc. provided additional information to their SEC Filing as exhibits

Exhibit 4.4: Instruments Defining The Rights Of Security Holders, Including Indentures

Exhibit 10.34: Material Contract

Exhibit 21.1: Subsidaries Of The Registrant

Exhibit 31.1: Rule 13A-14(A)/15D-14(A) Certification

Exhibit 31.2: Rule 13A-14(A)/15D-14(A) Certification

Exhibit 32.1: Section 1350 Certification

Exhibit 32.2: Section 1350 Certification

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