(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The registrant had ~~16,447,163~~300,183,243 shares of common stock outstanding on August ~~7, 2022.~~14, 2023.

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that involve substantial risks and uncertainties. All statements, other than statements of historical fact, contained in this Quarterly Report on Form 10-Q, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans and objectives of management, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “would,” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

The forward-looking statements in this Quarterly Report on Form 10-Q include, but are not limited to those described under the “Risk Factors” section and include, among other things:

We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information.

We have included important factors in the cautionary statements included in this Quarterly Report on Form 10-Q, particularly in the “Risk Factors” section, that we believe could cause actual results or events to differ materially from the forward-looking statements that we make. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, collaborations, joint ventures or investments we may make or enter into.

The accompanying notes are an integral part of these unaudited consolidated financial statements.


	Common stock				Preferred Stock																Preferred stock						Common Stock							Accumulated
	Number of				Number of				Additional paid-in			Accumulated Other Comprehensive			Accumulated						Number of						Number of				Additional paid-in			Other Comprehensive			Accumulated
	Shares		Amount		Shares		Amount		capital			Income			deficit			Total

Balance at September 30, 2020		7,340,421	$	7,340		–	$	–	$	3,053,660		$	–		$	(1,449,526	)	$	1,611,474
Shares issued for cash, net		2,000,000		2,000		–		–		3,646,071			–			–			3,648,071
Stock-based compensation		683,334		683		–		–		1,321,343			–			–			1,322,026
Shares issued due to conversion of notes payable		375,000		375		–		–		187,125			–			–			187,500
Stock warrants issued for asset acquisition		–		–		–		–		57,252			–			–			57,252
Net loss		–		–		–		–		–			–			(2,750,731	)		(2,750,731	)
Balance at December 31, 2020		10,398,755		10,398		–		–	$	8,265,451			–			(4,200,257	)		4,075,592

Shares issued for cash, net		250,014		251		–		–		719,435			–			–			719,686
Stock-based compensation		–		–		–		–		700,000			–			–			700,000
Net loss		–		–		–		–		–			–			(2,375,660	)		(2,375,660	)
Balance at March 31, 2021		10,648,769		10,649		–		–	$	9,684,886			–			(6,575,917		$	3,119,618

Shares and warrants issued for cash, net		2,400,000		2,400		–		–		13,511,800			–			–			13,514,200
Shares issued for intangible assets		–		–		–		–		1,456,650			–			–			1,456,650
Cashless exercise of warrants		62,386		62		–		–		(62	)		–			–			–
Stock-based compensation		–		–		–		–		834,971			–			–			834,971
Net loss		–		–		–		–		–			–			(3,957,611	)		(3,957,611	)
Balance at June 30, 2021		13,111,155		13,111		–		–	$	25,488,245			–			(10,533,528	)		14,967,828
																					Shares			Amount			Shares		Amount		capital			income (loss)			deficit			Total

Balance at September 30, 2021		13,315,414	$	13,315		–		–	$	26,834,354		$	53,911		$	(16,649,550	)	$	10,252,030			–		$	–			13,315,414	$	13,315	$	26,834,354		$	53,911		$	(16,649,550	)	$	10,252,030
Shares & warrants issued for cash, net		–		–		37,700		38		37,699,962			–			–			37,700,000			37,700			38			–		–		37,699,962			–			–			37,700,000
Shares issued to Aspire Global plc		186,838		187		–		–		13,326,565			–			–			13,326,752			–			–			186,838		187		13,326,565			–			–			13,326,752
Cashless exercise of warrants		244,346		244		–		–		(244	)		–			–			–			–			–			244,346		244		(244	)		–			–			–
Shares issued for conversion of debt		423,141		423		–		–		112,077			–			–			112,500			–			–			423,141		423		112,077			–			–			112,500
Exercise of stock options for cash		2,000		2		–		–		5,998			–			–			6,000			–			–			2,000		2		5,998			–			–			6,000
Stock-based compensation		20,000		20		–		–		1,435,296			–			–			1,435,316			–			–			20,000		20		1,435,296			–			–			1,435,316
Preferred share dividends		–		–		484		–		483,817			–			(483,817	)		–			484			–			–		–		483,817						(483,817	)		–
Issuance costs		–		–		–		–		(2,100,000	)		–			–			(2,100,000	)		–			–			–		–		(2,100,000	)		–			–			(2,100,000	)
Net loss		–		–		–		–		–			–			(8,881,038	)		(8,881,038	)		–			–			–		–		–			–			(8,881,038	)		(8,881,038	)
Comprehensive income		–		–		–		–		–			187,428			–			187,428			–			–			–		–		–			187,428			–			187,428
Balance at December 31, 2021		14,191,739	$	14,191		38,184	$	38	$	77,797,825		$	241,339		$	(26,014,405	)	$	52,038,988			38,184			38			14,191,739		14,191	$	77,797,825			241,339			(26,014,405	)		52,038,988

Cashless exercise of warrants and RSU		225,091		225		–		–		(225	)		–			–			–			–			–			225,091		225		(225	)		–			–			–
Stock-based compensation		–		–		–		–		1,814,607			–			–			1,814,607			–			–			–		–		1,814,607			–			–			1,814,607
Preferred share dividends		–		–		1,367		2		1,367,258			–			(1,367,260	)		–			1,367			2			–		–		1,367,258			–			(1,367,260	)		–
Net loss		–		–		–		–		–			–			(11,841,071	)		(11,841,071	)		–			–			–		–		–			–			(11,841,071	)		(11,841,071	)
Comprehensive income		–		–		–		–		–			(1,156,825	)		–			(1,156,825	)
Comprehensive loss																						–			–			–		–		–			(1,156,825	)		–			(1,156,825	)
Balance at March 31, 2022		14,416,830	$	14,416		39,551	$	40	$	80,979,465		$	(915,486	)	$	(39,222,736	)	$	40,855,699			39,551			40			14,416,830		14,416		80,979,465			(915,486	)		(39,222,736	)		40,855,699
Shares & warrants issued for cash, net		977,659		978		–		–		3,499,022			–			–			3,500,000

Common stock and warrants issued for cash																						–			–			977,659		978		3,499,022			–			–			3,500,000
Issuance costs																						–			–			–		–		(2,091,550	)		–			–			(2,091,550	)
Cashless exercise of warrants and RSU		178,465		178		–		–		(178	)		–			–			–			–			–			178,465		178		(178	)		–			–			–
Shares issued for conversion of debt		600,000		600		–		–		299,400			–			–			300,000			–			–			600,000		600		299,400			–			–			300,000
Stock-based compensation		–		–		–		–		1,091,167			–			–			1,091,167			–			–			–		–		1,091,167			–			–			1,091,167
Preferred share dividends		–		–		1,416		1		1,416,241			–			(1,416,242	)		–			1,416			1			–		–		1,416,241			–			(1,416,242	)		–
Issuance costs		–		–		–		–		(2,091,550	)		–			–			(2,091,550	)
Net loss																						–			–			–		–		–			–			(8,978,700	)		(8,978,700	)
Comprehensive loss																						–			–			–		–		–			(3,560,908	)		–			(3,560,908	)
Balance at June 30, 2022																						40,967		$	41			16,172,54	$	16,172	$	85,193,567		$	(4,476,394	)	$	(49,617,678	)	$	31,115,708

Balance at September 30, 2022																						37,700		$	38			16,654,573	$	16,654	$	91,941,757		$	(7,365,129	)	$	(62,827,744	)	$	21,765,576
Stock-based compensation																						–			–			20,750		21		503,084			–			–			503,105
Shares issued for conversion of debt																						–			–			600,000		600		299,400			–			–			300,000
Preferred share dividends																						–			–			–		–		1,536,969			–			(1,536,969	)		–
Net loss		–		–		–		–		–			–			(8,978,700	)		(8,978,700	)		–			–			–		–		–			–			(7,557,765	)		(7,557,765
Comprehensive income		–		–		–		–		–			(3,560,908	)		–			(3,560,908	)		–			–			–		–		–			6,356,110			–			6,356,110
Balance at June 30, 2022		16,172,954	$	16,172		40,967	$	41	$	85,193,567		$	(4,476,394	)	$	(49,617,678	)	$	31,115,708
Balance at December 31, 2022																						37,700			38			17,275,323		17,275		94,281,210			(1,009,019	)		(71,922,478	)		21,367,026

Common stock issued for cash																						–			–			6,372,530		6,373		5,915,609			–			–			5,921,982
Stock-based compensation																						–			–			31,500		31		377,664			–			–			377,695
Shares issued for conversion of debt																						–			–			1,465,322		1,465		731,196			–			–			732,661
Preferred share dividends																						–			–			–		–		1,557,576			–			(1,557,576	)		–
Net loss																						–			–			–		–		–			–			(4,011,675	)		(4,011,675	)
Comprehensive income																						–			–			–		–		–			1,329,046			–			1,329,046
Balance at March 31, 2023																						37,700			38			25,144,675		25,145		102,863,225			320,027			(77,491,729	)		25,716,735

Common stock issued for conversion of preferred stock																						(5,333	)		(6	)		9,028,538		9,029		(9,023	)		–			–			–
Stock-based compensation																						–			–			45,000		45		233,391			–			–			233,436
Reclassification of common stock warrants as liabilities																						–			–			–		–		(1,294,638	)		–			–			(1,294,638	)
Preferred share dividends																						–			–			–		–		992,274			–			(992,274	)		–
Net loss																						–			–			–		–		–			–			(43,730,398	)		(43,730,398	)
Comprehensive income																						–			–			–		–		–			142,779			–			142,779

Balance at June 30, 2023																						32,367		$	32			34,218,213	$	34,218	$	102,785,259		$	462,306		$	(122,214,401	)	$	(18,932,586	)

The accompanying notes are an integral part of these unaudited consolidated financial statements.

EBET, Inc. (“EBET” or “the Company”) was formed on September 24, 2020 as a Nevada corporation. EBET is a technology company operating platforms focused on ~~igaming~~i-gaming including casino, sportsbook and esports events. The Company operates under a Curacao gaming sublicense ~~and under~~pursuant to a ~~strategic partnership~~set of agreements with Aspire Global plc (“Aspire”) as a platform provider allowing EBET to provide online betting services to various countries around the world. ~~On May 5, 2022, the Company changed its name to EBET, Inc. from Esports Technologies, Inc.~~

On September 24, 2020, ESEG Limited (“ESEG”) was acquired by Global E-Sports Entertainment Group, LLC (“Global E-Sports”) in exchange for 50% of the membership interest in Global E-Sports held by the former owners of ESEG. The remaining 50% interest of Global E-Sports is held by EBET. Prior to this transaction both ESEG and Global E-Sports shared common ownership. This transaction was accounted for as a combination of entities under common control and as such both operations have been combined from their inception. In addition, on September 24, 2020, EBET executed a Share Exchange Agreement (“Share Exchange”) resulting in the acquisition of ~~100% of the membership interest of Global E-Sports in exchange for the issuance of~~ ~~7,340,421~~ ~~shares of common stock.~~

Pursuant to the Share Exchange, the merger between Global E-Sports and the Company was accounted for as a reverse merger. Under this method of accounting, EBET was treated as the “acquired” company for financial reporting purposes. The net assets of Global E-Sports are stated at historical cost, with no goodwill or other intangible assets recorded.

On October 1, 2021, the Company, and Esports Product Technologies Malta Ltd. (“Esports Malta”) entered into a Share Purchase Agreement (the “Acquisition Agreement”) with Aspire and various Aspire group companies to acquire all of the issued and outstanding shares of Karamba Limited. The total acquisition price was €65,000,000 paid as follows: (i) cash amount of €50,000,000; (ii) €10,000,000, payable in accordance with the terms of an unsecured subordinated promissory note (the “Note”); and (iii) shares of Company common stock, which are valued at €5,000,000 (based on the weighted-average per-share price of the ten days prior to the execution date of the Acquisition Agreement (the “Exchange Shares”). See Notes 3, 4 and 5 for additional information.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The continuation of the Company as a going concern is dependent upon the ability of the Company to obtain equity or debt financings to continue operations. The Company has ~~recurring losses~~a history of and ~~generated~~expects to continue to report negative cash flows from operations ~~since inception. In April 2021, the Company completed its Initial Public Offering (“IPO”)~~ and ~~issued~~ ~~2,400,000~~ ~~shares of common stock for gross cash proceeds of $14,400,000, receiving~~a net ~~proceeds of $13,514,200~~.loss. The Company's forecasts for ~~2022~~2023 and beyond indicate that it we will need additional funding in order to have sufficient financial resources to continue to settle its debts as they fall due. The Company has taken significant measures to increase the profitability of its business in the short term. These actions include optimizing the efficiency of marketing campaigns, reducing the total number of employees and contractors, ~~by approximately 45 positions,~~ terminating software and other immaterial contracts as well as generally reducing the operating costs of the business. These efforts have also resulted in an increased focus on the Company’s i-gaming business and a significant reduction in the investment of the Company’s esports products and ~~technologies.~~technologies, which resulted in the recognition of an impairment loss on certain intangible assets and fixed assets. As a result of the Company’s actions as referenced above, it does not expect to launch its esports products in the ~~short~~foreseeable future. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company may seek additional funding through a combination of equity offerings, debt financings, government or ~~medium term. In making this assessment, the Directors considered the going concern status for~~other third-party funding, commercialization, marketing and distribution arrangements, other collaborations, strategic alliances and licensing arrangements and delay planned cash outlays or a ~~period of at least 12 months from the date of signing the financial statements. For this reason, they continue to adopt the going concern basis in preparing the financial statements.~~combination thereof. Management cannot be certain that such events or a combination thereof can be achieved.

The outbreak of the 2019 novel coronavirus disease (“COVID-19”), which was declared a global pandemic by the World Health Organization on March 11, 2020, and the related responses by public health and governmental authorities to contain and combat its outbreak and spread, has severely impacted the U.S. and world economies. Economic recessions, including those brought on by the COVID-19 outbreak may have a negative effect on the demand for the Company’s products and the Company’s operating results. The range of possible impacts on the Company’s business from the coronavirus pandemic could include: (i) changing demand for the Company’s online betting products; and (ii) increasing contraction in the capital markets.

A significant or prolonged decrease in consumer spending on entertainment or leisure activities would also likely have an adverse effect on demand for the Company’s products, reducing cash flows and revenues, and thereby materially harming the Company’s business, financial condition and results of operations. In addition, a materially disruptive resurgence of COVID-19 cases or the emergence of additional variants or strains of COVID-19 could cause other widespread or more severe impacts depending on where infection rates are highest. As steps taken to mitigate the spread of COVID-19 necessitated a shift away from a traditional office environment for many employees, the Company implemented business continuity programs to ensure that employees were safe and that the business continued to function with minimal disruptions to normal work operations while employees worked remotely. The Company will continue to monitor developments relating to disruptions and uncertainties caused by COVID-19.

On April 27, 2023, the Company was notified by its gaming platform operator services provider Aspire that the gaming regulatory authority in Germany had sent a letter received by Aspire on April 25, 2023 stating that Aspire would be required to shut down activity of its gaming operations in Germany effective as of 10 days from receipt of said letter until such time as Aspire was otherwise granted a license to operate in Germany. Aspire informed the Company that although it sought an extension of the requested shutdown deadline, it was not successful in receiving an extension of time and/or any form of other relief from this request. In order to meet the subject German regulator requirement, Aspire shut down its activities in Germany on May 7, 2023 and as a result the gaming websites owned by the Company that operate in Germany were shut down on that date. During the nine months ended June 30, 2023 and 2022 revenue generated in German markets was $9,686,372 and $12,806,072, respectively. During the same periods gross profit contributed from the German markets was $2,775,605 and $2,967,251, respectively.

On June 28, 2023, based on the approval of the Strategic Alternatives Committee, that committee’s favorable recommendation to the Board, and the Board’s subsequent approval, the Company hired Houlihan Lokey Capital, Inc. (“Houlihan”) as the Company’s exclusive financial advisor to provide financial advisory and investment banking services in connection with one or more of a sale, recapitalization, restructuring or any other financial transactions involving the Company. The continued engagement of Houlihan is required by the Lender during the term of the Forbearance Agreement described in Note 4 below.

The significant accounting policies followed in the preparation of the consolidated financial statements are as follows:

The accompanying unaudited financial statements of the Company, include the accounts of the Company and its wholly-owned subsidiaries, and have been prepared in accordance with generally accepted accounting principles accepted in the United States (“U.S. GAAP”) for interim unaudited financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The unaudited financial statements include all adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary in order to make the condensed financial statements not misleading. Operating results for the nine months ended June 30, ~~2022,~~2023, are not necessarily indicative of the final results that may be expected for the year ended September 30, ~~2022.~~2023. For more complete financial information, these unaudited financial statements should be read in conjunction with the audited consolidated financial statements for the year ended September 30, ~~2021~~2022 included in our Form 10-K filed with the SEC. Notes to the consolidated financial statements which would substantially duplicate the disclosures contained in the audited consolidated financial statements for the most recent fiscal period, as reported in the Form 10-K, have been omitted. All intercompany accounts, transactions and balances have been eliminated in consolidation.

Certain reclassifications have been made to prior period amounts to conform to the current year presentation.

The Company accounts for business combinations under the acquisition method of accounting, in accordance with ASC 805, which requires assets acquired and liabilities assumed to be recognized at their fair values as of the acquisition date. Any fair value of purchase consideration in excess of the fair value of the assets acquired less liabilities assumed is recorded as goodwill. The fair values of the assets acquired, and liabilities assumed are determined based upon the valuation of the acquired business and involve management making significant estimates and assumptions.

Accounts receivables are recorded at amortized cost, less any allowance for doubtful accounts. Accounts receivable consists primarily of amounts due from our platform provider. The receivable balance as of September 30, 2022 owed to the Company represents the net amount owed to the Company by Aspire related to the strategic agreement for the Company’s i-gaming platform and is stated at historical cost less any allowance for doubtful accounts. The allowance for doubtful accounts was $0 as of June 30, 2023 and September 30, 2022.

The Company’s ~~other~~ intangible assets consist primarily of customer relationships, trademarks and internet domain names. Certain intangible assets have a defined useful life and others are classified as indefinite-lived intangible assets. Other intangible assets with a defined useful life are amortized over their estimated useful economic lives on a straight-line basis. An intangible asset with an indefinite useful life is not amortized but assessed for impairment annually, or more frequently, when events or changes in circumstances occur indicating that it is more likely than not that the indefinite-lived asset is impaired. Impairment exists when the carrying amount exceeds its fair value. In testing for impairment, the Company has the option to first perform a qualitative assessment to determine whether it is more likely than not that an impairment exists. If it is determined that it is more likely than not that an impairment exists, a quantitative impairment test is not necessary. If the Company concludes otherwise, it is required to perform a quantitative impairment test. To the extent an impairment loss is recognized, the loss establishes the new cost basis of the asset. Subsequent reversal of impairment losses is not permitted.

~~See Note 3 for intangible assets acquired in a business acquisition transaction.~~

Long-lived assets consist of software and equipment, finite-lived acquired intangible assets, such as license agreements, and indefinite-lived assets such as internet domain names. Long-lived assets are tested for recoverability whenever events or changes in business circumstances indicate that the carrying amount of the asset may not be fully recoverable. Impairment expense is recognized to the extent an asset’s expected undiscounted future cash flows are less than the asset’s carrying amount. As of June 30, 2023, the Company determined that it’s intangible assets and goodwill were impaired and recognized an impairment loss of $32,653,626.

The Company accounts for leases under ASC 842. The Company assesses whether a contract contains a lease on its execution date. If the contract contains a lease, lease classification is assessed upon its commencement date under ASC 842. For leases that are determined to qualify for treatment as operating leases, rent expense is recognized on a straight-line basis over the lease term. Leases that are determined to qualify for treatment as finance leases recognize interest expense as determined using the effective interest method with corresponding amortization of the right-of-use assets. For leases with terms of 12 months and greater, an asset and liability are initially recorded at an amount equal to the present value of the unpaid lease payments over the lease term. In determining the lease term for each lease, the Company includes options to extend the lease when it is reasonably certain that the option will be exercised. The Company uses the interest rate implicit in the lease, when known, or its estimated incremental borrowing rate, which is derived from information available at the lease commencement date including prevailing financial market conditions, in determining the present value of the unpaid lease payments.

The Company’s only significant lease is for office space in Malta, which has a two-year lease term beginning August 1, 2021, and is classified as an operating lease. The lease has an option to extend the term for an additional two years with a 10% increase in annual rent. On May 1, 2023, the Company notified the landlord that it will not renew the lease beyond its expiration date of July 31, 2023. The Company paid €176,001 at commencement and owed an additional €160,001 in August 2022. The Company has been making monthly payments of €13,335 on this annual payment. The Company recognized a right of use asset and lease liability of $381,346 at commencement based on the present value of lease payments at commencement and utilizing an estimate incremental borrowing rate of 10%.

The following table summarizes the lease-related assets and liabilities recorded in the consolidated balance sheets at June 30, 2023 and September 30, 2022:

The Company has no remaining lease payments under its operating lease. Operating lease expense was $43,564 and $42,613 during the nine months ended June 30, 2023 and 2022, respectively. Operating lease expense was $127,174 and $133,231 during the nine months ended June 30, 2023 and 2022, respectively.

The Company records liabilities for user account balances at a given reporting period based on deposits made by players either to the Company or the sales affiliate, less any losses on wagers and payout made to players. Liabilities to users amounts are not required to be backed by cash reserves of the Company. The user balances are maintained by the Company’s third-party platform provider, and the Company has an asset of an equivalent amount included within Prepaid expense and other current assets on the Company’s consolidated balance sheets.

The Company recognizes revenue in accordance with ASC Topic 606, Revenue From Contracts With Customers, which ~~was adopted on October 1, 2018 using the modified retrospective method. ASC Topic 606~~ requires companies to recognize revenue in a manner that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, the standard requires disclosures of the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. ~~The adoption of ASC Topic 606 had no impact to the Company’s comparative consolidated financial statements.~~ Revenue is recognized based on the following five step model:

No single customer ~~exceeded~~accounted for more than 10% of revenue ~~during~~for the three and nine months ended June 30, ~~2022 and 2020.~~2023 or 2022. In addition, no disaggregation of revenue is required because all current revenue is generated from gaming revenue.

i-gaming, or online casino, typically includes digital versions of wagering games available in land-based casinos, such as blackjack, roulette and slot machines. For these offerings, the Company functions similarly to land-based casinos, generating revenue through casino hold, as users play against the house. i-gaming revenue is generated from user wagers net of payouts made on users’ winning wagers and incentives awarded to users.

Sportsbook or sports betting involves a user wagering money on an outcome or series of outcomes occurring. When a user’s wager wins, the Company pays the user a pre-determined amount known as fixed odds. Sportsbook revenue is generated by setting odds such that there is a built-in theoretical margin in each sports wagering opportunity offered to users. Sportsbook revenue is generated from users’ wagers net of payouts made on users’ winning wagers and incentives awarded to users.

The Company operates an online betting platform allowing users to place wagers on a variety of live sporting events, i-gaming and esports events. Each wager placed by users create a single performance obligation for the Company to administer each event wagered. The performance obligation is satisfied once the event wagered on has been completed. Gross gaming revenue is the aggregate of gaming wins and losses based on results of each event that customers wager bets on. ~~Variable commission fees~~

Variability in the transaction price arises primarily due to market-based pricing, cash discounts, revenue sharing and usage-based fees. The Company offers loyalty programs, free plays, deposit bonuses, discounts, rebates and other rewards and incentives to its customers. Revenue for Sportsbook and i-gaming is collected prior to the contest or event and is fixed once the outcome is known. Prizes paid and payouts made to users are ~~paid~~recognized when awarded to ~~sales affiliates based on a percentage of revenue generated from~~ the ~~affiliate. The commissions rebated to affiliates are recorded as a reduction to gross gaming revenue.~~player.

Cost of revenue consists of third-party costs associated with the betting software platform and gaming taxes.

Sales and marketing expenses consist primarily of expenses associated with ~~customer related acquisition costs,~~amounts paid to affiliates, advertising and related software, strategic league and team partnerships and costs related to free to play contests, and the compensation of sales and marketing personnel, including stock-based compensation expenses. Variable commission fees are paid to sales affiliates based on a percentage of revenue generated from the affiliate. The commissions rebated to affiliates are recorded as a component of marketing expense. Advertising costs are expensed as incurred. ~~Advertising costs incurred was $434,465~~ ~~and $~~0 ~~for the nine months ended June 30, 2022 and 2021, respectively.~~

Product and technology expenses consist primarily of expenses which are not subject to capitalization or otherwise classified within Cost of Revenue. Product and Technology expenses include software licenses, depreciation of hardware and software and costs related to the compensation of product and technology personnel, including stock-based compensation.

General and administrative expenses include costs related to the compensation of the Company’s administrative functions, insurance costs, professional fees and consulting expense.

Deferred taxes are determined utilizing the "asset and liability" method, whereby deferred tax asset and liability account balances are determined based on differences between financial reporting and the tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company provides a valuation allowance, when it's more likely than not that deferred tax assets will not be realized in the foreseeable future. Deferred tax liabilities and assets are classified as current or non-current based on the underlying asset or liability or if not directly related to and asset or liability based on the expected reversal dates of the specific temporary differences.

The Company discloses fair value measurements for financial and non-financial assets and liabilities measured at fair value. Fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The accounting standard establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels, which are described below:

Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.

Level 2: Observable prices that are based on inputs not quoted on active markets but are corroborated by market data.

Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.

The following tables set forth the fair value of the Company’s financial assets and liabilities measured at fair value as of June 30, 2023 and September 30, 2022 based on the three-tier fair value hierarchy:

The Company accounts for its derivative financial instruments in accordance with ASC Topic 815, Derivatives and Hedging (“ASC 815”) and ASC Topic 820, Fair Value Measurements and Disclosures (“ASC 820”). The Company uses derivative financial instruments to reduce its exposure to changes in foreign currency exchange rates. All derivatives are recorded at fair value on the Consolidated Balance Sheets and changes in the fair value of derivative financial instruments are either recognized in Accumulated other comprehensive income (loss) (a component of Total shareholders' equity), Long-term debt or Net income depending on the nature of the underlying exposure, whether the derivative is formally designated as a hedge and, if designated, the extent to which the hedge is effective. The Company classifies the cash flows at settlement from derivatives in the same category as the cash flows from the related hedged items.

The Company's derivative instruments do not subject its earnings or cash flows to material risk, as gains and losses on these derivatives are intended to offset losses and gains on the item being hedged. The Company does not enter into derivative transactions for speculative purposes and it does not have any non-derivative instruments that are designated as hedging instruments pursuant to ASC 815. The Company manages the credit risk of its counterparties by dealing only with institutions that it considers financially sound and considers the risk of non-performance to be remote.

The Company entered into foreign exchange forward contracts to mitigate the change in fair value of specific liabilities and cash flows on the Consolidated Balance Sheets that were denominated in Euros related to the acquisition of the Aspire B2C business in November 2021. These undesignated hedging instruments are recorded at fair value as a derivative asset or liability on the Consolidated Balance Sheets with their corresponding change in fair value recognized in Other income (expense), net. The cash flows related to the gains and losses are classified in the consolidated statements of cash flows as part of cash flows from operating activities. The total notional amount of outstanding undesignated derivative instruments was $16,050,000 as of September 30, 2022. During the nine months ended June 30, 2023, the Company settled all of its foreign exchange forward contracts, receiving cash proceeds of $973,965 and recognized a loss of $142,187. The Company recognized a loss on derivative instruments of $203,116 during the nine months ended June 30, 2022.

The Company’s reporting currency is the U.S. Dollar. Certain subsidiaries of the Company have a functional currency other than the U.S. Dollar and are translated to the Company’s reporting currency at each reporting date. Non-monetary items are translated at historical rates. Monetary assets and liabilities are translated from British pounds and Euro into U.S. Dollars, at the period-end exchange rate, while foreign currency expenses are translated at the exchange rate in effect on the date of the transaction. The net effect of translation is reflected as other comprehensive income. The gains or losses on transactions denominated in currencies other than an entity’s functional currency are included in the consolidated statement of operations.

Goodwill represents the excess of the purchase price over the fair value of assets acquired and liabilities assumed. Goodwill is reviewed for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount may be impaired. When assessing goodwill for impairment, the Company uses qualitative and if necessary, quantitative methods in accordance with FASB ASC Topic 350, Goodwill. The Company also considers its enterprise value and if necessary, discounted cash flow model, which involves assumptions and estimates, including the Company’s future financial performance, weighted average cost of capital and interpretation of currently enacted tax laws.

Circumstances that could indicate impairment and require the Company to perform a quantitative impairment test include a significant decline in the Company’s financial results, a significant decline in the Company’s enterprise value relative to its book value, an unanticipated change in competition of the Company’s market share and a significant change in the Company’s strategic plans.

In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470- 20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity. This ASU (1) simplifies the accounting for convertible debt instruments and convertible preferred stock by removing the existing guidance in ASC 470-20, Debt: Debt with Conversion and Other Options, that requires entities to account for beneficial conversion features and cash conversion features in equity, separately from the host convertible debt or preferred stock; (2) revises the scope exception from derivative accounting in ASC 815-40 for freestanding financial instruments and embedded features that are both indexed to the issuer’s own stock and classified in stockholders’ equity, by removing certain criteria required for equity classification; and (3) revises the guidance in ASC 260, Earnings Per Share, to require entities to calculate diluted earnings per share (EPS) for convertible instruments by using the if-converted method. In addition, entities must presume share settlement for purposes of calculating diluted EPS when an instrument may be settled in cash or shares. The Company will adopt this guidance on October 1, 2023, and is currently evaluating the potential impact to its consolidated financial statements.

From time to time, new accounting pronouncements are issued by the Financial Accounting Standard Board (“FASB”) or other standard setting bodies that the Company adopts as of the specified effective date. The Company does not believe that the impact of recently issued standards that are not yet effective will have a material impact on the Company’s financial position or results of operations upon adoption.

On October 1, 2021, in order to accelerate the growth and expand market access for our product offerings, the Company and Esports Malta entered into the “Acquisition Agreement” with Aspire, Aspire Global International Limited, AG Communications Limited, Aspire Global 7 Limited (collectively the “Aspire Related Companies”), and Karamba Limited (“Karamba”) whereby Esports Malta acquired all of the issued and outstanding shares of Karamba. The total acquisition price, paid at the closing of the acquisition of the Karamba shares, was €65,000,000 paid as follows: (i) a cash amount of €50,000,000; (ii) €10,000,000, paid in accordance with the terms of an unsecured subordinated promissory note (the “Note”); and (iii) shares of Company common stock, which were valued at €5,000,000 (based on the weighted-average per-share price of the ten days prior to the execution date of the Acquisition Agreement). The transaction closed on November 29, 2021.

The Note provides for an interest rate of 10% per annum. The maturity date of the Note is the earlier of that date which is four years from the issuance date or a liquidity event. The Note requires repayment of the principal amount plus any accrued interest in three equal installments, payable annually starting on the second anniversary after issuance. No interest payment shall be due until that date which is the last day of the end of the second anniversary of issuance should the Note remain unpaid at such time. Should the Note remain unpaid at the second anniversary, the total accrued interest due at that time shall be paid at the second-year anniversary for accrued interest for the period from the issuance date through the second-year anniversary date. Thereafter, and on each anniversary date thereafter, the interest due for the prior annual period shall be paid. Notwithstanding the foregoing, if the Company owes greater than $15.0 million under the credit agreement with CP BF Lending, LLC entered into in connection with the acquisition (See Note 4 – Borrowings – Senior Notes, then then the parties agree that the Company shall repay any principal amount plus any accrued interest due through the issuance of Company common stock in lieu of any cash payment and the amount of said common stock shares to be issued by the Company shall be determined by using the Conversion Price as defined below. Should an event of default occur on the Note, then at the election of Aspire, either (i) the Operator Services Agreement will be amended such that the fees payable shall increase by 5% during the continuation of the event of default, or (ii) Aspire may elect to convert the entire outstanding principal amount plus any accrued interest into fully-paid and non-assessable shares of common stock of the Company at a price per share based on the weighted-average per-share price for the ten days prior to the date of the occurrence of the event of default (“Conversion Price”). In no event shall the Conversion Price be lower than $18.00 per share (as adjusted for stock splits, stock dividends, or similar events occurring after the date hereof) and the total maximum number of common stock shares that may be issued to Aspire upon any such conversion in the aggregate shall be 650,000 shares (as adjusted for stock splits, stock dividends, or similar events occurring after the date hereof).Unaudited Proforma Information

The ~~acquired assets were recorded at their estimated fair values.~~following schedule contains pro-forma consolidated results of operations for the three months and nine months ended June 30, 2023 and 2022 as if the Aspire B2C acquisition occurred on October 1, 2021. The ~~purchase price allocation is preliminary,~~pro forma results of operations are presented for informational purposes only and ~~as additional information becomes available, the Company may further revise the preliminary purchase price allocation, including the fair value of identified intangible assets, during the remainder~~are not indicative of the ~~measurement period, which will not exceed 12 months from~~results of operations that would have been achieved if the ~~closing~~acquisition had taken place on October 1, 2021, or of ~~the acquisition. Measurement period adjustments will be recognized~~results that may occur in the ~~reporting period in which the adjustment amounts are determined. Any such adjustments may be material.~~future.

~~The purchase price of this acquisition was allocated on a preliminary basis as follows:~~

Useful life is the period over which an asset is expected to add to the future cash flows of an entity. Useful life for identifiable assets is generally estimated using a modified straight-line method or a usage period. The ~~Company has determined that the useful life of the trademarks vary from 5 years to an indefinite life and determined that the useful life of the Customer Relationships was three years.~~

Goodwill represents the excess of the gross considerations transferred over the fair value of the underlying net assets acquired and liabilities assumed. Goodwill recognized is not deductible for local tax purposes.

~~Upon completing the acquisition of Aspire, the company incurred the following costs:~~

~~Debt issuance costs~~most significant proforma adjustments relate to ~~costs associated with acquiring~~annual interest on the ~~loan from the CP BF Lending LLC. These have been recorded as reduction of the face value of the debt~~Senior Notes and ~~are amortized over the life of the loan. Equity issuance costs relate~~Note to ~~the costs associated with the private placement. These have been recorded as reduction of the equity proceeds. Transactions costs relate to all direct and indirect costs associated~~Aspire issued in connection with the acquisition, amortization expense of the estimated intangible assets recognized as part of the purchase price allocation, and ~~expensed as incurred.~~the preferred dividends incurred in connection with the financing of the acquisition.

The following is a summary of borrowings outstanding as at June 30, ~~2022~~2023 and September 30, ~~2021:~~ 2022:

Schedule of borrowings outstanding
				June 30, 2022														September 30, 2021										June 30, 2023
	Contractual Interest			Principal outstanding balance		Principal outstanding balance		Unamortized debt discount			Accrued Interest		Issuance costs			Carrying amount		Principal outstanding balance		Unamortized debt discount			Carrying amount		Contractual Interest			Principal outstanding balance		Principal outstanding balance		Unamortized debt discount			Accrued Interest		Issuance costs		Carrying amount
	rate		Cur	Local		USD		USD			USD		USD			USD		USD		USD			USD		rate		Cur	Local		USD		USD			USD		USD		USD
Senior notes		15%	USD		30,000,000		30,000,000		(6,767,554	)		177,951		(2,687,937	)		20,722,460		0		0			0		15%	USD		26,086,927		26,086,927		–			–		–		26,086,927
Note due to Aspire		10%	EUR		10,000,000		10,387,000		0			637,793		0			11,024,793		0		0			0		10%	EUR		10,000,000		10,866,000		–			1,751,133		–		12,617,133
Convertible notes		10%	USD		1,606,891		1,606,891		0			0		0			1,606,891		1,912,500		(516,366	)		1,396,134		10%	USD		681,891		681,891		–			–		–		681,891
Other		0%	USD		675,000		675,000		(177,284	)		0		0			497,716		675,000		(211,076	)		463,924		0%	USD		675,000		675,000		(128,366	)		–		–		546,634
Total borrowings							42,668,891		(6,944,838	)		815,744		(2,687,937	)		33,851,860		2,587,500		(727,442	)		1,860,058							38,309,818		(128,366	)		1,751,133		–		39,932,585

Current																	1,606,891							1,396,133																39,385,951
Long-term																	32,244,969							463,925																546,634
Total borrowings																	33,851,860							1,860,058																39,932,585

On November 29, 2021, the Company entered into a credit agreement (the “Credit Agreement”) with CP BF Lending, LLC (“Lender”), pursuant to which the Lender agreed to make a single loan to the Company of $30,000,000 (the “Loan”). The Loan bears interest on the unpaid principal amount at a rate per annum equal to 15.0% as follows: (1) cash interest on the unpaid principal amount of the Loan at a rate equal to 14.0% per annum, plus (2) payable-in-kind interest (“PIK Interest”) on the unpaid principal amount of the Loan at a rate equal to 1.0% per annum. The Company paid to Lender on the closing date a non-refundable origination fee in an amount equal to $750,000.

The ~~Loan~~Senior Note matures in 36 months, provided that the Company may receive two 12-month extensions of the maturity date by paying to the Lender (1) an extension fee equal to 1.0% of the unpaid principal balance of the Loan as of the date of such extension, and (2) all reasonable and documented out-of-pocket fees and expenses paid or incurred by Lender, in each case in connection with the extension request, including but not limited to fees and expenses for appraisals, collateral exams and audits, and legal counsel. The foregoing extension right is subject to, among other items, (i) the Loan not being in default, (ii) the representations and warranties contained in Credit Agreement being true and correct; and (iii) the Lender granting its written approval thereof in its sole discretion.

The ~~Loan~~Senior Note may be prepaid by the Company at any time. In addition, the Credit Agreement provides that in the event there shall be excess cash flow from the Aspire Business (as such concept is defined in the Credit Agreement) for any calendar month, commencing with the month ended December 31, 2022, the Company shall apply a portion of such excess cash flow amount to prepay the outstanding principal balance of the Loan; provided that no such prepayment shall be required once the unpaid principal balance of the Loan has been reduced to $15,000,000.

The Credit Agreement requires the Company to meet certain financial ~~covenants commencing June 30, 2022.~~covenants. The Loan is secured by all of the assets of the Company and its subsidiaries. The Loan may be accelerated by the Lender upon an event of default, which in addition to customary events of default include: (i) if (1) any of the Company or its subsidiaries shall fail to maintain in full force and effect any gaming approval (as defined in the Credit Agreement) required for the operation of its business or (2) any gaming regulator shall impose any condition or limitation on any of the foregoing entities that could be reasonably expected to have a material adverse effect; or (ii) the suspension from trading or failure of the Company’s common stock to be trading or listed on the Nasdaq exchange for a period of three consecutive trading days.

As of ~~June 30,~~March 31, 2022, the Company had not maintained compliance with the covenants of the Senior Notes and obtained a waiver from its lender which waiver iswas contingent on the completion of an equity raise of $3.5 million, which was completed in June ~~2022 .~~2022. In consideration for obtaining a waiver from the compliance with certain covenants, the Company agreed to amend the Senior Notes such that $5 million of ~~principle~~principal loan balance becomes convertible at $3.58 per share commencing after the Company raises the $5,000,000 of common equity (including the foregoing $3.5 million). On February 2, 2023, the conversion option became exercisable upon closing of the offering that generated $6,500,000 of gross proceeds.

In connection with the Loan, the Company issued the Lender a warrant (the “Lender Warrant”) to purchase 1,567,840 shares of Company common stock at an initial exercise price of $25.00 per share expiring on the earlier to occur of (i) five years following the issue date or (ii) the second anniversary of the satisfaction of all obligations of the Company under the Credit Agreement. The exercise price is subject to appropriate adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting the Company’s common stock. In addition, the exercise price of the Lender Warrant is subject to “weighted-average” anti-dilution protection for issuances by the Company below the exercise price (other than certain defined exempt issuances), and, upon shareholder approval, which was received on February 9, 2022, the number of shares underlying the Lender Warrant shall also be adjusted for issuances to which the “weighted-average” anti-dilution protection applies. Pursuant to the foregoing anti-dilution provision, in connection with the $~~3.5~~$3.5 million offering completed in June 2022, the number of shares underlying the warrant increased to 1,654,538 and the exercise price was reduced to $23.69. Pursuant to the foregoing anti-dilution provision, in connection with the $6.5 million offering completed in February 2023, the number of shares underlying the warrant increased to ~~1,654,538~~2,312,449 and the exercise price was reduced to $~~23.69~~16.95. The Lender will not have the right to exercise any portion of the Lender Warrant if the Lender (together with its affiliates) would beneficially own in excess of 4.99% of the number of shares of Company common stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the Lender Warrant, which beneficial ownership amount, at the election of the Lender may be increased to any other percentage not in excess of 19.99% as specified by the Lender. If a fundamental transaction occurs, then the successor entity will succeed to, and be substituted for the Company, and will assume all of the Company’s obligations under the Lender Warrant with the same effect as if such successor entity had been named in the Lender Warrant itself.

On September 2, 2022, the Lender provided the Company with a limited waiver of the Senior Note covenants until September 30, 2022 in exchange for a one-time payment of $151,158 to be added to the principal amount of the Senior Note. In addition, the Senior Note required the Company to maintain a minimum balance of $4.0 million in the account utilized to collect the revenues from the Company’s i-gaming business. On September 30, 2022, the Lender provided the Company with a limited waiver of these covenants until October 31, 2022 in exchange for a one-time payment of $152,032 to be added to the principal amount of the Senior Note. In addition, the Senior Note required the Company to maintain a minimum balance of $5.0 million in the account utilized to collect the revenues from the Company’s i-gaming business.

On October 6, 2022, the Lender provided the Company with an additional limited waiver allowing the foregoing minimum balance to be reduced to $4.0 million until October 31, 2022, in exchange for a one-time payment of $76,409 to be added to the principal amount of the Senior Note. On October 31, 2022, the Lender provided the Company with a limited waiver of these covenants until November 30, 2022 in exchange for a one-time payment of $229,959 to be added to the principal amount of the Senior Note. On November 30, 2022, the Lender provided the Company with a limited waiver of these covenants until December 16, 2022. On December 16, 2022, the Lender provided the Company with a limited waiver of these covenants until January 9, 2023.

On January 9, 2023, the Lender provided the Company with a limited waiver of these covenants until January 31, 2023 and required a principal payment of $3,000,000 which was made on January 10, 2023. This waiver and principal payment reduced the minimum balance in the account to $2,000,000. On January 31, 2023, the Lender provided the Company with a limited waiver of these covenants until February 17, 2023. On February 1, 2023, the Lender provided the Company with a further limited waiver of these covenants until April 28, 2023. On April 28, 2023, the Lender provided the Company with a further limited waiver of these covenants until May 12, 2023. On May 12, 2023, the Lender provided the Company with a further limited waiver of these covenants until May 26, 2023. On May 26, 2023, the Lender provided the Company with a limited waiver of these covenants until June 9, 2023. On June 9, 2023, the Lender provided the Company with a limited waiver of these covenants until June 20, 2023. On June 20, 2023, the Lender provided the Company with a limited waiver of these covenants until June 30, 2023.

On June 30, 2023, the Company, the subsidiaries of the Company and the Lender entered into a forbearance agreement (the “Forbearance Agreement”). Pursuant to the Forbearance Agreement, the Company acknowledged, among other items, that, as June 30, 2023, it was in default under the Credit Agreement, the Lender had the right to accelerate the Loan, and the Lender had the right to impose the default rate of interest under the Credit Agreement. Pursuant to the Forbearance Agreement, the Lender agreed to forbear from exercising its rights and remedies against the Company and the Guarantors under the Credit Documents until the earlier of September 15, 2023, which may be extended by the Lender, or until a termination event occurs pursuant to the Forbearance Agreement. A termination event under the Forbearance Agreement consists of the filing of a bankruptcy proceeding by the Company or any Guarantor, the occurrence of a new event of default under the Credit Agreement, or the failure by the Company or any Guarantor to perform any material requirement, covenant, or obligation under the Forbearance Agreement. During the forbearance period, the Lender agreed, among other items, not to accelerate the Loan, initiate any bankruptcy filings, or apply any default rates of interest. As partial consideration for the Lender agreeing to enter into the Forbearance Agreement, the Company paid a forbearance fee equal to 50 basis points of the outstanding principal amount of the Loan (or $130,425), which amount was added to the principal balance of the loan. In addition, on June 30, 2023, the Company made a prepayment of the Loan in the amount of $2.0 million, which in turn reduced the minimum cash balance requirement under the Credit Agreement to $0.

In connection with the Forbearance Agreement, the Lender agreed to provide the Company with a revolving line of credit in the amount of $2.0 million (the “Revolving Note”), with any advances under the Revolving Note to be made in the sole discretion of the Lender. The Revolving Note will have a maturity date of November 29, 2024 and carry an interest rate of 15.0% per annum, provided that upon an occurrence of default the interest rate will increase to the default rate under the Loan. The Revolving Note shall be an Obligation as defined in the Credit Agreement and as such shall be secured by the collateral in which the Company and the Guarantors have granted liens and security interests to the Lender in connection with the Loan. All discretionary advances shall terminate automatically and all outstanding principal together with accrued but unpaid interest and fees shall become immediately due and payable, without notice to or action by any party, on the earlier of the termination date of the Forbearance Agreement, or the maturity date of the Revolving Note, unless otherwise extended by the Lender. As of June 30, 2023, there was no outstanding balance on the Revolving Note.

As a result of the event of default on the Senior Note, the Company amortized all remaining debt discount and debt issuance costs associated with the Senior Note. During the three months ended June 30, 2023 and 2022, the Company recognized interest expense of $8,432,886 and $1,596,244, respectively, from the amortization debt discount and debt issuance costs related to the Senior Note. During the nine months ended June 30, 2023 and 2022, the Company recognized interest expense of $10,962,752 and $2,942,169, respectively, from the amortization debt discount and debt issuance costs related to the Senior Note. There was no unamortized debt discount and debt issuance costs as of June 30, 2023.

The Note provides for an interest rate of 10% per annum. The maturity date of the Note will be the earlier of that date which is four years from the issuance date or a liquidity event. The Note will require repayment of the principal amount plus any accrued interest in three equal installments, payable annually starting on the second anniversary after issuance. No interest payment shall be due until that date which is the last day of the end of the second-year anniversary of issuance should the Note remain unpaid at such time. Should the Note remain unpaid at the second-year anniversary, the total accrued interest due at that time shall be paid at the ~~second year~~second-year anniversary for accrued interest for the period from the issuance date through the ~~second year~~second-year anniversary date. Thereafter, and on each annual anniversary date thereafter, the interest due for the prior annual period shall be paid. Notwithstanding the foregoing, if the Company owes greater than $15,000,000 under the Credit Agreement, then the parties agree that the Company shall repay any principal amount plus any accrued interest due through the issuance of Company common stock in lieu of any cash payment and the amount of said common stock shares to be issued by the Company shall be determined by using the Conversion Price as defined below. Should an event of default occur on the Note, then at the election of Aspire, either (i) the Operator Services Agreement will be amended such that the fees payable shall increase by 5% during the continuation of the event of default, or (ii) Aspire may elect to convert the entire outstanding principal amount plus any accrued interest into shares of common stock of the Company at a price per share based on the weighted-average per-share price for the ten trading days prior to the date of the occurrence of the event of default (“Conversion Price”). In no event shall the Conversion Price be lower than $18.00 per share (as adjusted for stock splits, stock dividends, or similar events occurring after the date hereof) and the total maximum number of shares of common stock that may be issued to Aspire upon any such conversion in the aggregate shall be 650,000 shares (as adjusted for stock splits, stock dividends, or similar events occurring after the date hereof). As a result of the default on the Senior Note and the Forbearance Agreement described above, a potential event of default exists pursuant to the terms of the Note, and as such as classified all principal and interest as a current liability.

On September 1, 2020, ESEG entered into three promissory notes, with a combined principal amount of $2,100,000. The notes bore interest at the rate of 1010%% per annum and matured on March 1, 2022 and are now convertible at the noteholder’s option. The Company also agreed to pay two of the lenders a total of $675,000 on September 1, 2025, bearing no interest. The Company issued each of the lenders a conversion option at a fixed price of $0.50 per share and issued 2,015,000 warrants to purchase shares of the Company’s common stock at an exercise price of $0.30 per share, each with a term of five years. The convertible notes bear interest at 10% per annum and ~~mature~~matured on March 1, 2022. The holder may convert the note into shares of common stock at any time throughout the maturity date, to the extent and provided that no holder of the notes was or will be permitted to convert such notes so long as it or any of its affiliates would beneficially own in excess of 4.99% of the Company’s common stock after such conversion. The Company determined that the assignment of the notes payable by the subsidiary to the parent company was an extinguishment of the original notes payable due to the addition of a substantive conversion feature, and the Company recognized a loss on extinguishment of $~~265,779~~ ~~during the year ended September 30, 2020.~~

The Company evaluated the conversion option and concluded a beneficial conversion feature was present at issuance. The Company recognized the beneficial conversion feature and relative fair value of the warrants as a debt discount and additional paid in capital. The fair value of the warrants at the grant date was estimated using a Black-Scholes model and the following assumptions: 1) volatility of approximately 85% based on a peer group of companies; 2) dividend yield of 0%; 3) risk-free rate of 0.26%; and 4) an expected term of five years. The $2,100,000debt discount will be amortized through the maturity date of the convertible notes payable. During the ~~three~~twelve months ended ~~December 31, 2020,~~September 30, 2021, a total of $187,500of principal was converted into 375,000 shares of common stock. During the year ended September 30, 2022, a total of $305,609 of principal and $106,891 of accrued interest was converted into 825,000shares of common stock. During the nine months ended June 30, 2023, a total of $925,000 of principal and $107,661 of accrued interest was converted into 1,465,322 shares of common stock. As of June 30, 2023, the outstanding principal and accrued interest balance of the convertible notes was $681,891 and $93,286, respectively.

During the three months ended June 30, 2023 and 2022, the Company recorded a charge of $~~2,128,943~~ 12,663 and $11,430, respectively, in the accompanying consolidated statement of operations from the amortization of its debt discount related to the convertible notes payable and other liabilities described above. During the nine months ended June 30, 2023 and 2022, the Company recorded a charge of $37,114 and $33,793, respectively, in the accompanying consolidated statement of operations from the amortization of its debt discount related to the convertible notes payable and other liabilities described above.

The Company is currently authorized to issue up to ~~100,000,000~~500,000,000 shares of common stock with a par value of $0.001. In addition, the Company is authorized to issue 10,000,000 shares of preferred stock with a par value of $0.001. The specific rights of the preferred stock, when so designated, shall be determined by the board of directors.

On ~~June 16, 2022,~~February 2, 2023 the Company ~~issued,~~entered into Securities Purchase Agreements (the “Purchase Agreements”) with several institutional and accredited investors to issue, in ~~a private placement priced at-the-market under Nasdaq rules:~~an offering (the “February Offering”): (i) ~~977,657~~6,372,530 shares (the “Shares”) of the Company’s common stock, par value $0.001 per share (the “Common Stock”), and (ii) warrants to purchase up to an aggregate of ~~977,657~~6,372,530 shares of ~~common stock.~~Common Stock (the “Warrants”). The combined purchase price of one share of ~~common stock~~Common Stock and accompanying ~~warrant~~Warrant was $~~3.58~~.$1.02.

Subject to certain ownership limitations, the Warrants are exercisable commencing six months after issuance. Each Warrant is exercisable into one share of Common Stock at a price per share of $1.02 (as adjusted from time to time in accordance with the terms thereof) and will expire five and one-half years from the issuance date. The closing of the sales of these securities under the Purchase Agreements was on February 6, 2023.

On February 2, 2023, the Company entered into a Placement Agent Agreement (the “Placement Agent Agreement”) with WestPark Capital, Inc. (the “WestPark”), pursuant to which the Company has agreed to pay WestPark an aggregate fee equal to 7.0% of the gross proceeds toreceived by the Company from the ~~private placement were approximately~~sale of the securities in the transaction. In addition, the Company agreed to pay to WestPark on the Closing Date a cash fee equal to 1.0% of gross proceeds received by the Company from the sale of the securities in the transaction for non-accountable expenses. The Company also agreed to pay WestPark up to $~~3.5~~50,000 ~~million, before deducting~~of fees and other expenses.

The Company received gross proceeds of $6,500,000 and paid fees and expenses of $577,018.

In connection with the offering ~~expenses, and excluding the proceeds, if any, from~~described above, the exercise price of a total of 2,019,672 warrants issued in connection with the Company’s Series A Convertible Preferred Stock were adjusted to $1.02 per share. No adjustments will be made to the number of shares underlying the Warrants. Additionally, the exercise price of the ~~warrants.~~Lender Warrant issued in connection with the Senior notes was reset to $16.95 and the number of shares underlying the Lender Warrant became 2,312,449, and $5,000,000 of the principal balance of the Senior Note became convertible at $3.58 per share.

During the nine months ended June 30, 2023, the Company issued 2,065,322 shares pursuant to a conversion of principal of $925,000 and accrued interest of $107,661 on its convertible notes.

During the nine months ended June 30, 2023, the Company issued 9,028,538 shares pursuant to the conversion of 5,333 shares of Preferred Stock

During the nine months ended June 30, 2023, the Company issued 97,250 shares related to vesting of restricted stock units by employees.

On October 1, 2021, in connection with the Acquisition, the Company entered into subscription agreements (the “Subscription Agreements”) with certain investors (the “Investors”). Pursuant to the Subscription Agreements, the Investors agreed to subscribe for and purchase, and the Company agreed to issue and sell to such Investors, simultaneous with the closing of the Acquisition Agreement, an aggregate of 37,700 shares of Series A Convertible Preferred Stock (the “Preferred Stock”) for a purchase price of $1,000.00 per share, for aggregate gross proceeds of $37,700,000 (the “Private Placement”). For each share of Preferred Stock issued, the Company issued the Investor a warrant to purchase 150% of the shares of Company common stock underlying the Preferred Stock (the “Warrants”).

Pursuant to the Subscription Agreement, the Company has obtained shareholder approval of the conversion of the Preferred Stock and Warrants into Company common stock in compliance with the rules and regulations of the Nasdaq Stock Market (“Shareholder Approval”).

The Preferred Stockholders are entitled to receive dividends, at a rate of 14.0% per annum, which shall be payable quarterly in arrears on January 1, April 1, July 1 and October 1, beginning on the first such date after the issuance date. With limited exceptions, the Preferred Stockholders will have no voting rights. The dividends can be paid in either cash or in the issuance of additional preferred shares. Upon any liquidation, dissolution or winding-up of the Company, the holders of the Preferred Stock shall be entitled to receive out of the assets, whether capital or surplus, of the Company available to shareholders, an amount equal to the greater of: (i) the purchase price for each share of Preferred Stock then held, or (ii) the amount the holders would have received had the holders fully converted the Preferred Stock to Company common stock, in each case, before any distribution or payment shall be made to the holders of the Company’s common stock. The Preferred Stock iswas convertible into Company common stock at an initial conversion price of $28.00 per share (“Conversion Price”); provided that the Conversion Price is subject to anti-dilution protection upon any subsequent transaction at a price lower than the Conversion Price then in effect. Pursuant to the terms of the Preferred Stock, on April 28, 2023, the conversion price of the Preferred Stock was reduced from $28.00 per share to $0.71 per share. During the six months ended June 30, 2023, the Company has received conversion notices with respect to 5,333 shares of Preferred Stock, resulting in the issuance of 9,028,538 shares of common stock. As of June 30, 2023, there were 32,367 shares of Preferred Stock outstanding.

In addition, on ~~December~~July 31, ~~2022~~2023, and ~~April 15,~~October 31, 2023 (each an “Adjustment Date”), the Conversion Price ~~shall~~was to be adjusted to the lesser of: (i) the Conversion Price in effect on the Adjustment Date, or (ii) 85% of the average closing price of the Company’s common stock for the fifteen trading days prior to the Adjustment Date. Pursuant to the terms of the Preferred Stock, on July 31, 2023, the conversion price of the Preferred Stock was reduced to $0.086 per share.

The Warrants are exercisable and expire on the fifth anniversary thereafter. The Warrants were initially to be exercisable at an exercise price of $30.00 per share, provided that the exercise price is subject to anti-dilution protection upon any subsequent transaction at a price lower than the exercise price then in effect. Notwithstanding the foregoing anti-dilution provision, in connection with the $3.5 million offering completed in June 2022, the exercise price was reduced to $5.00. In February 2023, the warrants exercise price was reset to $1.02 in connection with the February 2023 equity financing. The Warrants can be exercised on a cashless basis if there is no effective registration statement registering, or no current prospectus available for, the resale of the ordinary shares underlying the Warrants.

The holders of the Preferred Stock and Warrants will not have the right to convert or exercise any portion of the Preferred Stock and Warrants to the extent that, after giving effect to such conversion, such holder (together with certain related parties) would beneficially own in excess of 4.99% of the Company’s common stock outstanding immediately after giving effect to such conversion or exercise.

~~During the three months ended December 31, 2020,~~As discussed above, the Company ~~received gross cash proceeds of $4,000,000~~ ~~in exchange for~~ ~~2,000,000~~ ~~shares of common stock. In conjunction with this fundraising, broker commission and expenses of $351,929~~ ~~were paid and~~ ~~173,625~~has issued common stock warrants ~~with an exercise price of $2.00~~ ~~and a five-year term were issued. The fair value of the warrants issued~~ in connection with its fundraising activities to preference shareholders, its lender and convertible notes issued during the ~~financing was estimated to be $228,500~~ ~~as discussed below.~~nine months ended June 30, 2023. The following table summarizes warrant activity during the nine months ended June 30, 2023:

~~In January 2021, the Company sold~~ ~~250,014~~ ~~shares of common stock to investors for $3 per share, receiving gross proceeds of $750,042. The company paid $30,314~~ ~~of broker fees and commissions related to this fundraising and issued~~ ~~8,750~~ ~~warrants to purchase common stock with an exercise price of $~~3 ~~per share and a term of~~ 5 ~~years. The fair value of the warrants issued in connection with the financing was estimated to be $228,500~~ ~~as discussed below.~~

~~In April 2021,~~At June 30, 2023, the ~~Company completed its IPO~~outstanding and ~~issued~~ ~~2,400,000~~ ~~shares of common stock for gross cash proceeds of $14,400,000~~ ~~and received net proceeds of $13,514,200~~ ~~after costs of $885,800~~ ~~which were recorded in shareholders’ equity. The Company also issued~~ ~~168,000~~ exercisable common stock warrants ~~with a five-year term and exercise price of $7.20~~ ~~to the underwriter. These warrants have an estimated fair value of $5,474,076~~.

As a result of the reset of the conversion price of the Company’s preferred stock to $0.71 on April 28, 2023 as disclosed above, as of June 30, 2023 the Company had insufficient shares to settle its equity-linked instruments until it increased its authorized shares of Company common stock in July 2023. The Company applied a sequencing approach to determine which instruments may not be settled in shares based on the Company’s current authorized shares of common stock and should be accounted for as derivatives under ASC 815. The Company ordered its equity-linked instruments in order of issuance date, excluding employee awards that are not within the scope of ASC 815. Based on this analysis, the Company determined the 6,372,530 common stock warrants issued in connection with the sale of common stock on February 6, 2023 should be accounted for as liabilities at fair value. The Company estimated the fair value at April 28, 2023 using a Black Scholes option pricing model and the following inputs: 1) exercise price of $1.02; 2) volatility based on a peer group of companies of 89%; 3) risk-free rate of 3.51%; 4) dividend yield of 0% and 5) expected term of 5.3 years. The Company reclassified $1,294,638 from additional paid in capital to the warrant liability. The Company estimated the fair value as of June 30, 2023 to be $260,238 using the following assumptions: 1) exercise price of $1.02; 2) volatility based on a peer group of companies of 89%; 3) risk-free rate of 4.13%; 4) dividend yield of 0% and 5) expected term of 5.1 years.

In December 2020, the Company adopted the 2020 Stock Plan, or the 2020 Plan. The 2020 Plan is a stock-based compensation plan that provides for discretionary grants of stock options, stock awards, stock unit awards and stock appreciation rights to key employees, non-employee directors and consultants.

Under the 2020 Plan, the aggregate value of all compensation granted or paid to any individual for service as a non-employee director with respect to any calendar year, including awards granted under the 2020 Plan and cash fees paid to such non-employee director, will not exceed $300,000 in total value. For purposes of this limitation, the value of awards is calculated based on the grant date fair value of such awards for financial reporting purposes.

The number of shares of the common stock that may be issued under the 2020 Plan is 5,000,000. As of June 30, ~~2022,~~2023, the Company had awarded a total ~~shares~~of ~~4,065,782~~2,060,144 share awards under the 2020 Plan, with~~934,218~~ 2,939,856 remaining under the 2020 Plan. On July 26, 2023, the Company amended the 2020 Plan to increase the number of shares of common stock that may be issued under the 2020 Plan to 7,500,000.

~~During the nine months ended June 30, 2022, the~~The Company ~~agreed to award a total of~~ ~~406,600~~has historically awarded restricted ~~stock~~ units that convert into common stock to various employees, consultants and officers under the 2020 ~~Plan. Of the restricted stock unit awarded, 406,600~~Plan that will vest annually over a period of one to four ~~years.~~years from the date of issuance. At June 30, ~~2022,~~2023, the Company had ~~1,574,200~~298,750 restricted stock units ~~in issuance.~~outstanding. During the nine months ended June 30, 2023, 97,250 restricted stock units were converted into shares of common stock.

During the nine months ended June 30, 2023 and 2022, the Company recognized a total of $~~4,341,090~~827,694 and $3,125,498 of stock-based compensation expense, respectively, related to common stock awards and expects to recognize additional compensation cost of $~~9,950,657~~1,910,443 upon vesting of all awards.

As discussed above, the Company has issued common stock warrants in connection with its fundraising activities to preference shareholders, its lender and convertible notes issued during the nine months ended June 31, 2022. The following table summarizes warrant activity during the nine months ended June 30, 2022:

~~At June 30, 2022, the outstanding and exercisable common stock warrants had an estimated intrinsic value of $6,866,048. The Company estimated the fair value of the warrants using a Black-Scholes option pricing model and the following assumptions: 1) stock price of $~~2 ~~to $28.95~~ ~~per share; 2) dividend yield of~~ 0~~%; 3) risk-free rate of between~~ ~~0.18% and~~ ~~1.18%; 4) expected term of between~~ ~~2.5~~ ~~and~~ 5 ~~years; 5) an exercise price of $0.25, $2 $3, $25, or $~~28 ~~and 6) expected volatility of~~ ~~42.14% based on a peer group of public companies.~~

The following table summarizes option activity during the nine months ended June 30, ~~2022:~~ 2023:

Schedule of option activity
	Common Stock Options								Common Stock Options
	Shares			Weighted Average Exercise Price			Weighted average Remaining Life in years		Shares			Weighted Average Exercise Price		Weighted average Remaining Life in years
Outstanding at September 30, 2021		2,344,348		$	2.57			8.39
Outstanding at September 30, 2022										1,977,000		$	2.25		7.33
Granted		154,000			11.78			8.95		–			–		–
Cancelled		(26,000	)		(8.73	)		9.33		(781,250	)		1.78		7.06
Expired		0			0			–		–			–		–
Exercised		0			0			–		–			–		–
Outstanding at June 30, 2022		2,472,348		$	3.08			8.09
Exercisable at June 30, 2022		1,140,348		$	0.84			8.20
Outstanding at June 30, 2023										1,195,750		$	2.55		6.44
Exercisable at June 30, 2023										842,500		$	1.71		5.36

During the nine months ended June 30, 2023 and 2022, the Company recognized stock-based compensation expense of $~~968,401~~284,183 and $1,215,592, respectively, related to common stock options awarded. The exercisable common stock options had anno intrinsic value as of June 30, ~~2022, of $1,683,448~~.2023. The Company expects to recognize an additional $~~3,465,493~~535,155 of compensation cost related to stock options expected to vest.

~~The Company estimated the fair value of the stock options awarded using a Black-Scholes option pricing model and the following assumptions: 1) stock price of $~~3 ~~to $31.33~~ ~~per share; 2) dividend yield of~~ 0~~%; 3) risk-free rate of between~~ ~~0.85% and~~ ~~1.20%; 4) expected term of between~~ ~~3.5~~ ~~and~~ ~~6.25~~ ~~years; 5) an exercise price between $0.25~~ ~~and $31.33~~ ~~and 6) expected volatility of~~ ~~42.14% based on a peer group of public companies.~~

The Company’s fixed assets consisted of the following as of June 30, ~~2022~~2023 and September 30, ~~2021:~~ 2022:

Schedule of fixed assets
	June 30, 2022			September 30, 2021			June 30, 2023			September 30, 2022
Software	$	901,551		$	214,996		$	328,902		$	391,851
Furniture and fixtures		408,803			0			524,890			368,432
Total fixed assets		1,310,354			214,996			853,792			760,283
Accumulated depreciation		(201,236	)		(129,662	)		(505,975	)		(213,875	)
Fixed assets, net	$	1,109,118		$	85,334		$	347,817		$	546,408

Depreciation expense was $271,347 and $68,987 for the nine months ended June 30, 2023 and 2022, respectively.

As disclosed in Note 3, the Company acquired intangible assets as part of the Aspire B2C Business acquisition. The acquired intangibles consisted of the following as of June 30, 2023 and September 30, 2022:

~~On September 1, 2020, the Company’s wholly-owned subsidiary, ESEG, entered into domain purchase agreements to acquire the rights to certain domain names from third parties.~~ The ~~cost to acquire the domain names was $2,239,606, based on the estimated fair value~~Karamba trademarks and tradenames represent approximately 75% of the ~~consideration transferred to the sellers. ESEG issued notes payable with a combined principal amount of $2,100,000, which were to mature on~~ ~~March 1, 2022, bearing interest at~~ 10~~%. These notes were exchanged for notes~~total of the ~~Company in September 2020. The Company also agreed to pay a total of $675,000~~ on ~~September 1, 2025, with no interest. The Company estimated discount of these liabilities totaling $535,394~~ ~~at the date of the transaction, to be amortized over the maturity period of the liabilities. The domain names were recorded as an intangible asset with~~acquired intangibles and have an indefinite useful life. As of June 30, 2023, the Company determined that its intangible assets and goodwill were impaired as a result of the loss of the gaming websites owned by the Company that operate in Germany after being shut down in May 2023. The ~~Company’s management evaluated~~Company recognized a total impairment loss of $32,653,626, consisting of $17,367,817 related to goodwill and $15,285,809 related to intangible assets, primarily indefinite lived assets and customer relationships. The remaining trademarks and tradenames and customer relationships are amortized over an estimated useful life of three 3 years. Amortization expense on the ~~domain names at~~Aspire intangible assets was $5,018,736 and $4,701,522, respectively, for the nine months ended June 30, 2023 and 2022. Amortization for the year ended September 30, ~~2021~~2023, 2024 and ~~determined no impairment was necessary.~~

2025 is expected to be approximately $6,114,685, $4,383,796 and $7630,633, respectively.

On September 2, 2020, the Company entered into a financial advisor agreement with Boustead Securities LLC, the representative of the underwriters in the Company’s initial public offering, to provide services related to fundraising on the Company’s planned public listing. The Company agreed to pay the financial advisor a success fee of 4% of any gross proceeds from any debt financing, and a 7% success fee related to any equity or convertible debt financing, subject to customary approval by the regulatory authorities. In April 2021, the Company completed its IPO and issued ~~2,400,000~~ ~~shares of common stock for gross cash proceeds of $14,400,000. The Company paid underwriting fees of $885,800~~ ~~and issued~~ ~~168,000~~ ~~warrants to purchase shares of common stock at a price of $7.20~~ ~~per share for a period of five~~ 5 ~~years.~~

On September 26, 2020, the Company entered into a consulting agreement with a registered foreign broker dealer for fundraising services and paid 10% of any gross proceeds through capital raises from non-US investors introduced by the consultant, up to a maximum payment to the consultant of $~~200,000~~ ~~and the consultant also received warrants to purchase shares of the Company’s common stock at an exercise price of $2.00~~ ~~per share. These warrants were exercised in April 2021 and were converted into~~ ~~62,386~~ ~~shares of the Company stock.~~

The Company’s previous financial advisor, Boustead Securities LLC (“Advisor”) has alleged a breach by the Company over the termination of their engagement and the timing of the payment and amount of the fees owed to the Advisor ~~among other claims~~ (collectively the “Claims”). The fees the Company expects to pay are accrued in the accompanying balance sheet. On June 2, 2022, the Advisor named EBET in an arbitration proceeding with Financial Industry Regulatory Authority (“FINRA”) in connection with the Claims. The ~~statement~~Statement of ~~claim alleges~~Claim alleged damages of $5.7 million and ~~seeks~~sought a declaration that the Company be required to utilize the Advisor for a certain follow-on offering pursuant to an alleged right of first refusal between the parties. On August 4, 2022, EBET, Inc. counterclaimed against Boustead Securities, LLC for tortious interference with prospective economic advantage and demanded damages and attorneys’ fees in an amount to be determined. Boustead Securities, LLC’s current Second Amended Statement of Claim, filed on May 24, 2023, alleges $12 million in damages and no longer seeks declaratory relief. In response to Boustead Securities, LLC’s Second Amended Statement of Claim, Company maintains its counterclaim and all affirmative defenses previously asserted. The case is ongoing, with a hearing before a 3-arbitrator panel initially scheduled for July 19, 2023, but now continued to November 6, 2023. Arbitration is inherently unpredictable. However, the Company believes that it has meritorious defenses to a portion of the alleged fee claim asserted and to the claim that the Company has any obligations pursuant to a right of first refusal between the parties. Nevertheless, cash flows or results of operations could be materially affected in any particular period by the resolution of this ~~matter~~matter.

During June 2023, the Compensation Committee of the Company’s Board of Directors, the recently formed Strategic Alternatives Committee of the Board, and the Board reviewed and considered, and discussed with the Company’s executive officers, a plan to retain the Company’s executives through the conclusion of the Company’s strategic process by providing these officers with appropriate financial incentives to do so. In that regard, the Board and the Committees considered advice provided by the Company’s compensation consultant, Frederick W. Cook & Co., Inc. (“FW Cook”) and used FW Cook’s recommendations as part of their decision-making process in arriving at what the Board and the Committees regard as appropriate to achieve the Company’s retention goals. On June 30, 2023, the Compensation Committee and the Strategic Alternatives Committee reviewed and approved an executive retention plan, the Strategic Alternatives Committee recommended that the full Board approve it, and the Board did so. On June 30, 2023, the Compensation Committee and the Strategic Alternatives Committee reviewed and approved the payment of compensation to members of the Strategic Alternatives Committee in addition to the Company’s standard compensation arrangements for non-employee directors, the Strategic Alternatives Committee recommended that the full Board approve it, and the Board did so. The directors who are members of the Strategic Alternatives Committee are Christopher Downs (the Chairman), Dennis Neilander and Michael Nicklas. Under this plan, the Chairman of the committee will receive a monthly retainer of $15,000 and the other two members of the committee will receive a monthly retainer of $12,000. These fee arrangements will be reevaluated if the committee remains in place after six months.

Following the approval of the executive retention plan by the Committees and the Board and in accordance with the executive retention plan, on June 30, 2023, the Company agreed to enter into amendments to the employment agreements (each, a “Retention Letter”), with each of Aaron Speach, the Company’s Chief Executive Officer, and Matthew Lourie, the Company’s Chief Financial Officer.

Any unpaid retention bonus will be paid earlier if the Company completes a strategic transaction (a “Transaction”), or if the executive is terminated without “cause”.

In addition, pursuant to the Retention Letters, each of Mr. Speach and Mr. Lourie will be eligible to receive a cash transaction bonus equal to 0.95% of the gross proceeds of any Transaction, provided that the net proceeds from the Transaction are at least $26.0 million; and further provided that the executive may receive an additional 0.25% of the gross proceeds if the net proceeds from the Transaction are not less than the amount that would result in (a) the Company repaying its outstanding debt and all trade creditors, and (b) the Series A preferred holders and common shareholders receiving consideration of not less than the value of their equity holdings as of June 30, 2023 (the “Deal Threshold”).

If Mr. Speach and Mr. Lourie are terminated without “cause” prior to June 30, 2024, the Company agreed to pay a cash severance payment of:

In addition to the amounts payable to Messrs. Speach and Lourie set forth above, the Company also agreed on June 30, 2023 to pay additional retention bonuses under the executive retention plan to two consultants and advisors of up to $310,000, in the aggregate, and additional cash transaction bonuses equal to 1.9% of the gross proceeds of any Transaction, provided that the net proceeds from the Transaction are at least $26.0 million; and provided further that an additional 0.50% of the gross proceeds will be payable if the net proceeds from the Transaction are not less than the Deal Threshold.

The basic net loss per common share is calculated by dividing the Company's net loss available to common shareholders by the weighted average number of common shares during the year. The diluted net loss per common share is calculated by dividing the Company's net loss available to common shareholders by the diluted weighted average number of common shares outstanding during the year. The diluted weighted average number of common shares outstanding is the basic weighted number of common shares adjusted for any potentially dilutive debt or equity. Common shares issuable under convertible debt, stock options and common stock warrants were excluded from the calculation of diluted net loss per share due to their antidilutive effect.

The Company engaged a firm owned by Matthew Lourie, the Company’s Chief Financial Officer to provide financial reporting services. For the nine months ended June 30, 2023 and 2022, the Company incurred consulting fees of $83,300 and $19,624, respectively.

Subsequent to ~~quarter end,~~June 30, 2023, a total of 22,030 shares of Preferred Stock were converted into 96,499,500 shares of common stock. Pursuant to the terms of the Preferred Stock, on July 31, 2023, the conversion price of the Preferred Stock was reduced to $0.086 per share. As of August 14, 2023, 10,337 shares of Preferred Stock remain outstanding that are convertible into 147,867,809 shares of common stock.

After being adjourned on April 27, 2023, May 8, 2023 and May 26, 2023, the 2023 annual meeting of stockholders (the “Annual Meeting”) of the Company ~~has taken significant measures~~was reconvened on July 26, 2023. At the Annual Meeting the Company’s stockholders approved an amendment to the Company’s Articles of Incorporation to increase the ~~profitability of its business in the short term. These actions include optimizing the efficiency of marketing campaigns, reducing the total~~ number of ~~employees and contractors by approximately 45 positions, terminating software and other immaterial contracts as well as generally reducing~~shares of common stock the ~~operating costs~~Company is authorized to issue from 100,000,000 to 500,000,000 (the “Authorized Share Increase”). An amendment to the Company's Articles of Incorporation (the “Certificate of Amendment”) was filed with the Secretary of State of the ~~business. While these efforts focus~~State of Nevada to effect the Authorized Share Increase on July 27, 2023.

As previously reported, on November 21, 2022, EBET, Inc. (the “Company”) received a deficiency letter from the Listing Qualifications Department (the “Staff”) of the Nasdaq Stock Market (“Nasdaq”) notifying the Company that for the last 30 consecutive business days the bid price for the Company’s common stock had closed below the minimum $1.00 per share requirement for continued inclusion on the ~~goal~~Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2) (the “Bid Price Rule”). In accordance with Nasdaq Listing Rule 5810(c)(3)(A) (the “Compliance Period Rule”), the Company was provided an initial period of ~~attaining profitability~~180 calendar days to regain compliance with the Bid Price Rule. The Company requested an additional 180 days in which to regain compliance, and on May 23, 2023 the Company received notice from Nasdaq informing the Company that it had been granted an additional 180-day period, or until November 20, 2023, to regain compliance with the minimum bid price requirement.

On July 31, 2023, the Company was notified by the Staff that it had determined that the Company’s common stock had a closing bid price of $0.10 or less for ten consecutive trading days from July 17, 2023 through July 28, 2023. Accordingly, since the Company was subject to the provisions set forth under Listing Rule 5810(c)(3)(A)(iii), the Staff had determined to delist the Company’s securities from The Nasdaq Capital Market.

The Staff letter stated that unless the Company requests an appeal of the Staff’s determination, trading of the Company’s common stock will be suspended at the opening of business ~~it is likely to reduce overall revenue growth in~~on August 9, 2023, and a Form 25-NSE will be filed with the ~~short to medium term. These efforts have also resulted in an increased focus on~~Securities and Exchange Commission, which will remove the Company’s ~~i-gaming business~~securities from listing and a significant reduction in the investment of the Company’s esports products and technologies. As a result of the Company’s actions as referenced above, it does not expect to launch its esports products in the short or medium term.registration on The Nasdaq Stock Market.

The Company ~~expects~~plans to ~~record~~timely submit a ~~restructuring charge of approximately $0.5 million that~~hearing request to Nasdaq’s Hearings Department, which will ~~include~~stay the ~~severance and other costs associated with termination~~suspension of the ~~employment contracts, consultant contracts~~Company’s common stock and ~~any costs to terminate software licenses and other commitments. The Company is also completing an impairment review~~the filing of ~~its goodwill and intangible assets and will complete this review before September 30, 2022.~~the Form 25-NSE pending the panel’s decision.

item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This section of this report includes forward-looking statements that reflect our current views with respect to future events and financial performance. Forward looking statements are often identified by words like, believe, expect, estimate, anticipate, intend, project and similar expressions or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements, which apply only as of the date of this report. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or our predictions.

We operate platforms to provide a real money online gambling experience focused on ~~igaming~~i-gaming including casino, sportsbook and esports events. The Company operates under a Curacao gaming sublicense and under a strategic partnership with Aspire Global plc (“Aspire”) allowing EBET to provide online betting services to various countries around the world.

Acquisition of Aspire Global Plc’s (“Aspire”) Business to Consumer (“B2C”) Business

In order to accelerate the growth and expand market access for our esports product offerings, on November 29, 2021, we acquired Aspire’s B2C Business, for €65,000,000 payable as follows: (i) a cash amount of €50,000,000; (ii) €10,000,000, payable in accordance with the terms of an unsecured subordinated promissory note; and (iii) 186,838 shares of our common stock, which were valued at €5,000,000.

The acquisition of Aspire’s B2C business provides the following strategic benefits:

Our gaming sub-license from the Curacao Gaming Authority and the licenses made available to us from the acquisition of the Aspire B2C business allows us to accept esports and sports wagers from residents around the world.

~~Subsequent to~~During the quarter ~~end, the Company has taken~~ending September 30, 2022, we took significant measures to increase the profitability of ~~its~~our business in the short term. These actions include optimizing the efficiency of marketing campaigns, reducing the total number of employees and contractors by approximately 45 positions, terminating software and other immaterial contracts as well as generally reducing the operating costs of the business. While these efforts focus on the goal of attaining profitability of ~~the Company’s~~our business, it is likely to reduce overall revenue growth in the short to medium term. In addition, even after these efforts, we are not currently generating sufficient cash from our operations to settle our debts as they fall due and continue to require near term financing to fund our operations and continue our business. These efforts have also resulted in an increased focus on ~~the Company’s~~our i-gaming business and ~~a significant reduction~~the halting of investment in ~~the investment of~~ the Company’s esports products and technologies. As a result of ~~the Company’s~~these actions as referenced above, ~~it does~~we do not expect to launch ~~its~~our esports products in the ~~short or medium term.~~

The Company expects to record a restructuring charge of approximately $0.5 million that will include the severance and other costs associated with termination of the employment contracts, consultant contracts and any costs to terminate software licenses and other commitments. The Company is also completing an impairment review of its goodwill and intangible assets and will complete this review before September 30, 2022.

~~Acquisition of the B2C business of Aspire Global plc (the “Acquisition”)~~

On October 1, 2021, the Company, and Esports Product Technologies Malta Ltd. entered into a Share Purchase Agreement with Aspire Global plc, (“Aspire”) and various Aspire group companies to acquire its business to consumer (“B2C”) business. The total acquisition price was €65,000,000 paid as follows: (i) cash amount of €50,000,000; (ii) €10,000,000, payable in accordance with the terms of an unsecured subordinated promissory note (the “Note”); and (iii) shares of Company common stock, which were valued at €5,000,000 (based on the weighted-average per-share price of the ten days prior to the execution date of the Acquisition Agreement.

This acquisition expands our product offerings and increases the number of markets in which we can operate. The B2C business offers a portfolio of distinctive proprietary brands to a diverse customer base operating across regulated markets.

The acquisition of Aspire’s B2C business provides for various strategic benefits, including but not limited to, ownership of Aspire’s portfolio of B2C proprietary online casino and sportsbook brands consisting of Karamba, Hopa, Griffon Casino, BetTarget, Dansk777, and GenerationVIP and an enhanced strategic partnership with Aspire that provides the on-line gaming platform and a managed services offering, including customer service, customer on-boarding and payment processing ensuring operational stability and continuity.

Our gaming license from the Curacao Gaming Authority and the licenses made available to us from the Acquisition of the Aspire B2C business allows us to accept casino and sports wagers from residents of more than 160 jurisdictions.foreseeable future.

On April 27, 2023, the Company was notified by its gaming platform operator services provider Aspire Global plc (“Aspire”) that the gaming regulatory authority in Germany had sent a letter received by Aspire on April 25, 2023 stating that Aspire would be required to shut down activity of its gaming operations in Germany effective as of 10 days from receipt of said letter until such time as Aspire was otherwise granted a license to operate in Germany. Aspire informed the Company that although it sought an extension of the requested shutdown deadline, it was not successful in receiving an extension of time and/or any form of other relief from this request. In order to meet the subject German regulator requirement, Aspire shut down its activities in Germany on May 7, 2023 and as a result the gaming websites owned by the Company that operate in Germany were shut down on that date. During the nine months ended June 30, 2023 and 2022 revenue generated in German markets was $9,686,372 and $12,806,072, respectively. During the same periods gross profit contributed from the German markets was $2,775,605 and $2,967,251, respectively. As of June 30, 2023, the Company determined that its intangible assets and goodwill were impaired as a result of the loss of the gaming websites owned by the Company that operate in Germany after being shut down in May 2023. The Company recognized a total impairment loss of $32,653,626, consisting of $17,367,817 related to goodwill and $15,285,809 related to intangible assets, primarily indefinite lived assets and customer relationships.

On June 7, 2023, the Board of Directors of the Company created a Strategic Alternatives Committee to review and evaluate potential strategic alternatives in its sole discretion and exercise related powers that are typical of such committees. The directors who are members of the Strategic Alternatives Committee are Christopher Downs (the Chairman), Dennis Neilander and Michael Nicklas. On June 30, 2023, the Compensation Committee and the Strategic Alternatives Committee reviewed and approved the payment of compensation to members of the Strategic Alternatives Committee in addition to the Company’s standard compensation arrangements for non-employee directors, the Strategic Alternatives Committee recommended that the full Board approve it, and the Board did so. Under this plan, the Chairman of the committee will receive a monthly retainer of $15,000 and the other two members of the committee will receive a monthly retainer of $12,000. These fee arrangements will be reevaluated if the committee remains in place after six months.

On June 30, 2023, the Company, the subsidiaries of the Company and the Lender entered into the Forbearance Agreement. Pursuant to the Forbearance Agreement, the Company acknowledged, among other items, that, as June 30, 2023, it was in default under the Credit Agreement, the Lender had the right to accelerate the Loan, and the Lender had the right to impose the default rate of interest under the Credit Agreement. Pursuant to the Forbearance Agreement, the Lender agreed to forbear from exercising its rights and remedies against the Company and the Guarantors under the Credit Documents until the earlier of September 15, 2023, which may be extended by the Lender, or until a termination event occurs pursuant to the Forbearance Agreement. A termination event under the Forbearance Agreement consists of the filing of a bankruptcy proceeding by the Company or any Guarantor, the occurrence of a new event of default under the Credit Agreement, or the failure by the Company or any Guarantor to perform any material requirement, covenant, or obligation under the Forbearance Agreement. During the forbearance period, the Lender agreed, among other items, not to accelerate the Loan, initiate any bankruptcy filings, or apply any default rates of interest. As partial consideration for the Lender agreeing to enter into the Forbearance Agreement, the Company paid a forbearance fee equal to 50 basis points of the outstanding principal amount of the Loan (or $130,425), which amount was added to the principal balance of the loan. In addition, on June 30, 2023, the Company made a prepayment of the Loan in the amount of $2.0 million, which in turn reduced the minimum cash balance requirement under the Credit Agreement to $0.

As previously reported, on November 21, 2022, the Company received a deficiency letter from the Listing Qualifications Department (the “Staff”) of the Nasdaq Stock Market (“Nasdaq”) notifying the Company that for the last 30 consecutive business days the bid price for the Company’s common stock had closed below the minimum $1.00 per share requirement for continued inclusion on the Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2) (the “Bid Price Rule”). In accordance with Nasdaq Listing Rule 5810(c)(3)(A) (the “Compliance Period Rule”), the Company was provided an initial period of 180 calendar days to regain compliance with the Bid Price Rule. The Company requested an additional 180 days in which to regain compliance, and on May 23, 2023 the Company received notice from Nasdaq informing the Company that it had been granted an additional 180-day period, or until November 20, 2023, to regain compliance with the minimum bid price requirement.

The Staff letter stated that unless the Company requests an appeal of the Staff’s determination, trading of the Company’s common stock will be suspended at the opening of business on August 9, 2023, and a Form 25-NSE will be filed with the Securities and Exchange Commission, which will remove the Company’s securities from listing and registration on The Nasdaq Stock Market.

The Company plans to timely submit a hearing request to Nasdaq’s Hearings Department, which will stay the suspension of the Company’s common stock and the filing of the Form 25-NSE pending the panel’s decision

Results of Operations for the Three Months Ended June 30, 2023, compared to the Three Months Ended June 30, 2022

Results of operations in dollars and as a percentage of net revenue were as follows:

	Three Months Ended June 30,										Nine Months Ended										Three Months Ended June 30,
	2022					2021					2022					2021					2023					2022
	$			%		$			%		$			%		$			%		$			%		$			%

Revenue		18,168,515			100%		41,356			100%		44,311,030			100%		85,984			100%	$	7,974,517			100%	$	18,168,515			100%
Cost of revenue		10,918,796			60%		0			0%		27,537,479			62%		24,724			29%		(4,203,293	)		53%		(10,918,796	)		60%

Gross profit		7,249,719			40%		41,356			100%		16,773,551			38%		61,260			71%		3,771,224			47%		7,249,719			40%

Operating expenses:
Sales and marketing expenses		9,262,851			51%		964,836			2333%		22,711,724			51%		1,238,780			1441%		1,980,211			25%		9,262,851			51%
Product and technology expenses		1,115,165			6%		1,176,848			2846%		3,270,328			7%		2,286,228			2659%		280,201			4%		1,115,165			6%
Acquisition costs		0			0%		139,235			337%		2,240,147			5%		139,235			162%		–			0%		–			0%
Impairment																						32,653,626			409%		–			0%
General and administrative expenses		3,863,298			21%		1,340,042			3240%		12,454,493			28%		4,123,163			4795%		3,585,489			45%		3,863,298			21%
Total operating expenses		14,241,314			78%		3,620,961			8756%		40,676,692			92%		7,787,406			9057%		38,499,527			483%		14,241,314			78%

Income (loss) from operations		(6,991,595	)		(38)%		(3,579,605	)		(8,656)%		(23,903,141	)		(54)%		(7,726,146	)		(8,986)%
Loss from operations																						(34,728,303	)		435%		(6,991,595	)		38%

Other expenses:
Interest expense		(1,790,519	)		(12)%		(368,001	)		(890)%		(5,531,756	)		(12)%		(1,335,621	)		(1,553)%		(9,824,363	)		123%		(1,790,520	)		10%
Loss on derivatives		(130,034	)		(1)%		0			0%		(203,117	)		(0)%		0			0%
Foreign currency gain/(loss)		(66,552	)		0%		(10,005	)		(24)%		(62,794	)		(0)%		(22,235	)		(26)%
Loss on derivative instruments																						–			0%		(130,033	)		1%
Change in fair value of warrant liabilities																						1,034,400			13%		–			0%
Foreign currency loss and other																						(212,132	)		3%		(66,553	)		0%
Total other expense		(1,987,105	)		(11)%		(378,006	)		(914)%		(5,797,667	)		(13)%		(1,357,856	)		(1,579)%		(9,002,095	)		113%		(1,987,105	)		11%

Income (loss) before provision for income taxes		(8,978,700	)		(49)%		(3,957,611	)		(9,570)%		(29,700,808	)		(67)%		(9,084,002	)		(10,565)%
Loss before provision for income taxes																						(43,730,398	)		548%		(8,978,700	)		49%
Provision for income taxes		0			0%		0			0%		0			0%		0			0%		–			0%		–			0%

Net income (loss)		(8,978,700	)		(49)%		(3,957,611	)		(9,570)%		(29,700,808	)		(67)%		(9,084,002	)		(10,565)%
Net loss																					$	(43,730,398	)		548%	$	(8,978,700	)		49%

For the three months ended June 30, ~~2022~~2023, we generated $7,974,517 in revenue compared to $18,168,515 in revenue during the three months ended June 30, ~~2021~~2022. The decrease in revenue in the three months ended June 30, 2023, when compared with the same period in the prior year, was driven by the loss of the Company’s operations in Germany, and a shift in the Company’s focus on higher margin revenue sources. As a result of the Company’s restructuring of the business to improve its immediate profitability, certain inefficient sales and marketing efforts have been curtailed, which have adversely impacted revenue growth since the restructuring. In addition, the loss of operations in Germany in May 2023 will materially impact the Company’s ongoing revenue generation.

During the three months ended June 30, ~~2022, we generated $18.2 million in revenue an increase from $0.041 million~~2023, cost of sales was $4,203,293 as compared with $10,918,796 in the same period ofin the prior year. The ~~increase~~decrease in cost of sales is due to the decline on volume of revenue ~~was driven by the Acquisition which continues to generate significant revenue~~disclosed above. The improvement in ~~the UK, Germany, Denmark, Ireland, Austria and other regulated markets. The acquisition~~gross profit percentage is a result of the ~~Aspire B2C business accounted~~Company’s restructuring efforts to reduce costs and increase efficiencies. Cost of revenue consists of third-party costs associated with the betting software platform and gaming taxes.

Sales and marketing expense was $1,980,211 for ~~substantially all of~~ the ~~increase in revenue~~three months ended June 30, 2023 compared to $9,262,851 for the three months ended June 30, 2022, ~~as compared to~~a decrease of $7,282,640. As a percentage of revenue sales and marketing expense was 25% in the three months ended June 30, 2023 compared to 51% in the three months ended June 30, 2022. The dramatic improvement is the result of a shift in focus on higher margin revenue sources. Further the decrease in sales and marketing expense is driven by the Company’s efforts to streamline operations and a result of the reduction in headcount over the past year. Sales and marketing expenses also included $100,568 and $598,677 of stock-based compensation costs to employees and consultants for the three months ended June 30, 2023 and 2022, respectively, and payroll costs of $171,399 and $947,155, respectively, for the three months ended June 30, 2023 and 2022, respectively. We expect sales and marketing expenses to increase in future periods as our marketing campaigns increase in both number and volume.

Product and technology expense was $280,201 for the three months ended June 30, 2023 compared to $1,115,165 for the three months ended June 30, 2022, a decrease of $834,964. The decrease is due to decreased spending related to development of the esports operations that were abandoned in the fourth quarter of fiscal 2022. Product and technology expenses for the three months ended June 30, 2023, included payroll-related costs of $180,110, stock-based compensation of $20,694 and other development costs of $79,397 consisting primarily of consulting and other development costs. Product and technology expenses for the three months ended June 30, 2022, included payroll-related costs of $874,750, stock-based compensation of $102,676 and other development costs of $137,740 consisting primarily of consulting and other development costs.

General and administrative expense was $3,585,489 for the three months ended June 30, 2023, as compared to $3,863,298 for the same period in the prior year. General and administrative expense for the three months ended June 30, 2023 included amortization of intangible assets of $1,688,328, payroll-related costs of $731,273 and stock-based compensation cost of $112,177. General and administrative expense for the three months ended June 30, 2022 included amortization of intangible assets of $2,307,050, payroll-related costs of $510,887 and stock-based compensation cost of $389,814. The increase in payroll costs in the current period is related to the retention costs associated with new agreements with the Company’s executives as part of the restructuring plan.

During the three months ended June 30, 2023, the Company determined that its intangible assets and goodwill were impaired as a result of the loss of the gaming websites owned by the Company that operate in Germany after being shut down in May 2023. The Company recognized a total impairment loss of $32,653,626, consisting of $17,367,817 related to goodwill and $15,285,809 related to intangible assets, primarily indefinite lived assets and customer relationships.

During the three months ended June 30, 2023 and 2022, we recognized interest expense of $9,824,363 and $1,790,520, respectively, which included amortization of debt discounts and deferred finance costs of $8,445,549 and $1,607,674 related to the Senior Notes issued to acquire the Aspire business, and convertible debt issued to acquire certain intangible assets in the previous year. During the three months ended June 30, 2023 and 2022 we also incurred a foreign currency loss of $212,132 and $66,552, respectively, due to fluctuations in the Euro compared to the US dollar. The Company also recognized a gain from the change in fair value of warrants of $1,034,400 during the three months ended June 30, 2023 and had a loss on derivatives in the comparable period of $130,033.

Net loss for the three months ended June 30, 2023, was $43,730,398 compared to a net loss of $8,978,700 for the same period in the prior year. The increase in net loss was primarily due to the impairment loss of $32,653,626, the increase in interest expense associated with accelerated amortization of debt discount and deferred finance costs as a result of the Forbearance Agreement, partially offset by lower operating expenses from the Company’s restructuring efforts in late 2022.

Results of Operations for the Nine Months Ended June 30, 2023, compared to the Nine Months Ended June 30, 2022

Results of operations in dollars and as a percentage of net revenue were as follows:

For the nine months ended June 30, 2023, we generated $33,962,971 in revenue compared to $44,311,030 in revenue during the nine months ended June 30, 2022. The decrease in revenue in the nine months ended June 30, 2023, when compared with the same period in the prior year, was driven by the loss of the Company’s German operations in May 2023 and the Company’s shift to focus on higher margin revenue sources. The prior period also included only four months of activity since the closing date of the Aspire acquisition on November 29, 2021. As a result of the Company’s restructuring of the business to improve its immediate profitability, certain inefficient sales and marketing efforts will be curtailed, which ~~may~~have adversely ~~impact~~impacted revenue growth since the restructuring. In addition, the loss of operations in Germany in May 2023 will materially impact the ~~short to medium term.~~Company’s ongoing revenue generation.

During the ~~three~~nine months ended June 30, ~~2022,~~2023, cost of sales was ~~$10.9 million~~$19,314,114 as compared with ~~zero~~$27,537,479 in the same period in the prior year. The ~~increase~~decrease in cost of sales is due ~~entirely~~ to the ~~Acquisition and is consistent with the increase in revenue and consists primarily of platform fees, which are charged as a percentage~~decline on volume of revenue disclosed above. The improvement in gross profit percentage is a result of the Company’s restructuring efforts to reduce costs and ~~gaming taxes.~~increase efficiencies.

Sales and marketing expense was ~~$9.3 million~~$8,660,841 for the ~~three~~nine months ended June 30, 2023 compared to $22,711,724 for the nine months ended June 30, 2022, ~~an increase from $1.0 million in the same period in the prior year. The increase in~~a decrease of $14,050,883. As a percentage of revenue sales and marketing expense was 26% in the nine months ended June 30, 2023 compared to 51% in the nine months ended June 30, 2022. The dramatic improvement is ~~driven by increase~~the result of a shift in focus on higher margin revenue ~~from~~sources, and the ~~acquisition~~loss of the Company’s German operations in May 2023. The prior period also included only seven months of activity since the closing date of the Aspire ~~B2C business, increase in~~acquisition on November 29, 2021. Sales and marketing expenses also included $479,280 and $2,440,760 of stock-based compensation costs to employees and ~~increased levels of staff. Stock-based compensation was approximately $0.599 million~~consultants for ~~three-month period~~the nine months ended June 30, ~~2022.~~2023 and 2022, respectively, and payroll costs of $877,927 and $2,150,908, respectively, for the nine months ended June 30, 2023 and 2022, respectively. We expect sales and marketing expenses to ~~decrease~~increase in future periods as ~~increase our efficiency of~~ our marketing campaigns ~~and decrease the number of campaigns~~increase in both number and volume.

Product and technology expense ~~increased to $1.1 million~~was $816,309 for the ~~three~~nine months ended June 30, 2023 compared to $3,270,328 for the nine months ended June 30, 2022, ~~from $1.18 million~~a decrease of $2,454,019. The decrease is due to decreased spending related to development of the esports operations that were abandoned in the fourth quarter of fiscal 2022 and reduced headcount. Product and technology expenses for the ~~three~~nine months ended June 30, ~~2021. The increase is a result~~2023, included payroll-related costs of ~~increased hiring~~$523,660, stock-based compensation of ~~both employees~~$81,925 and ~~consultants as we increased investment in our product offerings offset by lower stock-based compensation.~~other development costs of $210,724 consisting primarily of consulting and other development costs. Product and technology ~~expense,~~expenses for the ~~three~~nine months ended June 30, 2022, included payroll-related costs of ~~approximately $870,000 and~~$2,018,465, stock-based compensation of ~~$103,000.~~$798,696 and other development costs of $453,167 consisting primarily of consulting and other development costs.

Acquisition costs were $0 for the nine months ended June 30, 2023, as compared to $2,240,147 for the nine months ended June 30, 2022. Acquisition costs in the comparable period included a non-cash hedging loss of $1,570,000 from executing a forward contract on the purchase price of the acquisition of the Aspire B2C business to hedge exposure to fluctuations in the Euro. Acquisition costs also included various legal and consultant fees associated with completing the acquisition.

During the nine months ended June 30, 2023, the Company determined that its intangible assets and goodwill were impaired as a result of the loss of the gaming websites owned by the Company that operate in Germany after being shut down in May 2023. The Company recognized a total impairment loss of $32,653,626, consisting of $17,367,817 related to goodwill and $15,285,809 related to intangible assets, primarily indefinite lived assets and customer relationships.

General and administrative expense was $3.9 million for the three months ended June 30, 2022, as compared to $1.3 million for the three months ended June 30, 2021. The increase in general and administrative expense was mainly attributable to an increase in employee costs from adding new employees, $390,000 of stock-based compensation cost, insurance fees and professional fees including legal, accounting, investor relations and other professional fees, depreciation and amortization of intangible assets.

During the three months ended June 30, 2022, we recognized interest expense of $1.8 million, which included amortization of debt discount of $0.8 million related to the convertible debt issued to acquire certain intangible assets consisting of acquired domain names and our recent loan completed as part of the Acquisition. We also incurred interest on the term loan completed on November 29, 2021 of $1.1 million.

Net loss for the three months ended June 30, 2022, was $9.0 million compared to a net loss of $4.0 million for the three months ended June 30, 2021. The increase in net loss was primarily due to the significant in increase in cost of sales and sales and marketing costs to support the Acquisition as well as increased general and administrative expenses product and technology expenses as a result of our efforts to develop our new products and services. Increased interest expense from the issuance of the senior notes, also contributed to the increase in our net loss for the period.

During the nine months ended June 30, 2022, we generated $44.3 million in revenue an increase from $0.086million in the same period of the prior year. The increase in revenue was driven by the Acquisition which continues to generate significant revenue in the UK, Germany, Denmark, Ireland, Austria and other regulated markets. The acquisition of the Aspire B2C business accounted for substantially all of the increase in revenue$10,365,751 for the nine months ended June 30, ~~2022,~~2023, as compared to ~~the nine months ended June 30, 2021.~~

~~During the nine months ended June 30, 2022, cost of sales was $37.5 million as compared with $0.025 million in~~$12,454,493 for the same period in the prior year. ~~The increase in cost of sales is due entirely to the Acquisition~~General and ~~is consistent with the increase in revenue and consists primarily of platform fees, which are charged as a percentage of revenue and gaming taxes.~~

~~Sales and marketing~~administrative expense ~~was $22.7 million~~ for the nine months ended June 30, ~~2022, an increase from $1.2 million in the same period in the prior year. The increase in sales~~2023 included amortization of intangible assets of $5,018,736, payroll-related costs of $1,456,535 and ~~marketing expense is driven by increase in revenue from the acquisition of the Aspire B2C business, increase in~~ stock-based compensation cost of $553,031. General and increased levels of staff. Stock-based compensation was approximately $2.4 million for nine-month period ended June 30, 2022. We expect sales and marketing expenses to decrease in future periods as we increase efficiency of our marketing campaigns and decrease the number of campaigns in both number and volume.

Product and technology expense increased to $3.3 million for the nine months ended June 30, 2022, from $2.3 million for the nine months ended June 30, 2021. The increase is a result of increased hiring of both employees and consultants as we invested in our product offerings. Product and technologyadministrative expense for the nine months ended June 30, 2022 included amortization of intangible assets of $4,701,522, payroll-related costs of ~~approximately $2.0 million, stock-based compensation of $799,000.~~

Acquisition costs was $2.2 million for the nine months ended June 30, 2022, as compared to zero for the nine months ended June 30, 2021. Acquisition costs included a non-cash hedging loss of $1.570 million from executing a forward contract on the purchase price of the Acquisition. Acquisition costs also included various legal$2,203,729 and ~~consultant fees associated with completing the Acquisition.~~

General and administrative expense was $12.5 million for the nine months ended June 30, 2022, as compared to $4.1 million for the nine months ended June 30, 2021. The increase in general and administrative expense was mainly attributable to an increase in employee costs from adding new employees, $1.1 million of stock-based compensation cost of $1,101,634. The decline in payroll costs is a result of the Company’s efforts to reduce headcount and ~~professional fees including legal, accounting, investor relations and other professional fees, depreciation and amortization of intangible assets.~~streamline operations.

During the nine months ended June 30, ~~2022,~~2023 and 2021, we recognized interest expense of ~~$5.5 million,~~$15,543,788 and $5,531,757, respectively, which included amortization of debt ~~discount~~discounts and deferred finance costs of ~~$2.1 million~~$10,999,866 and $2,975,962 related to the Senior Notes issued to acquire the Aspire business, and convertible debt issued to acquire certain intangible assets ~~consisting of acquired domain names and our recent loan completed as part of~~in the ~~Acquisition. We~~previous year. During the nine months ended June 30, 2023 we also incurred ~~interest on~~a foreign currency loss of $2,800,593 compared to $62,794 due to fluctuations in the ~~term loan completed on November 29, 2021~~Euro compared to the US dollar, and a derivative loss of ~~$3.2 million.~~$142,187 compared to a loss of $203,116 in the nine months ended June 30, 2022. The Company also recognized a gain of $1,034,400 from the change in fair value of warrant liabilities during the three months ended June 30, 2023.

Net loss for the nine months ended June 30, ~~2022,~~2023, was ~~$29.7 million~~$55,299,838 compared to a net loss of ~~$9.1 million~~$29,700,808 for the ~~nine months ended June 30, 2021.~~same period in the prior year. The increase in net loss was primarily due to the ~~significant in increase in cost~~impairment loss of sales and sales and marketing costs to support the Acquisition as well as increased general and administrative expenses product and technology expenses as a result of our efforts to develop our new products and services. Increased interest expense from the issuance of the senior notes, also contributed to$32,653,626, the increase in ~~our net loss for~~interest expense and foreign currency losses, partially offset by decreased operating expenses from the ~~period.~~lack of acquisition costs in the current period and the Company’s restructuring efforts and reduced headcount.

On June 30, ~~2022,~~2023, we had cash and cash equivalents of ~~$6.9 million,~~$1,437,787, and had a working capital deficit of ~~$4.8 million.~~$45,818,940. We have historically funded our operations from proceeds from debt and equity sales, and funds received from customers. ~~The Company's~~Our forecasts for fiscal year ~~2022~~2023 indicate that itwe will need near term additional funding ~~during such period~~ in order to have sufficient financial resources to satisfy our outstanding debts and to continue to settle ~~its~~our debts as they fall due. ~~The Company does~~As discussed below, pursuant to the Forbearance Agreement we entered into with our Lender, the Lender has agreed to forbear from exercising its rights and remedies against us under the Senior Notes until the earlier of September 15, 2023, which may be extended by the Lender, or until a termination event occurs pursuant to the Forbearance Agreement. As such, if we are unable to satisfy the Senior Notes prior to September 15, 2023, and if the Lender is unwilling to further extend the term of the Forbearance Agreement, the Lender will have the right to foreclose on our assets On February 6, 2023, we sold 6,372,530 shares of common stock and an equal number of warrants for net proceeds of $5,921,982. We do not have any commitments for ~~such~~additional funding and there is no assurance that itwe will be able to raise additional financing on favorable terms, if at all.

~~Acquisition~~The following is a summary of ~~Aspire Global Business to Consumer (“B2C”) Business~~borrowings outstanding as at June 30, 2023:

In order to accelerate the growth, on November 29, 2021, we completed the acquisition of Aspire Global’s B2C business for €65,000,000 payable as follows: (i) a cash amount of €50,000,000; (ii) €10,000,000, payable in accordance with the terms of an unsecured subordinated promissory note; and (iii) 186,838 shares of our common stock, which were valued at €5,000,000.

On September 30, 2021, the Company entered into subscription agreements (the “Subscription Agreements”) with certain investors (the “Investors”). Pursuant to the Subscription Agreements, the Investors agreed to subscribe for and purchase, and the Company agreed to issue and sell to such Investors, simultaneous with the closing of the Acquisition Agreement, shares of Series A Convertible Preferred Stock (the “Preferred Stock”) for a purchase price of $1,000.00 per share (the “Private Placement”). For each share of Preferred Stock issued, the Company issued the Investor a warrant to purchase 150% of the shares of Company common stock underlying the Preferred Stock (the “Warrants”). The aggregate Private Placement, which was completed on the closing date of the Acquisition Agreement was $37.7 million.

On November 29, 2021, the Company entered a credit agreement (the “Credit Agreement”) with CP BF Lending, LLC (“Lender”), pursuant to which the Lender agreed to make a single loan to the Company of $30.0 million (the “Loan”). The Loan bears interest on the unpaid principal amount at a rate per annum equal to 15.0% as follows: (1) cash interest on the unpaid principal amount of the Loan at a rate equal to 14.0% per annum, plus (2) payable-in-kind interest (“PIK Interest”) on the unpaid principal amount of the Loan at a rate equal to 1.0% per annum. The Company paid to Lender on the closing date a non-refundable origination fee in an amount equal to $750,000.

On June 16, 2022, the Company issued, in a private placement priced at-the-market under Nasdaq rules: (i) 977,657 shares of the Company’s common stock, and (ii) warrants to purchase up to an aggregate of 977,657 shares of common stock. The combined purchase price of one share of common stock and accompanying warrant is $3.58. The gross proceeds to the Company from the private placement were approximately $3.5 million, before deducting fees and other offering expenses, and excluding the proceeds, if any, from the exercise of the Warrants.

As of ~~June 30,~~March 31, 2022, ~~the Company~~we had not maintained compliance with the covenants of the Senior Notes and obtained a waiver from ~~its lender~~the Lender which waiver iswas contingent on the completion an equity raise of at least $3.5 million, which was completed in June 2022. . In consideration for obtaining a waiver from the compliance with certain covenants, ~~the Company~~we agreed to amend the Senior Notes such that $5 million of ~~principle~~principal loan balance becomes convertible at at $3.58 per share commencing after ~~the Company raises~~we raised the $5,000,000 of common equity (including the foregoing $3.5 million). Upon closing of the equity financing on February 6, 2023, the $5,000,000 of principal became convertible at $3.58 per share.

~~During fiscal year~~On June 30, 2023, the Company, the subsidiaries of the Company and the Lender entered into the Forbearance Agreement. Pursuant to the Forbearance Agreement, the Company acknowledged, among other items, that, as June 30, 2023, it was in default under the Credit Agreement, the Lender had the right to accelerate the Loan, and the Lender had the right to impose the default rate of interest under the Credit Agreement. Pursuant to the Forbearance Agreement, the Lender agreed to forbear from exercising its rights and remedies against the Company and the Guarantors under the Credit Documents until the earlier of September ~~30, 2021, we completed two private placements totaling 2,250,000 shares~~15, 2023, which may be extended by the Lender, or until a termination event occurs pursuant to the Forbearance Agreement. In connection with the Forbearance Agreement, the Lender agreed to provide the Company with a revolving line of ~~our common stock for gross proceeds~~credit in the amount of ~~$4.75 million.~~$2.0 million (the “Revolving Note”), with any advances under the Revolving Note to be made in the sole discretion of the Lender. The Revolving Note will have a maturity date of November 29, 2024 and carry an interest rate of 15.0% per annum, provided that upon an occurrence of default the interest rate will increase to the default rate under the Loan.

In ~~April 2021,~~addition, as a result of the ~~Company completed its IPO~~default on the Senior Note and ~~issued 2,400,000 shares~~the Forbearance Agreement described above, a potential event of ~~common stock~~default exists pursuant to the terms of the Note due to Aspire, which Note provides that upon such an event of default of the Credit Agreement with the Lender, the holder of the Note may choose to demand immediate repayment of the Note. To date, we have not received such notice with respect to the Note.

The accompanying consolidated financial statements have been prepared assuming that we will continue as a going concern. Our continuation as a going concern is dependent upon our ability to obtain equity or debt financings to continue operations. We have a history of and expect to continue to report negative cash flows from operations and a net loss. Our forecasts for ~~gross~~2023 and beyond indicate that we will need additional funding in order to have sufficient financial resources to continue to settle our debts as they fall due. We have taken significant measures to increase the profitability of our business in the short term, but we are not currently generating sufficient cash ~~proceeds~~from our operations to settle our debts as they fall due and continue to require near term financing. These actions include optimizing the efficiency of ~~$14,400,000. The Company paid underwriting fees~~marketing campaigns, reducing the total number of employees and contractors, terminating software and other ~~expenses~~immaterial contracts as well as generally reducing the operating costs of ~~$885,800~~the business. These efforts have also resulted in an increased focus on our i-gaming business and ~~issued 168,000 warrants~~a significant reduction in the investment of our esports products and technologies, which resulted in the recognition of an impairment loss on certain intangible assets and fixed assets. As a result of our actions as referenced above, we do not expect to ~~purchase shares~~launch our esports products in the short or medium term. These factors raise substantial doubt regarding our ability to continue as a going concern. These financial statements do not include any adjustments to the recoverability and classification of ~~common stock at~~recorded asset amounts and classification of liabilities that might be necessary should we be unable to continue as a ~~price~~going concern. We may seek additional funding through a combination of ~~$7.20 per share for~~equity offerings, debt financings, government or other third-party funding, commercialization, marketing and distribution arrangements, other collaborations, strategic alliances and licensing arrangements and delay planned cash outlays or a ~~period of five years.~~combination thereof. Management cannot be certain that such events or a combination thereof can be achieved.

As of June 30, ~~2021,~~2023, we have incurred an accumulated deficit of ~~$39.9 million~~$122,862,549 since inception and have not yet generated any meaningful income from operations.

Net cash used in operating activities was ~~$9.0 million~~$7,554,905 for the nine months ended June 30, ~~2022,~~2023, as compared to cash used in operating activities of ~~$1.9 million~~$8,950,692 for the ~~nine months ended June 30, 2021.~~same period in the prior year. Net cash used in operating activities during the ~~period~~nine months ended June 30, 2023, included payments made for employee costs, professional fees to our consultants, attorneys and accountants for services and a reduction of our outstanding accounts payable. Net cash used in operating activities for the nine months ended June 30, 2022, and were primarily impacted by net losses incurred offset by non-cash items including depreciation and amortization, stock based compensation and amortization of our debt discounts. Net cash used in operations was also a result of ourthe increase in ~~Accounts Receivable due to the growth in our business .~~accounts payable. Cash flow from operations were also ~~benefitted from deferred~~included payments made for, professional fees to our consultants, attorneys and accountants ~~primarily~~ required to complete the Acquisition.

Net cash used in investing activities was ~~$57.4 million~~$11,341 during the nine months ended June 30, 2023 related to the purchase of fixed assets. Net cash used in investing activities was $57,370,975 for the nine months ended June 30, 2022 ~~as compared to cash used in investing activities of $0.2 million for the nine months ended June 30, 2021. Net cash used in investing activities during the period~~and was primarily related to the completion of the Acquisition. Also contributing to the cash used in investing activities in the comparable period were purchase of fixed assets of ~~$1.1 million~~$1,141,449 due primarily to opening of our office in Malta and purchase of software assets to support the ~~new~~ wagering platform.

Net cash provided by financing activities was ~~$64,1 million~~$1,895,947 for the nine months ended June 30, 2023 due to the cash received from sale of common stock of $5,921,982, proceeds from settlement of derivatives of $973,965 partially offset by the repayment of $5,000,000 on the Senior Notes. Net cash provided by financing activities was $64,145,287 for the nine months ended June 30, 2022 ~~due~~and was related to the issuance of Preferred Shares and Senior Notes of ~~$37.7 million~~$37,014,450 and ~~$30.0 million, respectively as well as the $3.5 million raised in June 2022. Offsetting these amounts were the direct issuance costs.~~$27,130,837, respectively.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.

Our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)) are designed to ensure that information required to be disclosed by us in reports we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the appropriate time periods, and that such information is accumulated and communicated to the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely discussions regarding required disclosure. We, under the supervisions of and with the participation of our management, including our Chief Executive Officer, who is our principal executive officer, and Chief Financial Officer, who is our principal financial officer, have evaluated the effectiveness of our disclosure controls and procedures. Based ~~on that~~upon such evaluation, our ~~Chief Executive Officer~~chief executive officer and ~~Chief Financial Officer~~our chief financial officer have concluded that, ~~the design and operation~~as of June 30, 2023, our disclosure controls and procedures were ~~effective as~~ineffective because of ~~June 30, 2022.~~the material weaknesses in our internal control over financial reporting due to a lack of segregation of duties and the lack of formal documentation of our control environment.

In light of the material weakness described above, we continue to perform additional analysis and other post-closing procedures to ensure our financial statements are prepared in accordance with GAAP. Accordingly, we believe that the financial statements included in this report fairly present, in all material respects, our financial condition, results of operations and cash flows for the periods presented.

There were no changes to our internal control over financial reporting during the three months ended June 30, ~~2022,~~2023, that have materially affected, or are reasonable likely to materially effect, our internal controls over financial reporting.

The Company’s previous financial advisor, Boustead Securities LLC (“Advisor”) has alleged a breach by the Company over the termination of their engagement and the timing of the payment and amount of the fees owed to the Advisor (collectively the “Claims”). The fees the Company expects to pay are accrued in the accompanying balance sheet. On June 2, 2022, the Advisor named EBET in an arbitration proceeding with Financial Industry Regulatory Authority (“FINRA”) in connection with the Claims. The ~~statement~~Statement of ~~claim alleges~~Claim alleged damages of $5.7 million and ~~seeks~~sought a declaration that the Company be required to utilize the Advisor for a certain follow-on offering pursuant to an alleged right of first refusal between the parties. On August 4, 2022, EBET, Inc. counterclaimed against Boustead Securities, LLC for tortious interference with prospective economic advantage and demanded damages and attorneys’ fees in an amount to be determined. Boustead Securities, LLC’s current Second Amended Statement of Claim, filed on May 24, 2023, alleges $12 million in damages and no longer seeks declaratory relief. In response to Boustead Securities, LLC’s Second Amended Statement of Claim, Company maintains its counterclaim and all affirmative defenses previously asserted. The case is ongoing, with a hearing before a 3-arbitrator panel initially scheduled for July 19, 2023, but now continued to November 6, 2023. Arbitration is inherently unpredictable. However, the Company believes that it has meritorious defenses to a portion of the alleged fee claim asserted and to the claim that the Company has any obligations pursuant to a right of first refusal between the parties. Nevertheless, cash flows or results of operations could be materially affected in any particular period by the resolution of this matter.

On September 15, 2022, the Company filed a Complaint in the United States District Court for the District of Nevada against its former CTO Jason Finch for: (1) Breach of Contract; (2) Violation of Nevada Revised Statutes section 205.511; (3) Conversion; and (4) Misappropriation of Trade Secrets. In the subject matter,. we seek injunctive relief and demand damages and attorneys’ fees in an amount to be determined. In reply to our Complaint, Mr. Finch filed a Motion to Dismiss the matter and such motion is currently pending decision before the court. On May 12, 2023, the subject matter was resolved in full and the parties agreed to settle all claims and enter mutual releases of claims.

On June 26, 2023, a former vendor of the Company, Litebox USA, LLC filed a Complaint against EBET, Inc. alleging causes of action including Breach of Contract; Breach of the Implied Covenant of Good Faith and Fair Dealing; Unjust Enrichment; Quantum Meruit; Promissory Estoppel; Open Book Account/Account Stated; and other causes of action. The action stems from an alleged nonpayment pursuant to a Master Service Agreement and three separate Statements of Work for the alleged development of software thereunder. On August 4, 2023, EBET, Inc. filed a declaration stating its intention to file a Demurrer to the Complaint on the grounds that the claims are preempted by the California Uniform Trade Secret Act, among other things. The filing of this declaration automatically extends EBET, Inc.’s responsive pleading deadline date by 30 days. EBET intends to vigorously defend this matter.

Other than as described above, we are not at this time involved in any additional legal proceedings that we believe could have a material effect on our business, financial condition, results of operations or cash flows.

For a discussion of potential risks or uncertainties, see “Risk Factors” in the Company’s most recent annual report on Form ~~10-Kon~~10-K on file with the SEC. Except as set forth below, there have been no material changes to the risk factors disclosed in such annual report.

Future sales of shares by our preferred stockholders could cause our stock price to decline.

On November 29, 2021, in connection with the Acquisition, we issued an aggregate of 37,700 shares of Preferred Stock for a purchase price of $1,000.00 per share, for aggregate gross proceeds of $37,700,000 (the “Private Placement”). ~~For each share of Preferred Stock issued, we issued the investors a warrant to purchase 150% of the shares of common stock underlying the Preferred Stock (the “Warrants”).~~ The Preferred Stock iswas initially convertible into common stock at an initial conversion price of $28.00 per share (“Conversion Price”); provided that the Conversion Price is subject to anti-dilution protection upon any subsequent transaction at a price lower than the Conversion Price then in effect. In addition, ~~nine months from the issuance date (the~~on April 28, 2023, July 31, 2023 and October 31, 2023 (each, an “Adjustment Date”), the Conversion Price shall be adjusted to the lesser of: (i) the Conversion Price in effect on the Adjustment Date, or (ii) 85% of the average closing price of the Company’s common stock for the fifteen trading days prior to the Adjustment Date. ~~The Warrants~~Notwithstanding the foregoing, the adjusted Conversion Price may not be less than $0.71, unless the terms of the new adjustment dates are ~~initially exercisable~~approved by our shareholders, as required pursuant to applicable rules and regulations of NASDAQ. We agreed to submit for a vote the approval the terms of the new adjustment dates at our next meeting of shareholders and use our reasonable best efforts to solicit our shareholders’ approval of such vote. We did not receive shareholder approval to permit an ~~exercise~~adjustment of the Conversion Price prior to April 28, 2023. As such, although the adjusted price pursuant to the foregoing provision was less than $0.71 per share, on April 28, 2023, the Conversion Price was adjusted to $0.71 per share and on July 31, 2023, the conversion price of ~~$30.00~~the Preferred Stock was reduced to $0.086 per ~~share, provided that~~share. Through the ~~exercise price is subject to anti-dilution protection~~date of this filing, a total of 27,363 shares of Preferred Stock were converted into 274,968,568 shares of common stock. Accordingly, as of the date hereof, there are 147,867,809 shares of common stock issuable upon ~~any subsequent transaction at a price lower than~~conversion of the ~~exercise price then in effect.~~Preferred Stock. The trading price of our common stock could be adversely impacted if these preferred stockholders sell, or if the market believes such holders may sell, substantial amounts of our common stock in the public market. As a result of the preferred stock conversion price reset discussed above, the Company currently does not have sufficient authorized shares to settle its convertible instruments.

We are party to a Forbearance Agreement which expires on September 15, 2023, unless extended by the Lender, and if we are unable to comply with the Forbearance Agreement then the lender could declare a default of the Credit Agreement wherein we would be required to immediately repay the amounts due under the Credit Agreement.

On June 30, 2023, we, our subsidiaries and our Lender with respect to our Senior Notes, entered into a Forbearance Agreement. Pursuant to the Forbearance Agreement, we acknowledged, among other items, that, as June 30, 2023, we were in default under the Credit Agreement, the Lender had the right to accelerate the Loan, and the Lender had the right to impose the default rate of interest under the Credit Agreement. Pursuant to the Forbearance Agreement, the Lender agreed to forbear from exercising its rights and remedies against the Company and the Guarantors under the Credit Documents until the earlier of September 15, 2023, which may be extended by the Lender, or until a termination event occurs pursuant to the Forbearance Agreement. A termination event under the Forbearance Agreement consists of the filing of a bankruptcy proceeding by us or any guarantor, the occurrence of a new event of default under the Credit Agreement, or the failure by us or any guarantor to perform any material requirement, covenant, or obligation under the Forbearance Agreement. During the forbearance period, the Lender agreed, among other items, not to accelerate the Loan, initiate any bankruptcy filings, or apply any default rates of interest. As partial consideration for the Lender agreeing to enter into the Forbearance Agreement, we paid a forbearance fee equal to 50 basis points of the outstanding principal amount of the Loan (or $130,425.16), which amount was added to the principal balance of the loan. In addition, on June 30, 2023, we made a prepayment of the Loan in the amount of $2.0 million, which in turn reduced the minimum cash balance requirement under the Credit Agreement to $0. Upon the execution of the Forbearance Agreement and after the receipt of the forbearance fee and loan repayment, the principal amount of the Loan is $26,215,457.61.

The borrowings under the Credit Agreement are secured by a first priority lien on our assets. If we fail to comply with the terms of the Forbearance Agreement, the Lender could declare an event of default, which would give it the right to declare all borrowings outstanding, together with accrued and unpaid interest and fees, to be immediately due and payable. In addition, since the borrowings under the Credit Agreement are secured by a first priority lien on our assets, upon such an event of default, the Lender may foreclose on our assets. . There is no assurance that the Company will be successful in restructuring the terms of the Credit Agreement prior to the September 15, 2023 deadline in the Forbearance Agreement.

There were no sales of equity securities during the period covered by this Quarterly Report that were not registered under the Securities Act and were not previously reported on a Current Report on Form 8-K filed by the Company.

In May and June 2023, a total of 5,333 shares of Preferred Stock were converted into 9,028,538 shares of common stock by three holders of our Preferred Stock at a conversion price of $0.71 per share. The holders are “accredited investors” (as such term is defined in Rule 501(a) of Regulation D under the Securities Act of 1933, as amended (the “Securities Act”)), and the shares of Preferred Stock and common stock were issued in reliance upon an exemption from registration contained in Section 4(a)(2) of the Securities Act.

~~None.~~See the information set forth in “Item 1. Financial Statements – Note 4 – Borrowings – Senior Notes” for a discussion of our default under the Credit Agreement with respect to the Senior Notes. See the information set forth in “Item 1. Financial Statements – Note 4 – Borrowings – Notes Due to Aspire” for a discussion of the event of default that occurred pursuant to our Note to Aspire.

~~None.~~During the period covered by this Quarterly Report, none of the Company’s directors or executive officers has adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement (each as defined in Item 408 of Regulation S-K under the Securities Exchange Act of 1934, as amended).

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, there unto duly authorized.

~~197 E. California Ave. Ste. 302~~3960 Howard Hughes Parkway, Suite 500, Las Vegas, NV		~~89104~~89169
(Address of Principal Executive Offices)		(Zip Code)

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	EBET	The NASDAQ Stock Market LLC

Large Accelerated Filer ☐	Accelerated Filer ☐
Non-Accelerated Filer ☒	Smaller Reporting Company ☒
	Emerging Growth Company ☒

	·	our ability to successfully integrate our asset acquisitions;

	·	our ability to ~~introduce new enhancements to our website on~~operate under the ~~timeline we have indicated;~~gaming licenses of third-party entities;

	·	our ability to satisfy our debt obligations during the period provided to us pursuant to the forbearance agreement under which we are operating, or to obtain additional ~~funding~~waivers until we are able to ~~develop additional services and offerings and to service our debt obligations;~~do so;

	·	compliance with obligations under intellectual property licenses with third parties;

	·	market acceptance of our new offerings;

	·	competition from existing online offerings or new offerings that may emerge;

	·	our ability to establish or maintain collaborations, licensing or other arrangements;

	·	our ability and third parties’ abilities to protect intellectual property rights;

	·	our ability to adequately support future growth; and

	·	our ability to attract and retain key personnel to manage our business effectively.

				Page
PART I.	FINANCIAL INFORMATION

	Item 1.	Unaudited Financial Statements		4

		a)	Consolidated Balance Sheets as of June 30, ~~2022~~2023 and September 30, ~~2021~~2022	4
		b)	Consolidated Statements of Operations for the Three and ~~nine~~Nine Months Ended June 30, ~~2022~~2023 and ~~202~~20221	5
		c)	Consolidated Statements of Changes in Shareholders’ Equity for the ~~Three and~~ Nine Months Ended June 30, ~~2022~~2023 and ~~2021~~2022	6
		d)	Consolidated Statements Cash Flows for the Nine Months Ended June 30, ~~2022~~2023 and ~~202~~20221	7
		e)	Notes to Consolidated Financial Statements	8

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		2126

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk		2634

	Item 4.	Controls and Procedures		2634

PART II.	OTHER INFORMATION

	Item 1.	Legal Proceedings		2735

	Item 1A.	Risk Factors		2735

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		2736

	Item 3.	Defaults Upon Senior Securities		2736

	Item 4.	Mine Safety Disclosure		2736

	Item 5.	Other Information		2736

	Item 6.	Exhibits		2837

~~SIGNATURE~~SIGNATURES				2938


	June 30,			September 30,
	2022			2021

ASSETS
Current assets:
Cash	$	6,888,479		$	9,064,859
Accounts receivable, net		1,618,957			21,636
Prepaid expenses and other current assets		2,256,849			690,637
Right of use asset, operating lease, current portion		164,821			170,512

Total current assets		10,929,106			9,947,644

Long term assets:
Fixed assets, net		1,109,118			85,334
Right of use asset, operating lease		30,473			172,915
Intangible assets - license agreement, net		1,152,147			1,616,088
Intangible assets - domain names, net		2,241,052			2,240,510
Goodwill		32,667,115			0
Acquired intangibles, net		30,992,788			0

Total assets	$	79,121,799		$	14,062,491

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	12,352,125		$	1,721,103
Current lease liabilities		164,820			170,511
Derivative liabilities		233,397			0
Borrowings		1,606,891			1,396,133
Liabilities to users		1,403,889			58,789
Total current liabilities		15,761,122			3,346,536

Long-Term Liabilities
Borrowings		32,244,969			463,925

Total liabilities		48,006,091			3,810,461

COMMITMENTS AND CONTINGENCIES		–			–

Stockholders' equity:
Preferred Stock, $0.001 par value, 10,000,000 shares authorized, 40,967 and 0 issued and outstanding as of June 30, 2022 and September 30, 2021, respectively		41			0
Common stock; $0.001 par value, 100,000,000 shares authorized 16,172,954 and 13,315,414 shares issued and outstanding as of June 30, 2022 and September 30, 2021, respectively		16,172			13,315
Additional paid-in capital		85,193,567			26,834,354
Accumulated other comprehensive (deficit) income		(4,476,394	)		53,911
Accumulated deficit		(49,617,678	)		(16,649,550	)
Total stockholders’ equity		31,115,708			10,252,030

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	79,121,799		$	14,062,491


	Three Months Ended						Nine Months Ended
	June 30,						June 30,
	2022			2021			2022			2021

Revenue	$	18,168,515		$	41,356		$	44,311,030		$	85,984
Cost of revenue		(10,918,796	)		0			(27,537,479	)		(24,724	)

Gross profit		7,249,719			41,356			16,773,551			61,260

Operating expenses:
Sales and marketing expenses		9,262,851			964,836			22,711,724			1,238,780
Product and technology expenses		1,115,165			1,176,848			3,270,328			2,286,228
Acquisition costs		0			139,235			2,240,147			139,235
General and administrative expenses		3,863,298			1,340,042			12,454,493			4,123,163
Total operating expenses		14,241,314			3,620,961			40,676,692			7,787,406

Income (loss) from operations		(6,991,595	)		(3,579,605	)		(23,903,141	)		(7,726,146	)

Other expenses:
Interest expense		(1,920,553	)		(368,001	)		(5,734,873	)		(1,335,621	)
Foreign currency loss		(66,552	)		(10,005	)		(62,794	)		(22,235	)
Total other expense		(1,987,105	)		(378,006	)		(5,797,667	)		(1,357,856

Loss before provision for income taxes		(8,978,700	)		(3,957,611	)		(29,700,808	)		(9,084,002	)
Provision for income taxes		0			0			0			0

Net loss	$	(8,978,700	)	$	(3,957,611	)	$	(29,700,808	)	$	(9,084,002	)

Preferred stock dividends		(1,416,242	)		0			(3,267,319	)		0
Net loss attributable to common shareholders		(10,394,942	)		(3,957,611	)		(32,968,127	)		(9,084,002	)

Net loss per common share – basic	$	(0.70	)	$	(0.38	)	$	(2.31	)	$	(0.85	)
Net loss per common share – diluted	$	(0.70	)	$	(0.38	)	$	(2.31	)	$	(0.85	)

Weighted average common shares outstanding – basic		14,842,497			10,549,765			14,267,461			10,650,966
Weighted average common shares outstanding – diluted		14,842,497			10,549,765			14,267,461			10,650,966


	For the Nine Months Ended June 30,
	2022			2021

Cash flow from operating activities:
Net loss	$	(29,700,808	)	$	(9,084,002	)

Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of debt discount, issuance costs		1,319,608			1,187,913
Depreciation and amortization expense		4,770,509			178,339
Stock-based compensation		4,341,090			2,856,997
Gain on cryptocurrency settlement					5,665
Derivative (gain)/loss		233,397			0
Foreign exchange (gain)/loss		50,377			0
Changes in operating assets and liabilities:
Accounts receivable		(1,597,324	)		(35,252	)
Prepaid expenses and other		(1,566,211	)		(623,026	)
Accounts payable and accrued liabilities		11,853,570			775,277
Accounts payable - related parties		0			(152,888	)
Liabilities to users		1,345,100			(8,432	)
Net cash used in operating activities		(8,950,692	)		(4,899,409	)

Cash flow from investing activities:
Purchase of fixed assets		(1,141,449	)		(103,259	)
Cash paid for business combinations		(56,229,526	)		0
Purchase of other long term assets		0			(420,098	)
Net cash used by investing activities		(57,370,975	)		(523,357	)

Cash flow from financing activities:
Proceeds from debt issuance, net of issuance costs		27,130,837			0
Proceeds from equity issuance, net of issuance costs		37,014,450			17,881,957
Net cash provided by financing activities		64,145,287			17,881,957

NET CHANGE IN CASH		(2,176,380	)		12,459,191
CASH AT BEGINNING OF PERIOD		9,064,859			0
CASH AT END OF PERIOD	$	6,888,479		$	12,459,191

Supplemental disclosure of cash flow information:
Cash paid for interest	$	0		$	0

Non-cash transactions
Preferred shares issued for dividends	$	3,267,319		$	0
Stock warrants issued in connection with Senior Notes	$	7,661,382		$	0
Stock warrant issued for asset acquisition	$	0		$	57,282
Stock issued for conversion of notes payable	$	412,500		$	187,500
Stock issuable for intangible asset	$	0		$	1,456,650

Schedule of lease-related assets and liabilities
	June 30, 2023		September 30, 2022
Operating Leases:
Operating lease right-of-use assets	$	22,740	$	129,975
Right of use liability operating lease current portion		–		129,974
Right of use liability operating lease long term		–		–
Total operating lease liabilities	$	–	$	129,974

·	Identification of the contract with a customer

·	Identification of the performance obligations in the contract

·	Determination of the transaction price

·	Allocation of the transaction price to the performance obligations in the contract

·	Recognition of revenue when, or as, the Company satisfies a performance obligation

Schedule of allocation of purchase price
	Fair Value
Trademarks	$	21,836,528
Customer relationships		16,162,202
Goodwill		35,620,270
Total	$	73,619,000

Schedule of business combination proforma results
	Three Months Ended						Nine Months Ended
	June 30, 2023			June 30, 2022			June 30, 2023			June 30, 2022
Revenue	$	7,974,517		$	18,168,515		$	33,962,971		$	54,342,568
Operating loss		(34,728,303	)		(6,991,597	)		(37,847,670	)		(23,747,079	)
Net loss		(43,730,398	)		(8,978,699	)		(55,299,838	)		(30,971,308	)
Net loss attributable to common shareholders		(44,722,672	)		(10,402,922	)		(59,386,657	)		(35,172,147	)
Loss per common share - basic and diluted	$	(1.73	)		(0.73	)	$	(2.71	)		(2.47	)

Schedule of acquisition costs
Debt issuance costs		3,372,889
Equity issuance costs		4,184,000
Transaction expenses		2,472,533
Total acquisition expenses	$	10,029,422


				September 30, 2022
	Contractual Interest			Principal outstanding balance		Principal outstanding balance		Unamortized debt discount			Accrued Interest		Issuance costs			Carrying amount
	rate		Cur	Local		USD		USD			USD		USD			USD
Senior notes		15%	USD		30,558,446		30,558,446		(8,526,776	)		–		(2,435,976	)		19,595,694
Note due to Aspire		10%	EUR		10,000,000		9,748,000		–			888,343		–			10,636,343
Convertible notes		10%	USD		1,606,891		1,606,891		–			–		–			1,606,891
Other		0%	USD		675,000		675,000		(165,480	)		–		–			509,520
Total borrowings							42,588,337		(8,692,256	)		888,343		(2,435,976	)		32,348,448

Current																	21,202,585
Long-term																	11,145,863
Total borrowings																	32,348,448

Schedule of warrant activity
	Common Stock Warrants
	Shares		Weighted Average Exercise Price		Weighted average Remaining Life in years
Outstanding at September 30, 2022		6,033,365	$	9.14		4.01
Granted		7,030,441		2.51		5.33
Cancelled		–		–		–
Expired		–		–		–
Exercised		–		–		–
Outstanding at June 30, 2023		13,063,806	$	4.07		4.17
Exercisable at June 30, 2023		13,063,806	$	4.07		4.17

Schedule of intangible assets acquired
	June 30, 2023			September 30, 2022
Trademarks and tradenames, indefinite lives	$	3,230,000		$	14,232,080
Trademarks and tradenames, three year lives		5,826,014			4,562,064
Customer relationships		12,113,607			13,910,396
Other		15,224			10,493
Total acquired intangibles		21,184,845			32,715,033
Accumulated amortization		(10,905,427	)		(5,169,704	)
Acquired intangible assets, net	$	10,279,418		$	27,545,329

Schedule of earnings per share
	Three Months Ended						Nine Months Ended
	June 30, 2022			June 30, 2021			June 30, 2022			June 30, 2021
Numerator
Net income (loss)	$	(8,978,700	)	$	(3,957,611	)	$	(29,700,808	)	$	(9,084,002	)
Preferred stock dividends		(1,416,242	)		0			(3,267,319	)		0
Net income (loss) attributable to common stockholders	$	(10,394,942	)	$	(3,957,611	)	$	(32,968,127	)	$	(9,084,002	)

Denominator
Basic and diluted weighted average common shares		14,842,497			10,549,765			14,267,461			10,650,966
Basic and diluted net income (loss) per common share	$	(0.70	)	$	(0.38	)	$	(2.31	)	$	(0.85	)

	·	ownership of a portfolio of B2C proprietary online casino and sportsbook brands consisting of Karamba, Hopa, Griffon Casino, BetTarget, Dansk777, and GenerationVIP;

	·	market access for our esports products in key regulated markets including the United Kingdom, Germany, Ireland, Malta, and Denmark, among others, allowing us to cross-sell esports wagering opportunities;

	·	enhanced strategic partnership with Aspire who provides the on-line gaming platform and a managed services offering, including customer service, customer on-boarding and payment processing ensuring operational stability and continuity.

	Nine Months Ended June 30,
	2023					2022
	$			%		$			%

Revenue	$	33,962,971			100%	$	44,311,030			100%
Cost of revenue		(19,314,114	)		57%		(27,537,479	)		62%

Gross profit		14,648,857			43%		16,773,551			38%

Operating expenses:
Sales and marketing expenses		8,660,841			26%		22,711,724			51%
Product and technology expenses		816,309			2%		3,270,328			7%
Acquisition costs		–			0%		2,240,147			5%
Impairment loss		32,653,626			96%		–			0%
General and administrative expenses		10,365,751			31%		12,454,493			28%
Total operating expenses		52,496,527			155%		40,676,692			92%

Loss from operations		(37,847,670	)		111%		(23,903,141	))		54%

Other expenses:
Interest expense		(15,543,788	)		46%		(5,531,757	)		12%
Loss on derivative instruments		(142,187	)		0%		(203,116	)		0%
Change in fair value of warrant liabilities		1,034,400			3%		–			0%
Foreign currency loss and other		(2,800,593	)		8%		(62,794	)		0%
Total other expense		(17,452,168	))		51%		(5,797,667	)		13%

Loss before provision for income taxes		(55,299,838	)		163%		(29,700,808	)		67%
Provision for income taxes		–			0%		–			0%

Net loss	$	(55,299,838	)		163%	$	(29,700,808	)		67%

Exhibit Number		Description
3.1		~~Articles of Merger(incorporated by reference to exhibit 3.1 of the Form 8-K filed May 5, 2022)~~
~~3.2~~		~~Amended and Restated Bylaws(incorporated by reference to exhibit 3.2 of the Form 8-K filed May 5, 2022)~~
~~3.3~~		~~Amended and Restated~~ Certificate of ~~Designation of Preferences, Rights and Limitations~~Amendment of the ~~Series A Convertible Preferred Stock~~Articles of Incorporation of EBET, Inc. (incorporated by reference to exhibit 3.1 of the Form 8-K filed ~~June 8, 2022)~~July 28, 2023)
~~4.1~~10.1 +		~~Form~~Forbearance Agreement dated June 30, 2023 between EBET, Inc., certain subsidiaries of ~~Investor Warrant issued in June 2022 offering~~ ~~(incorporated by reference to exhibit 4.1 of the Form 8-K filed June 8, 2022)~~
~~10.1~~		~~Form of Securities Purchase Agreement in June 2022 offering~~EBET, Inc., and CP BF Lending, LLC (incorporated by reference to exhibit 10.1 of the Form 8-K filed ~~June 8, 2022)~~July 3, 2023)
10.2		Form of Revolving Note ~~Conversion Option Agreement between~~issuable by EBET, Inc. ~~and~~to CP BF ~~LENDING,~~Lending, LLC (incorporated by reference to exhibit 10.2 of the Form 8-K filed ~~June 8, 2022)~~July 3, 2023)
10.3		~~Amendment to Note Conversion Option Agreement between~~ EBET, Inc. 2020 Stock Plan, as amended, and ~~CP BF LENDING, LLC~~forms of award agreement (incorporated by reference to exhibit 10.1 of the Form 8-K filed ~~June 17, 2022)~~July 28, 2023)
10.4*		Amendment to the First Amended and Restated Employment Agreement dated October 1, 2021 by and between Aaron Speach and EBET, INC.
10.5*		Amendment to the Employment Agreement dated September 9, 2022, as amended, by and between Matthew Lourie and EBET, INC.
31.1*		Certification of the Principal Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934
31.2*		Certification of the Principal Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934
32.1*(1)		Certification of the Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*(1)		Certification of the Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS		Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)
101.SCH		Inline XBRL Taxonomy Extension Schema Document
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File (formatted in IXBRL, and included in exhibit 101).

	EBET, INC.

Date: August ~~15, 2022~~14, 2023	By:	/s/ Aaron Speach
		Aaron Speach Chief Executive Officer, President and Director (Principal Executive Officer)


~~Date:~~Date August ~~15, 2022~~14, 2023	By:	/s/ ~~James Purcell~~Matthew Lourie
		~~James Purcell~~Matthew Lourie Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)