UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended December 31, ~~2022~~2023

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period From to

Commission File Number: 001-40334

EBET, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Nevada

85-3201309

(State or Other Jurisdiction of

Incorporation or Organization)

(I.R.S. Employer

Identification No.)

3960 Howard Hughes Parkway, Suite 500, Las Vegas, NV		89169
(Address of Principal Executive Offices)		(Zip Code)

(888) 411-2726

(Registrant's Telephone Number, Including Area Code)

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

Securities registered pursuant to Section 12(b) of the Exchange Act: None

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

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.

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

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 ~~25,119,425~~14,979,642 shares of common stock outstanding on February ~~8, 2023.~~

12, 2024.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

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:

	·	our ability to successfully integrate our asset acquisitions;

	·	our ability to introduce new enhancements to our ~~website on the timeline we have indicated;~~websites;

	·	our ability to obtain additional funding to develop additional services and offerings and to service our debt obligations;

	·	our ability to achieve and maintain compliance with the covenants in our forbearance agreement related to our debt obligations or to obtain additional waivers of such covenants until we are able to 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.

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.

EBET, Inc.

FORM 10-Q

For the Quarter Ended December 31, ~~2022~~2023

INDEX

				Page
PART I.	FINANCIAL INFORMATION

	Item 1.	Unaudited Financial Statements		4

		a)	Consolidated Balance Sheets as of December 31, ~~2022~~2023 and September 30, ~~2022~~2023	4
		b)	Consolidated Statements of Operations for the Three Months Ended December 31, ~~2022~~2023 and ~~2021~~2022	5
		c)	Consolidated Statements of Changes in Shareholders’ Equity (Deficit) for the Three Months Ended December 31, ~~2022~~2023 and ~~2021~~2022	6
		d)	Consolidated Statements Cash Flows for the Three Months Ended December 31, ~~2022~~2023 and ~~2021~~2022	7
		e)	Notes to Consolidated Financial Statements	8

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		2422

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk		2927

	Item 4.	Controls and Procedures		2928

PART II.	OTHER INFORMATION

	Item 1.	Legal Proceedings		3029

	Item 1A.	Risk Factors		3029

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		3130

	Item 3.	Defaults Upon Senior Securities		3130

	Item 4.	Mine Safety Disclosure		3130

	Item 5.	Other Information		3130

	Item 6.	Exhibits		3230

SIGNATURE				3331

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

EBET, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)


	December 31,			September 30,			December 31,			September 30,
	2022			2022			2023			2023

ASSETS
Current assets:
Cash	$	5,825,984		$	5,486,210		$	539,327		$	304,709
Accounts receivable, net		2,031,974			1,647,345			786,751			643,254
Prepaid expenses and other current assets		1,425,946			1,772,332			1,143,229			1,331,201
Derivative asset		–			1,116,153
Right of use asset, operating lease, current portion		105,226			129,975

Total current assets		9,389,130			10,152,015			2,469,307			2,279,164

Long term assets:
Fixed assets, net		580,920			546,408			132,120			161,213
Intangible assets, net		28,441,265			27,545,329			3,529,929			3,701,609
Goodwill		33,544,570			30,657,460			9,348,434			8,962,652

Total assets	$	71,955,885		$	68,901,212		$	15,479,790		$	15,104,638

LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued liabilities	$	14,447,349		$	13,384,906		$	23,577,873		$	22,775,031
Current lease liabilities		105,226			129,974
Borrowings, current portion		22,552,618			21,202,585			42,872,144			39,252,130
Liabilities to users		1,140,748			1,272,308			944,280			937,948
Total current liabilities		38,245,941			35,989,773			67,394,297			62,965,109

Long-Term Liabilities
Long-Term Liabilities:
Borrowings, net of current portion		12,342,918			11,145,863			572,888			559,597

Total liabilities		50,588,859			47,135,636			67,967,185			63,524,706

COMMITMENTS AND CONTINGENCIES								–			–

Stockholders' equity:
Preferred Stock, $0.001 par value, 10,000,000 shares authorized, 37,700 issued and outstanding as of December 31, 2022 and September 30, 2022, respectively		38			38
Common stock; $0.001 par value, 100,000,000 shares authorized 17,275,323 and 16,654,573 shares issued and outstanding as of December 31, 2022 and September 30, 2022, respectively		17,275			16,654
Stockholders' equity (deficit):
Preferred Stock, $0.001 par value, 10,000,000 shares authorized, 0 issued and outstanding								–			–
Common Stock; $0.001 par value, 500,000,000 shares authorized 14,979,642 shares issued and outstanding as of December 31, 2023 and September 30, 2023								14,980			14,980
Additional paid-in capital		94,281,210			91,941,757			103,496,621			103,255,793
Accumulated other comprehensive deficit		(1,009,019	)		(7,365,129	)		(1,021,179	)		(532,401	)
Accumulated deficit		(71,922,478	)		(62,827,744	)		(154,977,817	)		(151,158,440	)
Total stockholders’ equity		21,367,026			21,765,576
Total stockholders’ equity (deficit)								(52,487,395	)		(48,420,068

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	71,955,885		$	68,901,212
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)							$	15,479,790		$	15,104,638

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

EBET, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	Three Months Ended						Three Months Ended
	December 31,						December 31,
	2022			2021			2023			2022

Revenue	$	14,407,964		$	7,139,927		$	4,284,055		$	14,407,964
Cost of revenue		(8,518,622	)		(4,609,087	)		(2,241,465	)		(8,518,622	)

Gross profit		5,889,342			2,530,840			2,042,590			5,889,342

Operating expenses:
Sales and marketing expenses		4,367,395			3,974,784			1,785,180			4,367,395
Product and technology expenses		294,073			1,015,248			132,964			294,073
Acquisition costs		–			2,238,957
General and administrative expenses		3,382,793			3,144,420			2,659,176			3,382,793
Total operating expenses		8,044,261			10,373,409			4,577,320			8,044,261

Loss from operations		(2,154,919	)		(7,842,569	)		(2,534,730	)		(2,154,919	)

Other expenses:
Other income (expenses):
Interest expense		(3,031,348	)		(976,418	)		(1,586,388	)		(3,031,348	)
Loss on derivative		(142,187	)		(6,052	)		–			(142,187	)
Foreign currency loss		(2,229,311	)		(55,999	)
Total other expense		(5,402,846	)		(1,038,469	)
Foreign currency gain (loss)								301,741			(2,229,311	)
Total other income (expense)								(1,284,647	)		(5,402,846	)

Loss before provision for income taxes		(7,557,765	)		(8,881,038	)		(3,819,377	)		(7,557,765	)
Provision for income taxes		–			–			-			-

Net loss		(7,557,765	)		(8,881,038	)		(3,819,377	)		(7,557,765	)

Preferred stock dividends		(1,536,969	)		(483,817	)		–			(1,536,969	)
Net loss attributable to common shareholders		(9,094,734	)		(9,364,855	)		(3,819,377	)		(9,094,734	)

Other comprehensive income:
Other comprehensive income (loss):
Foreign currency translation income (loss)		6,356,110			187,428			(488,778	)		6,356,110
Total other comprehensive income (loss)		6,356,110			187,428			(488,778	)		6,356,110

Comprehensive loss	$	(2,738,624	)	$	(9,177,427	)	$	(4,308,155	)	$	(2,738,624	)

Net loss per common share – basic and diluted	$	(0.53	)	$	(0.68	)	$	(0.25	)	$	(15.95	)

Weighted average common shares outstanding – basic and diluted		17,108,464			13,698,954			14,979,642			570,282

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

EBET, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)

FOR THE THREE MONTHS ENDED DECEMBER 31, 2023 AND 2022

(Unaudited)


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

Balance at September 30, 2023		–	$	–		14,979,642	$	14,980	$	103,255,793	$	(532,401	)	$	(151,158,440	)	$	(48,420,068	)
Stock-based compensation		–		–		–		–		240,828		–			–			240,828
Net loss		–		–		–		–		–		–			(3,819,377	)		(3,819,377	)
Comprehensive loss		–		–		–		–		–		(488,778	)		–			(488,778	)
Balance at December 31, 2023		–	$	–		14,979,642	$	14,980	$	103,496,621	$	(1,021,179	)	$	(154,977,817	)	$	(52,487,395	)


Balance at September 30, 2022		37,700	$	38		555,153	$	555	$	91,957,856	$	(7,365,129	)	$	(62,827,744	)	$	21,765,576
Stock-based compensation		–		–		692		1		503,104		–			–			503,105
Shares issued for conversion of debt		–		–		20,000		20		299,980		–			–			300,000
Preferred share dividends		–		–		–		–		1,536,969		–			(1,536,969	)		–
Net loss		–		–		–		–		–		–			(7,557,765	)		(7,557,765	)
Comprehensive income		–		–		–		–		–		6,356,110			–			6,356,110
Balance at December 31, 2022		37,700	$	38		575,845	$	576	$	94,297,909	$	(1,009,019	)	$	(71,922,478	)	$	21,367,026

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

~~EBET, INC.~~

~~CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY~~

~~FOR THE THREE MONTHS ENDED DECEMBER 31, 2022 AND 2021~~

~~(Unaudited)~~

Preferred Stock Common Stock Additional Accumulated Other
Number of Number of paid-in
Comprehensive
Accumulated
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
Shares and warrants issued for cash, net 37,700 38 – – 36,599,962 – – 36,600,000
Shares issued to Aspire Global plc – – 186,838 187 13,326,565 – – 13,326,752
Cashless exercise of warrants – – 244,346 244 (244 ) – – –
Shares issued for conversion of debt – – 423,141 423 112,077 – – 112,500
Exercise of stock options for cash – – 2,000 2 5,998 – – 6,000
Stock-based compensation – – �� 20,000 20 1,435,296 – – 1,435,316
Preferred share dividends – – – – 483,817 – (483,817 ) –
Net loss – – – – – – (8,881,038 ) (8,881,038 )
Comprehensive income – – – – – 187,428 – 187,428
Balance at December 31, 2021 37,700 $ 38 14,191,739 $ 14,191 $ 77,797,825 $ 241,339 $ (26,041,405 ) $ 52,038,988

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 – – – – – – (7,557,765 ) (7,557,765 )
Comprehensive income – – – – – 6,356,110 – 6,356,110
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

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

EBET, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED DECEMBER 31, ~~2022~~2023 and ~~2021~~2022

(Unaudited)


	For the Three Months Ended December 31,						For the Three Months Ended December 31,
	2022			2021			2023			2022

Cash flow from operating activities:
Net loss	$	(7,557,765	)	$	(8,881,038	)	$	(3,819,377	)	$	(7,557,765	)

Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of debt discount, issuance costs		1,277,016			528,212			13,290			1,277,016
Amortization of right of use assets		35,752			–			–			35,752
Depreciation and amortization expense		1,647,817			223,686			348,944			1,647,817
Stock-based compensation		503,105			1,435,316			240,828			503,105
Derivative loss		142,187			–			–			142,187
Foreign exchange loss		2,229,311			193,480
Foreign exchange gain (loss)								(301,741	)		2,229,311
Changes in operating assets and liabilities:
Accounts receivable		(223,384	)		(2,573,033	)		(114,583	)		(223,384	)
Prepaid expenses and other		468,720			(1,404,898	)		228,135			468,720
Accounts payable and accrued liabilities		(67,499	)		5,950,695			2,754,271			(67,499	)
Current lease liabilities		(35,752	)		–			–			(35,752	)
Liabilities to users		(240,410	)		1,506,930			(33,465	)		(240,410	)
Net cash used in operating activities		(1,820,902	)		(3,020,650	)		(683,698	)		(1,820,902	)

Cash flow from investing activities:
Purchase of fixed assets		(8,204	)		(392,564	)		–			(8,204	)
Cash paid for business combinations		–			(56,628,941	)
Net cash used by investing activities		(8,204	)		(57,021,505	)		–			(8,204	)

Cash flow from financing activities:
Proceeds from settlement of derivative instruments		973,965			–			–			973,965
Proceeds from debt issuance, net of issuance costs		–			27,130,837
Proceeds from equity issuance, net of issuance costs		–			35,606,000
Proceeds from revolving line of credit								1,900,000			–
Net cash provided by financing activities		973,965			62,736,837			1,900,000			973,965

Effect of foreign exchange rates on cash		1,194,915			–			(981,684	)		1,194,915

NET CHANGE IN CASH		339,774			2,694,682			234,618			339,774
CASH AT BEGINNING OF PERIOD		5,486,210			9,064,859			304,709			5,486,210
CASH AT END OF PERIOD	$	5,825,984		$	11,759,541		$	539,327		$	5,825,984

Supplemental disclosure of cash flow information:
Cash paid for interest	$	1,093,515		$	373,333		$	–		$	1,093,515

Non-cash transactions
Preferred shares issued for dividends	$	–		$	483,817
Stock warrants issued in connection with Senior Notes	$	–		$	7,661,382
Stock issued for conversion of notes payable	$	300,000		$	112,500		$	–		$	300,000
Increase in borrowings from interest expense							$	1,264,015		$	–

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

EBET, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 – ORGANIZATION, NATURE OF OPERATIONS AND GOING CONCERN

Organization

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 including casino, sportsbook and esports events. The Company operates under ~~a Curacao gaming sublicense and under a strategic partnership~~an operating services agreement with Aspire Global plc (“Aspire”) allowing EBET to provide online betting services to various countries around the world.

Acquisition of the B2C business of Aspire Global plc

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 Acquisition Agreement closed on November 29, 2021. 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.~~

Going Concern

The accompanying unaudited 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 a history of and expects to continue to report negative cash flows from operations and a net loss. The Company's forecasts for ~~2023~~2024 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 in an attempt 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, 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, which resulted in the recognition of an impairment ~~loss~~losses on certain goodwill, intangible assets and fixed ~~assets.~~assets in prior periods. 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.~~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 other third-party funding, commercialization, marketing and distribution arrangements, other collaborations, strategic alliances and licensing arrangements and delay planned cash outlays or a combination thereof. Management cannot be certain that such events or a combination thereof can be achieved.

~~Impact of COVID-19~~

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.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

Basis of Presentation

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 three months ended December 31, ~~2022,~~2023, are not necessarily indicative of the final results that may be expected for the year ended September 30, ~~2023.~~2024. 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, ~~2022~~2023 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.

Accounts Receivable

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 December 31, ~~2022~~2023 and September 30, ~~2022.~~2023.

Intangible Assets

The Company’s 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.

Impairment of Long-Lived Assets

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.

~~Leases~~

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. 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 December 31, 2022 and September 30, 2022:~~

Schedule of lease-related assets and liabilities
December 31, 2022 September 30, 2022
Operating Leases:
Operating lease right-of-use assets $ 105,226 $ 129,975
Right of use liability operating lease current portion 105,226 129,974
Right of use liability operating lease long term – –
Total operating lease liabilities $ 105,226 $ 129,974

~~The following table provides the maturities of lease liabilities at December 31, 2022:~~

Schedule of maturities of lease liabilities
Operating
Leases
2023 (9 months remaining) $ 108,146
2023 –
2024 –
2025 –
2026 and thereafter –
Total future undiscounted lease payments 108,146
Less: Interest (2,920 )
Present value of lease liabilities $ 105,226

~~Operating lease expense was $53,057~~ ~~and $31,877~~ ~~during the three months ended December 31, 2022 and 2021, respectively.~~

Liabilities to Users

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.

Revenue Recognition

The Company recognizes revenue in accordance with ASC Topic 606, Revenue From Contracts With Customers, which 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. Revenue is recognized based on the following five step model:

·	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

No single customer accounted for more than 10% of revenue for the three months ended December 31, ~~2022~~2023 or ~~2021.~~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.

Performance Obligations

The Company ~~operates~~owns an online betting platform allowing users to ~~place wagers~~bet on a variety of ~~live sporting events,~~ i-gaming ~~and esports events.~~or casino-style games online. 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.

Transaction Price Considerations

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 recognized when awarded to the player.

Cost of Revenue

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

Sales and Marketing Expenses

Sales and marketing expenses consist primarily of expenses associated with 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 $3,737,017~~ ~~and $2,721,899~~ ~~for the three months ended December 31, 2022 and 2021, respectively.~~

Product and Technology Expenses

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

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

Fair value of financial instruments

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 December 31, ~~2022~~2023 and September 30, ~~2022~~2023 based on the three-tier fair value hierarchy:

Schedule of fair value of financial assets and liabilities

Fair Value Measurements at December 31, 2022

Fair Value Measurements at December 31, 2023

Level 1

Level 2

Level 3

Level 1

Level 2

Level 3

Assets

Cash

5,825,984

–

539,327

–

Total assets

5,825,984

–

539,327

–

Liabilities

Senior Notes, net of discount

–

21,245,727

–

27,500,297

–

Revolving Note

–

3,704,347

–

Note due to Aspire

–

11,821,315

–

11,050,000

–

Convertible notes payable, net of discount

–

1,306,891

–

617,500

–

Other notes payable, net of discount

–

521,603

–

572,888

–

Total liabilities

–

34,895,536

–

43,445,032

–

Fair Value Measurements at September 30, 2022
Level 1 Level 2 Level 3
Assets
Cash $ 5,486,210 $ – $ –
Derivative asset – 1,116,153 –
Total assets 5,486,210 1,116,153 –

Liabilities
Senior Notes, net of discount – 19,595,694 –
Note due to Aspire – 10,636,343 –
Convertible notes payable, net of discount – 1,606,891 –
Other notes payable, net of discount – 509,520 –
Total liabilities $ – $ 32,348,448 $ –

~~Derivative Instruments~~

~~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.

Fair Value Measurements at September 30, 2023

Level 1

Level 2

Level 3

Assets

Cash

304,709

–

Derivative asset

–

Total assets

304,709

–

Liabilities

Senior Notes, net of discount

–

26,350,630

–

Revolving Note

–

1,690,000

–

Note due to Aspire

–

10,594,000

–

Convertible notes payable, net of discount

–

617,500

–

Other notes payable, net of discount

–

559,597

–

Total liabilities

–

39,811,727

–

1311

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. The Company recognized a gain on derivative instruments of $1,239,510~~ ~~during the year ended September 30, 2022. During the three months ended December 31, 2022, the Company settled all of its foreign exchange forward contracts, receiving cash proceeds of $973,965~~ ~~and recognized a loss of $142,187~~.

Foreign Currency

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

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.

Embedded Conversion Features

The Company evaluates embedded conversion features within convertible debt under ASC 815 “Derivatives and Hedging” to determine whether the embedded conversion feature(s) should be bifurcated from the host instrument and accounted for as a derivative at fair value with changes in fair value recorded in earnings. If the conversion feature does not require derivative treatment under ASC 815, the instrument is evaluated under ASC 470-20 “Debt with Conversion and Other Options.” Under the ASC 470-20, an entity must separately account for the liability and equity components of the convertible debt instruments that may be settled entirely or partially in cash upon conversion in a manner that reflects the issuer’s economic interest cost. The effect of ASC 470-20 on the accounting for our convertible debt instruments is that the equity component is required to be included in the additional paid-in capital section of stockholders’ equity on the consolidated balance sheets and the value of the equity component is treated as original issue discount for purposes of accounting for the debt component of the notes. As a result, the Company is required to record non-cash interest expense as a result of the amortization of the discounted carrying value of the convertible debt to their face amount over the term of the convertible debt. We report higher interest expense in our financial results because ASC 470-20 requires interest to include both the current period’s amortization of the debt discount and the instrument’s coupon interest.

Recently Issued Accounting Pronouncements

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.

NOTE 3 – ~~BUSINESS COMBINATIONS~~

~~Acquisition of the B2C business of Aspire Global plc~~

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.~~

~~Unaudited Proforma Information~~

The following schedule contains pro-forma consolidated results of operations for the three months ended December 31, 2022 and 2021 as if the Aspire B2C acquisition occurred on October 1, 2020. The pro forma results of operations are presented for informational purposes only and are not indicative of the results of operations that would have been achieved if the acquisition had taken place on October 1, 2020, or of results that may occur in the future.

Schedule of business combination proforma results
Three Months ended
December 31, 2022 December 31, 2021
Revenue $ 14,407,964 $ 17,171,465
Operating loss (2,154,919 ) (7,687,697 )
Net loss (7,557,765 ) (10,152,728 )
Net loss attributable to common shareholders (9,094,734 ) (11,604,179 )
Loss per common share - basic and diluted $ (0.53 ) $ (0.85 )

The most significant proforma adjustments relate to annual interest on the Senior Notes and Note to Aspire issued in connection with the acquisition, amortization expense of the estimated intangible assets recognized as part of the purchase price allocation, and the preferred dividends incurred in connection with the financing of the acquisition.

~~NOTE 4 –~~ BORROWINGS

The following is a summary of borrowings outstanding as at December 31, ~~2022~~2023 and September 30, ~~2022:~~2023:

Schedule of borrowings outstanding
December 31, 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 30,943,546 30,943,546 (7,542,918 ) – (2,154,901 ) 21,245,727
Note due to Aspire 10% EUR 10,000,000 10,666,000 – 1,155,315 – 11,821,315
Convertible notes 10% USD 1,306,891 1,306,891 – – – 1,306,891
Other 0% USD 675,000 675,000 (153,397 ) – – 521,603
Total borrowings 43,591,437 (7,696,315 ) 1,155,315 (2,154,901 ) 34,895,536

Current 22,552,618
Long-term 12,342,918
Total borrowings 34,895,536

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 borrowings outstanding
						December 31, 2023
	Contractual Interest			Principal outstanding balance		Principal outstanding balance		Unamortized debt discount			Issuance costs		Total		Accrued Interest
	rate		Cur	Local		USD		USD			USD		USD		USD
Senior Note		16.5%	USD		27,500,297		27,500,297		–			–		27,500,297		–
Revolving Note		16.5%	USD		3,704,347		3,704,347		–			–		3,704,347		–
Note due to Aspire		10%	EUR		10,000,000		11,050,000		–			–		11,050,000		2,358,233
Convertible notes		10%	USD		617,500		617,500		–			–		617,500		62,681
Other		0%	USD		675,000		675,000		(102,112	)		–		572,888		–
Total borrowings							43,547,144		(102,112	)		–		43,445,032		2,420,914

Current														42,872,144		2,420,914
Long-term														572,888		–
Total borrowings														43,445,032		2,420,914

1512

						September 30, 2023
	Contractual Interest			Principal outstanding balance		Principal outstanding balance		Unamortized debt discount			Issuance costs		Total		Accrued Interest
	rate		Cur	Local		USD		USD			USD		USD		USD
Senior Note		15.0%	USD		26,350,630		26,350,630		–			–		26,350,630		–
Revolving Note		15.0%	USD		1,690,000		1,690,000		–			–		1,690,000		–
Note due to Aspire		10%	EUR		10,000,000		10,594,000		–			–		10,594,000		2,049,029
Convertible notes		10%	USD		617,500		617,500		–			–		617,500		62,681
Other		0%	USD		675,000		675,000		(115,403	)		–		559,597		–
Total borrowings							39,927,130		(115,403	)		–		39,811,727		2,111,710

Current														39,252,130		2,111,710
Long-term														559,597		–
Total borrowings														39,811,727		2,111,710

Senior Notes

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 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 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 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. 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 principal loan balance becomes convertible at ~~$3.58~~$107.40 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~~52,262 shares of Company common stock at an initial exercise price of ~~$25.00~~$750 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 55,152 and the exercise price was reduced to $710.70. 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~~77,082 and the exercise price was reduced to $~~23.69~~508.50. 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 December 29, 2023, the Lender agreed to cancel all 77,082 outstanding common stock warrants it held.

Between September 2, 2022 and June 20, 2023, the Lender provided the Company with multiple limited waivers of the Senior Note covenants in exchange for aggregate payments of $609,558 which were added to the principal amount of the Senior Note. During this period, the Company made a principal repayment of $3,000,000 which reduced the minimum cash balance requirement from $5,000,000 to $2,000,000.

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 or a termination event. 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. On September 15, 2023, the Company, the subsidiaries of the Company and the Lender entered into an amendment number 1 to the Forbearance Agreement (the “Forbearance Amendment No. 1”). The Forbearance Amendment No. 1 extended the Forbearance Date from September 15, 2023 until October 31, 2023.

On October 1, 2023, the Company, the subsidiaries of the Company and the Lender entered into an amendment number 2 to the Forbearance Agreement (the “Forbearance Amendment No. 2”). The Forbearance Amendment No. 2 extended the Forbearance Date from October 31, 2023 until June 30, 2025, and provides that instead of interest being payable monthly in cash, such interest shall accrue in arrears and can be added to the outstanding principal balance of the Loan and Revolving Note. The interest rate on the Loan and the Revolving Note was increased to 16.5% per annum. The Forbearance Amendment No. 2 further adds that the Company’s suspension from trading or failure to be listed on the Nasdaq Capital Market for more than 30 calendar days will constitute a Termination Event under the Forbearance Agreement as amended. On November 11, 2023, Lender provided the Company with an extension of the Nasdaq Capital Market delisting/suspension Termination Event for an additional 40 calendar days up to December 23, 2023, and on December 19, 2023, the Lender provided the Company with an additional extension of 40 days. Effective January 31, 2023, the Lender provided the Company with an additional extension of 90 days. Pursuant to Forbearance Amendment No. 2, the Company agreed that to the extent it receives net proceeds from or in connection with a judgment, settlement or other in or out of court resolution of a commercial tort claim, the Company will: (i) make a prepayment on the Loan or the Revolving Note (discussed below) of 100% of such net proceeds; and (ii) make an additional payment to the Lender equal to 5% of any such net proceeds (prior to the payments set forth in subsection (i)) in excess of $50.0 million.

1614

~~On September 2, 2022,~~In connection with the Forbearance Agreement, the Lender ~~provided~~agreed to provide the Company with a ~~limited waiver~~revolving line of ~~these covenants until September 30, 2022~~credit in ~~exchange for a one-time payment~~the amount of $~~151,158~~$2.0 million (the “Revolving Note”), with any advances under the Revolving Note to be ~~added~~made in the sole discretion of the Lender. On September 29, 2023, the Lender agreed to increase the ~~principal~~maximum available amount of the ~~Senior Note.~~Revolving Loan to $4.0 million. The Company paid Lender a fee of $40,000 in connection with the increase. 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.

Effective October 1, 2023, the Company entered into an amended and restated note conversion option agreement (the “Option Agreement”) with the Lender. Pursuant to the Option, the Company agreed that Lender have the right to convert any amounts due pursuant to the Loan and the Revolving Note into shares of Company common stock at a conversion price of $1.25 per share with respect to the initial $5.0 million and at a conversion price of $2.50 per share with respect to the remaining amounts. In addition, the ~~Senior Note required~~Company agreed to file a registration statement registering the resale of the shares of Company common stock underlying the Loan within 45 days of the date of the Option and to use its commercially reasonable efforts to cause such registration statement to become effective within 120 days of the date of the Option.

The Option Agreement provides that the Lender (together with its affiliates) may not convert any portion of the Loan or Revolving Loan during an initial 45-day lockup or to the extent that the Lender would own more than 9.99% of the Company’s outstanding common stock immediately after exercise, except that upon prior notice from the Lender to 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 may increase or decrease the amount of ownership of outstanding stock after conversion of the Loan, provided ~~the Company with a limited waiver of these covenants~~that any modification will not be effective until ~~October 31, 2022 in exchange for a one-time payment of $152,032~~ ~~to be added~~61 days following notice 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.Company.

On January 9, ~~2023,~~2024, the Company, the subsidiaries of the Company and the Lender entered into a Third Amendment to Credit Agreement (the “Amendment No. 3”). The Amendment No. 3 increased the maximum available amount of the Revolving Loan from $4.0 million to $6.5 million and provided such additional loan availability under a use of proceeds that including working capital as well as funding for our litigation matters, materially including our litigation against Aspire. In connection with entering into Amendment No. 3, the Company ~~with~~and the Lender entered in a ~~limited waiver~~second amended and restated note conversion option agreement (the “Conversion Agreement”), pursuant to which the Company agreed that the Lender shall have the right to convert the principal balance and accrued interest under the Loan and Revolving Note into shares of ~~these covenants~~Company common stock at a conversion price of $0.116 per share (subject to adjustment for stock splits, stock dividends and other similar events). The foregoing conversion price is subject to future adjustment to the lowest price per share referenced in any equity related instrument the Company issues to any other person 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~~Lender has exercised its conversion rights. Pursuant to the Conversion Agreement, the Lender is prohibited from converting its debt to the extent that such conversion would result in the ~~account~~number of shares of common stock beneficially owned by Lender and its affiliates exceeding 9.99% of the total number of shares of common stock outstanding immediately after giving effect to $~~1,500,000. On January 31, 2023,~~the conversion, which percentage may be increased or decreased at the holder’s election provided any adjustment would not become effective for 61 days. The Company agreed to file a resale registration statement providing for the resale by the Lender ~~provided~~of the ~~Company with a limited waiver~~shares of ~~these covenants until February 17, 2023. On February 1, 2023,~~common stock that may be received upon the ~~Lender provided~~foregoing conversion within 30 calendar days of the ~~Company with a further limited waiver~~Lender’s request, and to use commercially reasonable efforts to cause such registration statement to become effective within 90 days of ~~these covenants until April 28, 2023. The~~such request. To the extent that the Company does not ~~expect~~have sufficient authorized shares of common stock to ~~satisfy certain of these covenants prior to April 28, 2023 and is currently in discussions with~~allow for the ~~Lender on modifying~~full conversion permitted by the ~~financial covenants, although there is no assurance that~~Conversion Agreement, upon the Lender’s request, the Company will be ~~successful~~required to use its reasonable best efforts to obtain approval of an increase in ~~making such modifications~~the Company's authorized shares from its shareholders. During any period of time that the Company does not have sufficient authorized shares to allow for the full conversion permitted by the Conversion Agreement, the Company will be prohibited from issuing any shares of common stock or common stock equivalents. As a result of Amendment No. 3, the exercise price of the warrants issued to the ~~Senior Note.~~holders of Preferred Stock was reset to $0.116 per share.

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 December 31, ~~2022~~2023 and ~~2021,~~2022, the Company recognized interest expense of $~~1,264,933~~0 and $~~207,389~~1,264,933, 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 associated with the Senior Note as of December 31, 2023.

Note due to Aspire

In connection with the Acquisition of Aspire in October 2021, the Company entered into a €10,000,000 unsecured subordinated Promissory Note with the seller (the “Note”). The Note provides for an interest rate of ~~10%~~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~~$540.00 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~~21,667 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.

Convertible Notes and other

On September 1, 2020, ESEG Limited, a wholly owned subsidiary of the Company, entered into three promissory notes, with a combined principal amount of $2,100,000. The notes bore interest at the rate of 10% per annum through maturity 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~~$15 per share and issued ~~2,015,000~~67,167 warrants to purchase shares of the Company’s common stock at an exercise price of ~~$0.30~~$9.00 per share, each with a term of five years. ~~The convertible notes bear interest at 10% per annum and 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 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 $2,100,000 debt discount will be amortized through the maturity date of the convertible notes payable. During the twelve months ended September 30, 2021, a total of $187,500 of principal was converted into ~~375,000~~12,500 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 ~~825,000~~27,500 shares of common stock. During the ~~three months~~year ended ~~December 31, 2022,~~September 30, 2023, a total of $~~300,000~~989,391 of principal and $138,266 of accrued interest was converted into ~~600,000~~75,179 shares of common stock. As of December 31, 2023, the outstanding principal and accrued interest balance of the convertible notes was $617,500 and $62,681, respectively.

During the three months ended December 31, ~~2022~~2023 and ~~2021,~~2022, the Company recorded a charge of $~~12,083~~13,290 and $~~320,823~~12,083, 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.

NOTE 54 – STOCKHOLDERS’ EQUITY

~~The~~On July 26, 2023, the Company ~~is currently~~increased its authorized ~~to issue up~~common shares 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 10,000,000shares 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.

~~Shares issued~~

At the Company’s annual meeting of stockholders completed on July 26, 2023, the stockholders of the Company approved an amendment to the Company’s amended and restated articles of incorporation (the “Amendment”) to effect the reverse stock split at a ratio in the ~~current year~~

~~During~~range of 1-for-2 to 1-for-30, with such ratio to be determined in the ~~three months ended December 31, 2022,~~discretion of the ~~Company issued~~ ~~600,000~~ ~~shares pursuant~~Company’s board of directors and with such reverse stock split to ~~a conversion~~be effected at such time and date, if at all, as determined by the Company’s board of ~~principal~~directors in its sole discretion prior to the one-year anniversary of $~~300,000~~ ~~on its convertible notes.~~the annual meeting.

~~During~~Pursuant to such authority granted by the ~~three months ended December 31, 2022,~~Company’s stockholders, the ~~Company~~Company’s board of directors approved a one-for-thirty (1:30) reverse stock split (the “Reverse Stock Split”) of the Company’s common stock and the filing of the Amendment to effectuate the Reverse Stock Split. The Amendment was filed with the Secretary of State of the State of Nevada and the Reverse Stock Split became effective in accordance with the terms of the Amendment at 4:01 p.m. Eastern Time on September 29, 2023 (the “Effective Time”). The Amendment provides that, at the Effective Time, every thirty shares of the Company’s issued ~~20,750~~ ~~shares related to vesting~~and outstanding common stock will automatically be combined into one issued and outstanding share of ~~restricted~~common stock, ~~units by employees.~~without any change in par value per share, which will remain $0.001. The Reverse Stock Split is presented retroactively.

Acquisition of the B2C segment of Aspire Global plc

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 initially underlying the Preferred Stock (the “Warrants”).

~~Pursuant to~~During the ~~Subscription Agreement, the Company has obtained shareholder approval of the conversion of~~year ended September 30, 2023, the Preferred ~~Stock and Warrants into Company common~~ stock ~~in compliance with~~was fully converted by 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 holders. There were 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 shares 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 holdersoutstanding as of the Company’s common stock. The Preferred Stock is 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. In addition, on April 28, 2023, JulyDecember 31, 2023 and October 31, 2023 (each an “Adjustment Date”), the Conversion Price 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. Notwithstanding the foregoing, the adjusted Conversion Price may not be less than $0.71, unless the terms of the new adjustment dates are approved by our shareholders, as required pursuant to applicable rules and regulations of NASDAQ.September 30, 2023.

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~~$900.00 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.~~$45.00. In February 2023, the warrants exercise price was reset to $30.60 in connection with the February 2023 equity financing. As a result of Amendment No. 3 to the Credit Agreement, the exercise price of the warrants issued to the holders of Preferred Stock was reset to $0.116 per share on January 9, 2024. 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.

Warrants

As discussed above, the Company has issued common stock warrants in connection with its fundraising activities to ~~preference~~preferred shareholders, its lender and convertible notes issued during ~~the three months ended December 31, 2022.~~previous years. The following table summarizes warrant activity during the three months ended December 31, ~~2022:~~2023:

Schedule of warrant activity
	Common Stock Warrants						Common Stock Warrants
	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, 2022		6,033,365	$	9.14		4.01
Outstanding at September 30, 2023								435,491		$	122.04		3.91
Granted		–		–		–		–			–		–
Cancelled		–		–		–		(77,082	)		508.50		2.91
Expired		–		–		–		–			–		–
Exercised		–		–		–		–			–		–
Outstanding at December 31, 2022		6,033,365	$	9.14		3.75
Exercisable at December 31, 2022		6,033,365	$	9.14		3.75
Outstanding at December 31, 2023								358,409		$	38.92		3.82
Exercisable at December 31, 2023								358,409		$	38.92		3.82

At December 31, ~~2022,~~2023, the outstanding and exercisable common stock warrants had ~~an estimated~~no intrinsic ~~value of $491,100~~.

value.

1917

2020 Stock Plan

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 December 31, ~~2022,~~2023, the Company had awarded a total of ~~2,734,769~~45,841 ~~share awards~~shares under the 2020 Plan, with ~~2,265,231~~204,159 remaining under the 2020 Plan.

Common Stock Awards

The Company has ~~historically~~ awarded restricted stock units ~~that convert into~~and shares of common stock to various employees, consultants and officers under the 2020 ~~Plan that~~Plan. The majority of these awards will vest ~~annually~~equally over ~~a period~~terms of ~~one~~up to four ~~years from the date of issuance.~~years. At December 31, ~~2022,~~2023, the Company had ~~440,875~~6,974 restricted stock units ~~outstanding. During the three months ended December 31, 2022,~~ ~~20,750~~ ~~restricted stock units were converted into shares of common stock.~~in issuance.

During the three months ended December 31, ~~2022~~2023 and ~~2021,~~2022, the Company recognized a total of $170,548 and $372,790, respectively of stock-based compensation expense related to common stock awards and expects to recognize additional compensation cost of $~~5,105,836~~1,354,434 upon vesting of all awards.

Options

The following table summarizes option activity during the three months ended December 31, ~~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, 2022		1,977,000	$	2.25		7.33
Outstanding at September 30, 2023								20,287		$	113.55		5.37
Granted		–		–		–		–			–		–
Cancelled		(172,250)		6.04		5.75		(275	)		671.10		7.69
Expired		–		–		–		–			–		–
Exercised		–		–		–		–			–		–
Outstanding at December 31, 2022		1,804,750	$	1.88		7.22
Exercisable at December 31, 2022		844,375	$	1.15		7.16
Outstanding at December 31, 2023								20,012		$	105.88		5.08
Exercisable at December 31, 2023								15,794		$	87.32		5.03

During the three months ended December 31, ~~2022,~~2023, the Company recognized stock-based compensation expense of $~~130,315~~68,404 related to common stock options awarded. The exercisable common stock options had anno intrinsic value as of December 31, ~~2022, of $234,555~~.2023. The Company expects to recognize an additional $~~3,722,085~~263,728 of compensation cost related to stock options expected to vest.

2018

NOTE 65 – LONG-LIVED ASSETS

Fixed Assets

The Company’s fixed assets consisted of the following as of December 31, ~~2022~~2023 and September 30, ~~2022:~~2023:

Schedule of fixed assets
	December 31, 2022			September 30, 2022			December 31, 2023			September 30, 2023
Software	$	323,902		$	391,851		$	276,250		$	264,850
Furniture and fixtures		513,923			368,432			404,936			388,226
Total fixed assets		837,825			760,283			681,186			653,076
Accumulated depreciation		(256,905	)		(213,875	)		(549,066	)		(491,863	)
Fixed assets, net	$	580,920		$	546,408		$	132,120		$	161,213

Depreciation expense was $~~24,639~~35,380 and $~~18,489~~24,639 for the three months ended December 31, ~~2022~~2023 and ~~2021~~2022 respectively.

Intangible Assets – Aspire b2C Acquisition

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 December 31, ~~2022~~2023 and September 30, ~~2022:~~2023:

Schedule of intangible assets acquired
	December 31 2022			September 30, 2022			December 31 2023			September 30, 2023
Trademarks and tradenames, indefinite lives	$	15,572,360		$	14,232,080		$	2,305,126		$	2,210,000
Trademarks and tradenames, three year lives		4,991,688			4,562,064			4,728,146			4,533,030
Customer relationships		15,220,382			13,910,396
Other								12,781			12,693
Total acquired intangibles		35,784,430			32,704,540			7,046,053			6,755,723
Accumulated amortization		(7,352,726	)		(5,169,148	)		(3,516,124	)		(3,054,114	)
Acquired intangible assets, net	$	28,431,704		$	27,535,392		$	3,529,929		$	3,701,609

The Karamba trademarks and tradenames represent approximately 75% of the total of the acquired intangibles and have an indefinite useful life. The remaining trademarks and tradenames and customer relationships are amortized over an estimated useful life of three years. Amortization expense on the Aspire intangible assets was $~~1,623,448~~313,564 and $01,623,448, respectively, for the three months ended December 31, ~~2022~~2023 and ~~2021.~~ 2022.

Amortization for the year ended September 30, ~~2023,~~ 2024 and 2025 is expected to be approximately $~~5,034,352, $6,712,469~~1,340,598 and $~~1,118,745~~220,366, respectively.

~~Intangible Assets - Cryptocurrencies~~

~~The following table presents the activities of the Company’s cryptocurrency holdings for the three months ended December 31, 2022:~~

Cryptocurrency activity
Cryptocurrency at September 30, 2022 $ 4,993
Additions of cryptocurrency 300
Payments of cryptocurrency –
Loss on cryptocurrency (333 )
Cryptocurrency at December 31, 2022 $ 4,960

Additions of cryptocurrency during the three months ended December 31, 2022 represent net deposits from players, and payments of cryptocurrency represent payments of accounts payable and accrued expenses. Use of cryptocurrency to settle receivables and payables during the period are reflected as a component of changes in operating assets and liabilities in the consolidated statement of cash flows.

NOTE 7 – COMMITMENTS AND CONTINGENCIES

Financial Advisor’s Claims

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~~arbitration occurred on November 6, 2023, ended on November 8, 2023. On January 5, 2024, the arbitration panel awarded the Advisor $15.2 million in damages and attorneys’ fees. The Company has accrued the awarded amounts in the accompanying consolidated balance sheet, included in Accounts Payable and Accrued Liabilities. The Company recognized expense of $11,597,240 related to this award during the year ended September 30, 2023, included in general and administrative expenses.

Other Contingencies

On June 26, 2023, a ~~hearing before a 3-arbitrator panel currently scheduled for July 2023. Arbitration is inherently unpredictable. However,~~former vendor of the Company, ~~believes that it has meritorious defenses to~~Litebox USA, LLC filed a ~~portion~~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 ~~fee claim asserted and to the claim that the Company has any obligations~~nonpayment pursuant to a ~~right~~Master Service Agreement and three separate Statements of ~~first refusal between~~Work for the ~~parties. Nevertheless,~~alleged development of software thereunder. EBET, Inc. filed a demurrer to this Complaint and the hearing on same is set for June 2024. EBET intends to vigorously defend this matter.

On September 28, 2023, EBET, INC. filed a lawsuit in the State of Nevada against Aspire Global PLC, AG Communications and affiliated entities asserting damages in an amount of no less than 65,000,000 Euro plus punitive and other damages proven at trial (“Aspire Litigation”) and including causes of action against Aspire and the other defendants for fraud and material breach of the share purchase agreement whereon the Company had acquired the i-gaming B2C assets including the Karamba, Hopa, Griffon Casino, BetTarget, Dansk777, and GenerationVIP domains, sites, player database and other related assets and also related to the operator service agreements and Promissory Note entered concurrent with the closing of the share purchase agreement. On November 7, 2023, Aspire and the other defendants removed the subject matter to the United States District Court for the District of Nevada. The Aspire Litigation is material to the Company and the result of such litigation is highly likely to have a material impact on the Company going forward.

Other Commitments

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.

Pursuant to the Retention Letters,

	(a)	Mr. Speach was entitled to receive a cash retention bonus of $175,000 payable 20% upon execution of the Retention Letter, 40% after three months, and the remainder after six months, and

	(b)	Mr. Lourie was entitled to an increase in his base salary to $320,000 and to receive a cash retention bonus of $240,000 payable 20% upon execution of the Retention Letter, 30% after three months, 30% after six months, and the remainder after nine months.

In addition, pursuant to the Retention Letters, each of Mr. Speach and Mr. Lourie will be eligible to receive a cash ~~flows or results~~transaction bonus equal to 0.95% of ~~operations could be materially affected in~~the gross proceeds of any ~~particular period by~~strategic transaction (a “Transaction”), provided that the ~~resolution of this matter. At this time, any estimated loss potentially arising~~net proceeds from the ~~Claims cannot~~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:

	(a)	with respect to Mr. Speach, the greater of 1.0 times Mr. Speach’s base salary or the severance payable pursuant to Mr. Speach’s current employment agreement; and

	(b)	with respect to Mr. Lourie, 0.5 times Mr. Lourie’s base salary.

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 ~~reasonably estimated and no liability has been recognized.~~payable if the net proceeds from the Transaction are not less than the Deal Threshold.

NOTE 8 – LOSS PER COMMON SHARE

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~~For the three months ended December 31, 2023, common shares issuable under preferred stock (0 and 50,361 shares), convertible debt, (45,346 and 100,523 shares), stock options (20,012 and 28,146 shares) and common stock warrants (435,491 and 201,137 shares) were excluded from the calculation of diluted net loss per share due to their antidilutive effect.

Schedule of earnings per share
Schedule of loss per common share
	Three Months Ended						Three Months Ended
	December 31, 2022			December 31, 2021			December 31, 2023			December 31, 2022
Numerator:
Net income (loss)	$	(7,548,137	)	$	(8,881,038	)
Net loss							$	(3,819,377	)	$	(7,557,765	)
Preferred stock dividends		(1,536,969	)		(483,817	)		–			(1,536,969	)
Net income (loss) attributable to common stockholders	$	(9,085,106	)	$	(9,364,855	)
Net loss attributable to common stockholders							$	(3,819,377	)	$	(9,094,734	)

Denominator:
Basic and diluted weighted average common shares		17,108,464			13,698,954			14,979,642			570,282
Basic and diluted net income (loss) per common share	$	(0.53	)	$	(0.68	)	$	(0.25	)	$	(15.95	)

NOTE 9 – TRANSACTION WITH RELATED PARTIES

The Company engaged a firm owned by Matthew Lourie, the Company’s Chief Financial Officer to provide financial reporting services. For the three months ended December 31, ~~2022~~2023 and ~~2021,~~2022, the Company incurred consulting fees of $~~22,063~~19,729 and $~~14,448~~22,063, respectively.

~~NOTE 10~~ –~~SUBSEQUENT EVENTS~~

On February 2, 2023 the Company entered into Securities Purchase Agreements (the “Purchase Agreements”) with several institutional and accredited investors to issue, in an offering (the “February Offering”): (i) 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 6,372,530 shares of Common Stock (the “Warrants”). The combined purchase price of one share of Common Stock and accompanying Warrant is $1.02. The gross proceeds to the Company from the offering are expected to be approximately $6.5 million, before deducting fees and other offering expenses, and excluding the proceeds, if any, from the exercise of the Warrants. The Company intends to use the net proceeds for general corporate purposes.

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, 2022, 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 received by the Company from the 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 will also pay WestPark up to $50,000 of fees and other expenses.

In connection with the offering 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 and a total of 977,659 warrants issued in connection with the June 2022 Private Placement 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 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.

Subsequent to December 31, 2022, the Company issued 6,250 shares of common stock pursuant to restricted stock unit exercises. Additionally, on February 6, 2023 two holders of the convertible notes converted a total of $625,000 in principal and $107,661 of accrued interest into 1,465,322 shares of common stock.

2321

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.

Overview

We operate platforms to provide a real money online gambling experience focused on i-gaming including casino, sportsbook and esports events. The Company operates under ~~a Curacao gaming sublicense and under a strategic partnership~~an operating services agreement 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~~/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.Business.

The acquisition of Aspire’s B2C business ~~provides~~was intended to provide the following ~~strategic~~ benefits:

	·	ownership of Aspire’s 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~~operator relationship 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.

~~Our~~On April 27, 2023, the Company was notified by its gaming ~~sub-license~~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 year ended September 30, 2023 and 2022 revenue generated in German markets was $9,686,372 and $17,555,683, respectively. During the same periods gross profit contributed from the ~~Curacao Gaming Authority~~German markets was $2,775,605 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 of more than 160 jurisdictions.~~$3,741,443, respectively.

~~Focus on I-Gaming Operations~~

During the quarter ending September 30, 2022, we took significant measures to increase the profitability of 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 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 our i-gaming business and the halting of investment in the Company’s esports products and technologies. As a result of these actions as referenced above, we do not expect to launch our esports products in the foreseeable future.

2422

Results of Operations for the Three Months Ended December 31, ~~2022,~~2023, compared to the Three Months Ended December 31, ~~2021~~2022

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

	Three Months Ended December 30,										Three Months Ended December 31,
	2022					2021					2023					2022
	$			%		$			%		$			%		$			%

Revenue	$	14,407,964			100%	$	7,139,927			100%	$	4,284,055			100%	$	14,407,964			100%
Cost of revenue		(8,518,622	)		-59%		(4,609,087	)		-65%		(2,241,465	)		52%		(8,518,622	)		59%

Gross profit		5,889,342			41%		2,530,840			35%		2,042,590			48%		5,889,342			41%

Operating expenses:
Sales and marketing expenses		4,367,395			30%		3,974,784			56%		1,785,180			42%		4,367,395			30%
Product and technology expenses		294,073			2%		1,015,248			14%		132,964			3%		294,073			2%
Acquisition costs		–			0%		2,238,957			31%
General and administrative expenses		3,382,793			23%		3,144,420			44%		2,659,176			62%		3,382,793			23%
Total operating expenses		8,044,261			56%		10,373,409			145%		4,577,320			107%		8,044,261			56%

Income (loss) from operations		(2,154,919	)		-15%		(7,842,569	)		-110%		(2,534,730	)		-59%		(2,154,919	)		-15%

Other expenses:
Interest expense		(3,031,348	)		-21%		(976,418	)		-14%		(1,586,388	)		-37%		(3,031,348	)		-21%
Loss on derivative instruments		(142,187	)		-1%		–			0%		–			0%		(142,187	)		-1%
Foreign currency loss and other		(2,229,311	)		-15%		(62,051	)		-1%		301,741			7%		(2,229,311	)		-15%
Total other expense		(5,402,846	)		-37%		(1,038,469	)		-15%		(1,284,647	)		-30%		(5,402,846	)		-37%

Income (loss) before provision for income taxes		(7,557,765	)		-52%		(8,881,038	)		-124%		(3,819,377	)		-89%		(7,557,765	)		-52%
Provision for income taxes		–			0%		–			0%		–			0%		–			0%

Net loss	$	(7,557,765	)		-52%	$	(8,881,038	)		-124%	$	(3,819,377	)		-89%	$	(7,557,765	)		-52%

Revenue

For the three months ended December 31, ~~2022,~~2023, we generated ~~$14,407,964~~$4,284,055 in revenue compared to ~~$7,139,927~~$14,407,964 in revenue during the three months ended December 31, ~~2021.~~2022. The ~~increase~~decrease in revenue in the three months ended December 31, ~~2022,~~2023, when compared with the same period in the prior year, was driven by the full quarter of operations from the acquisition of the Aspire B2C business in November 2021 which continues to generate significant revenue in the UK, Germany, Denmark, Ireland, Austria and other regulated markets, and accounted for all of the increase in revenue for the three months ended December 31, 2022, as compared to the year ended December 31, 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~~have been curtailed, which ~~may~~have adversely ~~impact~~impacted revenue growth since the restructuring. The current period revenue was also impacted by the loss of the Company’s German business which occurred in April 2023, which represented approximately $4.7 million of revenue for the ~~short to medium term.~~three months ended December 31, 2022.

Cost of Revenue

During the three months ended December 31, ~~2022,~~2023, cost of sales was ~~$8,518,622~~$2,241,465 as compared with ~~$4,609,087~~$8,518,622 in the same period in the prior year. The ~~increase~~decrease in cost of sales is due ~~entirely~~primarily to ~~a full quarter of operations from~~ the ~~acquisition~~loss of the ~~Aspire B2C~~Company’s German business which occurred in ~~November 2021~~April 2023 and ~~is consistent with~~ the ~~increase in revenue~~Company’s restructuring of the business described above, and consists of third-party costs associated with the betting software platform and gaming taxes.

Sales and Marketing Expense

Sales and marketing expense was ~~$4,367,395~~$1,785,180 for the three months ended December 31, 2022 compared to ~~$3,974,784~~$4,367,395 for the three months ended December 31, ~~2021, an increase~~2022, a decrease of ~~$392,611.~~$2,582,215. The ~~increase~~decrease in sales and marketing expense is primarily driven by ~~two additional months of operations from~~ the ~~acquisition of the Aspire B2C business.~~revenue volume declines described above. Sales and marketing expenses also included ~~$225,564~~$74,400 and ~~$877,759~~$225,564 of stock-based compensation costs to employees and consultants for the three months ended December 31, ~~2022~~2023 and ~~2021,~~2022, respectively, payroll costs of ~~$373,094~~$239,217 and ~~$461,893,~~$373,094, respectively, for the three months ended December 31, ~~2022~~2023 and ~~2021,~~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

Product and technology expense was $132,964 for the three months ended December 31, 2023 compared to $294,073 for the three months ended December 31, 2022, ~~compared to $1,015,248 for the three months ended December 31, 2021,~~ a decrease of ~~$721,175.~~$259,223. The decrease is due to decreased spending related to development of the ~~esports operations that were abandoned in~~Company’s sites. Product and technology expenses for the ~~fourth quarter~~three months ended December 31, 2023, included payroll-related costs of ~~fiscal 2022.~~$78,035, stock-based compensation of $13,419 and other development costs of $41,510 consisting primarily of consulting and other development costs. Product and technology expenses for the three months ended December 31, 2022, included payroll-related costs of $166,932, stock-based compensation of $43,571 and other development costs of $83,570 consisting primarily of consulting and other development costs. Product and technology expenses for the three months ended December 31, 2021, included payroll-related costs of $568,159, stock-based compensation of $328,951 and other development costs of $118,138 consisting primarily of consulting and other development costs.

~~Acquisition Costs~~

Acquisition costs were $0 for the three months ended December 31, 2022, as compared to $2,238,957 for the three months ended December 31, 2021. 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.

General and Administrative Expense

General and administrative expense was ~~$3,382,793~~$2,659,176 for the three months ended December 31, ~~2022,~~2023, as compared to ~~$3,144,420~~$3,382,793 for the same period in the prior year. General and administrative expense for the three months ended December 31, 2023 included depreciation and amortization of intangible assets of $348,944, payroll-related costs of $457,192, stock-based compensation cost of $153,009, consulting, professional fees and restructuring costs of $1,501,345 including legal, accounting, investor relations and other professional fees, depreciation and amortization of intangible assets. General and administrative expense for the three months ended December 31, 2022 included amortization of intangible assets of $1,623,448, payroll-related costs of $523,633, stock-based compensation cost of $225,564, and professional fees of $150,736 including legal, accounting, investor relations and other professional fees, depreciation and amortization of intangible assets. General and administrative expense for the three months ended December 31, 2021 included payroll-related costs of $461,894, stock-based compensation cost of $877,759 (of which $573,750 was to outside consultants) and professional fees of $799,160. The increase in payroll is due to a full quarter of Aspire B2C business related payroll costs.

Interest and Other Expenses

During the three months ended December 31, ~~2022~~2023 and ~~2021,~~2022, we recognized interest expense of ~~$3,031,348~~$1,586,388 and ~~$976,418,~~$3,031,348, respectively, which included amortization of debt discounts and deferred finance costs of ~~$1,277,016~~$13,290 and ~~$528,212~~$1,277,016 related to the Senior Notes issued to acquire the Aspire business, and convertible debt issued to acquire certain intangible assets in the previous ~~year.~~years. During the three months ended December 31, 2023 and 2022 we also incurred a foreign currency gain of $301,741and a loss of $2,229,311, respectively, due to fluctuations in the Euro compared to the US dollar.

~~Net Income/Loss~~

Net loss for the three months ended December 31, 2022, was $7,548,137 compared to a net loss of $8,881,038 for the same period in the prior year. The decrease in net loss was primarily due to the increased revenue and gross profit from a full quarter of operations with the Aspire B2C business in the current period, and decreased operating expenses from the lack of acquisition costs in the current period, partially offset by the increase in interest expense as described above.

Liquidity and Capital Resources

On December 31, ~~2022,~~2023, we had cash and cash equivalents of ~~$5,825,984,~~$539,327, and had a working capital deficit of ~~$28,856,810.~~$64,924,990. We have historically funded our operations from proceeds from debt and equity sales, and funds received from ~~customers.~~operations. Our forecasts for fiscal year ~~2023~~2024 indicate that we will need additional near term ~~additional~~ funding in order to have sufficient financial resources to satisfy our outstanding debts and to continue to settle our debts as they fall due. ~~On February 6, 2023, we sold 6,372,530 shares of common stock and an equal number of warrants for gross proceeds of approximately $6,500,000.~~ We do not have any commitments for ~~additional~~equity funding and ~~there~~are reliant on the Revolving Note to fund our operations. Pursuant to the Revolving Note, our Lender is ~~no assurance that~~not required to provide us with any specific amount of financing and we are dependent on our Lender agreeing to provide us with future working capital. To the extent our Lender determines not to provide us with additional working capital, we do not believe we will be able to raise alternative funding, and we will not have the ability to settle our current obligations or satisfy our outstanding payables. In such event, we will likely be required to cease operations or seek protection from creditors under applicable bankruptcy laws.

The following is a summary of borrowings outstanding as at December 31, 2023:


						December 31, 2023
	Contractual Interest			Principal outstanding balance		Principal outstanding balance		Unamortized debt discount			Issuance costs		Total		Accrued Interest
	rate		Cur	Local		USD		USD			USD		USD		USD
Senior Note		16.5%	USD		27,500,297		27,500,297		–			–		27,500,297		–
Revolving Note		16.5%	USD		3,704,347		3,704,347		–			–		3,704,347		–
Note due to Aspire		10%	EUR		10,000,000		11,050,000		–			–		11,050,000		2,358,233
Convertible notes		10%	USD		617,500		617,500		–			–		617,500		62,681
Other		0%	USD		675,000		675,000		(102,112	)		–		572,888		–
Total borrowings							43,547,144		(102,112	)		–		43,445,032		2,420,914

Current														42,872,144		2,420,914
Long-term														572,888		–
Total borrowings														43,445,032		2,420,914

On November 29, 2021, we 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 us of $30.0 million (the “Senior Note”). The Senior Note 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 Senior Note at a rate equal to 14.0% per annum, plus (2) payable-in-kind interest (“PIK Interest”) on the unpaid principal amount of the Senior Note at a rate equal to 1.0% per annum. 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. 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. On September 15, 2023, the Company, the subsidiaries of the Company and the Lender entered into an amendment number 1 to the Forbearance Agreement (the “Forbearance Amendment No. 1”). The Forbearance Amendment No. 1 extended the Forbearance Date from September 15, 2023 until October 31, 2023.

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. On September 29, 2023, the Lender agreed to increase the maximum available amount of the Revolving Loan to $4.0 million. The Company paid Lender a fee of $40,000 in connection with the increase. 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.

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 was required by the Lender during the term of the Forbearance Agreement. On January 31, 2024, the Company and Houlihan agreed to terminate the engagement with approval of the Lender.

Effective on October 1, 2023, the Company, the subsidiaries of the Company and the Lender entered into an amendment number 2 to the Forbearance Agreement (the “Forbearance Amendment No. 2”). The Forbearance Amendment No. 2 extended the Forbearance Date from October 31, 2023 until June 30, 2025, and provides that instead of interest being payable monthly in cash, such interest shall accrue in arrears and can be added to the outstanding principal balance of the Loan. The interest rate on the Loan and the Revolving Note was increased to 16.5% per annum. The Forbearance Amendment No. 2 further adds that the Company’s suspension from trading or failure to be listed on the Nasdaq Capital Market for more than 30 calendar days will constitute a Termination Event under the Forbearance Agreement as amended. On November 11, 2023, Lender provided the Company with an extension of the Nasdaq Capital Market delisting/suspension Termination Event for an additional ~~financing~~40 calendar days up to December 23, 2023, and on ~~favorable terms, if~~December 19, 2023, the Lender provided the Company with an additional extension of 40 days. Effective January 31, 2023, the Lender provided the Company with an additional extension of 90 days. Pursuant to Forbearance Amendment No. 2, the Company agreed that to the extent it receives net proceeds from or in connection with a judgment, settlement or other in or out of court resolution of a commercial tort claim, the Company will: (i) make a prepayment on the Loan or the Revolving Note (discussed below) of 100% of such net proceeds; and (ii) make an additional payment to the Lender equal to 5% of any such net proceeds (prior to the payments set forth in subsection (i)) in excess of $50.0 million.

Effective on October 1, 2023, the Company entered into an amended and restated note conversion option agreement (the “Option Agreement”) with the Lender. Pursuant to the Option Agreement, the Company agreed to permit the Lender the right to convert any amounts due pursuant to the Loan and the Revolving Note into shares of Company common stock at ~~all.~~ a conversion price of $1.25 per share with respect to the initial $5.0 million and at a conversion price of $2.50 per share with respect to the remaining amounts.

On January 9, 2024, the Company, the subsidiaries of the Company and the Lender entered into a Third Amendment to Credit Agreement (the “Amendment No. 3”). The Amendment No. 3 increased the maximum available amount of the Revolving Loan from $4.0 million to $6.5 million and provided such additional loan availability under a use of proceeds that including working capital as well as funding for our litigation matters, materially including our litigation against Aspire. In connection with entering into Amendment No. 3, the Company and the Lender entered in a second amended and restated note conversion option agreement (the “Conversion Agreement”), pursuant to which the Company agreed that the Lender shall have the right to convert the principal balance and accrued interest under the Loan and Revolving Note into shares of Company common stock at a conversion price of $0.116 per share (subject to adjustment for stock splits, stock dividends and other similar events). The foregoing conversion price is subject to future adjustment to the lowest price per share referenced in any equity related instrument the Company issues to any other person until the Lender has exercised its conversion rights. Pursuant to the Conversion Agreement, the Lender is prohibited from converting its debt to the extent that such conversion would result in the number of shares of common stock beneficially owned by Lender and its affiliates exceeding 9.99% of the total number of shares of common stock outstanding immediately after giving effect to the conversion, which percentage may be increased or decreased at the holder’s election provided any adjustment would not become effective for 61 days. The Company agreed to file a resale registration statement providing for the resale by the Lender of the shares of common stock that may be received upon the foregoing conversion within 30 calendar days of the Lender’s request, and to use commercially reasonable efforts to cause such registration statement to become effective within 90 days of such request. To the extent that the Company does not have sufficient authorized shares of common stock to allow for the full conversion permitted by the Conversion Agreement, upon the Lender’s request, the Company will be required to use its reasonable best efforts to obtain approval of an increase in the Company's authorized shares from its shareholders. During any period of time that the Company does not have sufficient authorized shares to allow for the full conversion permitted by the Conversion Agreement, the Company will be prohibited from issuing any shares of common stock or common stock equivalents. As a result of Amendment No. 3, the exercise price of the warrants issued to the holders of Preferred Stock was reset to $0.116 per share.

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 ~~2023~~2024 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 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 marketing campaigns, reducing the total number of employees and contractors, 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 our i-gaming business and 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 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 recorded asset amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern. We may seek additional funding through a combination of 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 combination thereof. Management cannot be certain that such events or a combination thereof can be achieved.

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, we 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 we 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, we issued the Investor a warrant to purchase 150% of the shares of common stock underlying the Preferred Stock (the “Warrants”). The aggregate Private Placement, which was completed on the closing date of the Acquisition Agreement was $37,700,000.

On June 16, 2022, we issued, in a private placement priced at-the-market under Nasdaq rules: (i) 977,657 shares of 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 us 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 March 31, 2022, we had not maintained compliance with the covenants of the Senior Notes and obtained a waiver from the Lender which waiver was 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, we agreed to amend the Senior Notes such that $5 million of principal loan balance becomes convertible at $3.58 per share commencing after we raised the $5,000,000 of common equity (including the foregoing $3.5 million).

As of December 31, ~~2022,~~2023, we have incurred an accumulated deficit of ~~$71,922,478~~$154,977,817 since inception and have not yet generated any meaningful income from operations.

Cash used in operating activities

Net cash used in operating activities was ~~$1,820,902~~$683,698 for the three months ended December 31, ~~2022,~~2023, as compared to cash used in operating activities of ~~$3,020,650~~$1,820,902 for the same period in the prior year. Net cash used in operating activities during the three months ended December 31, ~~2022,~~2023, included payments made for employee costs, professional fees to our consultants, attorneys and accountants for services. ~~Net~~The decrease in cash used in ~~operating activities for~~operations compared to the ~~three months ended December 31, 2021, and were primarily impacted by the increase in Accounts Receivable~~prior period is due to the ~~growth in our business, which was collected in January 2022. Cash flow from~~Company’s efforts to streamline operations ~~were also included payments made for, professional fees to our consultants, attorneys~~ and ~~accountants required to complete the Acquisition.~~ reduce costs.

Cash used in investing activities

Net cash used in investing activities was $0 during the three months ended December 31, 2023. Net cash used in investing activities was $8,204 ~~during~~for the three months ended December 31, 2022 and was related to the purchase of fixed assets.~~Net cash used in investing activities was $57,021,505 for the three months ended December 31, 2021 and~~ was 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 $492,564 due primarily to opening of our office in Malta and purchase of software assets to support the new wagering platform.

Cash used provided by financing activities

Net cash provided by financing activities was $1,900,000 for the three months ended December 31, 2023 due to proceeds from the Revolving Note. Net cash provided by financing activities was $973,965 for the three months ended December 31, 2022 ~~due~~and was related to the settlement of derivative instruments. Net cash provided by financing activities was $62,736,837 for the three months ended December 31, 2021 and was related to the issuance of Preferred Shares and Senior Notes of $35,606,000 and $27,130,837, respectively. Offsetting these amounts were the direct issuance costs.

Off Balance Sheet Arrangements

None.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

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.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

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 upon such evaluation, our chief executive officer and our chief financial officer have concluded that, as of December 31, ~~2022,~~2023, our disclosure controls and procedures were ineffective because of 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 December 31, ~~2022,~~2023, that have materially affected, or are reasonable likely to materially effect, our internal controls over financial reporting.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings

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. ~~Arbitration is inherently unpredictable. However, the Company believes that it has meritorious defenses to a portion of the alleged fee claim asserted~~On August 4, 2022, EBET, Inc. counterclaimed against Boustead Securities, LLC for tortious interference with prospective economic advantage 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 demanddemanded 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 ~~reply~~response to ~~our~~Boustead Securities, LLC’s Second Amended Statement of Claim, Company maintains its counterclaim and all affirmative defenses previously asserted. The arbitration occurred on November 6, 2023, ended on November 8, 2023. On January 5, 2024, the arbitration panel awarded the Advisor $15.2 million in damages and attorneys’ fees. The Company has accrued the awarded amounts in the accompanying consolidated balance sheet.

On June 26, 2023, a former vendor of the Company, Litebox USA, LLC filed a Complaint ~~Mr. Finch~~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. EBET, Inc. filed a demurrer to this Complaint and the hearing on same is set for June 2024. EBET intends to vigorously defend this matter.

On September 28, 2023, EBET, INC. filed a lawsuit in the State of Nevada against Aspire Global PLC, AG Communications and affiliated entities asserting damages in an amount of no less than 65,000,000 Euro plus punitive and other damages proven at trial (“Aspire Litigation”) and including causes of action against Aspire and the other defendants for fraud, material breach of the share purchase agreement whereon the Company had acquired the i-gaming B2C assets including the Karamba, Hopa, Griffon Casino, BetTarget, Dansk777, and GenerationVIP domains, sites, player database and other related assets and also related to the operator service agreements and Promissory Note entered concurrent with the closing of the share purchase agreement, and other causes of action. On November 7, 2023, Aspire and the other defendants removed the subject matter to the United States District Court for the District of Nevada. On December 12, 2024, Aspire filed a Motion to Dismiss our Complaint in the matter and on January 9, 2024 we filed an Opposition to Aspire’s Motion to Dismiss. The Aspire Litigation is material to the Company and the result of such ~~motion~~litigation is ~~currently pending decision before~~highly likely to have a material impact on the ~~court.~~ Company going forward.

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.

Item 1A. Risk Factors

For a discussion of potential risks or uncertainties, see “Risk Factors” in the Company’s most recent annual report on Form 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~~Our current operations are dependent on the market access rights secured with the Aspire acquisition, and if we do not retain these rights or if Aspire do not maintain their rights, we will not be able to operate.

We previously held a Curacao gaming sublicense pursuant to which we could accept wagers from residents of ~~shares by~~a limited number of jurisdictions, primarily in parts of Asia and South America. Given our ~~preferred stockholders could cause~~focus on pursuing a direct gaming license in Curacao, we allowed our ~~stock price~~Curacao gaming sub-license to ~~decline.~~expire without material consequent to our business on January 29, 2024 We intend to pursue a direct license in Curacao in the future, although there is no assurance we will be successful in obtaining such license. We do not believe the loss of our sublicenses will materially affect our operations.

~~On November 29, 2021,~~The acquisition of the Aspire B2C business included sublicenses to allow us to operate in ~~connection~~several western European markets. We and our operator service platform provider Aspire are required to comply with requirements of each of these licenses to maintain market access. If we and our operator service platform provider Aspire fail to comply with the ~~Acquisition,~~various regulations, 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”). The Preferred Stock is convertible into common stock at an initial conversion price of $28.00 per share (“Conversion Price”); providedmay be unable to conduct any gaming business in that jurisdiction and our business would be materially harmed. In April 2023, we were notified by Aspire that the ~~Conversion Price is~~gaming regulatory authority in Germany had sent a letter to Aspire stating that Aspire would be required to shut down activity of its gaming operations in Germany until such time as Aspire was otherwise granted a license to operate in Germany. In order to meet the subject ~~to anti-dilution protection upon any subsequent transaction at a price lower than the Conversion Price then~~German regulator requirement, Aspire shut down its activities in ~~effect. In addition,~~Germany on ~~April 28, 2023, July 31,~~May 7, 2023 and ~~October 31, 2023 (each, an “Adjustment Date”),~~as a result the ~~Conversion Price shall be adjusted to the lesser of: (i) the Conversion Price~~gaming websites owned by us that operate in ~~effect~~Germany were shut down 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. Notwithstanding the foregoing, the adjusted Conversion Price maythat date. There is no assurance that similar actions will not be ~~less than $0.71, unless the terms of the new adjustment dates are approved~~taken 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. 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 stockadditional jurisdictions in the ~~public market.~~

future.

3029

~~We are party~~In order to a Credit Agreement which contains restrictive covenants, and if we are unable to comply with these covenants then upon notice of an event of default and/or event of material adverse effect to lender, 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 November 29, 2021, we entered into a Credit Agreement with CP BF Lending, LLC (“Lender”) to finance the acquisition of the Aspire assets that we purchased on the same date, via a term loan in the maximum principal amount of $30.0 million with a maturity of 36 months. The Credit Agreement imposes various restrictions and contains customary affirmative and restrictive covenants, including, without limitation, certain reporting obligations and certain limitations on restricted payments; and limitations on liens, encumbrances and indebtedness. In addition, borrowings under the Credit Agreement are secured by a first priority lien onexpand our assets. If we fail to comply with the covenants or payments specified in the Credit 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. The amount of our outstanding indebtedness could have an adverse effect on our operations and liquidity, including by, among other things: (i) making it more difficult for us to pay or refinance our debts as they become due during adverse economic and industry conditions, because we may not have sufficient cash flows to make our scheduled debt payments; (ii) causing us to use a larger portion of our cash flows to fund interest and principal payments, thereby reducing the availability of cash to fund working capital, capital expenditures and other business activities; (iii) making it more difficult for us to take advantage of significant business opportunities, such as acquisition opportunities or other strategic transactions, and to react to changes in market or industry conditions; and (iv) limiting our ability to borrow additional monies in the future, particularly into the United States and additional European countries, we will need to ~~fund the activities and expenditures described above and for other general corporate purposes as and when needed, which could force us to suspend, delay~~obtain gaming licenses in such jurisdictions or ~~curtail business prospects, strategies or operations. To date, the Company has entered into a series of a total of 14 waiver agreements~~partner with the Lender providing for the limited waivers of default as to specific financial and other covenants. The waivers were provided under certain terms and conditions and sometimes included fees accrued to the principal balance amount due Lender under the Credit Agreement, and required the Company to repay $3,000,000companies already operating in ~~principal on January 10, 2023. These waivers will expire on April 28, 2023.~~such jurisdictions. We do not expect to satisfy the financial covenants that are subject to the current waiver prior to April 28, 2023 and are currently in discussions with the Lender on modifying the financial covenants which are the subject of the waiver. There iscan provide no assurance that ~~the Company~~we will be ~~successful in making such modifications~~able to ~~the Credit Agreement and as such, no assurance that the Company will not default certain covenants existing in the Credit Agreement.~~obtain future gaming licenses.

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

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.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosure

Not Applicable.

Item 5. Other Information

~~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).

Item 6. Exhibits

Exhibit Number		Description

3.1		Amendment to EBET, Inc. Articles of Incorporation (incorporated by reference to exhibit 3.1 of the Form 8-K filed October 2, 2023)
10.1**		Forbearance Agreement Amendment No. 2 dated October 2, 2023 between EBET, Inc., certain subsidiaries of EBET, Inc., and CP BF Lending, LLC (incorporated by reference to exhibit 10.3 of the Form 8-K filed October 2, 2023)
10.2		Amended and Restated Note Conversion Option Agreement dated October 2, 2023 between EBET, Inc. and CP BF Lending, LLC (incorporated by reference to exhibit 10.5 of the Form 8-K filed October 2, 2023)
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).

____________________

*	Filed herewith.
**	Schedules and exhibits omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company will furnish a copy of any omitted schedule or exhibit to the SEC upon request.

(1)	The certifications on Exhibit 32 hereto are deemed not “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that Section. Such certifications will not be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act.

3230

SIGNATURES

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.

	EBET, INC.

Date: February ~~10, 2023~~13, 2024	By:	/s/ Aaron Speach
		Aaron Speach Chief Executive Officer, President and Director (Principal Executive Officer)


Date: February ~~10, 2023~~13, 2024	By:	/s/ Matthew Lourie
		Matthew Lourie Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

3331

Schedule of lease-related assets and liabilities
	December 31, 2022		September 30, 2022
Operating Leases:
Operating lease right-of-use assets	$	105,226	$	129,975
Right of use liability operating lease current portion		105,226		129,974
Right of use liability operating lease long term		–		–
Total operating lease liabilities	$	105,226	$	129,974

Schedule of maturities of lease liabilities
	Operating
	Leases
2023 (9 months remaining)	$	108,146
2023		–
2024		–
2025		–
2026 and thereafter		–
Total future undiscounted lease payments		108,146
Less: Interest		(2,920	)
Present value of lease liabilities	$	105,226

Cryptocurrency activity
Cryptocurrency at September 30, 2022	$	4,993
Additions of cryptocurrency		300
Payments of cryptocurrency		–
Loss on cryptocurrency		(333	)
Cryptocurrency at December 31, 2022	$	4,960