| Summary of Significant Accounting Policies | Note
2 – Summary of Significant Accounting Policies Basis
of presentation and principles of consolidation The
accompanying unaudited condensed consolidated financial statements and related notes have been prepared in accordance with accounting
principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, and with the
rules and regulations of the United States Securities and Exchange Commission (the “SEC”) set forth in Article 8 of Regulation
S-X. Pursuant to the rules and regulations of the SEC, certain information and footnote disclosures normally included in annual financial
statements prepared in accordance with U.S. GAAP have been omitted. The unaudited condensed consolidated financial statements
reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary to fairly state
the results for the interim periods presented. Interim results are not necessarily indicative of the results for the full fiscal year.
The unaudited condensed consolidated financial statements should be read along with the Annual Report filed on Form 10-K of the Company
for the annual period ended June 30, 2021. The
unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All material
intercompany transactions and balances have been eliminated in consolidation. Reportable
Segment The
Company determined it has one reportable segment. This determination considers the organizational structure of the Company and the nature
of financial information available and reviewed by the chief operating decision maker to assess performance and make decisions about
resource allocations. Reclassifications Certain
prior period amounts have been reclassified to conform to the current period presentation. These reclassifications had no effect on the
reported results of operations or total assets, liabilities and stockholders’ equity. The amounts previously reported in other
income and foreign exchange loss were reclassified to other non-operating income (loss) on the unaudited condensed consolidated statements
of operations. The prior period amounts reported as taxes payable and equity to be issued were classified to accounts payable and accrued
expenses for the current period presentation on the unaudited condensed consolidated balance sheets. Use
of estimates The
preparation of unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements, and
the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant
estimates include the valuation and accounting for equity awards related to warrants and stock-based compensation, determination of fair
value for derivative instruments, the accounting for business combinations, including estimating contingent consideration and allocating
purchase price, estimating the useful life of fixed assets and intangible assets, as well as the estimates related to accruals and contingencies. Liquidity
and Going Concern The
accompanying unaudited condensed consolidated financial statements of the Company have been prepared assuming the Company will continue
as a going concern. The going concern basis of presentation assumes that the Company will continue in operation one year after the date
these financial statements are issued and will be able to realize its assets and discharge its liabilities and commitments in the normal
course of business. The
evaluation of going concern under the accounting guidance requires significant judgment. The Company must consider it has historically
incurred losses and negative cash flows in recent years as it has prepared to grow its esports business through acquisition and new venture
opportunities. The Company must also consider its current liquidity as well as future market and economic conditions that may be deemed
outside the control of the Company as it relates to obtaining financing and generating future profits. As of September 30, 2021, the
Company had approximately $ 2,817,536 1,301,846 In determining whether there is substantial
doubt about the Company’s ability to continue as a going concern, the Company may consider the effects of any mitigating plans
for additional sources of financing. The Company identified additional financing sources it believes are currently available to
fund its operations and drive future growth that include (i) the announcement on November 11, 2021 of the pricing of an underwritten
registered public offering by the Company to issue 800,000 10.0% 11.00 10.00 8.0 the
payment of € 4,000,000 approximately $ 4,721,852 1,250 8,046 19,991,954 COVID-19
In
December 2019, a novel strain of coronavirus (“COVID-19”) emerged in Wuhan, Hubei Province, China. While initially the outbreak
was largely concentrated in China and caused significant disruptions to its economy, it has now spread to several other countries and
infections have been reported globally. Due to the outbreak of COVID-19, almost all major sports events and leagues were postponed or
put-on hold, for the period from April 2020 through June 2020. The cancelation of major sports events had a significant short-term negative
effect on betting activity globally. As a result, iGaming and event operators faced major short-term losses in betting volumes. Online
casino operations have generally continued as normal without any noticeable disruption due to the COVID-19 outbreak. The virus’s
expected effect on online casino activity globally is expected to be overall positive or neutral. Travel
restrictions and border closures have not materially impacted the Company’s ability to manage and operate the day-to-day functions
of the business. Management has been able to operate in a virtual setting. However, if such restrictions become more severe, they could
negatively impact those activities in a way that would harm the business over the long term. Travel restrictions impacting people can
restrain the ability to operate, but at present we do not expect these restrictions on personal travel to be material to the Company’s
operations or financial results. The
ultimate impact of the COVID-19 pandemic on the Company’s operations is unknown and will depend on future developments, which are
highly uncertain and cannot be predicted with confidence, including the duration of the COVID-19 outbreak, new information which may
emerge concerning the severity of the COVID-19 pandemic, and any additional preventative and protective actions that governments, or
the Company, may direct, which may result in an extended period of continued business disruption and reduced operations. Any resulting
financial impact cannot be reasonably estimated at this time but may have a material adverse impact on our business, financial condition
and results of operations. Cash
and Cash Equivalents Cash includes cash on
hand. Cash equivalents consist of highly liquid financial instruments purchased with an original maturity of three months or less. As
of September 30, 2021 and June 30, 2021 the Company did not have any financial instruments classified as cash equivalents. At times,
cash deposits inclusive of restricted cash may exceed Federal Deposit Insurance Corporation (“FDIC”) insured limits. The
Company’s cash is held with financial institutions, and the account balances may exceed the Federal Deposit Insurance Corporation
(FDIC) insurance limit at times. Accounts are insured by the FDIC up to $ 250,000 Restricted
Cash Restricted cash includes
cash reserves maintained for compliance with gaming regulations that require adequate liquidity to satisfy the Company’s liabilities
to customers. Receivables
Reserved for Users User deposit receivables
are stated at the amount the Company expects to collect from a payment processor. A user initiates a deposit with a payment processor,
and the payment processor remits the deposit to the Company. The amount due from the payment processor is recorded as a receivable reserved
for users on the consolidated balance sheets. An allowance for doubtful accounts may be established if it is determined that the Company
is unable to collect a receivable from a payment processor. An increase to the allowance for doubtful accounts is recognized as a loss
within general and administrative expenses in the consolidated statements of operations. The allowance for doubtful accounts is not material
to the consolidated financial statements. Liabilities
to Customers The Company records liabilities
to customers, also referred to as player liabilities, for the amounts that may be withdrawn by a player at a given time. The player liabilities
include player deposits, bonuses or incentive awards and user winnings less withdrawals, tax withholdings and player losses. The Company
maintains a restricted cash balance and player deposits held by third parties, recorded as receivables reserved for users on the unaudited
condensed consolidated balance sheets, at levels that equal to or exceeding its liabilities to customers. Business Combinations The Company accounts for business combinations
using the acquisition method of accounting. The Company records the assets acquired, liabilities assumed and acquisition-related contingent
consideration at fair value on the date of acquisition. The difference between the purchase price, including any contingent consideration,
and the fair value of net assets acquired is recorded as goodwill. The Company may adjust the preliminary purchase price and purchase
price allocation, as necessary, during the measurement period of up to one year after the acquisition closing date as it obtains more
information as to facts and circumstances that impact the determination of fair value at the acquisition date. Any change in fair value
of acquisition-related contingent consideration resulting from events after the acquisition date is recognized in earnings. Acquisition-related
costs are recognized separately from the acquisition and are expensed as incurred. Impairment of Long-Lived Assets Equipment and other long-lived assets, including
finite lived intangibles, are evaluated for impairment periodically or when events and circumstances indicate that the carrying amount
of an asset may not be recoverable. If an evaluation is required, an estimate of future undiscounted cash flows are determined through
estimated disposition date of the asset. To the extent that estimated future undiscounted net cash flows attributable to the asset are
less than the carrying amount, an impairment loss is recognized equal to the difference between the carrying value of such asset and
its fair value, considering external market participant assumptions. An estimation of future cash flows requires significant judgment
as the Company makes assumptions about future revenues and market conditions. Since the determination of future cash flows is an estimate
of future performance, there may be impairments recognized in future periods in the event future cash flows do not meet expectations.
There was no Income
Taxes The Company accounts
for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the
expected future tax consequences of events that have been recognized in the consolidated financial statements or in the Company’s
tax returns. Deferred tax assets and liabilities are determined on the basis of the differences between U.S. GAAP treatment and tax treatment
of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Changes in
deferred tax assets and liabilities are recorded in the provision for income taxes. The Company assesses the likelihood that its deferred
tax assets will be recovered from future taxable income and, to the extent it believes, based upon the weight of available evidence,
that it is more likely than not that all or a portion of the deferred tax assets will not be realized, a valuation allowance is established
through a charge to income tax expense. Potential for recovery of deferred tax assets is evaluated by considering taxable income in carryback
years, existing taxable temporary differences, prudent and feasible tax planning strategies and estimated future taxable profits. The Company accounts
for uncertainty in income taxes recognized in the consolidated financial statements by applying a two-step process to determine the amount
of tax benefit to be recognized. First, the tax position must be evaluated to determine the likelihood that it will be sustained upon
external examination by the taxing authorities. If the tax position is deemed more-likely-than-not to be sustained, the tax position
is then assessed to determine the amount of benefit to recognize in the consolidated financial statements. The amount of the benefit
that may be recognized is the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement. The provision
for income taxes includes the effects of any resulting tax reserves, or unrecognized tax benefits, that are considered appropriate, as
well as the related net interest and penalties. Derivative Instruments The Company evaluates its convertible notes and
warrants to determine if those contracts or embedded components of those contracts qualify as derivatives. The result of this accounting
treatment is that the fair value of the embedded derivative is recorded at fair value each reporting period and recorded as a liability.
In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statements of operations as
other income or expense. In circumstances where the embedded conversion
option in a convertible instrument is required to be bifurcated and there are also other embedded derivative instruments in the convertible
instrument that are required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative
instrument. The classification of derivative instruments,
including whether such instruments should be recorded as liabilities or as equity, is reassessed at the end of each reporting period.
Equity instruments that are initially classified as equity that become subject to reclassification are reclassified to liability at the
fair value of the instrument on the reclassification date. Derivative instrument liabilities are classified in the balance sheet as current
or non-current to correspond with its host instrument. The Company records the fair value of the remaining embedded derivative warrants
at each balance sheet date and records the change in the fair value of the remaining embedded derivative warrants as other income or
expense in the consolidated statements of operations. Fair
Value Measurements Fair
value is defined as the price that would be received for an asset, or paid to transfer a liability, in an orderly transaction between
market participants at the measurement date. Valuation techniques maximize the use of observable inputs and minimize the use of unobservable
inputs. When determining the fair value measurements for assets and liabilities, the Company considers the principal or most advantageous
market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability. The
following summarizes the three levels of inputs required to measure fair value, of which the first two are considered observable and
the third is considered unobservable:
Level
1: Unadjusted
quoted prices in active markets for identical assets or liabilities.
Level
2: Observable
inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not
active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the
assets or liabilities.
Level
3: Unobservable
inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Certain
assets and liabilities are required to be recorded at fair value on a recurring basis. The Company adjusts contingent consideration resulting
from a business combination, as well as derivative financial instruments and warrant liabilities to fair value on a recurring basis.
The fair value for other assets and liabilities such as cash, restricted cash, accounts receivable, receivables reserved for users, other
receivables, prepaid expenses and other current assets, accounts payable and accrued expenses, and liabilities to customers have been
determined to approximate carrying amounts due to the short maturities of these instruments. Earnings
Per Share Basic
income (loss) per share is computed by dividing net income (loss) attributable to common shareholders (the numerator) by the weighted-average
number of common shares outstanding (the denominator) for the period. In periods of losses, diluted loss per share is computed on the
same basis as basic loss per share as the inclusion of any other potential shares outstanding would be anti-dilutive. The
following securities were excluded from weighted average diluted common shares outstanding for the three months ended September 30, 2021
and 2020 because their inclusion would have been antidilutive. Schedule
of Weighted Average Diluted Common Shares Outstanding
As of September 30,
2021 2020
Common stock options 466,176 51,942
Common stock warrants 5,350,558 6,001,129
Common stock issuable upon conversion of Senior Convertible Note 2,120,000 —
Contingently issuable shares — 2,667
Total 7,936,734 6,055,738 Revenue
and Cost Recognition The
revenue of the Company is currently generated from online casino and sports betting (referred to herein as “iGaming” revenue),
as well from the provision of esports event and team management services. The Company recognizes revenue in accordance with Topic 606
– Revenue from Contracts with Customers Revenue
generating activities of the Company are subject to value added tax (“VAT”) in most jurisdictions in which the Company operates.
Revenue is presented net of VAT in the consolidated statements of operations. VAT receivables and VAT payables are included in other
receivables and accounts payable and accrued expenses, respectively on the consolidated balance sheets. Sales to customers do not have
significant financing components or payment terms greater than 12 months. iGaming
Revenue iGaming
revenue is derived from the placement of bets by end-users, also referred to as customers, through online gaming sites. The transaction
price in an iGaming contract, or Net Gaming Revenue (“NGR”), is the difference between gaming wins and losses, as further
reduced by any nondiscretionary incentives awarded to the customer. Gaming transactions involve four performance obligations, namely
the settlement of each individual bet, the honoring of discretionary incentives available to the customer through loyalty reward programs,
the award of free spin and deposit match bonuses, and the winning of a casino jackpot. The total amount wagered by a customer is commonly
referred to as the win or Gross Gaming Revenue (“GGR”). The GGR is allocated to each performance obligation using the relative
standalone selling price (“SSP”) determined for iGaming contracts. Revenue
recognition for individual wagers is recognized when the gaming occurs, as such gaming activities are settled immediately. The revenue
allocated to incentives, such as loyalty points offered through a rewards program, is deferred and recognized as revenue when the loyalty
points are redeemed. Revenue allocated to free spins and deposit matches, referred to as bonuses, are recognized at the time that they
are wagered. The revenue for jackpot games is recognized when the jackpot is won by the customer. The Company applies a practical expedient
by accounting for its performance obligations on a portfolio basis as iGaming contracts have similar characteristics. The Company expects
the application of the revenue recognition guidance to a portfolio of iGaming contracts will not materially differ from the application
of the revenue recognition guidance on an individual contract basis. The
Company evaluates bets that its users place on websites owned by third party brands in order to determine whether it may recognize revenue
on a gross basis, when acting as the principal provider of the wagering service, or on a net basis, when acting as an intermediary or
agent. The principal in a wagering service involving a third party is generally the entity that controls the wagering service such that
it has a right to the services being performed by the third party and can direct the third party in delivery of the service to its users.
The Company records revenue on a gross basis as it has determined it is the principal in transactions involving third parties, such as
revenue sharing arrangements, as it controls the wagering service being offered to the users such that it has a right to the service
performed by third parties and can further direct third parties in providing services to users. The Company further records expenses
related to its revenue sharing arrangements and other third-party iGaming expenses within costs of revenue in the consolidated statement
of operations. Esports
Gaming Service Revenue The
Company derives revenue from the operation of esports game centers, sales of subscriptions to access cloud-based software used by independent
operators of game centers, as well as from consulting and data analytic services provided to game operators. The revenue from the operation
of esports centers by the Company is recognized when a customer purchases time to use the esports gaming equipment at each center. The
revenue from time purchased by a customer and from the sale of food and beverages is recognized at the point of sale. The revenue derived
from the sale of subscription services to cloud-based software used by game centers is recognized over the term of the contract, which
generally can range from one month to one year in duration, beginning on the date the customer is provided access to the Company’s
hosted software platform. The
Company may further provide consultation services related to the use of hardware and equipment for gaming operations together with implementation
services that include sourcing, training, planning, and installation of technology. The Company considers services related to hardware
and equipment, implementation, and any design of user interface for the customer as separate performance obligations. Revenue for hardware
equipment and design of custom user interface is recognized at a point in time upon delivery and completion. Implementation services
are recognized over time, as services are performed. The
Company also has contracts with software companies to provide talent data analytics and related esports services, which include analytic
development, other related services to develop software and applications for tournaments, to provide data support, data gathering, gameplay
analysis and reporting which includes talent analytics and related esports services, including analytic development, data analysis, survey
design, interview services, player dossiers, and expert services. The Company recognizes revenue from its data analytic services over
the life of the contract utilizing the output method, using a direct measurement of the value to the customer of the goods or services
transferred to date relative to the remaining goods or services promised under the contact. The Company elected to use the right to invoice
practical expedient and recognize revenue based on the amounts invoiced. The payment terms and conditions vary by contract; however,
the Company’s terms generally require payment within 30 to 60 days from the invoice date. The
Company may further enter partnership contracts with strategic customers within the esports industry. The partnership contracts are negotiated
agreements, which contain both licensing arrangements of intellectual property and development services, including fixed and variable
components. The variability of revenue is driven by development plans and results of sales as specified by the partnership contract,
which are known as of an invoice date. Partnership contracts generally do not have terms that extend beyond one year. The Company considers
licensing arrangements and development services as separate performance obligations. Licensing revenues are recorded over time. Revenue
associated with development is recognized over time, as labor is incurred. Contracts
that contain multiple performance obligations require an allocation of the transaction price to each distinct performance obligation
based on a relative standalone selling price basis unless the transaction price is variable and meets the criteria to be allocated entirely
to a performance obligation or to a distinct good or service that forms part of a single performance obligation. The Company determines
standalone selling price based on the price at which the performance obligation is sold separately. If the standalone selling price is
not observable through past transactions, the Company estimates the standalone selling price taking into account the Company’s
overall pricing objectives, taking into consideration market conditions and other factors, including the value of the deliverables in
the contracts, customer demographics, geographic locations, and the number and types of users within the contracts. Esports
Event Management and Team Service Revenue The
Company derives revenue from esports event management and team services. Esports event management services support the creation, production
and delivery of an esports event by providing event staffing, gaming consoles, and other technical goods and services for a customer
event that is either hosted live or online. The revenue generated from esports event management services is generally earned on a fixed
fee basis per event. The esports team services offerings of the Company include recruitment and management services offered to sports
clubs to facilitate their entrance into esports tournament competition. Team services provided to a customer may include player recruitment,
administration of player contracts, processing of tournament admission, providing logistical arrangements, as well as providing ongoing
support to the team during the event. Team services are earned on a fixed fee basis per tournament. Esports
event management and team services revenues are recognized over the term of the event or the relevant contractual term for services as
this method best depicts the transfer of control to the customer. The Company recognizes revenue for event management services based
on the number of days completed for the event relative to the total days of the event. Revenue from team management services is recognized
from inception of the contract through the end of the tournament using the number of days completed relative to the total number of days
in the contract term. Revenue collected in advance of the event management or team services is recorded as deferred revenue on the consolidated
balance sheets. The Company may also enter into profit sharing arrangements which are determined based on the net revenue earned by the
customer for an event in addition to a fixed fee. Revenue recognition for profit sharing arrangements is recognized at the time the revenue
from the event is determined, which is generally at the conclusion of the event. An event or team services contact may further require
the Company to distribute payments to event or tournament attendees resulting in the recognition of a processing fee by the Company.
The Company does not recognize revenue from the processing of payments until the conclusion of the event or tournament. The
Company evaluates the service being provided under an esports event and team services contract to determine whether it should recognize
revenue on a gross basis as the principal provider of the service, or on a net basis in a manner similar to that of an agent. The Company
has determined that for esports event and team services contracts that allow for the assignment of individual tasks to a third-party
contractor, the Company acts as the principal provider of the service being offered to the customer as it remains primarily responsible
for fulfilling the contractual promise to the customer. In profit sharing arrangements, such as events that allow for the Company to
share in the revenue earned by a customer for an event, the Company has determined it acts in the role of an agent to the customer as
the event creator. The Company has also determined it acts as an agent when it collects a processing fee for performing the service of
distributing prize money on behalf of its customers to event or tournament winners. Contract
Liabilities Liabilities
to customers include both player liabilities, consisting of a free spin bonus and a deposit match bonus, and the player reward liabilities.
The free spin bonus provides the user the opportunity to a free play, or otherwise spin, on an iGaming casino slot machine without withdrawing
a bet amount from the player’s account. The deposit match bonus matches a player’s deposit up to a certain specified percentage
or amount. These bonuses represent consideration payable to a customer and therefore are treated as a reduction of the transaction price
in determining NGR. The Company also offers non-discretionary loyalty rewards points to customers that can be redeemed for free play
or cash. The Company allocates revenue from wagers to loyalty points rewards earned by users, thereby deferring a portion of revenue
from users that participate in a loyalty reward program. The amount of revenue deferred related to loyalty points available to users
is based on the estimated fair value of the loyalty point incentive available to the user. The
Company also records payments received in advance of performance under an esports gaming services contract or event management or team
services contract as deferred revenue. Recently
Adopted Accounting Pronouncements In
December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes Recently
Issued Accounting Standards In
June 2020, the FASB issued ASU No. 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging -
Contracts in Entity’s Own Equity (Subtopic 815-40). In
June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial
Instruments Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic
842): Effective Dates In
January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other: Simplifying the Test for Goodwill Impairment (ASC 350).
From
time to time, new accounting pronouncements are issued by the 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. |
