| 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, 2022. 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
Segments The
Company operates two complementary business segments: EEG
iGaming EEG
iGaming includes the Company’s iGaming casino and sportsbook product offerings. Currently, the Company operates the business to
consumer segment primarily in Europe. EEG
Games EEG
Games delivers esports entertainment experiences to gamers through a combination of 1) the Company’s proprietary infrastructure
software, GGC, which underpins our focus on esports and is a leading provider of local area network (“LAN”) center management
software and services, enabling us to seamlessly manage mission critical functions such as game licensing and payments, 2) online tournaments
(through the Company’s EGL tournament platform), and 3) player-vs-player wagering (through our yet to be released Betground, our
proprietary wagering product). Currently, we operate our esports EEG Games business in the United States and Europe. These
segments consider 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. 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 unaudited condensed consolidated 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 valuation and recoverability of goodwill and intangible assets, the accounting for business
combinations, including estimating contingent consideration and allocating purchase price, estimating fair value of 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 unaudited condensed consolidated 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
Company has determined that certain factors raise substantial doubt about its ability to continue as a going concern for a least one
year from the date of issuance of these unaudited condensed consolidated financial statements. One such factor considered by the
Company is its compliance with certain debt covenants under terms of the Senior Convertible Note (the “Senior Convertible
Note”), issued by the Company on February 22, 2022 in the principal amount of $ 35,000,000 32,221,573 2,778,427 June
2, 2023 9,124,756 606,000,000 9,124,756 In
addition to compliance with debt covenants, the Company considered that it had an accumulated deficit of $ 153,309,017 10,229,398 62,523,660 4,594,854 4,168,591 2,982,179 52,294,262 On
September 19, 2022 the Company closed an offering (the “September 2022 Offering”) in which it sold (a) 30,000,000 0.001 30,000,000 0.25 0.25 7,500,000 3,600,000 0.01 0.25 36,000 2,265,927 50 2,000,000 7 512,500 2,050,000 2,050,000 512,500 4,075,991 On March 2, 2022 the Company closed an offering (the
“March 2022 Offering”) in which it sold 15,000,000 1.00 15,000,000 1.00 2,250,000 1.00 13,605,000 The amount of available cash on hand on November 11, 2022, one business day preceding this filing, was $ 1,134,097 The
Company believes that its current level of cash and cash equivalents are not sufficient to fund its operations and obligations without
additional financing. Although the Company has financing available, as further described below, the ability to raise financing using
these sources is subject to several factors, including market and economic conditions, performance, and investor sentiment as it relates
to the Company and the esports and iGaming industry. The combination of these conditions was determined to raise substantial doubt regarding
the Company’s ability to continue as a going concern for a period of at least one year from the date of issuance of these unaudited
condensed consolidated financial statements. In
determining whether the Company can overcome the presumption of substantial doubt about its 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, depending on market conditions, may be available to fund its operations and drive future growth, which
include (i) the potential proceeds from the exercise of the 33,600,000 0.25 17,250,000 1.00 Net
cash provided by financing activities for the three months ended September 30, 2022 totaled $ 3,838,549 6,854,418 30,000,000 2,778,427 36,814 200,628 These
above plans are likely to require the Company to place reliance on several factors, including favorable market conditions, to access
additional capital in the future. These plans were therefore determined not to be sufficient to overcome the presumption of substantial
doubt about the Company’s ability to continue as a going concern. The unaudited condensed consolidated financial statements do
not reflect any adjustments that might result from the outcome of this uncertainty. COVID-19 The
novel coronavirus (“COVID-19”) emerged in December 2019 and has since adversely impacted global commercial activity, disrupted
supply chains and contributed to significant volatility in financial markets. The
Company has previously indicated that a significant or prolonged decrease in consumer spending on entertainment or leisure activities
may have an adverse effect on demand for the Company’s product offerings, including in-person access to game centers and tournaments,
reducing cash flows and revenues, and thereby materially harming the Company’s business, financial condition and results of operations. The
ultimate impact of the COVID-19 pandemic on other areas of the business will depend on future developments, which are uncertain and may
result in an extended period of continued business disruption and reduced operations. 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. Any resulting financial impact cannot be reasonably estimated at this time but may have a material
adverse impact on the Company’s business, financial condition and results of operations. The Company will continue to monitor developments
relating to disruptions and uncertainties caused by COVID-19. Nasdaq
Continued Listing Rules or Standards On
April 11, 2022, the Company received a deficiency notification letter from the Listing Qualifications Staff of the Nasdaq Stock Market
(the “Nasdaq”) indicating that the Company was not in compliance with Nasdaq Listing Rule 5550(a)(2) because the bid price
for the Company’s Common Stock had closed below $ 1.00 On
June 7, 2022, the Company received a further letter from the Nasdaq notifying the Company that for the last 30 consecutive business days,
the Company’s minimum Market Value of Listed Securities (“MVLS”) was below the minimum of $ 35 On
October 11, 2022 the Company received a third letter from Nasdaq that the Company’s Common Stock will be delisted, and the Company’s
Common Stock warrants traded under the symbols GMBLW and GMBLZ and the Company’s 10 %
Series A cumulative redeemable convertible preferred stock traded under symbol GMBLP will no longer qualify for listing, and in that
regard trading of the Company’s Common Stock, Common Stock warrants and 10 %
Series A cumulative redeemable convertible preferred stock will be suspended. The Company requested an appeal and under the Nasdaq rules,
while any appeal is pending, the suspension of trading of the Company’s Common Stock, warrants and 10 %
Series A cumulative redeemable convertible preferred stock will be stayed and will continue to trade on Nasdaq until the Nasdaq hearing
panel makes a determination after the hearing. The hearing is scheduled for November 17, 2022. As part of the compliance plan the Company is negotiating with the Holder
to restructure the Senior Convertible Note, including the derivative liability. All listing deficiencies will be considered
as part of the Company’s compliance plan. While
the Company is exercising diligent efforts to maintain the listing of its Common Stock on Nasdaq, there can be no assurance that the
Company will be able to regain or maintain compliance with the Nasdaq listing standards, or that it will not be delisted. 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, 2022 and June 30, 2022, 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.
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. Accounts
Receivable Accounts
receivable is comprised of the amounts billed to customers principally for esports events and team management services. Accounts
receivable is recorded net of an allowance for credit losses. The Company performs ongoing credit evaluations for its customers and
determines the amount of the allowance for credit losses upon considering such factors as historical losses, known disputes or
collectability issues, the age of a receivable balance as well as current economic conditions. Bad debt expense is recorded to
maintain the allowance for credit losses at an appropriate level and changes in the allowance for credit losses are included in
general and administrative expense in the unaudited condensed consolidated statements of operations. At September 30, 2022 and June
30, 2022, the allowance for credit losses was not material to the unaudited condensed consolidated financial statements of the
Company. 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 unaudited condensed 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 unaudited
condensed consolidated statements of operations. The allowance for doubtful accounts is not material to the unaudited condensed
consolidated financial statements. Equipment Equipment
is stated at cost less accumulated depreciation. The Company capitalizes the direct cost of equipment as well as expenditures related
to improvements and betterments that add to the productive capacity or useful life of the equipment. Depreciation is computed utilizing
the straight-line method over the estimated useful life of the asset, or for leasehold improvements, the shorter of the initial lease
term or the estimated useful life of the improvements. The estimated useful life of equipment by asset class follows: Schedule of Estimated Useful Life of Asset
Computer Equipment
Up to 5 years
Furniture and fixtures Up to 7 years
Leasehold improvements Shorter of the remaining lease term or estimated life
of the improvement The
estimated useful life and residual value of equipment are reviewed and adjusted, if appropriate, at the end of each reporting
period. The costs and accumulated depreciation of assets that are sold, retired, or otherwise disposed of are removed from the
accounts and the resulting gain or loss is recognized as a gain or loss on sale or disposition of assets in the unaudited condensed
consolidated statements of operations. Digital
Assets Digital
assets for the period ended September 30, 2022 and the year ended June 30, 2022 comprised of Ethereum Classic cryptocurrency
(“Ethereum Classic” or “ETC)” and Ethereum cryptocurrency (“Ethereum” or “ETH)”,
respectively. The digital assets are included in current assets in the accompanying unaudited condensed consolidated balance sheets.
The classification of digital assets as a current asset has been made after the Company’s consideration of the consistent
daily trading volume on cryptocurrency exchange markets. There are no limitations or restrictions on the Company’s ability to
sell digital assets. Digital assets purchased are recorded at cost and cryptocurrencies awarded to the Company through its mining
activities are accounted for in connection with the Company’s revenue recognition policy disclosed below. Digital
assets held are accounted for as intangible assets with indefinite useful lives. 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,
which is measured using the quoted price of the digital asset at the time its fair value is being measured. 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 not 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 losses of
the Company’s digital assets were not material to the unaudited condensed consolidated financial statements for the three months
ended September 30, 2022 and September 30, 2021. The
Company accounts for its gains or losses in accordance with the first in first out (FIFO) method of accounting. The Company generally
liquidates its digital assets position monthly, or more frequently depending upon the market conditions. The Company’s recognized
realized gains through the sale and disbursement of digital assets during the three months ended September 30, 2022 and 2021 and the
amounts were not material to the unaudited condensed consolidated financial statements. At September 30, 2022 and June 30, 2022, the
Company held no 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. Goodwill Goodwill
represents the excess of fair value of consideration paid for an acquired entity over the fair value of the assets acquired and liabilities
assumed in a business combination. Goodwill is not amortized but rather it is tested for impairment at the reporting unit level on an
annual basis on April 1 for each fiscal year, or more often if events or changes in circumstances indicate that more likely than not
the carrying amount of the asset may not be recoverable. A reporting unit represents an operating segment or a component of an operating
segment. In accordance with ASC Topic 350 Intangibles - Goodwill and Other In
testing goodwill for impairment, the Company has the option to begin with a qualitative assessment, commonly referred to as “Step
0,” to determine whether it is more likely than not that the fair value of a reporting unit containing goodwill is less than its
carrying value. This qualitative assessment may include, but is not limited to, reviewing factors such as macroeconomic conditions, industry
and market considerations, cost factors, entity-specific financial performance and other events, including changes in the Company’s
management, strategy and primary user base. If the Company determines that it is more likely than not that the fair value of a reporting
unit is less than its carrying value, the Company then performs a quantitative goodwill impairment analysis by comparing the carrying
amount to the fair value of the reporting unit. If it is determined that the fair value is less than its carrying amount, the excess
of the goodwill carrying amount over the implied fair value is recognized as an impairment loss in accordance with Accounting Standards
Update (“ASU”) No. 2017-04, Goodwill and Other (Topic 350): Simplifying the Accounting for Goodwill Impairment Intangible
assets Intangible
assets with determinable lives consist of player relationships, developed technology and software, tradenames and gaming licenses. Intangible
assets with determinable lives are amortized on a straight-line basis over their estimated useful lives of 5 years 10 years 2 years 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 results 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. During
the three months ended September 30, 2022 and 2021, the Company determined that there was no impairment on its long-lived assets. 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 equal to or exceeding its
liabilities to customers. Jackpot
Provision The
jackpot provision liability is an estimate of the amount due to players for jackpot winnings. The jackpot liability is accrued monthly
based on an estimate of the jackpot amount available for winning. The jackpot increases with each bet on a jackpot eligible iGaming casino
machine and a portion of each losing bet is allocated towards the funding of the jackpot amount. Jackpots are programmed to be paid out
randomly across certain casino brands. When a player wins a jackpot, the amount of the jackpot is reset to a defined amount that varies
across eligible iGaming casino machines. Participating iGaming casino machines of the Company pool into the same jackpot and therefore
the winning of a jackpot affects other players on the network of participating iGaming casino machines. Jackpot winnings reduce revenue
at the time the entity has the obligation to pay the jackpot, which occurs when the jackpot is won by the player. Leases The
Company leases office space through operating lease agreements that were a result of its acquisitions of Argyll and Lucky Dino. The
Company previously leased game center space, other property and equipment, acquired through the Helix acquisition, that was sold as part of the Helix sale transaction on June 10, 2022, where the purchaser assumed the lease liabilities. The Company measures
an operating lease right-of-use (“ROU”) asset and liability, as well as a finance lease asset and liability, based on the
present value of the future minimum lease payments over the lease term at the commencement date. Minimum lease payments include the fixed
lease and non-lease components of the agreement, as well as any variable rent payments that depend on an index, initially measured using
the index at the lease commencement date. The
minimum payments under operating leases are recognized on a straight-line basis over the lease term in the unaudited condensed
consolidated statements of operations. Operating lease expenses related to variable lease payments are recognized as operating
expenses in a manner consistent with the nature of the underlying lease and as the events, activities, or circumstances in the lease
agreement occur. Leases with a term of less than 12 months (“short-term leases”) are not recognized on the unaudited
condensed consolidated balance sheets. The rent expense for short-term leases is recognized on a straight-line basis over the lease
term and included in general and administrative expense on the unaudited condensed consolidated statements of operations. 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 unaudited condensed 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 unaudited condensed 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 unaudited condensed 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, equity instruments and warrants, to determine if those contracts or embedded components of
those contracts qualify as derivatives (Note 11). 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 (Note 16) in the unaudited condensed
consolidated balance sheets. In the event that the fair value is recorded as a liability, the change in fair value is recorded in
the unaudited condensed consolidated statements of operations as other income or expense (Note 16). 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 a 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 at each balance sheet date and records the change in the fair value of the remaining embedded derivative
as other income or expense in the unaudited condensed 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, derivative financial instruments and warrant liabilities, to fair value on a recurring basis. Certain long-lived
assets may be periodically required to be measured at fair value on a nonrecurring basis, including long-lived assets that are impaired.
The fair values 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 their carrying amounts due to the short maturities of these instruments. The fair values of the Senior Convertible
Note and lease liabilities approximate their carrying value based on current interest and discount rates. Earnings
Per Share Basic
income (loss) per share is calculated using the two-class method. Under the two-class method, basic income (loss) is computed by dividing
net income (loss) available to common stockholders by the weighted-average number of common shares outstanding during the period excluding
the effects of any potentially dilutive securities. Diluted income (loss) per share is computed similar to basic income (loss) per share,
except that the denominator is increased to include the number of additional common shares that would have been outstanding if potential
common shares had been issued if such additional common shares were dilutive. Diluted income (loss) per share includes the effect of
potential common shares, such as the Company’s preferred stock, notes, warrants and stock options, to the extent the effect is
dilutive. As the Company had net losses for all the periods presented, basic and diluted loss per share are the same, and additional
potential common shares have been excluded, as their effect would be anti-dilutive. The
following securities were excluded from weighted average diluted common shares outstanding for the three months ended September 30, 2022
and 2021 because their inclusion would have been antidilutive: Schedule of Weighted Average Diluted Common Shares Outstanding
2022 2021
As of September 30,
2022 2021
Common stock options 981,126 466,176
Common stock warrants 56,200,558 5,350,558
Common stock issuable upon conversion of senior convertible note 14,758,874 2,120,000
10% Series A cumulative redeemable convertible preferred stock 835,950 -
Total 72,776,508 7,936,734 Comprehensive
Loss Comprehensive
loss consists of the net loss for the year and foreign currency translation adjustments related to the effect of foreign exchange on
the value of assets and liabilities. The net translation loss for the year is included in the unaudited condensed consolidated
statements of comprehensive loss. Stock-based
Compensation The
Company periodically issues stock-based compensation to employees, directors, contractors and consultants for services rendered. Stock-based
compensation granted to employees and non-employee directors includes grants of restricted stock and employee stock options that are
measured and recognized based on their fair values determined on the grant date. The award of restricted stock and stock option |
