| BORROWINGS | NOTE 4 – BORROWINGS The following is a summary of borrowings outstanding
as at September 30, 2023 and 2022:
Schedule of borrowings outstanding
September 30, 2023
Contractual Interest Principal outstanding balance Principal outstanding balance Unamortized Issuance costs Issuance costs 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
September 30, 2022
Contractual Interest Principal outstanding balance Principal outstanding balance Unamortized debt discount Issuance costs Carrying Amount Accrued Interest
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 – – 9,748,000 888,343
Convertible notes 10 USD 1,606,891 1,606,891 – – 1,606,891 200,947
Other 0 USD 675,000 675,000 (165,480 ) – 509,520 –
Total borrowings 42,588,337 (8,692,256 ) (2,435,976 ) 31,460,105 1,089,290
Current 21,202,585 1,089,290
Long-term 10,257,520 –
Total borrowings 31,460,105 1,089,290 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 $ 30,000,000 750,000 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. 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 was 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
$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 In connection with the Loan, the Company issued
the Lender a warrant (the “Lender Warrant”) to purchase 52,262 shares of Company common stock at an initial exercise price
of $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 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 77,082 508.50 77,082 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 3,000,000 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 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. 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. 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 40,000 November 29, 2024 15.0 1,690,000 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 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, the Lender may increase or decrease the amount of ownership of outstanding
stock after conversion of the Loan, provided that any modification will not be effective until 61 days following notice to the Company. 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. 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 year ended
September 30, 2023 and 2022, the Company recognized interest expense of $ 10,962,752 4,216,442 no Note due to Aspire The Note provides for an interest rate of 10%
per annum. The maturity date of the Note will be the earlier of that date which is four years from the issuance date or a liquidity event.
The Note will require repayment of the principal amount plus any accrued interest in three equal installments, payable annually starting
on the second anniversary after issuance. No interest payment shall be due until that date which is the last day of the end of the second-year
anniversary of issuance should the Note remain unpaid at such time. Should the Note remain unpaid at the second-year anniversary, the
total accrued interest due at that time shall be paid at the second-year anniversary for accrued interest for the period from the issuance
date through the 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 $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 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 10 March
1, 2022 675,000 67,167 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 $ 2,100,000 187,500 12,500 305,609 106,891 27,500 989,391 138,266 75,179 617,500 62,681 During the year ended September 30, 2023 and 2022,
the Company recorded a charge of $ 50,077 561,963 |
