United States securities and exchange commission logo
January 6, 2021
Matt Lourie
Chief Financial Officer
eSports Technologies, Inc.
720 South 7th Street, 3rd Floor
Las Vegas, NV 89101
Re: eSports
Technologies, Inc.
Draft Registration
Statement on Form S-1
Filed December 10,
2020
CIK No. 0001829966
Dear Mr. Lourie:
We have reviewed your draft registration statement and have the
following comments. In
some of our comments, we may ask you to provide us with information so
we may better
understand your disclosure.
Please respond to this letter by providing the requested
information and either submitting
an amended draft registration statement or publicly filing your
registration statement on
EDGAR. If you do not believe our comments apply to your facts and
circumstances or do not
believe an amendment is appropriate, please tell us why in your
response.
After reviewing the information you provide in response to these
comments and your
amended draft registration statement or filed registration statement, we
may have additional
comments.
Draft Registration Statement on Form S-1 Submitted December 10, 2020
Summary Financial Data, page 6
1. Your statement that the
summary of your financial data for the years ended September 30,
2020 and September 30,
2019 were derived from your unaudited financial statements
appearing elsewhere in
this prospectus does not appear to be consistent with your
presentation of audited
financial statements for the years ended September 30, 2020 and
September 30, 2019 on
page F-1. Please revise your disclosure.
We currently generate all of our revenue internationally, page 9
2. We note that your
operations may be affected by foreign government policies and
legislation,
particularly those in the Philippines and Latin America. Please revise the risk
Matt Lourie
FirstName LastNameMatt
eSports Technologies, Inc. Lourie
Comapany
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6, 2021
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factors section to describe these material risks to investors. In this
regard, we note that in
the second sentence of this risk factor you have identified a litany
of risks but have not
discussed the nature or severity of the threat posed to the company or
to investors. Please
revise to describe these risks in detail under separate risk factor
headings, as necessary. In
addition, please describe any material legislation in the Governmental
Regulations section
on page 36.
Participation in the sports betting industry exposes us to trading, liability
management, and
pricing risk, page 9
3. In appropriate places in your prospectus, please revise to provide
additional information
about the third party service providers that you rely on to generate
odds. Where
appropriate, discuss the terms of your agreements with these providers
and consider
whether you should file them as exhibits. In addition, please revise
the risk factors section
and elsewhere as appropriate to discuss the unique challenges of
odds-making for esports
matches. In this regard, we note that traditional considerations and
information channels
that may inform oddsmaking for major American professional sports
leagues or similarly
long standing events would not seem to apply to the relatively newer
genre of e-sports.
4. Revise where appropriate to discuss whether there is an average return
that bookmakers
typically require and whether that return differs for esports
competitions as compared to
other sporting events.
Our current operations are entirely dependent on our Curacao gaming license,
page 14
5. We note that your operations are dependent on your gaming license in
Curacao. Please
revise, where appropriate, to discuss in greater detail the
requirements you must meet to
maintain your license and identify the bodies that evaluate
compliance. To the extent that
your inability to meet the requirements will subject you to certain
risks, including fines or
suspensions, please provide additional disclosure to quantify the
range of sanctions to
which you may be subject. For example, it is unclear how fines are
calculated. It is also
unclear how determinations are made to revoke or suspend gaming
licenses and, in the
event of a suspension, how the length of the suspension is determined.
Use of Proceeds, page 21
6. State the approximate amount of proceeds intended to be used for each
identified purpose.
In addition, we note your statement that you cannot specify with
certainty all of the
particular uses for the net proceeds and that management will
have broad discretion in
the application of the proceeds. You may reserve the right to
change the use of proceeds,
provided that such reservation is due to certain contingencies that
are discussed
specifically and the alternatives to such use in that event are
indicated; please revise
accordingly. Alternatively, if you determine that you do not have a
specific plan for the
proceeds or a significant portion thereof, state that that is the case
and the principal
reasons for the offering. Refer to Item 504 of Regulation S-K.
Matt Lourie
eSports Technologies, Inc.
January 6, 2021
Page 3
Market for Esports Gambling, page 32
7. We note the projected revenue for esports revenue (not including
gambling). Please
clarify, here and on page 2, the sources of revenue that are included
in the esports revenue
projections and whether your business generates streams of income from
these non-
gambling sources, so that investors can determine the relevance of
these projections to
your business. Please also address the extent to which your operations
as a sportsbook for
esports events may preclude you from participating in certain streams
of revenue
associated with esports, such as those associated with team ownership.
Future Products and Services, page 33
8. Please discuss the anticipated costs, relevant milestones, and current
stage of development
of the products and services described in this section and in the
first paragraph of the
section entitled "Our Intellectual Property and License Agreements."
You should also
address who will be tasked with creating the new platforms, products
and tools, including
predictive model, feeds, and bet matching engines, that you describe.
In this regard, we
note that you appear to rely on license agreements for your IP and do
not currently own IP
and it is unclear whether you have any prior experience introducing
new technology in
this industry. To the extent that you are unable to fund each of the
initiatives described,
please explain how you will prioritize the various initiatives. Also,
to the extent that there
are specific risks and challenges associated with the products and
services you intend to
launch, please describe them.
9. Refer to the second paragraph of this section. Please disclose how you
will provide the
best overall prices on esports wagering matches given your disclosure
elsewhere that
third-party intermediaries may seek a specified return. In addition,
please explain what a
market derivative is in the context of your business and describe in
greater detail how your
cash-out license operates as well as the terms of the license
agreement.
10. Refer to the third paragraph of this section. Revise to more clearly
explain how the tools
and platforms that you propose to create differ from those currently
available to industry
participants. In addition, please describe the characteristics of a
"business-focused user"
and explain the specific functionality that would make your new tools
and platform
desirable to them.
Our Intellectual Property and License Agreements, page 34
11. We note your disclosure in the final paragraph on page 34. If material,
please revise your
risk factors to address the risk that regulatory review and licensing
requirements may
FirstName LastNameMatt Lourie
preclude you from using certain technologies. To the extent that the IP
that you currently
Comapany NameeSports
license is subject toTechnologies, Inc. please disclose that fact and
any associated
regulatory review,
Januarymaterial
6, 2021risks.
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Matt Lourie
FirstName LastNameMatt
eSports Technologies, Inc. Lourie
Comapany
January NameeSports Technologies, Inc.
6, 2021
January
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Additional Markets, page 35
12. Please describe the steps necessary to secure licensing in the
additional markets that you
will target in 2021, including Japan, Thailand, Mexico, and South
America. In addition,
please disclose the anticipated costs, if material.
Consolidated Balance Sheets, page F-2
13. You recorded other long term liabilities, net of discount in the
amount of $422,409 as of
September 30, 2020. Please disclose the nature and terms of the
transaction underlying
this item and explain how you determined the amount of this line item
as of the reporting
date.
Consolidated Statements of Cash Flows, page F-5
14. Please reconcile the amounts reported as change in accounts receivable
and change in
accounts payable and accrued liabilities in the year ended September
30, 2020 to the
related balances reported on your consolidated balance sheets.
General
15. We note that you intend to allow your users to utilize cryptocurrency
and virtual currency
within your platform. Please disclose the currencies that are or will
be accepted and clarify
that cryptocurrency and virtual currency, regardless of the
terminology, are considered
digital assets and therefore may be deemed securities or other types
of assets. To the
extent that you accept or begin to accept digital assets for payment,
consider whether they
are securities and, if so, what material risks and/or uncertainties
you will face, including
those under the Investment Company Act of 1940 and anti-money
laundering laws. In
addition, revise to address whether you plan to hold or trade each
digital asset you
currently hold and describe the custodial practices and cybersecurity
measures you
currently have in place or intend to use to protect the digital assets
you hold.
16. Please disclose whether your applications are or will be dependent on
a blockchain that
you did not develop. If so, please revise to explain and describe the
risks and challenges
related to such reliance; if not, please describe the risks related to
developing and
maintaining your own blockchain, if applicable. Please also explain
(1) the material terms
and characteristics of your virtual currency, including how it will be
valued and any
associated volatility, (2) the process by which the virtual currency
will be distributed to
users, (3) laws or regulations that may limit your ability or the
ability of users to convert
cryptocurrency or virtual currency into real currency or property, and
(4) the risks to your
users of holding the digital assets if they are distributed (e.g., any
risks and challenges
related to the storage or custody of the private key(s) granting
access to the digital assets,
such as the threat of a cybersecurity breach). To the extent that you
will offer customers a
digital wallet, please discuss the associated regulatory risks.
Matt Lourie
FirstName LastNameMatt
eSports Technologies, Inc. Lourie
Comapany
January NameeSports Technologies, Inc.
6, 2021
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17. In appropriate places, please provide the disclosure required by Item
101(c)(2)(ii) of
Regulation S-K
18. On your prospectus cover page and in you Summary, please disclose the
percentage of
voting power to be held by your directors and executive officers (and
any other related
parties) after the offering, explain that these shareholders will
control the matters to be
voted upon by stockholders, and state, if true, that you will be a
controlled company.
Please also include a risk factor discussing the risks associated with
being a controlled
company, if you will be one.
19. We note that you have included two prospectuses in this registration
statement. Please tell
us whether you intend to use both prospectuses concurrently in the
same format as filed.
If so (i) please tell us how you will inform investors whether they
will be investing in the
public offering by the company or in the resale offering and (ii)
disclose on the prospectus
cover page of the primary offering that you are concurrently
conducting a secondary
offering. In addition, the prospectus for the resale offering does not
appear to be complete
in its own right; please advise or revise. Finally, with a view toward
future disclosure and
legal analysis by the staff regarding the nature of the offerings,
please tell us whether the
resale offering will be conducted by Boustead Securities, LLC and
whether the shares to
be offered in the resale offering will be purchased by the selling
stockholders in the
primary offering.
You may contact Suying Li at (202) 551-3335 or Lyn Shenk at (202)
551-3380 if you
have questions regarding comments on the financial statements and related
matters. Please
contact Daniel Morris at (202) 551-3314 or Lilyanna Peyser at (202) 551-3222
with any other
questions.
Sincerely,
Division of
Corporation Finance
Office of Trade
& Services
cc: Cavas Pavri