UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

________________

FORM 10-Q

_________________

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2022~~March 31, 2023

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to ______

Commission File Number 001-39170

_________________

ELYS GAME TECHNOLOGY, CORP.

(Exact name of registrant as specified in its charter)

Delaware			33-0823179
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

130 Adelaide Street, West,, Suite 701

Toronto, Ontario, Canada M5H 2K4

1-~~628~~561-~~258-5148~~838-3325

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	ELYS	The Nasdaq Capital Market

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated Filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~November 11, 2022,~~May 19, 2023, the registrant had ~~30,360,810~~ 38,812,842shares of common stock, $0.0001 par value per share, outstanding.

TABLE OF CONTENTS

PART I -	FINANCIAL INFORMATION	PAGE

	Cautionary Statement Regarding Forward Looking Statements	3

Item 1	Financial Statements
	Consolidated Balance Sheets (unaudited)	4
	Consolidated Statements of Operations and Comprehensive Loss (unaudited)	5
	Consolidated Statements of Changes in Stockholders' Equity (unaudited)	6
	Consolidated Statements of Cash Flows (unaudited)	7
	Notes to Consolidated Financial Statements (unaudited)	9
Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operation	3336
Item 3	Quantitative and Qualitative Disclosures About Market Risk	4748
Item 4	Controls and Procedures	4748

PART II -	OTHER INFORMATION	4849

Item 1	Legal Proceedings	4849
Item 1A	Risk Factors	4850
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	5251
Item 3	Defaults Upon Senior Securities	5251
Item 4	Mine Safety Disclosures	5251
Item 5	Other Information	5251
Item 6	Exhibits	52

SIGNATURES		53

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical fact could be deemed forward-looking statements. Statements that include words such as “may,” “might,” “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “pro forma” or the negative of these words or other words or expressions of and similar meaning may identify forward-looking statements. For example, forward-looking statements include any statements of the plans, strategies and objectives of management for future operations, including the execution of integration and restructuring plans and the anticipated timing of filings; any statements concerning proposed new products, services or developments; any statements regarding future economic conditions or performance; statements of belief and any statement of assumptions underlying any of the foregoing.

These forward-looking statements are found at various places throughout this Quarterly Report on Form 10-Q and the other documents referred to in this Quarterly Report on Form 10-Q and relate to a variety of matters, including, but not limited to, other statements that are not purely statements of historical fact. These forward-looking statements are made on the basis of the current beliefs, expectations and assumptions of management, are not guarantees of performance and are subject to significant risks and uncertainty. These forward-looking statements should not be relied upon as predictions of future events and Elys Game Technology, Corp. cannot assure you that the events or circumstances discussed or reflected in these statements will be achieved or will occur. Furthermore, if such forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by Elys Game Technology, Corp. or any other person that we will achieve our objectives and plans in any specified timeframe, or at all. These forward-looking statements should, therefore, be considered in light of various important factors, including those set forth below, under Part II, “Item 1A. “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q and those identified under Part I, Item 1A in our Annual Report on Form ~~10-K/A~~10-K for the year ended December 31, ~~2021~~2022 filed with the Securities and Exchange Commission on April ~~15, 2022.~~17, 2023.

You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q. We disclaim any obligation to publicly update or release any revisions to these forward-looking statements, whether as a result of new information, future events or otherwise, after the date of this Quarterly Report on Form 10-Q or to reflect the occurrence of unanticipated events, except as required by law.

In this Quarterly Report on Form 10-Q, unless the context indicates otherwise, references to “Elys Game” “our Company,” “the Company,” “we,” “our,” and “us” refer to Elys Game Technology, Corp. a Delaware corporation, and its wholly owned subsidiaries.

~~COVID-19 UPDATE~~

As a result of the global outbreak of the COVID-19 virus, on March 8, 2020 the Italian government issued a decree which imposed certain restrictions on public gatherings and travel, and closures of physical venues that included betting shops, arcades and bingo halls across Italy. Accordingly, we had temporarily closed all betting shop locations throughout Italy as a result of the decree until May 4, 2020. Subsequently, on March 10, 2020 the Italian government imposed further restrictions on travel throughout Italy as well as transborder crossings and had either postponed or cancelled most professional sports events which had an effect on the Company’s overall sports betting handle and revenues and negatively impacted the Company’s operating results. On June 19, 2020 all land-based betting shops, including corner locations such as coffee shops throughout Italy temporarily reopened until November 2020 when the Italian government imposed new lockdowns that were lifted on June 14, 2021. The closing of physical betting shop locations did not affect our online and mobile business operations which has mitigated some of the impact.

During Q2 2021, management decided to close our Ulisse operations in Italy due to the uncertainty at that time of the duration and scope of the COVID-19 outbreak, while focusing investments on growing our U.S. market and the more familiar Multigioco brand, the result of which management believes has reduced the complexity and improved the efficiency of our gaming operations in Italy.

~~Currently there are no restrictive lockdowns in any of the markets in which we operate.~~

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ELYS GAME TECHNOLOGY, CORP.

Consolidated Balance Sheets

(Unaudited)

September 30,
2022

December 31,
2021
Current Assets
Cash and cash equivalents $ 4,690,034 $ 7,319,765
Accounts receivable 593,114 271,161
Gaming accounts receivable 1,116,713 2,418,492
Prepaid expenses 2,968,452 968,682
Related party receivable 8,318 1,413
Other current assets 372,561 403,972
Total Current Assets 9,749,192 11,383,485

Non-Current Assets
Restricted cash 332,606 386,592
Property, plant and equipment 617,906 490,079
Right of use assets 1,276,733 589,288
Intangible assets 14,403,191 15,557,561
Goodwill 16,164,049 16,164,337
Marketable securities 50,749 7,499
Total Non-Current Assets 32,845,234 33,195,356
Total Assets $ 42,594,426 $ 44,578,841

Current Liabilities
Bank overdraft $ —   $ 7,520
Accounts payable and accrued liabilities 5,237,836 6,820,279
Gaming accounts payable 2,882,813 2,610,305
Taxes payable 401,933 47,787
Advances from related parties 161 502
Promissory notes payable, related parties 374,347 51,878
Operating lease liability 313,981 244,467
Financial lease liability 6,937 8,347
Bank loan payable, current portion 3,122 36,094
Total Current Liabilities 9,221,130 9,827,179

Non-Current Liabilities
Contingent Purchase Consideration 14,257,232 12,859,399
Deferred tax liability 3,053,362 3,291,978
Operating lease liability 977,456 340,164
Financial lease liability 1,439 7,716
Bank loan payable 148,968 151,321
Equipment funding loan, related parties 360,355 —
Other long-term liabilities 380,012 359,567
Total Non-Current Liabilities 19,178,824 17,010,145
Total Liabilities 28,399,954 26,837,324

Stockholders' Equity
Preferred stock, $0.0001 par value; 5,000,000 shares authorized, none issued —   —
Common stock, $0.0001 par value, 80,000,000 shares authorized; 30,360,810 and 23,363,732 shares issued and outstanding as of September 30, 2022 and December 31, 2021 3,036 2,336
Additional paid-in capital 73,756,657 66,233,292
Accumulated other comprehensive loss (1,129,079 ) (251,083 )
Accumulated deficit (58,436,142 ) (48,243,028 )
Total Stockholders' Equity 14,194,472 17,741,517
Total Liabilities and Stockholders’ Equity $ 42,594,426 $ 44,578,841

	March 31, 2023			December 31, 2022
Current Assets
Cash and cash equivalents	$	3,241,109		$	3,400,166
Accounts receivable		729,639			731,962
Gaming accounts receivable		1,468,167			1,431,497
Prepaid expenses		918,704			900,205
Related party receivable		22,511			22,511
Other current assets		675,574			338,871
Total Current Assets		7,055,704			6,825,212

Non - Current Assets
Restricted cash		369,463			364,701
Property and equipment		1,102,201			610,852
Right of use assets		1,741,917			1,498,703
Intangible assets		10,607,512			10,375,524
Goodwill		3,416,422			1,662,278
Marketable securities		999			19,999
Total Non - Current Assets		17,238,514			14,532,057
Total Assets	$	24,294,218		$	21,357,269

Current Liabilities
Accounts payable and accrued liabilities	$	8,327,200			6,790,523
Gaming accounts payable		2,352,782			2,213,532
Taxes payable		227,412			179,720
Related party payable		146,936			422,129
Promissory notes payable - related parties		769,523			752,000
Operating lease liability		403,462			369,043
Financial lease liability		5,588			6,831
Bank loan payable - current portion		3,097			3,151
Total Current Liabilities		12,236,000			10,736,929

Non-Current Liabilities
Deferred tax liability		1,471,039			1,696,638
Operating lease liability		1,289,698			1,157,979
Financial lease liability		1,624			2,288
Bank loan payable		149,646			148,169
Convertible notes payable, net of discount of $192,856		164,145			—
Convertible notes payable – related parties, net of discount of $275,507		234,493			—
Other long-term liabilities		679,715			464,851
Total Non – Current Liabilities		3,990,360			3,469,925
Total Liabilities		16,226,360			14,206,854

Stockholders' Equity
Common stock, $0.0001 par value, 80,000,000 shares authorized; 38,812,842 and 30,360,810 shares issued and outstanding as of March 31, 2023 and December 31, 2022		3,881			3,036
Additional paid-in capital		77,371,556			74,249,244
Accumulated other comprehensive (loss) income		(512,972	)		(600,619	)
Accumulated deficit		(68,794,607	)		(66,501,246	)
Total Stockholders' Equity		8,067,858			7,150,415
Total Liabilities and Stockholders’ Equity	$	24,294,218		$	21,357,269

See notes to the unaudited condensed consolidated financial statements

ELYS GAME TECHNOLOGY, CORP.

Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

For the Three Months Ended
September 30,

For the Nine Months Ended
September 30,
2022 2021 2022 2021
Revenue $ 9,591,294 $ 8,030,082 $ 32,175,015 $ 33,877,359

Costs and Expenses
Selling expenses 6,874,581 6,054,757 24,029,532 26,333,156
General and administrative expenses 5,808,768 5,075,300 15,589,410 13,975,455
Restructuring and severance expenses — — 1,205,689 —
Total Costs and Expenses 12,683,349 11,130,057 40,824,631 40,308,611

Loss from Operations (3,092,055 ) (3,099,975 ) (8,649,616 ) (6,431,252 )

Other (Expenses) Income
Other income 21,931 74,327 90,783 444,689
Other expense (45,528 ) (384 ) (56,539 ) (28,522 )
Interest expense, net of interest income (9,104 ) (4,705 ) (22,641 ) (14,748 )
Change in fair value of contingent purchase consideration (482,059 ) (569,076 ) (1,397,833 ) (569,076 )
Amortization of present value discount — — — (12,833 )
(Loss) gain on marketable securities (49,250 ) (200,000 ) 43,250 (292,500 )
Total Other (Expenses) Income (564,010 ) (699,838 ) (1,342,980 ) (472,990 )

Loss Before Income Taxes (3,656,065 ) (3,799,813 ) (9,992,596 ) (6,904,242 )
Income tax provision (167,574 ) 284,636 (200,518 ) 8,136
Net Loss (3,823,639 ) (3,515,177 ) (10,193,114 ) (6,896,106 )

Other Comprehensive Loss
Foreign currency translation adjustment (367,765 ) (154,572 ) (877,996 ) (413,917 )

Comprehensive Loss $ (4,191,404 ) $ (3,669,749 ) $ (11,071,110 ) $ (7,310,023 )

Loss per common share – basic and diluted $ (0.14 ) $ (0.15 ) $ (0.41 ) $ (0.33 )
Weighted average number of common shares outstanding – basic and diluted 26,942,389 23,080,193 24,871,319 22,205,785


	For the three months ended March 31,
	2023			2022

Revenue	$	12,432,146		$	12,235,986

Costs and Expenses
Selling expenses		9,868,154			9,286,232
General and administrative expenses		4,447,747			4,570,426
Depreciation and amortization		347,323			438,958
Total Costs and Expenses		14,663,224			14,295,616

Loss from Operations		(2,231,078	)		(2,059,630	)

Other (Expenses) Income
Interest expense, net		(35,936	)		(3,859	)
Amortization of debt discount		(17,560	)		—
Other income		8,846			39,749
Changes in Fair Value of contingent purchase consideration		—			(450,013	)
Other expense		(9,028	)		(1,070	)
(Loss) gain on marketable securities		(19,000	)		77,500
Total Other (Expenses) Income		(72,678	)		(337,693	)

Loss Before Income Taxes		(2,303,756	)		(2,397,323	)
Income tax provision		10,395			(156,893	)
Net Loss	$	(2,293,361	)	$	(2,554,216	)

Other Comprehensive Income (Loss)
Foreign currency translation adjustment		87,647			(151,775	)

Comprehensive Loss	$	(2,205,714	)	$	(2,705,991	)

Loss per common share – basic and diluted	$	(0.07	)	$	(0.11	)
Weighted average number of common shares outstanding – basic and diluted		32,495,019			23,515,154

See notes to the unaudited condensed consolidated financial statements

ELYS GAME TECHNOLOGY, CORP.

Consolidated Statements of Changes in Stockholders' Equity

~~Nine~~Three months ended ~~September 30,~~March 31, 2023 and March 31, 2022 ~~and September 30, 2021~~

(Unaudited)

Common Stock
Additional Accumulated
Other
Shares Amount
Paid-in
Capital

Comprehensive
Income
Accumulated Deficit Total
Nine months ended September 30, 2021
Balance at December 31, 2020 20,029,834 $ 2,003 $ 53,064,919 $ 267,948 $ (33,178,517 ) $ 20,156,353

Shares issued in consideration of acquisition
Shares issued in consideration of acquisition, shares
Proceeds from open market sales
Proceeds from open market sales, shares
Brokers Fees on open market sales
Proceeds from private placement
Proceeds from private placement, shares
Proceeds from prefunded warrants
Brokers fees on private placement
Proceeds from warrants exercised 1,488,809 149 3,909,832 —   —   3,909,981
Common stock issued to settle liabilities 467,990 47 2,676,854 —   —   2,676,901
Restricted stock compensation 24,476 2 139,998 —   —   140,000
Stock based compensation expense —   —   288,968 —   —   288,968
Foreign currency translation adjustment —   —   —   (344,088 ) —   (344,088 )
Net Loss —   —   —   —   (609,579 ) (609,579 )
Balance at March 31, 2021 22,011,109 $ 2,201 $ 60,080,571 $ (76,140 ) $ (33,788,096 ) $ 26,218,536

Proceeds from warrants exercised 5,000 1 12,499 —   —   12,500
Stock based compensation expense —   —   291,162 —   —   291,162
Foreign currency translation adjustment —   —   —   84,743 —   84,743
Net loss —   —   —   —   (2,771,350 ) (2,771,350 )
Balance at June 30, 2021 22,016,109 $ 2,202 $ 60,384,232 $ 8,603 $ (36,559,446 ) $ 23,835,591

Shares issued in consideration of acquisition 1,265,823 127 4,544,177 —   —   4,544,304
Proceeds from warrants exercised 16,000 1 39,999 —   —   40,000
Stock based compensation expense —   —   671,678 —   —   671,678
Foreign currency translation adjustment —   —   —   (154,572 ) —   (154,572 )
Net loss —   —   —   —   (3,515,177 ) (3,515,177 )
Balance at September 30, 2021 23,297,932 $ 2,330 $ 65,640,086 $ (145,969 ) $ (40,074,623 ) $ 25,421,824


	Common Stock				Additional			Accumulated Other
	Shares		Amount		Paid-In Capital			Comprehensive Income			Accumulated Deficit			Total

Three months ended March 31, 2022
Balance at December 31, 2021		23,363,732	$	2,336	$	66,233,292		$	(251,083	)	$	(48,243,028	)	$	17,741,517

Proceeds from open market sales		56,472		6		131,559			—			—			131,565
Brokers Fees on open market sales		—		—		(3,949	)		—			—			(3,949	)
Fair value of common stock issued for Acquisition of Engage IT
Fair value of common stock issued for Acquisition of Engage IT, shares
Fair value of warrant issued with convertible debt
Restricted stock awards		162,835		16		424,984			—			—			425,000
Fair value of restricted stock issued to settle liabilities
Fair value of restricted stock issued to settle liabilities, shares
Fair value of options issued to settle liabilities
Stock based compensation expense		—		—		597,972			—			—			597,972
Foreign currency translation adjustment		—		—		—			(151,775	)		—			(151,775	)
Net loss		—		—		—			—			(2,554,216	)		(2,554,216	)
Balance at March 31, 2022		23,583,039	$	2,358	$	67,383,858		$	(402,858	)	$	(50,797,244	)	$	16,186,114

Three months ended March 31, 2023
Balance at December 31, 2022		30,360,810	$	3,036	$	74,249,244		$	(600,619	)	$	(66,501,246	)	$	7,150,415

Fair value of common stock issued for Acquisition of Engage IT Services, Srl		3,018,461		302		1,735,313			—			—			1,735,615
Fair value of warrant issued with convertible debt		—		—		485,922			—			—			485,922
Restricted stock awards		5,366,155		537		170,885			—			—			171,422
Fair value of restricted stock issued to settle liabilities		67,416		6		59,994			—			—			60,000
Fair value of options issued to settle liabilities		—		—		125,000			—			—			125,000
Stock based compensation expense		—		—		545,198			—			—			545,198
Foreign currency translation adjustment		—		—		—			87,647			—			87,647
Net loss		—		—		—			—			(2,293,361	)		(2,293,361	)
Balance at March 31, 2023		38,812,842	$	3,881	$	77,371,556		$	(512,972	)	$	(68,794,607	)	$	8,067,858

Common Stock Additional Accumulated
Other
Shares Amount Paid-In Capital Comprehensive Income Accumulated Deficit Total

Nine months ended September 30, 2022
Balance at December 31, 2021 23,363,732 $ 2,336 $ 66,233,292 $ (251,083 ) $ (48,243,028 ) $ 17,741,517

Proceeds from open market sales 56,472 6 131,559 —   —   131,565
Brokers Fees on open market sales —   — (3,949 ) —   —   (3,949 )
Restricted stock compensation 162,835 16 424,984 —   —   425,000
Stock based compensation expense —   —   597,972 —   —   597,972
Foreign currency translation adjustment —   —   —   (151,775 ) —   (151,775 )
Net loss —   —   —   —   (2,554,216 ) (2,554,216 )
Balance at March 31, 2022 23,583,039 $ 2,358 $ 67,383,858 $ (402,858 ) $ (50,797,244 ) $ 16,186,114

Proceeds from open market sales 111,544 11 255,477 —   —   255,488
Brokers Fees on open market sales —   — (7,663 ) —   —   (7,663 )
Proceeds from private placement 2,625,000 263 2,486,925 —   —   2,487,188
Proceeds from prefunded warrants —   —   512,758 —   —   512,758
Brokers fees on private placement —   —   (245,950 ) —   —   (245,950 )
Stock based compensation expense —   —   1,296,118 —   —   1,296,118
Foreign currency translation adjustment —   —   —   (358,456 ) —   (358,456 )
Net loss —   —   —   —   (3,815,259 ) (3,815,259 )
Balance at June 30, 2022 26,319,583 $ 2,632 $ 71,681,523 $ (761,314 ) $ (54,612,503 ) $ 16,310,338

Proceeds from warrants exercised 541,227 54 —   —   —   54
Restricted stock compensation 3,500,000 350 1,587,250 —   —   1,587,600
Stock based compensation expense —   —   487,884 —   —   487,884
Foreign currency translation adjustment —   —   —   (367,765 ) —   (367,765 )
Net loss —   —   —   —   (3,823,639 ) (3,823,639 )
Balance at September 30, 2022 30,360,810 $ 3,036 $ 73,756,657 $ (1,129,079 ) $ (58,436,142 ) $ 14,194,472

See notes to the unaudited condensed consolidated financial statements

ELYS GAME TECHNOLOGY, CORP.

Consolidated Statements of Cash Flows

(Unaudited)

For the nine months ended September 30,
2022 2021
Cash Flows from Operating Activities
Net Loss $ (10,193,114 ) $ (6,896,106 )
Adjustments to reconcile net loss to net cash Used in Operating Activities
Depreciation and amortization 1,315,593 885,437
Change in fair value of contingent purchase consideration 1,397,833 569,076
Amortization of present value discount —   12,833
Restricted stock awards 2,012,600 140,000
Stock option compensation expense 2,381,974 1,251,808
Non-cash interest 17,637 6,788
Unrealized (gain) loss on trading securities (43,250 ) 292,500
Movement in deferred taxation (238,616 ) (116,896 )
Gain on Government relief loan forgiven —   (7,992 )
Changes in Operating Assets and Liabilities (Net of assets acquired and liabilities assumed)
Prepaid expenses (2,043,015 ) (458,601 )
Accounts payable and accrued liabilities (1,013,194 ) (1,095,287 )
Accounts receivable (282,002 ) 79,467
Gaming accounts receivable 981,478 89,293
Gaming accounts liabilities 693,455 516,302
Taxes payable 391,339 (110,385 )
Due from related parties (8,026 ) (1,968 )
Other current assets (19,838 ) (134,648 )
Long term liabilities 76,916 (280,230 )
Net Cash Used in Operating Activities (4,572,230 ) (5,258,609 )

Cash Flows from Investing Activities
Acquisition of subsidiary, net of cash of $26,161 —   (5,973,839 )
Acquisition of property, plant and equipment and intangible assets (355,939 ) (135,835 )
Net Cash Used in Investing Activities (355,939 ) (6,109,674 )

Cash Flows from Financing Activities
Proceeds from warrants exercised —   3,962,482
Proceeds from bank overdraft —   1,045
Repayment of bank overdraft (7,043 ) —
Repayment of bank credit line —   (500,000 )
Repayment of bank loan (33,041 ) (100,850 )
Redemption of convertible debentures —   (27,562 )
Proceeds from promissory notes, related party 305,000 —
Proceeds from equipment funding, related party 360,000 —
Repayment of Government relief loan —   (25,438 )
Proceeds from subscriptions – net of fees 2,616,679 —
Proceeds from. Pre-funded warrants 512,813 —
Repayment of deferred purchase consideration, non-related parties —   (385,121 )
Repayment of deferred purchase consideration, related parties —   (25,262 )
Repayment of financial leases (5,926 ) (8,108 )
Net Cash Provided by Financing Activities 3,748,482 2,891,186

Effect of change in exchange rate (1,504,030 ) (766,233 )

Net decrease in cash (2,683,717 ) (9,243,330 )
Cash, cash equivalents and restricted cash – beginning of the period 7,706,357 20,044,769
Cash, cash equivalents and restricted cash – end of the period $ 5,022,640 $ 10,801,439

Reconciliation of cash, cash equivalents and restricted cash within the Balance Sheets to the Statement of Cash Flows
Cash and cash equivalents $ 4,690,034 $ 9,408,035
Restricted cash included in non-current assets 332,606 1,393,404
$ 5,022,640 $ 10,801,439


	For the three months ended March 31,
	2023			2022

Net Loss	$	(2,293,361	)	$	(2,554,216	)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization		347,323			438,959
Gain on disposal of property and equipment		(5,809	)		—
Amortization of debt discount		17,560			—
Restricted stock awards		171,422			425,000
Stock-based compensation expense		545,198			597,972
Non-cash interest		35,945			992
Loss on dissolution of subsidiary		335			—
Change in fair value of contingent purchase consideration		—			450,013
Unrealized loss (gain) on marketable securities		19,000			(77,500	)
Movement in deferred taxation		(225,599	)		(79,539	)

Changes in Operating Assets and Liabilities, net of Assets Acquired and Liabilities Assumed
Prepaid expenses		(5,217	)		(545,972	)
Accounts payable and accrued liabilities		1,161,434			(215,744	)
Accounts receivable		5,984			(64,381	)
Gaming accounts receivable		(17,765	)		1,163,531
Gaming accounts liabilities		108,954			(276,557	)
Taxes payable		44,249			225,645
Due from related parties		144,083			2,700
Other current assets		(309,314	)		43,759
Long term liability		37,016			29,305
Net Cash Used in Operating Activities		(218,562	)		(436,033	)

Cash Flows from Investing Activities
Cash on acquisition of subsidiary		94,450			—
Acquisition of property and equipment and intangible assets		(1,016,162	)		(105,129	)
Net Cash Used in Investing Activities		(921,712	)		(105,129	)

Cash Flows from Financing Activities
Proceeds from convertible notes		350,000			—
Proceeds from convertible notes, related parties		500,000			—
Repayment of bank overdraft		—			(7,420	)
Repayment of bank loan		—			(33,316	)
Proceeds from subscriptions – Net of brokers fees		—			127,616
Repayment of financial leases		(1,999	)		(2,062	)
Net Cash provided by Financing Activities		848,001			84,818

Effect of change in exchange rate		130,868			(267,703	)

Net decrease in cash		(161,405	)		(724,047	)
Cash, cash equivalents and restricted cash – beginning of the period		3,771,977			7,706,357
Cash, cash equivalents and restricted cash – end of the period	$	3,610,572		$	6,982,310

Reconciliation of cash, cash equivalents and restricted cash within the Balance Sheets to the Statement of Cash Flows
Cash and cash equivalents	$	3,241,109		$	6,605,262
Restricted cash included in non-current assets		369,463			377,048
	$	3,610,572		$	6,982,310

Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest	$	243	$	3,048
Income tax	$	167,511	$	11,727

Supplemental cash flow disclosure for non-cash activities
Fair value of common stock issued on acquisition of Engage IT Services Srl	$	1,735,615	$	—
Fair value of warrant issued with convertible debt	$	485,922	$	—
Fair value of restricted stock issued to settle liabilities	$	60,000	$	—
Fair value of options issued to settle liabilities	$	125,000	$	—

See notes to the unaudited condensed consolidated financial statements

~~ELYS GAME TECHNOLOGY, CORP.~~

~~Consolidated Statements of Cash Flows~~

~~(Unaudited)~~

For the nine months ended September 30,
2022 2021
Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest $ 5,855 $ 22,609
Income tax $ 84,988 $ 266,211
Supplemental cash flow disclosure for non-cash activities
Common stock issued to settle liabilities $ — $ 2,676,901
Common shares issued in consideration of acquisition (Refer Note 3 below) $ — $ 4,544,304

~~See notes to the unaudited condensed consolidated financial statements~~8

ELYS GAME TECHNOLOGY, CORP.

Notes to Unaudited Condensed Consolidated Financial Statements

1. Nature of Business

Established in the state of Delaware in 1998, Elys Game Technology, Corp (“Elys” or the “Company”), provides gaming services in the U.S. market via Elys Gameboard Technologies, LLC and Bookmakers Company US, LLC (“~~USB”~~US Bookmaking”) in certain licensed states where the Company offers bookmaking and platform services to the Company’s customers. The Company’s intention is to focus its attention on expanding its operations in the U.S. market. ~~The~~In this regard, the Company ~~recently began operation~~operates in Washington D.C. through a Class B Managed Service Provider and Class B Operator license to operate a sportsbook within the Grand Central Restaurant and Sportsbook located in the Adams Morgan ~~area of~~district and the Over Under Sportsbook Rooftop Lounge in Washington, D.C., and in ~~October 2021~~March 2022 the Company ~~entered into an agreement with~~began providing platform and bookmaking services at Ocean Casino Resort in Atlantic City, New Jersey, and through its acquisition of US Bookmaking, the Company also provides sportsbook services to ~~provide platform~~tribal casinos in New Mexico, North Dakota, Colorado and ~~bookmaking services. Ocean Casino Resort began using the Company’s platform and bookmaking services in March 2022.~~Michigan.

The Company also provides business-to-consumer (“B2C”) gaming services in Italy through its subsidiary, Multigioco, which operations are carried out via both land-based retail or online ~~retail~~interactive gaming licenses regulated by the Agenzia delle Dogane e dei Monopoli (“ADM”) that permits the Company to distribute leisure betting products such as sports betting, and virtual sports betting products through both physical, land-based ~~retail~~ locations as well as online through the Company’s licensed website www.newgioco.it or commercial webskins linked to the Company’s licensed website and through mobile devices. Management implemented a consolidation strategy in the Italian market by integrating all B2C operations into Multigioco and allowed the Austrian Bookmakers license, that was regulated by the Austrian Federal Finance Ministry (“BMF”), to terminate.

Additionally, the Company provides business-to-business (“B2B”) gaming technology through its Odissea subsidiary which owns and operates a betting software designed with a unique “distributed model” architecture colloquially named Elys Game Board (the “Platform”). The Platform is a fully integrated “omni-channel” framework that combines centralized technology for updating, servicing and operations with multi-channel functionality to accept all forms of customer payment through the two distribution channels described above. The omni-channel software design is fully integrated with a built in player gaming account management system, built-in sports book and a virtual sports platform through its Virtual Generation subsidiary. The Platform also provides seamless integration of application programming interface ~~integration~~ of third-party supplied products such as online casino, poker, lottery and horse racing and has the capability to incorporate e-sports and daily fantasy sports providers. Management implemented a growth strategy to expand B2B gaming technology operations in the U.S. and is considering further expansion in Canada and Latin American countries in the near future.

~~Strategic agreements entered into with Lottomatica (currently known as G.B.O, S.p.A)~~

During the second quarter of the 2022 financial year, the Company entered into a Master Technology Development and License Agreement and a Technical Services Agreement with Lottomatica to develop and provide a dedicated Sports Betting Platform (“SBP”) for use in both land-based and on-line applications by Lottomatica in the U.S. and Canadian markets, as well as potentially worldwide. The contract is for a period of ten years, after which the source code will be assigned to Lottomatica. An option was also granted to Lottomatica that after a period of four years from the commencement of the provision of the SBP, that Lottomatica may acquire the source code to the SBP for €4.0 million.

The Technical Services Agreement was entered into with the Company’s subsidiary Odissea to provide engineering services, develop and deliver the software and provide operational and product management support to Lottomatica on the SBP. The initial term of the agreement is for a period of ten years and is based on cost plus a percentage of the services provided.

In a separate Virtual Service Agreement entered into between the Company’s subsidiary Virtual Generation and Goldbet S.p.A., a subsidiary of Lottomatica, whereby Virtual Generation will license virtual event content to be implemented on the Lottomatica’s Platform throughout the Lottomatica vast network of retail outlets and on the online services in Italy. The agreement provides for an exclusivity period of two years from the date of certification of the virtual platform by the Italian regulator (ADM), which will only allow Lottomatica and the Company to make use of the platform. Virtual Generation will generate commission revenue based on a percentage of Net Gaming Revenues.

In a separate Assignment Agreement entered into between the Company’s subsidiary, Multigioco, Lottomatica assigned ownership of approximately 100 Sports Rights to Multigioco, which will allow Multigioco to expand its land-based distribution network to approximately 110 point-of-sale locations. Multigioco activated approximately 30 location rights during the third quarter of 2022 and expects to activate an additional 50 locations over the remainder of the 2022 calendar year, and the remaining 20 locations through the first quarter of 2023. These rights are only valid until the ADM puts new location rights up for tender, which could take place at any time, and therefore were assigned a minimal value.

~~ELYS GAME TECHNOLOGY, CORP.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

~~1. Nature of Business (continued)~~

The entities included in these ~~unaudited condensed~~ consolidated financial statements are as follows:

Name	Acquisition or Formation Date	Domicile	Functional Currency

Elys Game Technology, Corp. (“Elys”)	Parent Company	USA	U.S. dollar
Multigioco Srl (“Multigioco”)	August 15, 2014	Italy	Euro
Ulisse GmbH (“Ulisse”)	July 1, 2016	Austria	Euro
Odissea Betriebsinformatik Beratung GmbH (“Odissea”)	July 1, 2016	Austria	Euro
Virtual Generation Limited (“VG”)	January 31, 2019	Malta	Euro
Newgioco Group Inc. (“NG Canada”)	January 17, 2017	Canada	Canadian dollar
~~Elys Technology Group Limited~~	~~April 4, 2019~~	~~Malta~~	~~Euro~~
Newgioco Colombia SAS	November 22, 2019	Colombia	Colombian peso
Elys Gameboard Technologies, LLC	May 28, 2020	USA	U.S. dollar
Bookmakers Company US, LLC	July 15, 2021	USA	U.S. dollar
Elys US Game Technologies and Services, LLC	July 1, 2022	USA	U.S. dollar
Engage IT Services, Srl	January 29, 2023	Italy	Euro

On January 12, 2023, Elys Technology Group Limited, a previously wholly owned subsidiary, was dissolved and its operations were assumed by Virtual Generation Limited.

ELYS GAME TECHNOLOGY, CORP.

Notes to Unaudited Condensed Consolidated Financial Statements

1. Nature of Business (continued)

The Company operates in two lines of business: (i) the operating of ~~web based~~ web-based betting as well as ~~land based~~ land-based leisure betting establishments situated throughout Italy and; (ii) provider of certified betting Platform software services to global leisure betting establishments and operators.

The Company’s operations are carried out through the following four geographically organized groups:

a)	an operational group based in Europe that maintains administrative offices headquartered in Rome, Italy with satellite offices for operations administration in Naples and Teramo, Italy and San Gwann, Malta;
b)	an operational group based in the U.S. with offices in Las Vegas, Nevada;
c)	a technology group which is based in Innsbruck, Austria and manages software development, training, and administration; and
d)	a corporate group which is based in North America and maintains an executive suite in Las Vegas, Nevada and a space in Toronto, Ontario, Canada through which the Company carries-out corporate activities, handles day-to-day reporting and U.S. development planning, and through which various employees, independent contractors and vendors are engaged.

2. Accounting Policies and Estimates

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, ~~2022.~~2023. The balance sheet at December 31, ~~2021~~2022 has been derived from the Company’s audited consolidated financial statements at that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. For further information, please refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021,~~2022, as filed with the U.S. Securities and Exchange Commission (“SEC”) on April ~~15, 2022.~~17, 2023.

All amounts referred to in the Notes to the unaudited condensed consolidated financial statements are in United States Dollars ($) unless stated otherwise.

The Company previously had a secondary listing on the NEO exchange in Canada, which was terminated on December 31, 2021. For the purposes of its previous listing in Canada, the Company is an “SEC Issuer” as defined under National Instrument 52-107 “Accounting Principles and Audit Standards” and is relying on the exemptions of Section 3.7 of NI 52-107 and of Section 1.4(8) of the Companion Policy to National Instrument 51-102 “Continuous Disclosure Obligations” (“NI 51-102CP”) which permits the Company to prepare its financial statements in accordance with U.S. GAAP.

~~ELYS GAME TECHNOLOGY, CORP.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

~~2. Accounting Policies and Estimates (continued)~~

Principles of consolidation

The unaudited condensed consolidated financial statements include the financial statements of the Company and its subsidiaries, all of which are wholly owned. All significant inter-company accounts and transactions have been eliminated in the unaudited condensed consolidated financial statements.

Foreign operations

The Company translated the assets and liabilities of its foreign subsidiaries into U.S. dollars at the exchange rate in effect at quarter end and the results of operations and cash flows at the average rate throughout the quarter. The translation adjustments are recorded directly as a separate component of stockholders’ equity, while transaction gains (losses) are included in net income (loss).

All revenues were generated in Euro, Colombian Peso and U.S. dollars during the periods presented.

Gains and losses from foreign currency transactions are recognized in current operations.

ELYS GAME TECHNOLOGY, CORP.

Notes to Unaudited Condensed Consolidated Financial Statements

2. Accounting Policies and Estimates (continued)

Business Combinations

The Company allocates the fair value of purchase consideration to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill.

Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from acquired users, acquired technology, and trade names from a market participant perspective, useful lives and discount rates. ~~Management’s~~Management's estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates.

Use of Estimates

The preparation of unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting ~~periods.~~periods, using accounting principles generally accepted in the United States (“U.S. GAAP”) applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. Actual results could differ from those estimates. These estimates and assumptions include valuing equity securities issued in share-based payment arrangements, determining the fair value of assets acquired, ~~and liabilities assumed,~~ allocation of purchase price, impairment of long-lived intangible assets and goodwill, the collectability of receivables, leasing arrangements, convertible debentures, contingent purchase consideration, contingencies and the value of deferred taxes and related valuation allowances. Certain estimates, including evaluating the collectability of receivables and advances, could be affected by external conditions, including those unique to the Company’s industry and general economic conditions. It is possible that these external factors could have an effect on the Company’s estimates that could cause actual results to differ from the Company’s estimates. The Company re-evaluates all of its accounting estimates at least quarterly based on these conditions and records adjustments when necessary.

Loss Contingencies

The Company may be subject to claims, suits, government investigations, and other proceedings involving competition and antitrust, intellectual property, ~~gaming license,~~ privacy, indirect taxes, labor and employment, commercial disputes, content generated by our users, goods and services offered by advertisers or publishers using the Company’s website platforms, and other matters. Certain of these matters include speculative claims for substantial or indeterminate amounts of damages. The Company records a liability when it believes that it is both probable that a loss has been incurred, and the amount can be reasonably estimated. If the Company determines that a loss is possible, and a range of the loss can be reasonably estimated, it discloses the range of the possible loss in the Notes to the ~~unaudited condensed~~ Consolidated Financial Statements.

The Company evaluates, on a regular basis, developments in its legal matters that could affect the amount of liability that has been previously accrued, and the matters and related ranges of possible losses disclosed and makes adjustments and changes to our disclosures as appropriate. Significant judgment is required to determine both likelihood of there being and the estimated amount of a loss related to such matters. Until the final resolution of such matters, there may be an exposure to loss in excess of the amount recorded, and such amounts could be material. Should any of the Company’s estimates and assumptions change or prove to have been incorrect, it could have a material impact on its business, consolidated financial position, results of operations, or cash flows.

To date, none of these types of litigation matters, most of which are typically covered by insurance, has had a material impact on the Company’s operations or financial condition. The Company has insured and continues to insure against most of these types of claims.

ELYS GAME TECHNOLOGY, CORP.

Notes to Unaudited Condensed Consolidated Financial Statements

2. Accounting Policies and Estimates (continued)

Fair Value Measurements

ASC Topic 820, Fair Value Measurement and Disclosures, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. This topic also establishes a fair value hierarchy which requires classification based on observable and unobservable inputs when measuring fair value. There are three levels of inputs that may be used to measure fair value:

Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: Inputs other than quoted prices that are observable, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

Level 3: Unobservable inputs in which little or no market data exists, therefore developed using estimates and assumptions developed by us, which reflect those that a market participant would use.

The carrying value of the ~~Company’s~~Company's accounts receivables, gaming accounts receivable, lines of credit - bank, accounts payable, gaming accounts payable and bank loans payable approximate fair value because of the short-term maturity of these financial instruments.

Derivative Financial Instruments

ASC 815 generally provides three criteria that, if met, require companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments. These three criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not ~~re- measured~~re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument subject to the requirements of ASC 815. ASC 815 also provides an exception to this rule when the host instrument is deemed to be conventional, as described.

Cash and Cash Equivalents

The Company considers all highly liquid debt instruments with maturities of three months or less at the time acquired to be cash equivalents. The Company had no cash equivalents as of September 30, 2022 and December 31, 2021, respectively.

~~The Company~~ primarily places cash balances in the ~~USA~~U.S. with high-credit quality financial institutions located in the United States which are insured by the Federal Deposit Insurance Corporation up to a limit of $~~250,000~~$250,000 per institution, in Canada which are insured by the Canadian Deposit Insurance Corporation up to a limit of CDN $~~100,000~~$100,000 per institution, in Italy which is insured by the Italian deposit guarantee fund Fondo Interbancario di Tutela dei Depositi (FITD) up to a limit of €100,000 per institution, and in Germany which is a member of the Deposit Protection Fund of the Association of German Banks (Einlagensicherungsfonds des Bundesverbandes deutscher Banken) up to a limit of €100,000 per institution.

To date, the Company has not been exposed to the recent U.S. bank failures and we do not anticipate any adverse impact on the Company’s cash balances.

Gaming Accounts Receivable

Gaming accounts receivable represent gaming deposits made by customers to their online gaming accounts either directly by credit card, bank wire, e-wallet or other accepted method through one of our websites or indirectly by cash collected at the cashier of a betting shop but not yet credited to the Company’s bank accounts and subject to normal trade collection terms without discounts. The Company periodically evaluates the collectability of its gaming accounts receivable and considers the need to record or adjust an allowance for doubtful accounts based upon historical collection experience and specific customer information. Actual amounts could vary from the recorded estimates. The Company does not require collateral to support customer receivables. The Company recorded no bad debt expense for the three ~~and nine~~ months ended ~~September 30, 2022.~~ March 31, 2023.

ELYS GAME TECHNOLOGY, CORP.

Notes to Unaudited Condensed Consolidated Financial Statements

2. Accounting Policies and Estimates (continued)

Gaming Accounts Payable

Gaming accounts payable represent customer balances, including winnings and deposits, that are held as credits in online gaming accounts and have not as of yet been used or withdrawn by the customers. Customers can request payment of winnings from the Company at any time and the payment to customers can be made through bank wire, credit card, or cash disbursement from one of our locations. Online gaming account credit balances are non-interest bearing.

~~ELYS GAME TECHNOLOGY, CORP.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

~~2. Accounting Policies and Estimates (continued)~~

~~Long-Lived~~Long Lived Assets

The Company evaluates the carrying value of its long-lived assets for impairment by comparing the expected undiscounted future cash flows of the assets to the net book value of the assets when events or circumstances indicate that the carrying amount of a long-lived asset may not be recoverable. If the expected undiscounted future cash flows are less than the net book value of the assets, the excess of the net book value over the estimated fair value will be charged to earnings.

Fair value is based upon discounted cash flows of the assets at a rate deemed reasonable for the type of asset and prevailing market conditions, appraisals, and, if appropriate, current estimated net sales proceeds from pending offers.

Property and Equipment

Property and equipment is stated at acquisition cost less accumulated depreciation and adjustments for impairment losses. Expenditures are capitalized only when they increase the future economic benefits embodied in an item of property and equipment. All other expenditures are recognized as expenses in the statement of operations as incurred.

Depreciation is charged on a straight-line basis over the estimated remaining useful lives of the individual assets. Amortization commences from the time an asset is put into operation.

The range of the estimated useful lives is as follows:

Plant and Equipment Useful lives

Description	Useful Life (in years)

Leasehold improvements	Life of the underlying lease
Computer and office equipment	3	to	5	years
Furniture and fittings	7	to	10	years
Computer Software	3	to	5	years
Vehicles	4	to	5	years

Description Useful Life

Leasehold improvements Life of the underlying lease
Computer and office equipment 3 to 5 years
Furniture and fittings 7 to 10 years
Computer Software 3 to 5 years
Vehicles 4 to 5 years

Intangible Assets

Intangible assets are stated at acquisition cost less accumulated amortization, if applicable, less any adjustments for impairment losses.

Amortization is charged on a straight-line basis over the estimated remaining useful lives of the individual intangibles. Where intangibles are deemed to be impaired the Company recognizes an impairment loss measured as the difference between the estimated fair value of the intangible and its book value.

The range of the estimated useful lives is as follows:

Intangible Useful lives
Description Useful Life

Betting Platform Software 15 years
Multigioco and Rifa ADM Licenses 1.5 to 7 years
Location contracts 5 to 7 years
Customer relationships 10 to 18 years
Trademarks/Tradenames 10 to 14 years
Websites 5 years
Non-compete agreements 4 years

Intangible Useful lives
Description	Useful Life (in years)

Betting Platform Software	15
Multigioco and Rifa ADM Licenses	1.5	to	7
Location contracts	5	to	7
Customer relationships	10	to	18
Trademarks/Tradenames	10	to	14
Websites	5
Non-compete agreements	4

ELYS GAME TECHNOLOGY, CORP.

Notes to Unaudited Condensed Consolidated Financial Statements

2. Accounting Policies and Estimates (continued)

Goodwill

The Company annually assesses whether the carrying value of its reporting ~~units exceed their~~unit exceeds its fair ~~values~~value and, if necessary, records an impairment loss equal to any such excess. Each interim reporting period, the Company assesses whether events or circumstances have occurred which indicate that the carrying amount of the reporting ~~units~~unit exceeds ~~their~~its fair value. If the carrying amount of the reporting ~~units~~unit exceeds ~~their~~its fair value, an asset impairment charge will be recognized in an amount equal to that excess.

Goodwill was recently assessed on December 31, ~~2021~~2022 and as of ~~September 30, 2022~~March 31, 2023 there were no qualitative indications that impairment of intangible assets or goodwill may be appropriate. The Company is currently assessing the financial position and the future direction of its USB subsidiary and will enter into a mediation process with the executive management of USB. The outcome of this mediation is uncertain and until such time as the Company has determined an appropriate course of action, which is dependent on the outcome of the mediation and possible legal action initiated by the Company, the ability to project future business and profitability is uncertain. The Company expects to determine an appropriate course of action within the next three to six months, at which time the decision around impairment of the carrying value of the USB assets will be determinable.

Leases

The Company accounts for leases in terms of ASC 842. In terms of ASC 842, the Company assesses whether any asset based leases entered into for periods longer than twelve months meet the definition of financial leases or ~~operating~~operation leases, by evaluating the terms of the lease, including the following; the duration of the lease; the implied interest rate in the lease; the cash flows of the lease; and whether the Company intends to retain ownership of the asset at the end of the lease term.

Leases which imply that the Company will retain ownership at the end of the lease term are classified as financial leases, are included in ~~plant~~property and equipment with a corresponding financial liability raised at the date of lease inception. Interest incurred on financial leases are expensed using the effective interest rate method.

Leases which imply that the Company will not acquire the asset at the end of the lease term are classified as operating leases, the Company’s right to use the asset is reflected as a non-current right of use asset with a corresponding operational lease liability raised at the date of lease inception. The right of use asset and the operational lease liability are amortized over the right of use period using the effective interest rate implied in the operating lease agreement.

Income Taxes

The Company uses the asset and liability method of accounting for income taxes in accordance with ASC Topic 740, “Income Taxes.” Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an ~~entity’s~~entity's financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of the available positive and negative evidence, it is more likely than not some portion or all of the deferred tax assets will not be realized.

ASC Topic 740-10-30 clarifies the accounting for uncertainty in income taxes recognized in an ~~enterprise’s~~enterprise's financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740-10-40 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The Company has no material uncertain tax positions for any of the reporting periods presented.

In Italy, tax years beginning ~~2015~~2017 forward, are open and subject to examination, while in Austria companies are open and subject to inspection for five years and ten years for inspection of serious infractions. In the United States and Canada, tax years beginning ~~2015~~2017 forward, are subject to examination. The Company is not currently under examination and it has not been notified of a pending examination.

ELYS GAME TECHNOLOGY, CORP.

Notes to Unaudited Condensed Consolidated Financial Statements

2. Accounting Policies and Estimates (continued)

Contingent Purchase Consideration

The Company estimates and records the acquisition date estimated fair value of contingent consideration as part of the purchase price consideration for acquisitions. At each reporting period, the Company estimates changes in the fair value of contingent consideration, and any change in fair value is recognized in the Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). An increase in the earn-out expected to be paid will result in a charge to operations in the year that the anticipated fair value of contingent consideration increases, while a decrease in the earn-out expected to be paid will result in a credit to operations in the year that the anticipated fair value of contingent consideration decreases. The estimate of the fair value of contingent consideration requires subjective assumptions to be made regarding future operating results, discount rates, and probabilities assigned to various potential operating result scenarios. Future revisions to these assumptions could materially change the estimate of the fair value of contingent consideration and therefore, materially affect the Company’s future financial results. ~~Additional information regarding contingent consideration is provided in Note 3.~~

Revenue Recognition

The Company recognizes revenue when control of its products and services is transferred to its customers in an amount that reflects the consideration the Company expects to receive from its customers in exchange for those products and services. Revenues from sports-betting, casino, cash and skill games, slots, bingo and horse race wagers represent the gross pay-ins (also referred to as turnover) from customers less gaming taxes and payouts to customers. Revenues are recorded when the game is closed which is representative of the point in time at which the Company has satisfied its performance obligation. In addition, the Company receives commissions from the sale of scratch tickets and other lottery games. Commissions are recorded when the ticket for scratch off tickets and lottery tickets are sold.

Revenues from the Betting Platform include software licensing fees, training, installation, and product support services. The Company does not sell its proprietary software. Revenue is recognized when transfer of control to the customer has been made and the Company’s performance obligation has been fulfilled.

	·•	License fees are calculated as a percentage of each licensee’s level of activity and are contingent upon the licensee’s usage. The license fees are recognized on an accrual basis as earned.

	·•	Training fees, ~~and~~ installation fees are recognized when each task has been completed.

·•

Product support services are recognized based on the nature of the agreement with our customers, ad-hoc support service revenue will be recognized when the task is completed and revenue from product support service contracts will be recognized on a periodic basis where we charge a recurring fee to provide ongoing support services.

Stock-Based Compensation

The Company records its compensation expense associated with stock options and other forms of equity compensation based on their fair value at the date of grant using the Black-Scholes option pricing model. Stock-based compensation includes amortization related to stock option awards based on the estimated grant date fair value. Stock-based compensation expense related to stock options is recognized ratably over the vesting period of the option. In addition, the Company records expense related to Restricted Stock Units (“RSU’s”) granted based on the fair value of those awards on the grant date. The fair value related to the RSUs is amortized to expense over the vesting term of those awards. Forfeitures of stock options and RSUs are recognized as they occur.

Stock-based compensation expense for a stock-based award with a performance condition is recognized when the achievement of such performance condition is determined to be probable. If the outcome of such performance condition is not determined to be probable or is not met, no compensation expense is recognized and any previously recognized compensation expense is reversed.

ELYS GAME TECHNOLOGY, CORP.

Notes to Unaudited Condensed Consolidated Financial Statements

2. Accounting Policies and Estimates (continued)

Comprehensive Income (Loss)

Comprehensive income (loss) is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources, including foreign currency translation adjustments.

~~ELYS GAME TECHNOLOGY, CORP.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

~~2. Accounting Policies and Estimates (continued)~~

Earnings Per Share

Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 260, “Earnings Per Share” provides for calculation of “basic” and “diluted” earnings per share. Basic earnings per share includes no dilution and is computed by dividing net income (loss) available to common shareholders by the weighted average common shares outstanding for the period. Diluted earnings per share ~~reflect~~reflects the dilutive impact on the number of shares outstanding should they be exercised. Securities that have the potential ~~dilution of securities that could share in the earnings of an entity and~~to dilute shareholder's interests include ~~options and warrants, adding back any expenditure directly associated with the convertible instruments, if any. When the Company incurs a net loss, the effect of the Company’s outstanding~~unexercised stock options and warrants ~~and convertible debt are not included in the calculation of diluted earnings (loss) per share~~ as ~~the effect would be anti-dilutive.~~well as unconverted debentures.

Related Parties

Parties are considered to be related to the Company if the parties directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. The Company discloses all related party transactions. All transactions are recorded at fair value of the goods or services exchanged.

Recent Accounting Pronouncements

The ~~FASB~~Financial Accounting Standards Board (“FASB”) issued ~~several~~additional updates during the ~~period, none~~quarter ended March 31, 2023. None of these standards are either applicable to the Company or require adoption at a future date and none are expected to have a material impact on the Company’s condensed consolidated financial statements upon adoption.

Reporting by ~~Segment~~segment

The Company has two operating segments from which it derives revenue. These segments are:

(i)

the operating of ~~web based~~web-based as well as land-based leisure betting establishments situated throughout Italy, and ~~recently added land-based operations in the U.S. and~~


(ii)	provider of certified betting Platform software services to ~~global~~ leisure betting establishments in ~~Italy~~the U.S. and 89 other countries.

3. Going Concern

The Company’s financial statements are prepared using accounting principles generally accepted in the United States (“U.S. GAAP”) applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business.

The accompanying financial statements for the period ended March 31, 2023 have been prepared assuming the Company will continue as a going concern, but the ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund ongoing development work of its gaming platforms and operations until we are able to generate revenue streams from our additional gaming platforms and become profitable. These factors, individually and collectively indicate that a material uncertainty exists that raises substantial doubt about the Company’s ability to continue as a going concern for one year from the date of issuance of these unaudited condensed audited consolidated financial statements. Management’s plans to continue as a going concern include raising additional capital through sales of equity securities and borrowing. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans. If the Company is not able to obtain the necessary additional financing on a timely basis, the Company will be required to delay, and reduce the scope of the Company’s development and operations. Continuing as a going concern is dependent upon its ability to successfully secure other sources of financing and attain profitable operations. The accompanying unaudited condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

ELYS GAME TECHNOLOGY, CORP.

Notes to Unaudited Condensed Consolidated Financial Statements

4. Acquisition of ~~Subsidiaries~~subsidiaries

On ~~July 5, 2021,~~January 29, 2023 (the “Closing Date”), the Company entered into a ~~Membership~~Share Purchase Agreement (the “Purchase Agreement”) to acquire 100% of ~~Bookmakers Company US, LLC,~~Engage IT Services, Srl, a ~~Nevada limited liability~~ company ~~doing business as USBookmaking~~organized under the laws of Italy (“~~USB”~~Engage IT”), from its ~~members~~founding shareholders (the “Sellers”). ~~On July 15, 2021~~The Purchase Agreement provided that, upon the terms and subject to the conditions set forth therein, the Company ~~consummated the acquisition of USB and in terms~~would acquire all of the ~~Purchase Agreement the Company acquired 100%~~shares of ~~USB, from its members (the “Sellers”)~~Engage IT and ~~USB~~Engage IT became a wholly owned subsidiary of ~~the Company.~~Elys.

~~USB is~~Founded in 2016 by the Company’s current Head of Global Technology, Luca Pasquini, along with Alessandro Alpi and Michael Denney, Engage IT employs 27 specialist technicians, developers and software engineers that specialize in the design, implementation and management of SQL databases, agile project management, and solutions based on the Microsoft cloud platform (Azure) and in the development of .NET applications. Since 2016, Engage has also provided contract services to the Company, playing a ~~provider~~key role in the development of ~~sports wagering services such as design~~the Company’s Elys Gameboard sportsbook technology and ~~consulting, turn-key sports wagering solutions, and risk management.~~Player Account Management Platform (PAM).

Pursuant to the terms of the Purchase Agreement, on the ~~consideration~~Closing Date, the Company paid the “Dollar Equivalent” of €1,080,000 for all of the ~~equity~~shares of ~~USB was $~~~~6,000,000~~ ~~6 million in cash plus~~Engage IT on a debt free basis, which amount may be increased or decreased based on the working capital surplus or deficit, and any indebtedness due to or from Engage IT by or from any one or more of the Sellers to be determined 10 days prior to June 30, 2023. The Company satisfied the payment by the issuance 3,018,461 shares of common stock (the “Exchange Shares”), valued at $~~1,265,823~~ 1,735,615~~shares~~, equal to the “Dollar Equivalent” of the Purchase Price, calculated at the exchange rate at the time of closing, at a price equal to the volume weighted average price per share (calculated to the nearest one-hundredth of one cent) of the Company’s common stock ~~with a market value of $4,544,304~~ for the twenty consecutive trading days beginning on the ~~date~~twenty-third trading day immediately preceding the Closing Date and concluding at the close of ~~acquisition.~~trading on the third trading day immediately preceding the Closing Date or US $0.39 per share, which may be adjusted for any stock split, reverse stock split, stock dividend, recapitalization, combination, exchange or similar event; or any subsequent equity sale or rights offering of Elys, and is subject to shareholder approval if required. Additionally, the Company may repurchase the Exchange Shares in cash in whole or in part at any time on or prior to June 30, 2023.

The Purchase Agreement ~~provided that~~contains customary representations, warranties and covenants of Elys and the Sellers. Subject to certain customary limitations, the Sellers ~~will~~ have ~~an opportunity~~agreed to ~~receive up~~indemnify Elys and its officers and directors against certain losses related to, ~~an additional $38,000,000~~ ~~(undiscounted) plus a potential undiscounted premium of 10% (or $3,800,000) based upon achievement of stated adjusted cumulative~~ ~~EBITDA milestones until December 31, 2025, payable 50%~~ ~~in cash and 50% in the Company’s stock at a price equal to volume weighted average price~~among other things, breaches of the ~~company’s common stock for~~Sellers’ representations and warranties, certain specified liabilities and the ~~90 consecutive trading days preceding January 1 of each subsequent fiscal year for the duration of the earnout period ending December 31, 2025, subject~~failure to ~~obtaining shareholder approval, if the~~ ~~aggregate number of shares to be issued pursuant to~~perform covenants or obligations under the Purchase ~~Agreement exceeds 4,401,020 and with a cap of 5,065,000 on the aggregate number of shares to be issued.~~ ~~Any excess not approved by shareholders or exceeding the cap will be paid in cash. The fair value of the contingent purchase consideration of~~ ~~$24,716,957~~ ~~was estimated by applying the income approach, which uses significant assumptions (Level 3 assumptions) which are not readily available in the market.~~Agreement.

16The preliminary purchase price allocation was as follows:

	Amount
Consideration
3,018,461 shares of common stock at fair market value	$	1,735,615
Total purchase consideration	$	1,735,615

Recognized amounts of identifiable assets acquired and liabilities assumed
Cash	$	94,450
Accounts receivable – Related party		555,634
Other Current assets		22,377
Property and equipment		36,135
Right-of-use assets		47,335
	$	755,931
Less: liabilities assumed
Current liabilities assumed	$	(425,882	)
Related party payables		(130,278	)
Operating lease liabilities		(47,335	)
Non-current liabilities assumed		(171,051	)
	$	(774,546	)
Net identifiable assets acquired and liabilities assumed		(18,615	)
Goodwill		1,754,230
	$	1,735,615

ELYS GAME TECHNOLOGY, CORP.

Notes to Unaudited Condensed Consolidated Financial Statements

3.4. Acquisition of subsidiaries (continued)

The goodwill of $27,024,383 arising at the time of acquisition consists largely of the reputation and knowledge of USB in the sports betting market in the U.S. markets which should facilitate the Company’s penetration into the U.S. market. All of the goodwill was assigned to the ~~Betting platform software and services segment.~~

~~None of the goodwill is expected to be deducted for income tax purposes.~~

~~In terms of the agreement, the preliminary purchase price was allocated to the fair market value of tangible and intangible assets acquired and liabilities assumed as follows:~~

Amount
Consideration
Cash $ 6,000,000
1,265,823 shares of common stock at fair market value
4,554,304
Contingent purchase consideration 24,716,957
Total purchase consideration $ 35,261,261
Recognized amounts of identifiable assets acquired and liabilities assumed
Cash $ 26,161
Other Current assets 151,284
Property, plant and equipment 788
Other non-current assets 4,000
Tradenames/Trademarks 1,419,000
Customer relationships 7,275,000
Non-compete agreements 2,096,000
10,972,233
Less: liabilities assumed
Current liabilities assumed (264,135 )
Non-current liabilities assumed (205,320 )
Imputed Deferred taxation on identifiable intangible acquired (2,265,900 )
(2,735,355 )
Net identifiable assets acquired and liabilities assumed 8,236,878
Goodwill 27,024,383
$ 35,261,261

The amount of revenue and earnings included in the Company’s consolidated statement of operations and comprehensive income (loss) for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 and the revenue and earnings of the combined entity had the acquisition date been January 1, ~~2020,~~2022, is presented as follows:

	Revenue		Earnings

Actual for the period from acquisition to March 31, 2023	$	—	$	(9,433	)

2023 supplemental pro forma from January 1, 2023 to March 31, 2023	$	12,432,146	$	(2,322,347	)

2022 supplemental pro forma from January 1, 2022 to March 31, 2022	$	12,237,047	$	(2,594,794	)

Revenue Earnings

Actual for the nine months ended September 30, 2022 $ 872,366 $ (1,786,317 )

2021 Supplemental pro forma from January 1, 2021 to September 30, 2021 $ 34,288,462 $ (7,154,851 )

2020 Supplemental pro forma from January 1, 2020 to September 30, 2020 $ 24,992,504 $ (4,810,317 )

The ~~2021 Supplemental~~2023 supplemental pro forma information was adjusted to exclude $~~120,479~~75,062 of ~~non-recurring acquisition~~intercompany profit that would not have been capitalized to platform costs, ~~in addition,~~ the ~~2021~~ associated adjustment to amortization expense of platform costs amounting to $1,251 and, ~~2020~~the associated deferred taxation calculated on the elimination of the intercompany profit and adjustment to amortization expense amounting to $15,500. The 2022 supplemental pro forma information was adjusted to ~~account for~~exclude $88,615 of intercompany profit that would not have been capitalized to platform costs and an estimated once-off legal expense of $15,000, that would not have been incurred had this transaction taken place on January 1, 2022. There was no associated adjustment to amortization ~~of intangibles on acquisition of $579,619~~expense as the platform cost associated with the intercompany profit was not being depreciated during the three months ended March 31, 2022. ~~and~~ ~~$802,550~~ ~~, respectively.~~

~~ELYS GAME TECHNOLOGY, CORP.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

4.5. Restricted Cash

Restricted cash consists of cash held in a segregated bank account at Intesa Sanpaolo Bank S.p.A. (“Intesa Sanpaolo Bank”) as collateral against the Company’s operating line of credit with Intesa Sanpaolo Bank. The Company no longer has an operating line of credit and will apply for the release of the restricted cash.

5.6. Property ~~plant~~ and equipment

September 30, 2022 December 31, 2021
Cost Accumulated depreciation
Net book
value

Net book
value

Leasehold improvements $ 53,632 $ (34,396 ) $ 19,236 $ 27,260
Computer and office equipment 1,013,804 (742,269 ) 271,535 223,214
Fixtures and fittings 400,215 (240,619 ) 159,596 135,433
Vehicles 86,087 (56,120 ) 29,967 44,837
Computer software 281,250 (143,678 ) 137,572 59,335
$ 1,834,988 $ (1,217,082 ) $ 617,906 $ 490,079


	March 31, 2023							December 31, 2022
	Cost		Accumulated depreciation			Net book value		Net book value

Leasehold improvements	$	139,818	$	(46,464	)	$	93,354	$	17,876
Computer and office equipment		1,215,894		(894,161	)		321,733		307,602
Fixtures and fittings		485,346		(284,143	)		201,203		160,122
Vehicles		14,718		(14,718	)		—		—
Computer software		722,226		(236,315	)		485,911		125,252
	$	2,578,002	$	(1,475,801	)	$	1,102,201	$	610,852

The aggregate depreciation charge to operations was $~~152,955~~62,228 and $~~162,594~~51,251 for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively. The depreciation policies followed by the Company are described in Note 2.

67. Leases

.The Company’s portfolio of leases contains both finance and operating leases that relate to real estate agreements, vehicles and office equipment agreements.

Operating leases

Real estate agreements

The Company has several property lease agreements in Italy and Austria and one lease agreement in the U.S. which have terms in excess of a twelve month period, these property leases are for our administrative operations in these countries. The Company does not and does not intend to take ownership of the properties at the end of the lease term.

ELYS GAME TECHNOLOGY, CORP.

Notes to Unaudited Condensed Consolidated Financial Statements

7. Leases (continued)

Vehicle agreements

The Company leases several vehicles for business use purposes, the terms of these leases range from twenty four to forty-eight months. The Company does not and does not intend to take ownership of the vehicles at the end of the lease term.

Finance Leases

Office equipment agreements

The Company has entered into several finance leases for office equipment, the term of these leases range from thirty-six to sixty months. The Company takes ownership of the office equipment at the end of the lease term.

Right of use assets

Right of use assets included in the condensed consolidated balance sheet are as follows:

September 30,
2022

December 31,
2021
Non-current assets
Right of use assets - operating leases, net of amortization $ 1,276,733 $ 598,288
Right of use assets - finance leases, net of depreciation – included in property, plant and equipment $ 8,092 $ 15,520

	March 31, 2023		December 31, 2022
Non-current assets
Right of use assets - operating leases, net of amortization	$	1,741,917	$	1,498,703
Right of use assets - finance leases, net of depreciation – included in property and equipment	$	7,070	$	8,884

Lease costs consists of the following:


	Nine Months Ended September 30,				Three Months Ended March 31,
	2022		2021		2023		2022
Finance lease cost:
Amortization of financial lease assets	$	5,726	$	8,071	$	1,904	$	2,011
Interest expense on lease liabilities		348		642		107		141

Operating lease cost		257,582		201,308		306,467		89,015

Total lease cost	$	263,656	$	210,021	$	308,478	$	91,167

Other lease information:

Nine Months Ended September 30,
2022 2021
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from finance leases $ (348 ) $ (642 )
Operating cash flows from operating leases $ (257,582 ) $ (201,308 )
Financing cash flows from finance leases $ (5,926 ) $ (8,108 )

Weighted average remaining lease term – finance leases 1.24 years 2.43 years
Weighted average remaining lease term – operating leases 4.64 years 1.95 years

Weighted average discount rate – finance leases 3.73 % 3.73 %
Weighted average discount rate – operating leases 2.83 % 3.23 %

	Three Months ended March 31,
	2023			2022
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from finance leases	$	(107	)	$	(141	)
Operating cash flows from operating leases		(306,467	)		(89,015	)
Financing cash flows from finance leases		(1,999	)		(2,062	)

Weighted average remaining lease term – finance leases		1.94 years			1.70 years
Weighted average remaining lease term – operating leases		4.19 years			4.24 years

Weighted average discount rate – finance leases		5.25	%		3.73	%
Weighted average discount rate – operating leases		3.15	%		2.61	%

ELYS GAME TECHNOLOGY, CORP.

Notes to Unaudited Condensed Consolidated Financial Statements

6.7. Leases (continued)

Maturity of Leases

Finance lease liability

The amount of future minimum lease payments under finance leases are as follows:

Finance lease liability	Amount			Amount

Remainder of 2022	$	1,810
2023		6,068
Remainder of 2023				$	5,101
2024		704			1,276
2025					494
2026					494
2027					372
Total undiscounted minimum future lease payments		8,582			7,737
Imputed interest		(206	)		(525	)
Total finance lease liability	$	8,376		$	7,212

Disclosed as:
Current portion	$	6,937		$	5,588
Non-Current portion		1,439			1,624
	$	8,376		$	7,212

Operating lease liability

The amount of future minimum lease payments under operating leases are as follows:

Operating lease liability Amount

Remainder of 2022 $ 92,278
2023 334,306
2024 267,418
2025 242,980
2026 and thereafter 424,226
Total undiscounted minimum future lease payments 1,361,208
Imputed interest (69,771 )
Total operating lease liability $ 1,291,437

Disclosed as:
Current portion $ 313,981
Non-Current portion 977,456
$ 1,291,437

Operating lease liability	Amount

Remainder of 2023	$	353,422
2024		436,883
2025		391,702
2026		327,917
2027 and thereafter		270,473
Total undiscounted minimum future lease payments		1,780,397
Imputed interest		(87,237	)
Total operating lease liability	$	1,693,160

Disclosed as:
Current portion	$	403,462
Non-Current portion		1,289,698
	$	1,693,160

8. Intangible Assets

7.ELYS GAME TECHNOLOGY, CORP.

Notes to Unaudited Condensed Consolidated Financial Statements

8. Intangible Assets (continued)

Intangible assets consist of the following:


	September 30, 2022							December 31, 2021		March 31, 2023							December 31, 2022
	Cost		Accumulated amortization			Net book value		Net book value		Cost		Accumulated amortization			Net book value		Net book value
Betting platform software	$	6,149,537	$	(1,711,119	)	$	4,438,418	$	4,745,895	$	9,144,884	$	(1,980,887	)	$	7,163,997	$	6,776,486
Licenses		959,804		(948,171	)		11,633		3,413		974,984		(965,034	)		9,950		11,864
Location contracts		1,000,000		(1,000,000	)		—		—		1,000,000		(1,000,000	)		—		—
Customer relationships		8,145,927		(955,865	)		7,190,062		7,538,533		3,395,927		(1,188,179	)		2,207,748		2,323,905
Trademarks		1,536,586		(236,342	)		1,300,244		1,413,887		1,537,426		(311,609	)		1,225,817		1,263,269
Non-compete agreements		2,096,000		(633,167	)		1,462,833		1,855,833		764,167		(764,167	)		—		—
Websites		40,000		(40,000	)		—		—		40,000		(40,000	)		—		—
	$	19,927,854	$	(5,524,664	)	$	14,403,190	$	15,557,561	$	16,857,388	$	(6,249,876	)	$	10,607,512	$	10,375,524

19The Company recorded $285,008

~~ELYS GAME TECHNOLOGY, CORP.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~ and $387,618 in amortization expense for finite-lived assets for the three months ended March 31, 2023 and 2022, respectively.

~~7. Intangible Assets (continued)~~The estimated amortization expense over the next five-year period is as follows:

Amortization Expense		Amount
	Remainder of 2023	$	941,514
	2024		1,250,821
	2025		1,247,075
	2026		1,247,075
	2027		1,239,075
	Total estimated amortization expense	$	5,925,560

The Company evaluates intangible assets for impairment on an annual basis during the last month of each year and at an interim date if indications of impairment exist. Intangible asset impairment is determined by comparing the fair value of the asset to its carrying amount with an impairment being recognized only when the fair value is less than carrying value and the impairment is deemed to be permanent in nature.

~~The Company recorded~~ 9. Goodwill

	March 31, 2023			December 31, 2022
Cost
Opening balance as of January 1,	$	28,686,661		$	28,687,051
Acquisition of Engage IT Services, Srl		1,754,230			—
Foreign exchange movements		(86	)		(390	)
Closing balance as of period end		30,440,805			28,686,661

Accumulated Impairment charge
Opening balance as of January 1,		(27,024,383	)		(12,522,714	)
Impairment charge		—			(14,501,669	)
Closing balance as of period end		(27,024,383	)		(27,024,383	)

Goodwill, net of impairment charges	$	3,416,422		$	1,662,278

~~$1,162,438~~ELYS GAME TECHNOLOGY, CORP. ~~and~~

~~$722,843~~ ~~in amortization expense for finite-lived assets for the nine months ended September 30, 2022 and 2021, respectively.~~Notes to Unaudited Condensed Consolidated Financial Statements

Licenses obtained by the Company in the acquisitions of Multigioco and Rifa include a Gioco a Distanza (“GAD”) online license as well as a Bersani and Monti land-based licenses issued by the Italian gaming regulator to Multigioco and Rifa, respectively as well as an Austrian Bookmaker License through the acquisition of Ulisse, which has subsequently being impaired to $0.

~~The estimated amortization expense for all intangibles over the next five year period is as follows:~~

Amortization Expense Amount

Remainder of 2022 $ 390,245
2023 1,555,010
2024 1,551,154
2025 1,308,599
2026 1,024,767
Total estimated amortization expense $ 5,829,775

8.9. Goodwill (continued)

September 30,
2022

December 31,
2021
Opening balance $ 28,687,051 $ 1,663,120
Acquisition of Bookmakers Company US, LLC —   27,024,383
Foreign exchange movements (288 ) (452 )
28,686,763 28,687,051
Accumulated Impairment charge
Opening Balance January 1 (12,522,714 ) —
Impairment charge —   (12,522,714 )
Closing Balance (12,522,714 ) (12,522,714 )

Goodwill net of impairment charge $ 16,164,049 $ 16,164,337

Goodwill represents the excess purchase price paid over the fair value of assets acquired, including any other identifiable intangible assets.

The Company evaluates goodwill for impairment on an annual basis during the last month of each year and at an interim date if indications of impairment exist. Goodwill impairment is determined by comparing the fair value of the ~~asset~~reporting unit to its carrying amount with an impairment being recognized only when the fair value is less than carrying ~~value.~~ value and the impairment is deemed to be permanent in nature.

The Company is currently assessing the financial position and the future direction of its USB subsidiary and will enter into a mediation process with the executive management of USB. The outcome of this mediation is uncertain and until such time as the Company has determined an appropriate course of action, which is dependent on the outcome of the mediation and possible legal action initiated by the Company, the ability to project future business and profitability is uncertain. The Company expects to determine an appropriate course of action within the next three to six months, at which time the decision around impairment of the carrying value of the USB assets will be determinable.

~~ELYS GAME TECHNOLOGY, CORP.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

9.10. Marketable Securities

Investments in marketable securities consists of 2,500,000 shares of Zoompass Holdings (“Zoompass”) and is accounted for at fair value, with changes recognized ~~into~~in earnings.

~~The~~On March 31, 2023, the shares of Zoompass were last quoted at $0.0004 per share on the OTC market, at ~~$0.0203~~ ~~per share on September 30, 2022,~~ resulting in an unrealized ~~gain~~loss recorded to earnings related to these securities of ~~$43,250~~$19,000 ~~for the nine months ended September 30, 2022.~~.

~~10.~~11. Bank Loan Payable

~~In September 2016, the Company obtained a loan of €500,000~~ ~~(approximately $545,000) from Intesa Sanpaolo Bank in Italy, which loan is secured by the Company's assets. The loan had an underlying interest rate of~~ ~~4.5%~~ ~~above the Euro Inter Bank Offered Rate, subject to quarterly review and was amortized over~~ 57 ~~months initially expected to end on March 31, 2021. Monthly repayments of~~ ~~€9,760~~ ~~began in January 2017.~~

In terms of a directive by the Italian Government, in order to provide financial relief due to the COVID-19 pandemic, Multigioco was able to suspend repayments of the loan for a period of six months and the maturity date of the loan was extended to March 31, 2022, the interest rate remained the same at 4.5% above the Euro Inter Bank Offered Rate with monthly repayments revised to $~~9,971. The Company made payments of €29,913~~ ~~(approximately~~ ~~$34,159) which included principal of~~ ~~€29,059~~ ~~(approximately $33,184) and interest of~~ ~~€854~~ ~~(approximately $975) for the three months ended March 31, 2022, thereby extinguishing the loan.~~

Included in bank loans is a Small Business Administration Disaster Relief loan (“SBA Loan”) assumed on the acquisition of ~~USB~~US Bookmaking with a principal outstanding of $$150,000. The SBA Loan bears interest at 3.75% per annum and is repayable in monthly installments of $$731 which began in June 2021, and matures in May 2050. The SBA Loan is collateralized by all of ~~USB’s~~ US Bookmaking’s tangible and intangible assets. The balance outstanding at March 31, 2023 consists of principal outstanding of $144,430 and interest thereon of $8,313.

Since acquisition of ~~USB,~~US Bookmaking, the Company has repaid principal of $~~$3,247~~ 4,402and has total accrued and unpaid interest of $~~5,337~~$8,313 on this loan as of ~~September 30, 2022.~~March 31, 2023.

The maturity of bank loans payable as of ~~September 30, 2022~~March 31, 2023 is as follows:

	Amount
Bank loans payable			Amount
Within 1 year	$	3,122	$	3,097
1 to 2 years		3,241		3,215
2 to 3 years		3,365		3,338
3 to 4 years		3,493		3,465
5 years and thereafter		138,869		139,628
Total	$	152,090	$	152,743
Disclosed as:
Current portion	$	3,122	$	3,097
Non-Current portion		148,968		149,646
	$	152,090	$	152,743

~~11. Contingent Purchase Consideration~~12. Convertible notes payable

~~In terms~~On January 30, 2023 (the "Closing Date"), the Company closed a private placement offering of up to 2,000 units and entered into Subscription Agreements with a group of accredited investors (the "Investors"), which Investors included Braydon Capital Corp. a company owned by Claudio Ciavarella, a related party and brother of the ~~acquisition~~Company’s Executive Chairman, Michele Ciavarella. Each Unit sold to Investors was sold at a per unit price of ~~USB disclosed in Note 3 above, the~~ ~~Purchase Agreement provides that the~~ ~~Sellers will have an opportunity to receive up to an additional $38,000,000 plus~~$1,000 and was comprised of (i) a ~~potential premium of 10% (or $3,800,000) based upon achievement of stated adjusted cumulative EBITDA milestones during the next four years, payable 50% in cash and 50%~~12% convertible debenture in the principal amount of $1,000 (the “Debentures”), and (ii) warrants to purchase shares of the Company’s common stock (the “Warrants”).

The Investors purchased a total of 850 units and the Company issued Debentures for the total principal amount of $850,000 (the "Principal Amount") to the Investors and warrants to purchase 2,179,487 shares of common stock of the Company.

ELYS GAME TECHNOLOGY, CORP.

Notes to Unaudited Condensed Consolidated Financial Statements

12. Convertible notes payable (continued)

The Debentures mature three years from their date of issuance and bear interest at a rate of 12% per annum compounded annually and payable on the maturity date. Each Debenture is convertible, at the option of the holder, at any time, into such number of shares of common stock of the Company equal to the principal amount of the Debenture plus all accrued and unpaid interest at a price equal to the volume weighted average price per share (calculated to the nearest one-hundredth of one cent) of the ~~company’s~~Company’s common stock on the Nasdaq stock market for the 90period of twenty consecutive trading days beginning on the twenty-third trading day immediately preceding ~~January 1~~the Closing Date and concluding at the close of ~~each subsequent fiscal year~~trading on the third trading day immediately preceding the Closing Date, subject to adjustment as provided in the Debenture, at any time up to the Maturity Date. The Debentures are initially convertible into 2,179,487 shares of common stock, subject to anti-dilution adjustment as provided in the Debentures. The holder is guaranteed to receive a minimum of five months of interest in the event of an early repayment (“Redemption”) by the Company.

In addition, the Company may accelerate this right of conversion on at least ten (10) business days prior written notice to the Holder if there is an effective Registration Statement registering, or a current prospectus available for, the ~~duration~~resale of the ~~earnout~~common shares issuable on the conversion and (i) the closing price of the Company’s common shares exceeds two hundred (200%) per cent of the Conversion Price for five (5) trading days in a thirty (30) day period ~~ending December 31, 2025,~~or (ii) the Company wishes to redeem or pre-pay the Debentures prior to the Maturity Date.

If at any time that the common shares issuable to the Investors on conversion of the Debenture in whole or in part would be free trading without resale restrictions or statutory hold periods, the Debenture is redeemable by the Company at any time or times prior to the Maturity Date on not less than ten (10) Business Days prior written notice from the Company to the Investor of the proposed date of Redemption (the “Redemption Date”), without bonus or penalty, provided, however, that prior to the Redemption Date, the Investor has the right to convert the whole or any part of the principal and accrued and unpaid interest of the Debenture into common shares of the Company.

The warrants are exercisable at an exercise price equal to the volume weighted average price per share (calculated to the nearest one-hundredth of one cent) of the Company common stock on the Nasdaq stock market for the period of twenty consecutive trading days beginning on the twenty-third trading day immediately preceding the Closing Date and concluding at the close of trading on the third trading day immediately preceding the Closing Date, subject to ~~obtaining shareholder approval, if~~adjustment as provided in the ~~aggregate number~~Warrant and expire three years after the issuance date. Each warrant is exercisable on a cashless basis in the event that there is not an effective registration statement registering the shares underlying the warrant at the time of ~~shares~~exercise. The initial exercise price of the warrant is $0.39 per share, subject to ~~be issued pursuant~~a down-round adjustment to ~~the Purchase Agreement exceeds 4,401,020 and with~~ a ~~cap~~floor exercise price of ~~5,065,000 on the aggregate number of shares to be issued. Any excess not approved by shareholders or exceeding the cap will be paid in cash.~~$0.35 per share.

The Company ~~had~~may accelerate the right to exercise the Warrant on at least ten (10) business days prior written notice to the Holder if there is an ~~independent third party valuation entity perform~~effective Registration Statement registering, or a ~~Purchase Price Analysis which included~~current prospectus available for, the ~~probability~~resale of the ~~Sellers achieving~~common shares issuable on exercise of the ~~additional proceeds~~Warrant and the closing price of $~~41,800,000~~.the Company’s common shares exceeds two hundred (200%) per cent of the Exercise Price for five (5) trading days in a thirty (30) day period.

The Warrants and Debentures provide that if the Company issues or sells common stock of securities convertible or exercisable into common stock for a price lower than the exercise price of conversion price that the exercise price and conversion price will be reduced to such price, subject to a floor price of $0.35 and subject to certain exempt issuances set forth in the Debenture and Warrant.

21The number of shares of common stock that may be issued upon exercise of the Warrants and Debentures is subject to an Exchange Cap (as defined in the Debentures and Warrants) unless shareholder approval to exceed the Exchange Cap is approved. The parties agree to amend the Debentures and Warrants as necessary in order to comply with the requirements of the Nasdaq Capital Markets.

On March 5, 2023, the Company obtained written consents from holders of shares of Common Stock representing approximately 54.1% of the total issued and outstanding shares of voting stock of the Company on March 1, 2023, the record date, approving the for purposes of The Nasdaq Stock Market LLC Rules 5635 (b) and 5635(d), the issuance of all of the outstanding shares of the Company’s Common Stock to be issued upon (i) conversion of the Debentures and (ii) exercise of the common stock purchase warrants, dated January 30, 2023, issued to such investors by us pursuant to the Subscription Agreement.

The convertible notes were evaluated in terms of ASC 470, Debt, and is carried at amortized cost. The warrants issued in conjunction with the convertible notes were evaluated in terms of ASC 480, Distinguishing Liabilities from Equity and in terms of ASC 815, Derivatives and Hedging, the Company determined that the warrants met the definition of equity in terms of ASC 480 and did not fall within the scope of ASC 815, therefore the value of the warrants, determined using a Black-Scholes valuation model (see note 16 below), was recorded as a debt discount which is amortized using the effective interest method over the term of the convertible notes.

ELYS GAME TECHNOLOGY, CORP.

Notes to Unaudited Condensed Consolidated Financial Statements

~~11. Contingent Purchase Consideration~~12. Convertible notes payable (continued)

At each reporting period, the Company estimates changes in the fair value of contingent consideration, and any change in fair value is recognized in the Consolidated Statements of Operations and Comprehensive Income (Loss). The estimateConvertible notes payable consists of the fair value of contingent consideration requires subjective assumptions to be made regarding future operating results, discount rates, and probabilities assigned to various potential operating result scenarios. Due to the uncertainty regarding the achievement of the stated unadjusted accumulated EBITDA milestones and the methodology in determining the number of shares to be issued during each earnout period and the potential restriction on the number of shares available for issue, the contingent purchase consideration is classified as a liability.following:

Convertible Notes Payable	March 31, 2023
Principal outstanding
Opening balance	$	—
Advances to the Company		350,000
Closing balance		350,000

Accrued Interest
Opening balance		—
Accrued interest		7,000
Closing balance		7,000

Debt Discount
Opening balance		—
Debt discount on valuation of warrants		(200,086	)
Amortization of debt discount		7,231
		(192,855	)

Total	$	164,145

September 30,
2022

December 31,
2021
Opening balance $ 12,859,399 $ —
Contingent purchase consideration measured on the acquisition of USB — 24,716,957
Changes in fair value 1,397,833 (11,857,558 )
Closing balance $ 14,257,232 $ 12,859,399

~~12.~~13. Other Long-term Liabilities

Other long-term liabilities represent the Italian “Trattamento di Fine Rapporto” which is a severance amount set up by Italian companies to be paid to employees on termination or retirement.

Balances of other long-term liabilities were as follows:

September 30,
2022
December 31,
2021
Severance liability $ 380,012 $ 359,567

March 31,

2023

December 31,

2022

Severance liability

674,715

464,851

~~13.~~14. Related Parties

~~Equipment loan -~~Promissory notes payable – Related ~~Party~~Parties

~~On September 26, 2022, the Company entered into an equipment loan agreement with Braydon Capital Corp, for the principal sum of $500,000~~ ~~of which an initial advance of $360,000~~ ~~was received.~~ The ~~loan bears interest at~~ 9% ~~per annum, compounded monthly and is repayable~~movement on ~~October 31, 2023. The loan agreement also provides for additional compensation to the lender of 1%~~promissory notes payable – Related Parties, consists of the ~~gross income received from equipment funded by this loan, capped at 2% of the principal sum advanced.~~following:

	March 31, 2023		December 31, 2022
Principal outstanding
Opening balance	$	715,000	$	50,000
Loans advanced – Braydon Capital Corp		—		360,000
Loans advanced – Victor Salerno		—		305,000
Closing balance		715,000		715,000

Accrued Interest
Opening balance		37,000		1,878
Accrued interest		17,523		35,122
Closing balance		54,523		37,000

Total	$	769,523	$	752,000

ELYS GAME TECHNOLOGY, CORP.

Notes to Unaudited Condensed Consolidated Financial Statements

14. Related Parties (continued)

Convertible notes payable – Related parties

On January 30, 2023, the Company issued convertible notes payable, as disclosed under note 12 above. Braydon Capital ~~Corp~~Corp.subscribed for $500,000 of the convertible notes, Braydon Capital Corp. is ~~managed~~owned by Mr. Claudio Ciavarella, the ~~bother~~brother of ~~the~~our Chairman ~~of the Board.~~and interim CEO.

~~The movement on Equipment loan - Related Party,~~Convertible notes payable – related party, consists of the following:

September 30,
2022
Opening balance —
Loan advanced $ 360,000
Loan repayments —
Interest accrued 355
Closing balance $ 360,355

	March 31, 2023
Principal outstanding
Opening balance	$	—
Advances to the Company		500,000
Closing balance		500,000

Accrued Interest
Opening balance		—
Accrued interest		10,000
Closing balance		10,000

Debt Discount
Opening balance		—
Debt discount on valuation of warrants		(285,836	)
Amortization of debt discount		10,329
		(275,507	)

Total	$	234,493

Related Party (Payables) Receivables

Related party payables and receivables represent non-interest-bearing (payables) receivables that are due on demand.

The balances outstanding are as follows:

Related Party Receivables		September 30, 2022			December 31, 2021				March 31, 2023			December 31, 2022
	Related Party payables							Related Party payable
Related Party payables								Engage IT Services, Srl	$	—		$	(406,467	)
Related Party payables	Luca Pasquini	$	(161	)	$	(502	)	Luca Pasquini		(130,468	)		(459	)
Related Party payables	Victor Salerno		(374,346	)		(51,878	)	Michele Ciavarella		(16,468	)		(15,203	)
Related Party payables		$	(374,507	)	$	(52,380	)		$	(146,936	)	$	(422,129	)

	Related Party Receivables							Related Party Receivable
Related Party Receivables	Luca Pasquini	$	—		$	1,413		Victor Salerno	$	22,511		$	22,511
Related Party Receivables									$	22,511		$	22,511

Engage IT Services, Srl.

The Company acquired Engage IT with effect from January 29, 2023. Engage IT performed software development work for the Company’s wholly owned subsidiary, Gameboard. As of December 31, 2022, Gameboard owed Engage IT $406,467 for development work performed. The intercompany balance eliminates on consolidation for the three months ended March 31, 2023.

ELYS GAME TECHNOLOGY, CORP.

Notes to Unaudited Condensed Consolidated Financial Statements

~~13.~~14. Related Parties (continued)

Luca Pasquini

~~On January 31, 2019, the Company acquired Virtual Generation for €4,000,000~~ ~~(approximately $4,576,352), Mr. Pasquini, who at the time of acquisition was an executive officer and director of the~~ ~~Company,~~ ~~was a 20% owner of Virtual Generation and was due gross proceeds of €800,000~~ ~~(approximately $915,270). The gross proceeds of €800,000~~ ~~was to be settled by a payment in cash of €500,000~~ ~~over a twelve month period and by the issuance of common stock valued at €300,000~~ ~~over an eighteen month period. As of June 30, 2021, the Company had paid Mr. Pasquini the full cash amount of €500,000~~ ~~(approximately $604,380) and issued~~ ~~112,521~~ ~~shares valued at €300,000~~ ~~(approximately~~ ~~$334,791~~).

~~On January 22, 2021, the Company issued Mr. Pasquini~~ ~~44,968~~ ~~shares of common stock valued at~~ $~~257,217, in settlement of accrued compensation due to him.~~

~~On July 11, 2021, the Company entered into an agreement with Engage IT Services Srl.("Engage"), to provide gaming software and maintenance and support of the system, the total contract price was~~ ~~€390,000~~ ~~(approximately~~ ~~$459,572~~), in addition, on October 14, 2021, the Company entered into a further agreement with Engage, to provide gaming software and maintenance and support of the system for a period of 12 months, the total contract price was ~~€1,980,000~~ ~~(approximately~~ ~~$2,192,000). Mr. Pasquini owns~~ ~~34%~~ ~~of Engage.~~

On September 13, 2021, Mr. Pasquini, the Company’s Vice President of Technology, resigned as a director of the Company and on October 4, 2021, Mr. Pasquini became the Global Head of Engineering of the Company’s subsidiary Odissea Betriebsinformatik Beratung GmbH and ceased to be Vice President of Technology and an executive officer of the Company.

On September 26, 2022, Mr. Pasquini was awarded 500,000 restricted shares of common stock valued at $~~226,750~~226,800 for services rendered to the Company.

On January 29, 2023, the Company acquired Engage IT, Mr. Pasquini owned 34% of Engage IT prior to the acquisition. The purchase price was settled by the issuance of common stock of which Mr. Pasquini received 1,026,277 shares of common stock which resulted in him becoming an effective 5.7% shareholder of the Company.

Michele Ciavarella

~~Mr. Ciavarella, the Company’s Executive Chairman of the Board, agreed to receive $140,000~~ ~~of his 2021 fiscal year compensation as a restricted stock award, on January 22, 2021, the Company issued Mr. Ciavarella~~ ~~24,476~~ ~~shares of common stock valued at $140,000 on the date of issue.~~

~~On January 22, 2021, the Company issued Mr. Ciavarella~~ ~~175,396~~ ~~shares of common stock valued at $1,003,265, in settlement of accrued compensation due to him.~~

On July 15, 2021, Mr. Ciavarella, Executive Chairman of the Company, was appointed as the interim Chief Executive Officer and President of the Company, effective July 15, 2021. Mr. Ciavarella will serve as the Company's Executive Chairman and interim Chief Executive Officer until the earlier of his resignation or removal from office.

~~Mr. Ciavarella agreed to receive his 2021 bonus and a portion of his 2022 salary as a restricted stock award. On January 7, 2022, the Company issued Mr. Ciavarella~~ ~~162,835~~ ~~shares of common stock valued at $425,000~~ ~~on the date of issue.~~

On September 26, 2022, Mr. Ciavarella was awarded 300,000 restricted shares of common stock valued at $136,080 for services rendered to the Company.

On February 14, 2023, Mr. Ciavarella, the Company’s Executive Chairman and interim CEO, voluntarily offered and agreed to reduce his annual base compensation to $372,000 for fiscal 2023, subject to a review of his total compensation package.

Carlo Reali

On January 5, 2022, the Company promoted Carlo Reali to the role of Interim Chief Financial Officer.

On March 29, 2022, the Company issued Mr. Reali ten-year options exercisable for 100,000 shares of common stock, at an exercise price of $2.50 per share, vesting equally over a 4 year period commencing on January 1, 2023.

The Company does not have a formal employment ~~or other compensation related agreement~~ with Mr. ~~Reali; however,~~Reali and awarded him €40,000 (approximately $42,930) as compensation for the Interim Chief Financial Officer role; Mr. Reali will continue to receive the ~~same~~ compensation that he currently receives which is an annual base salary of €~~76,631~~76,632 (approximately $~~83,847~~82,244).

On September 26, 2022, Mr. Reali was awarded 200,000 restricted shares of common stock valued at $90,720 for services rendered to the Company.

~~ELYS GAME TECHNOLOGY, CORP.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

~~13. Related Parties (continued)~~

Victor Salerno

On July 15, 2021 the Company consummated the acquisition of USB and in terms of the Purchase Agreement the Company acquired 100% of USB, from its members (the “Sellers”). Mr. Salerno was a 68% owner of USB and received ~~$4,080,000~~ ~~of the $6,000,000~~ ~~paid in cash upon closing and~~ ~~860,760~~ ~~of the~~ ~~1,265,823~~ ~~shares of common stock issued on closing.~~

Together with the consummation of the acquisition of USB, the Company entered into a 4 year employment agreement with Mr. Salerno terminating on July 14, 2025 (the “Salerno Employment Agreement”), automatically renewable for a period of one year unless notified by either party of non-renewal. The employee will earn an initial base salary of $0 and thereafter $150,000 per annum commencing on January 1, 2022. Mr. Salerno is entitled to bonuses, equity incentives and benefits consistent with those of other senior employees.

Mr. Salerno may be terminated for no cause or resign for good reason, which termination would entitle him to the greater of one year’s salary or the remaining term of the employment agreement plus the highest annual incentive bonus paid to him during the past two years. If Mr. Salerno is terminated for cause he is entitled to all unpaid salary and expenses due to him at the time of termination. If the employment agreement is terminated due to death, his heirs and successors are entitled to all unpaid salary, unpaid expenses and one times his annual base salary. Termination due to disability will result in Mr. Salerno being paid all unpaid salary and expenses and one times annual salary.

Pursuant to the Salerno Employment Agreement, Mr. Salerno has also agreed to customary restrictions with respect to the disclosure and use of the Company’s confidential information and has agreed that work product or inventions developed or conceived by him while employed with the Company relating to its business is the Company’s property. In addition, during the term of his employment and if terminated for cause for the 12 month period following his termination of employment, Mr. Salerno has agreed not to (1) perform services on behalf of a competing business which was the same or similar to the type of services he was authorized, conducted, offered or provided to the Company, (2) solicit or induce any of the Company’s employees or independent contractors to terminate their employment with the Company, (3) solicit any actual or prospective customers with whom he had material contact on behalf of a competing business or (4) solicit any actual or prospective vendors with whom he had material contact to support a competing business.

~~On September 13, 2021, the Board appointed Mr. Salerno, the President and founder of the Company’s newly acquired subsidiary, USB, to serve as a member of the Board.~~

Prior to the acquisition of ~~USB, Mr.~~US Bookmaking, Victor Salerno had advanced ~~USB~~US Bookmaking $100,000 of which$50,000 was forgiven and the remaining $50,000 is still owing to Mr. Salerno, which amount earns interest at 88%% per annum, compounded monthly and is repayable on ~~December 31, 2023.~~ October 1, 2022.

Between February 23, 2022 and September 22, 2022,, Mr. Salerno advanced ~~USB a total of $305,000~~US Bookmaking an additional $305,000 in terms of purported promissory notes, bearing interest at 10% per annum and repayable between June 30, 2022 and November 30, 2022. These purported promissory notes contain a default clause whereby any unpaid principal would attract an additional 25% ~~penalty.~~penalty and additional interest of 5% per annum.. These notes were advanced to ~~USB~~ US Bookmaking without the consent of the Company, which is required as per the terms of the Members Interest Purchase Agreement entered into on July 15, 2021. Therefore, the Company acknowledges the advance of funds to ~~USB~~ US Bookmaking by Mr. Salerno, however the terms of the advance and the default penalty have not been accepted and are subject to negotiation or dispute. As of ~~September 30, 2022,~~March 31, 2023, these notes remain outstanding, interest has been accrued on these notes, however we intend to dispute the validity of these notes and have accordingly not repaid them or accrued penalty interest in terms of these notes.

On January 23, 2023, Mr. Salerno voluntarily resigned as a member of the Board.

Paul Sallwasser

On ~~September 13, 2021,~~February 14, 2023, the Company granted Mr. Sallwasser ~~ten year~~ ten-year options exercisable for ~~21,300~~ ~~shares of common stock at an exercise price of $5.10, vesting equally over a twelve month period commencing on September 13, 2021.~~

~~Steven Shallcross~~

~~On January 22, 2021, the Company issued to Mr. Shallcross, a director of the Company,~~ ~~5,245~~ ~~shares of common stock valued at $30,000, in settlement of directors’ fees due to him.~~

~~On September 13, 2021, the Company granted Mr. Shallcross ten year options exercisable for~~ ~~13,600~~154,132 shares of common stock at an exercise price of $~~5.10~~0.89, per share, of which 77,254 vested immediately and the remaining 76,878 vesting equally over a ~~twelve~~ten month period commencing on ~~September 13, 2021.~~March 1, 2023.

ELYS GAME TECHNOLOGY, CORP.

Notes to Unaudited Condensed Consolidated Financial Statements

~~13.~~14. Related Parties (continued)

Steven Shallcross

On February 14, 2023, the Company granted Mr. Shallcross ten-yearoptions exercisable for 131,631 shares of common stock at an exercise price of $0.89 per share, of which 54,753 vested immediately and the remaining 76,878 vesting equally over a ten month period commencing on March 1, 2023.

On February 14, 2023, the Company issued Mr. Shallcross 22,472 shares of common stock valued at $20,000 from the 2018 equity incentive plan in lieu of 2022 cash directors fees owing to Mr. Shallcross.

Andrea Mandel-Mantello

On June 29, 2021, the board of directors of the Company appointed Mr. Mandel-Mantello to serve as a member of the Board. The appointment was effective immediately. Mr. Mandel-Mantello serves on the audit committee of the Board.

~~On September 13, 2021,~~February 14, 2023, the Company granted Mr. Mandel-Mantello ~~ten year~~ten-year options exercisable for ~~13,600~~131,631 shares of common stock at an exercise price of $~~5.10~~0.89, per share, of which 54,753 vested immediately and the remaining 76,878 vesting equally over a ~~twelve~~ten month period commencing on ~~September 13, 2021.~~

~~14. Stockholders’ Equity~~March 1, 2023.

On ~~January 7, 2022,~~February 14, 2023, the Company issued ~~a total of~~Mr. Mandel-Mantello ~~162,835~~44,944 shares of common stock valued at $~~425,000~~40,000 ~~for~~from the 2018 equity incentive plan in lieu of 2022 cash directors fees owing to Mr. Mandel-Mantello

Aiden Ciavarella

The Company recently employed Aiden Ciavarella to train as part of our U.S. project and risk management team lead. Aiden earns an annual salary of $75,000. there is no formal employment agreement with Aiden who is the son of our chairman and interim CEO, Michele Ciavarella.

15. Stockholders’ Equity

Pursuant to the acquisition of Engage IT Srl, as disclosed in note 4 above, on January 29, 2023, the Company issued 3,018,461 shares of common stock valued at $1,753,615, in settlement of ~~compensation~~the purchase price.

On January 29, 2023, the Company issued 5,366,155 shares of restricted common stock valued at $3,085,339 from its 2018 Stock Incentive Plan to certain developers and ~~bonuses due~~project managers in its IT subsidiaries, these shares will vest equally and are amortized on a monthly basis over a thirty-six month period to incentivize these employees who are essential to the Company’s ~~executive chairman, refer note 13 above.~~development efforts.

~~Between~~A summary of the vesting of restricted stock during the period January 1, 2023 to March ~~28, 2022~~31, 2023 is as follows:

Vesting of Restricted Stock	Total restricted shares		Weighted average fair market value per share		Total unvested restricted shares			Weighted average fair market value per share			Total vested restricted shares		Weighted average fair market value per share
Outstanding January 1, 2023		—	$	—		—		$	—			—	$	—
Granted and issued		5,366,155		0.575		5,366,155			0.575			—		—
Forfeited/Cancelled		—		—		—			—			—		—
Vested		—		—		(298,122	)		(0.575	)		298,122		0.575
Outstanding March 31, 2023		5,366,155	$	0.575		5,068,033		$	0.575			298,122	$	0.575

The restricted stock granted, issued and ~~April 13, 2022,~~exercisable at March 31, 2023 is as follows:

		Restricted Stock Granted and Vested
Grant date Price		Number Granted		Weighted Average Fair Value per Share
$	0.575		5,366,155	$	0.575

ELYS GAME TECHNOLOGY, CORP.

Notes to Unaudited Condensed Consolidated Financial Statements

15. Stockholders’ Equity (continued)

In lieu of $60,000 of director fees due and outstanding, the Company ~~sold~~approved the issuance of ~~168,016~~67,416 shares of common stock, respectively, under the 2018 equity incentive plan.

The Company has recorded a restricted stock expense of $171,422for ~~gross proceeds of $387,053, less brokerage fees of~~ ~~$11,612~~ ~~pursuant to~~ the ~~Open Market Sales Agreement~~^SM ~~that the Company entered into with Jefferies LLC on November 19, 2021.~~three months March 31, 2023.

On June 10, 2022, the Company entered into an engagement letter (the “Engagement Letter”), with H.C. Wainwright & Co., LLC (the “Placement Agent”), pursuant to which the Placement Agent agreed to serve as the exclusive placement agent for the Company, on a reasonable best efforts basis, in connection with an offering of securities (the “Offering”). The Company agreed to pay the Placement Agent an aggregate cash fee equal to 6.0% of the gross proceeds received in the Offering. The Company also agreed to pay the Placement Agent $50,000 for fees and expenses of legal counsel and up to $15,950 for clearing fees.16. Warrants

On ~~June 13, 2022,~~January 30, 2023, as disclosed in note 12 above, the Company closed a private placement offering of up to 2,000 units and entered into Subscription Agreements with a ~~securities purchase agreement~~group of accredited investors (the ~~“Purchase Agreement”~~“Investors”) ~~with an institutional investor (the “Investor”) providing for~~, which Investors included Braydon Capital Corp. a company owned by Claudio Ciavarella, a related party and brother of the ~~issuance~~Company’s Executive Chairman, Michele Ciavarella. Each Unit sold to Investors was sold at a per unit price of $1,000 and was comprised of (i) ~~2,625,000~~a 12% convertible debenture in the principal amount of $1,000 (the “Debentures”), and (ii) warrants to purchase shares of the Company’s common stock ~~(ii) pre-funded~~(the “Warrants”).

The Investors purchased a total of 850 units and the Company issued Debentures for the total principal amount of $850,000 (the “Principal Amount”) to the Investors and warrants to purchase ~~up to 541,227~~2,179,487 shares of ~~Common Stock~~ (common stock of the ~~“Pre-Funded Warrant Shares”)~~Company. ~~with~~

The warrants are exercisable at an exercise price ~~of $0.0001~~equal to the volume weighted average price per share ~~which Pre-Funded Warrants were issued in lieu~~(calculated to the nearest one-hundredth of ~~shares~~one cent) of ~~Common Stock to ensure that~~ the ~~Investor does not exceed certain beneficial ownership limitations,~~Company common stock on the Nasdaq stock market for the period of twenty consecutive trading days beginning on the twenty-third trading day immediately preceding the Closing Date and ~~(iii) warrants to purchase an aggregate~~concluding at the close of ~~up to 3,166,227 shares of Common Stock, with an exercise price of $0.9475 per share,~~trading on the third trading day immediately preceding the Closing Date, subject to ~~customary adjustments thereunder. If~~adjustment as provided in the Warrant and expire three years after the ~~six month anniversary of~~issuance date. Each warrant is exercisable on a cashless basis in the ~~issuance date~~event that there is nonot an effective registration statement registering the shares underlying the ~~Warrants (the “Warrant Shares”) for resale, then~~warrant at the ~~Warrants are exercisable on~~time of exercise. The initial exercise price of the warrant is $0.39 per share, subject to a ~~cashless basis.~~down-round adjustment to a floor exercise price of $0.35 per share.

The Company may accelerate the right to exercise the Warrant on at least ten (10) business days prior written notice to the Holder if there is an effective Registration Statement registering, or a current prospectus available for, the resale of the common shares issuable on exercise of ~~Common Stock,~~ the ~~Pre-Funded Warrants, the Pre-Funded~~ Warrant ~~Shares~~ and the ~~Warrants are collectively referred to as the “Securities.” Pursuant to the Purchase Agreement, the Investor agreed to purchase the Securities for an aggregate purchase~~closing price of ~~$3 million.~~the Company’s common shares exceeds two hundred (200%) per cent of the Exercise Price for five (5) trading days in a thirty (30) day period.

~~Pursuant~~The Warrants provide that if the Company issues or sells common stock of securities convertible or exercisable into common stock for a price lower than the exercise price of conversion price that the exercise price and conversion price will be reduced to such price, subject to a floor price of $0.35 and subject to certain exempt issuances set forth in the ~~Purchase Agreement, on June 15, 2022,~~Debenture and Warrant.

The number of shares of common stock that may be issued upon exercise of the Warrants and Debentures is subject to an ~~aggregate~~Exchange Cap (as defined in the Debentures and Warrants) unless shareholder approval to exceed the Exchange Cap is approved. The parties agree to amend the Debentures and Warrants as necessary in order to comply with the requirements of the Nasdaq Capital Markets.

~~2,625,000~~ ~~Shares~~On February 14, 2023, the Company engaged Shareholder Intelligence Services, LLC (“ShareIntel”) to utilize their patented, proprietary service offerings to obtain share trading analytic metrics designed to determine if the Company has been the target of improper and ~~Pre-Funded Warrants~~potentially illegal trading activities, including illegal naked short selling, in an effort to allow the Company to better monitor trading activity, including potential violations of SEC Regulation SHO, which governs stock and option share locate, close out and fail to deliver requirements.

The Company issued a warrant to purchase up to ~~541,227~~200,000 shares of Common Stock ~~were issued~~ to ~~an Investor in a registered direct offering (the “Registered Offering”) and registered under the Securities Act of 1933,~~ShareIntel, as amended (the “Securities Act”), pursuant to a prospectus supplement to the Company’s currently effective registration statement on Form S-3 (File No. 333-256815), which was initially filed with the U.S. Securities and Exchange Commission (the “SEC”) on June 4, 2021, and was declared effective on June 14, 2021.consideration for services provided. The ~~Company filed the prospectus supplement for the Registered Offering on June 15, 2022.~~

~~Pursuant to the Purchase Agreement, the Company issued a~~Consultant Warrant ~~exercisable for~~ ~~3,166,227~~ ~~shares of common stock,~~is exercisable at a price of $~~0.9475~~0.89 per share and ~~expires on December 15, 2027, to the Investor~~vests at a rate of 1,000 warrant shares for each reduction of 10,000 shares of Reduction in ~~a concurrent private placement pursuant to an exemption~~Imbalances (Shorts), and will expire three years from the ~~registration requirements~~date of issuance. These warrants only vest upon the attainment of the ~~Securities Act provided in Section 4(a)(2) of the Securities Act and/or Regulation D promulgated thereunder.~~goals discussed above.

~~On July 12, 2022, the pre-funded warrant disclosed in note 15 below for~~ ~~541,227~~ ~~shares of common stock was exercised at an exercise price of $0.0001~~ ~~per share for gross proceeds of $~~54~~.12.~~

On September 14, 2022, the Company filed a registration statement (the “Registration Statement”) to register the resale of the Warrant Shares within 90 days of the date of the Purchase Agreement which was declared effective on September 16, 2022.

~~On September 26, 2022, the compensation committee awarded a total of~~ ~~3,500,000~~ ~~restricted shares of common stock, valued at $1,587,600~~ to senior management of the Company as additional compensation for services rendered. Of the 3,500,000 restricted shares awarded, Mr. Ciavarella, the Company’s interim Chief Executive Officer was awarded ~~300,000~~ ~~restricted shares of common stock valued at~~ ~~136,080~~ ~~and Mr. Reali, our interim Chief Financial Officer was awarded~~ ~~200,000~~ ~~restricted shares of common stock, valued at~~ ~~$90,720~~.

ELYS GAME TECHNOLOGY, CORP.

Notes to Unaudited Condensed Consolidated Financial Statements

~~15.~~16. Warrants (continued)

The warrants granted during the three months ended March 31, 2023 were valued using a Black-Scholes pricing model.

~~In terms of~~The following assumptions were used in the Purchase Agreement discussed in note 14 above, on June 15, 2022, the Company issued, (i) Pre-Funded Warrants to purchase 541,227 shares of Common Stock with an exercise price of $0.0001 per share, which Pre-Funded Warrants were issued in lieu of shares of Common Stock to ensure that the Investor did not exceed certain beneficial ownership limitations, and (ii) Warrants to purchase 3,166,227 shares of Common Stock, with an exercise price of $0.9475 per share, subject to customary adjustments thereunder. If after the six month anniversary of the issuance date there is no effective registration statement registering the Warrant Shares for resale, then the Warrants are exercisable on a cashless basis.Black-Scholes model:

Each Pre-Funded Warrant is exercisable for one share of Common Stock at an exercise price of $0.0001 per share. The Pre-Funded Warrants are immediately exercisable and may be exercised at any time after their original issuance until all of the Pre-Funded Warrants are exercised in full.

~~On July 12, 2022, the pre-funded warrant disclosed in note 15 below for 541,227 shares of common stock was exercised at an exercise price of $0.0001 per share for gross proceeds of $54.12.~~

Each Warrant is exercisable for one share of Common Stock at an exercise price of $0.9475 per share, subject to customary adjustments thereunder. The Warrants have a term of five years and six months, maturing on December 15, 2027 and are exercisable from December 15, 2022.

A holder (together with its affiliates) of the Pre-Funded Warrant or Warrant may not exercise any portion of the Common Stock underlying the Pre-Funded Warrant or Warrant, as applicable, to the extent that the holder would own more than 4.99% (or, at the holder’s option upon issuance, 9.99%) of the Company’s outstanding Common Stock immediately after exercise, as such percentage ownership is determined in accordance with the terms of the Pre-Funded Warrant or Warrant, as applicable. In lieu of making the cash payment otherwise contemplated to be made to the Company upon exercise of a Pre-Funded Warrant or Warrant in payment of the aggregate exercise price, the holder may elect instead to receive upon such exercise (either in whole or in part) the net number of shares of Common Stock determined according to a formula set forth in Warrants, provided that such cashless exercise shall only be permitted if the Registration Statement is not effective at the time of such exercise or if the prospectus to which the Registration Statement is a part is not available for the issuance of shares of Common Stock to the Warrant holder.

In addition, in certain circumstances, upon a Fundamental Transaction, the holders of the Pre-Funded Warrants and Warrants will have the right to receive as alternative consideration, for each share of Common Stock that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, the number of shares of Common Stock of the successor or acquiring corporation of the Company, if it is the surviving corporation, and any additional consideration receivable upon or as a result of such transaction by a holder of the number of shares of Common Stock for which the Pre-Funded Warrants or Warrants are exercisable immediately prior to such event. Notwithstanding the foregoing, in the event of a Fundamental Transaction, the holders of the Warrants have the right to require the Company or a successor entity to redeem the Warrants for an amount of consideration equal to the Black Scholes Value (as defined in the Warrants) of the remaining unexercised portion of the Warrants concurrently with or within thirty (30) days following the consummation of a Fundamental Transaction. In the event of a Fundamental Transaction, the holders of the Warrants will only be entitled to receive from the Company or its successor entity, as of the date of consummation of such Fundamental Transaction the same type or form of consideration (and in the same proportion), at the Black Scholes Value of the unexercised portion of the Warrant, that is being offered and paid to the holders of the Common Stock in connection with the Fundamental Transaction, whether that consideration is in the form of cash, stock or any combination of cash and stock, or whether the holders of Common Stock are given the choice to receive alternative forms of consideration in connection with the Fundamental Transaction.

Assumptions	Three months ended March 31, 2023
Exercise price	$	0.39	to	0.89
Risk free interest rate		3.96	to	4.32	%
Expected life of options		3 years
Expected volatility of underlying stock		130.3	to	133.7	%
Expected dividend rate		0			%

A summary of all of the Company’s warrant activity during the period January 1, ~~2021~~2022 to ~~September 30, 2022~~March 31, 2023 is as follows:

Warrants	Number of shares			Exercise price per share				Weighted average exercise price		Number of shares			Exercise price per share				Weighted average exercise price
Warrants: Number of Shares
Warrants: Exercise price per share
Warrants: Weighted average exercise price
Outstanding January 1, 2021		2,053,145		$	2.50	to	5.00	$	2.63		546,336		$	2.50	to	5.00	$	2.66
Granted – pre-funded warrants											541,227			0.0001				0.0001
Granted											3,166,227			0.9475				0.9475
Forfeited/cancelled											(48,395	)		3.75				3.75
Exercised – pre-funded warrants											(541,227)			0.0001				0.0001
Outstanding December 31, 2022											3,664,168		$	0.9475	to	5.00	$	1.17
Granted		—			—				—		2,379,487			0.39	to	0.89		0.43
Forfeited/cancelled		—			—				—		—			—				—
Exercised		(1,506,809	)		2.50	to	3.75		2.63		—			—				—
Outstanding December 31, 2021		546,336		$	2.50	to	5.00	$	2.66
Granted – pre-funded warrants*		541,227			0.0001				0.0001
Granted		3,166,227			0.9475				0.9475
Forfeited/cancelled		(48,395	)		3.75				3.75
Exercised – pre-funded warrants*		(541,227)			0.0001				0.0001
Outstanding September 30, 2022		3,664,168		$	0.9475	to	5.00	$	1.17
Outstanding March 31, 2023											6,043,655		$	0.39	to	5.00	$	0.88

* The prefunded warrants have an indefinite maturity date and have been excluded from the calculation of the weighted average remaining years and the weighted average exercise price disclosed below.

26The following tables summarize information about warrants outstanding as of March 31, 2023:

Warrants outstanding, Exercise Price
	Warrants outstanding					Warrants exercisable
Exercise price		Number of shares	Weighted average remaining years		Weighted average exercise price		Number of shares		Weighted average exercise price
$0.39		2,179,487	2.84				2,179,487
$0.89		200,000	2.88				—
$0.9475		3,166,227	4.71				3,166,227
$2.50		486,173	2.39				486,173
$5.00		11,768	0.16				11,768
		6,043,655	3.78	$	0.88		5,843,655	$	0.88

The outstanding warrants have an intrinsic value of $270,256 as of March 31, 2023.

ELYS GAME TECHNOLOGY, CORP.

Notes to Unaudited Condensed Consolidated Financial Statements

~~15. Warrants (continued)~~

~~The following tables summarize information about warrants outstanding as of September 30, 2022:~~

Warrants outstanding, Exercise Price
Warrants outstanding Warrants exercisable

Exercise price
Number of shares Weighted average remaining years Weighted average exercise price Number of shares Weighted average exercise price
$0.9475 3,166,227 5.21 $ 0.9475 — $ —
$2.50 486,173 2.88 $ 2.50 486,173 $ 2.50
$5.00 11,768 0.66 5.00 11,768 5.00
3,664,168 4.89 $ 1.17 497,941 $ 2.56

~~16.~~17. Stock Options

In September 2018, the Company’s stockholders approved our 2018 Equity Incentive Plan, which provides for a maximum of 1,150,000 awards that can be issued as options, stock appreciation rights, restricted stock, stock units, other equity awards or cash awards.

On ~~October 1, 2020,~~November 21, 2022, the Board approved an ~~amendment~~Amendment to the ~~Company’s 2018 Equity Incentive~~ Plan ~~(the “Plan”~~(“Amendment No. 3”) to increase by 9,000,000 the ~~maximum~~ number of shares that may be granted ~~as an award~~ under the Plan. Amendment No. 3 to the 2018 Plan ~~to any non-employee director during any one calendar year to: (i) chairperson or lead director –~~ ~~300,000~~ ~~shares~~will increase the number of ~~common stock; and (ii) other non-employee director - 250,000~~ shares of common stock with respect to which ~~reflects an increase in the annual limits for~~ awards tomay be granted ~~to non-employee directors~~ under the ~~Plan.~~2018 Plan from an aggregate of 7,000,000 shares of Common Stock to 16,000,000 shares of common stock.

On ~~November 20, 2020,~~December 30, 2022, the Company held its ~~2020~~2022 Annual Meeting of Stockholders. At the ~~2020~~ Annual Meeting, the Company’s stockholders approved an amendment 3 to the Company’s 2018 Equity Incentive Plan to increase the number of shares of common stock that the Company will have authority to grant under the plan by an additional ~~1,850,000~~ 9,000,000 shares of common stock. On December 8, 2021, the Company held its 2021 Annual Meeting of Stockholders. At the 2021 Annual Meeting, the Company’s stockholders approved an amendment to the Company’s 2018 Equity Incentive Plan to increase the number of shares of common stock that the Company will have authority to grant under the plan by an additional ~~4,000,000~~ ~~shares of common stock~~

On ~~March 29, 2022,~~February 14, 2023, the ~~Company issued ten year~~Compensation Committee of the Company’s Board granted the Company’s non-executive directors, under the Company’s Stock Incentive Plan; (i) an award of 131,631 stock options to ~~purchase~~ ~~160,000~~ ~~shares at an exercise price~~each of ~~$2.50~~ ~~per share,~~Steven Shallcross and Andrea Mandell-Mantello, of which ~~100,000~~ ~~were issued~~54,753 vested immediately and the remaining 76,878 vest monthly over a ten month period; and (ii) an award of 154,132 stock options to ~~our Interim CFO~~Paul Sallwasser, of which 77,254 vested immediately and ~~60,000~~ ~~to an employee.~~76,878 vest monthly over a ten month period.

~~On September 25, 2022, the Company issued ten year options to purchase~~ ~~110,000~~ ~~shares at an exercise price of~~ ~~$0.454~~ ~~per share to two employees of the company.~~

The options awarded during the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 were valued ~~at an average of~~ ~~$1.56~~ ~~per share~~ at the date of issuance using a Black-Scholes ~~option~~ pricing model.

The following assumptions were used in the Black-Scholes model:

Assumptions	Three months ended March 31, 2023
Exercise price	$		0.89
Risk free interest rate			3.77	%
Expected life of options		10 years
Expected volatility of underlying stock			200.0	%
Expected dividend rate		0		%

A summary of all of the Company’s option activity during the period January 1, 2022 to March 31, 2023 is as follows:

Nine months ended
September 30, 2022
Exercise price $ 0.454 to 2.50
Risk free interest rate 2.41 to 3.69 %
Expected life of options 10 years
Expected volatility of underlying stock 204.2 to 205.3 %
Expected dividend rate 0 %

Stock Option Activity	Number of shares			Exercise price per share					Weighted average exercise price
Stock Option Activity
Exercise price per share
Weighted Average exercise price
Outstanding January 1, 2022		2,766,438			$	1.84	to	5.10		$	2.92
Granted		270,000				0.454	to	2.50			1.67
Forfeited/cancelled		(652,375	)			1.84	to	2.80			1.85
Exercised		—				—					—
Outstanding December 31, 2022		2,384,063			$	0.454	to	5.10		$	3.07
Granted		417,394						0.89			0.89
Forfeited/cancelled		(60,000	)					2.50			2.50
Exercised		—				—					—
Outstanding March 31, 2023		2,741,457			$	0.454	to	5.10		$	2.75

27 30

ELYS GAME TECHNOLOGY, CORP.

Notes to Unaudited Condensed Consolidated Financial Statements

~~16.~~17. Stock Options (continued)

~~A summary of all of the Company’s option activity during the period January 1, 2021 to September 30, 2022 is as follows:~~

Stock Option Activity Number of shares Exercise price per share Weighted average exercise price
Stock Option Activity
Exercise price per share
Weighted Average exercise price
Outstanding January 1, 2021 1,622,938 $ 1.84 to 2.96 $ 2.11
Granted 1,193,500 2.62 to 5.10 3.15
Forfeited/cancelled (50,000 ) 2.62 2.62
Exercised — — —
Expired — — —
Outstanding December 31, 2021 2,766,438 $ 1.84 to 5.10 $ 2.92
Granted 270,000 0.454 to 2.50 1.67
Forfeited/cancelled (652,375 ) 1.84 to 2.80 1.85
Exercised — — —
Outstanding September 30, 2022 2,384,063 $ 0.454 to 5.10 $ 3.07

The following tables summarize information about stock options outstanding as of ~~September 30, 2022:~~March 31, 2023:

Stock Options Outstanding
	Options outstanding					Options exercisable
Exercise price		Number of shares	Weighted average remaining years		Weighted average exercise price		Number of shares		Weighted average exercise price
$0.45		110,000	9.50				—
$0.89		417,394	9.88				209,823
$2.03		659,000	7.51				573,333
$2.50		100,000	9.00				—
$2.72		25,000	3.25				25,000
$2.80		216,250	6.48				189,583
$2.96		70,313	6.27				70,313
$3.43		25,000	8.72				9,000
$4.03		1,020,000	8.26				461,667
$4.07		25,000	8.30				9,000
$4.20		25,000	8.09				9,000
$5.10		48,500	8.46				48,500
		2,741,457	8.17	$	2.75		1,605,219	$	2.72

Stock Options Outstanding Options outstanding Options exercisable

Exercise price
Number of shares Weighted average remaining years Weighted average exercise price Number of shares Weighted average exercise price
$0.45 110,000 9.99 —
$2.03 659,000 8.01 487,667
$2.50 160,000 9.50 —
$2.72 25,000 3.75 25,000
$2.80 216,250 6.98 162,552
$2.96 70,313 6.77 70,313
$3.43 25,000 9.22 —
$4.03 1,020,000 8.76 358,333
$4.07 25,000 8.79 9,000
$4.20 25,000 8.59 9,000
$5.10 48,500 8.96 48,500
2,384,063 8.39 $ 3.07384 1,170,365 $ 2.98

As of ~~September 30, 2022,~~March 31, 2023, there were unvested options to purchase ~~1,213,698~~1,136,238 shares of common stock. Total expected unrecognized compensation cost related to such unvested options is $~~3,624,266~~2,725,920 which is expected to be recognized over a period of 3933 months.

As of ~~September 30, 2022,~~March 31, 2023, there was an aggregate of ~~2,384,063~~2,741,457 options to purchase shares of common stock granted under the Company’s 2018 Equity Incentive Plan, and an aggregate of ~~4,155,301~~9,588,872 restricted shares granted to certain officers employees and directors of the Company ~~in settlement of liabilities owing to them,~~ with ~~460,636~~3,669,671 shares available for future grants.

The options outstanding at ~~September 30, 2022~~March 31, 2023 had an intrinsic value of $~~2,310~~6,600.

2831

ELYS GAME TECHNOLOGY, CORP.

Notes to Unaudited Condensed Consolidated Financial Statements

~~17.~~18. Revenues

The following table represents disaggregated revenues from our gaming operations for the three months ended March 31, 2023 and ~~nine months ended September 30, 2022 and 2021.~~2022. Net Gaming Revenues represents Turnover (also referred to as “Handle”), the total bets processed for the period, less customer winnings paid out, and taxes due to government authorities, ~~while~~ Service Revenues is revenue invoiced for our Elys software service and royalties invoiced for the sale of virtual products.

Three Months Ended Nine Months Ended
September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021
Turnover
Turnover web-based $ 163,563,603 $ 162,471,799 $ 565,785,709 $ 613,678,568
Turnover land-based 2,924,866 1,193,778 6,528,054 13,237,738
Total Turnover 166,488,469 163,665,577 572,313,763 626,916,306

Winnings/Payouts
Winnings web-based 152,545,450 152,328,198 527,323,323 572,975,466
Winnings land-based 2,208,100 1,031,217 5,166,387 11,362,524
Total Winnings/payouts 154,753,550 153,359,415 532,489,710 584,337,990

Gross Gaming Revenues 11,734,919 10,306,162 39,824,053 42,578,316

Less: ADM Gaming Taxes 2,822,830 2,515,570 9,671,040 9,129,881
Net Gaming Revenues 8,912,089 7,790,592 30,153,013 33,448,435

Service Revenues 679,205 239,490 2,022,002 428,924
Revenue $ 9,591,294 $ 8,030,082 $ 32,175,015 $ 33,877,359

~~ELYS GAME TECHNOLOGY, CORP.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~


	For the three months ended March 31,
	2023			2022
Handle (Turnover)
Web-based	$	199,923,035		$	215,780,282
Land-based		8,568,521			1,785,107
Total Handle (Turnover)		208,491,556			217,565,389

Winnings/Payouts
Web-based		186,131,151			200,853,821
Land-based		6,765,964			1,400,413
Total Winnings/Payouts		192,897,115			202,254,234

Gross Gaming Revenues
Web-based		13,791,884			14,926,461
Land-based		1,802,557			384,694
Total Gross Gaming Revenues		15,594,441			15,311,155

Less: ADM Gaming Taxes		(3,739,751	)		(3,730,830	)
Net Gaming Revenues		11,854,690			11,580,325
Add: Service Revenues		577,456			655,661
Revenues	$	12,432,146		$	12,235,986

~~18.~~19. Net ~~loss~~Loss per Common Share

Basic ~~income (loss)~~loss per share is based on the weighted-average number of common shares outstanding during each period. Diluted ~~income (loss)~~loss per share is based on basic shares as determined above, plus the incremental shares that would be issued upon the assumed exercise of “in-the-money” ~~options and~~ warrants using the treasury stock method and the inclusion of all convertible securities, including convertible debentures, assuming these securities were converted at the beginning of the period or at the time of issuance, if ~~later, adding back any direct incremental expenses related to the convertible securities, including interest expense, present value discount amortization.~~later. The computation of diluted net ~~income (loss)~~loss per share does not assume the issuance of common shares that have an anti-dilutive effect on net loss per share.

~~The computation of the diluted income per share for the three months and nine months ended September 30, 2022 and 2021 was anti-dilutive due to the losses realized.~~

For the three months ended March 31, 2023 and ~~nine months ended September 30,~~ 2022, ~~and 2021,~~ the following restricted shares, options, warrants and ~~warrants~~convertible debentures were excluded from the computation of diluted loss per share as the result of the computation was anti-dilutive:


Net Loss Per Share
Description	Three and nine Months ended September 30, 2022		Three and nine Months ended September 30, 2021		Three Months ended March 31, 2023		Three Months ended March 31, 2022

Restricted shares						5,068,033		—
Convertible notes payable						2,179,487		—
Options		2,384,063		2,741,438		2,741,457		2,926,438
Warrants		3,664,168		546,336		6,043,655		546,336
		6,048,231		3,287,774		16,030,632		3,472,774

~~19.~~ELYS GAME TECHNOLOGY, CORP.

Notes to Unaudited Condensed Consolidated Financial Statements

20. Segmental Reporting

The Company has two reportable operating segments. These segments are:

~~(i) Betting establishments~~

(i)

Betting establishments

The operating of ~~web based~~web-based as well as ~~land based~~land-based leisure betting establishments situated throughout ~~Italy; and~~ Italy.~~only~~ ~~web based~~ ~~distribution through our Austrian subsidiary~~ ~~in the~~ ~~Italian market until June 2021, and~~

~~(ii) Betting platform software and services~~

(ii)

Betting platform software and services

Provider of certified betting Platform software services to ~~global~~ leisure betting establishments in the U.S. and ~~operators.~~9 other countries.

The operating assets and liabilities of the reportable segments are as follows:

Segment Reporting


	September 30, 2022												March 31, 2023
	Betting establishments			Betting platform software and services			All other			Total			Betting establishments			Betting platform software and services			All other			Total

Purchase of non-current assets	$	214,805		$	64,721		$	76,413		$	355,939
Purchase of Non-Current assets													$	493,293		$	520,605		$	2,264		$	1,016,162
Assets
Current assets		6,002,886			3,540,566			205,740			9,749,192		$	4,695,890		$	2,073,507		$	286,307		$	7,055,704
Non-current assets		2,681,303			30,048,147			115,784			32,845,234
Non-Current assets														3,469,999			13,714,305			54,210			17,238,514
Liabilities
Current liabilities		(5,904,785	)		(2,070,572	)		(1,245,773	)		(9,221,130	)		(7,404,395	)		(3,131,815	)		(1,699,790	)		(12,236,000	)
Non-current liabilities		(1,358,907	)		(17,819,917	)		—			(19,178,824	)
Non-Current liabilities														(1,685,900	)		(1,905,820	)		(398,640	)		(3,990,360	)
Intercompany balances		5,006,155			(3,887,691	)		(1,118,464	)		—			6,343,542			(4,564,484	)		(1,779,058	)		—
Net asset position	$	6,426,652		$	9,810,533		$	(2,042,713	)	$	14,194,472		$	5,419,136		$	6,185,693		$	(3,536,971	)	$	8,067,858


	March 31, 2022
	Betting establishments			Betting platform software and services			All other			Total

Purchase of Non-Current assets	$	76,620		$	22,938		$	5,571		$	105,129
Assets
Current assets	$	7,839,520		$	1,614,877		$	562,008		$	10,016,405
Non-Current assets		2,668,559			30,820,909			92,640			33,582,108
Liabilities
Current liabilities		(6,729,694	)		(1,171,806	)		(1,495,238	)		(9,396,738	)
Non-Current liabilities		(1,318,442	)		(16,697,219	)		—			(18,015,661	)
Intercompany balances		4,551,910			(2,114,610	)		(2,437,300	)		—
Net asset position	$	7,011,853		$	12,452,151		$	(3,277,890	)	$	16,186,114

~~ELYS GAME TECHNOLOGY, CORP.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

~~19. Segmental Reporting (continued)~~

~~The segment operating results of the reportable segments are disclosed as follows:~~33

Nine months ended September 30, 2022
Betting establishments Betting platform software and services All other Adjustments Total
Revenue $ 30,408,624 $ 1,766,391 $ —   $ —   $ 32,175,015
Intercompany Service revenue 74,584 1,517,807 —   (1,592,391 ) —
Total revenue 30,483,208 3,284,198 —   (1,592,391 ) 32,175,015
Operating expenses
Intercompany service expense 1,517,807 74,584 —   (1,592,391 ) —
Selling expenses 23,896,814 132,718 —   —   24,029,532
General and administrative expenses 4,387,356 5,724,166 5,477,888 —   15,589,410
Restructuring and Severance expenses —   —   1,205,689 —   1,205,689
Total operating expenses 29,801,977 5,931,468 6,683,577 (1,592,391 ) 40,824,631

Income (Loss) from operations 681,231 (2,647,270 ) (6,683,577 ) —   (8,649,616 )

Other income (expense)
Other income 90,781 2 —   —   90,783
Other expense (47,959 ) (8,580 ) —   —   (56,539 )
Interest expense, net (1,069 ) (21,572 ) —   —   (22,641 )
Change in fair value of contingent purchase consideration —   (1,397,833 ) —   —   (1,397,833 )
Amortization of present value discount
Gain on marketable securities —   —   43,250 —   43,250
Total other income (expense) 41,753 (1,427,983 ) 43,250 —   (1,342,980 )

Income (Loss) before Income Taxes 722,984 (4,075,253 ) (6,640,327 ) —   (9,992,596 )
Income tax provision (437,042 ) 236,524 —   —   (200,518 )
Net Income (Loss) $ 285,942 $ (3,838,729 ) $ (6,640,327 ) $ —   $ (10,193,114 )

~~The operating assets and liabilities of the reportable segments are as follows:~~

September 30, 2021
Betting establishments Betting platform software and services All other Total

Purchase of non-current assets $ 25,502 $ 37,881,164 $ 43,552 $ 37,950,218
Assets
Current assets 8,587,092 1,308,003 2,230,792 12,125,887
Non-current assets 6,783,911 43,666,430 1,156,085 51,606,426
Liabilities
Current liabilities (6,499,182 ) (915,762 ) (1,225,532 ) (8,640,476 )
Non-current liabilities (765,779 ) (3,618,200 ) (25,286,034 ) (29,670,013 )
Intercompany balances 4,247,985 (705,171 ) (3,542,814 ) —
Net asset position $ 12,354,027 $ 39,735,300 $ (26,667,503 ) $ 25,421,824

ELYS GAME TECHNOLOGY, CORP.

Notes to Unaudited Condensed Consolidated Financial Statements

~~19.~~20. Segmental Reporting (continued)

The segment operating results of the reportable segments are disclosed as follows:


	Nine months ended September 30, 2021															Three Months ended March 31, 2023
	Betting establishments			Betting platform software and services			All other			Adjustments			Total			Betting establishments			Betting platform software and services			All other			Adjustments			Total
Revenue	$	33,448,435		$	428,924		$	—		$	—		$	33,877,359

Net Gaming Revenue																$	11,854,690		$	—		$	—		$	—		$	11,854,690
Betting platform and services revenue																	—			577,456			—			—			577,456
Intercompany Service revenue		271,518			3,323,848			—			(3,595,366	)		—			26,831			795,066			—			(821,897	)		—
Total revenue		33,719,953			3,752,772			—			(3,595,366	)		33,877,359
																	11,881,521			1,372,522			—			(821,897	)		12,432,146
Operating expenses
Intercompany service expense		3,323,848			271,518			—			(3,595,366	)		—			795,066			26,831			—			(821,897	)		—
Selling expenses		26,318,643			14,513			—			—			26,333,156			9,826,240			41,914			—			—			9,868,154
General and administrative expenses		5,251,863			4,204,834			4,518,758			—			13,975,455			1,654,903			1,312,375			1,480,469			—			4,447,747
Depreciation and amortization																	58,321			282,624			6,378			—			347,323
Total operating expenses		34,894,354			4,490,865			4,518,758			(3,595,366	)		40,308,611			12,334,530			1,663,744			1,486,847			(821,897	)		14,663,224

Loss from operations		(1,174,401	)		(738,093	)		(4,518,758	)		—			(6,431,252	)		(453,009	)		(291,222	)		(1,486,847	)		—			(2,231,078	)

Other income (expense)
Other Income (expenses)
Interest expense, net																	(242	)		(18,694	)		(17,000	)		—			(35,936	)
Amortization of debt discount																	—			—			(17,560	)		—			(17,560	)
Other income		434,624			2,073			7,992			—			444,689			7,323			1,523			—			—			8,846
Other expense		(23,954	)		(4,568	)		—			—			(28,522	)		(21	)		(7,663	)		(1,344	)		—			(9,028	)
Interest expense, net		(7,486	)		(2,109	)		(5,153	)		—			(14,748	)
Change in fair value of contingent purchase consideration		—			—			(569,076	)		—			(569,076	)
Amortization of present value discount		—			—			(12,833	)		—			(12,833	)
Loss on marketable securities		—			—			(292,500	)		—			(292,500	)		—			—			(19,000	)		—			(19,000	)
Total other income (expense)		403,184			(4,604	)		(871,570	)		—			(472,990	)
Total other income (expenses)																	7,060			(24,834	)		(54,904	)		—			(72,678	)

Loss before Income Taxes		(771,217	)		(742,697	)		(5,390,328	)		—			(6,904,242	)		(445,949	)		(316,056	)		(1,541,751	)					(2,303,756	)
Income tax provision		(50,666	)		58,802			—			—			8,136			—			10,395			—			—			10,395
Net Loss	$	(821,883	)	$	(683,895	)	$	(5,390,328	)	$	—		$	(6,896,106	)	$	(445,949	)	$	(305,661	)	$	(1,541,751	)	$	—		$	(2,293,361	)

ELYS GAME TECHNOLOGY, CORP.

Notes to Unaudited Condensed Consolidated Financial Statements

20. Segmental Reporting (continued)

The segment operating results of the reportable segments are disclosed as follows:


	Three months ended March 31, 2022
	Betting establishments			Betting platform software and services			All other			Adjustments			Total
Revenue	$	11,751,266		$	484,720		$	—		$	—		$	12,235,986
Intercompany Service revenue		56,127			555,693			—			(611,820	)		—
Total revenue		11,807,394			1,040,412			—			(611,820	)		12,235,986
Operating expenses
Intercompany service expense		555,693			56,127			—			(611,820	)		—
Selling expenses		9,253,177			33,055			—			—			9,286,232
General and administrative expenses		1,412,238			1,507,128			1,651,060			—			4,570,426
Depreciation and amortization		49,453			387,701			1,804			—			438,958
Total operating expenses		11,270,561			1,984,011			1,652,864			(611,820	)		14,295,616

Income (Loss) from operations		536,833			(943,599	)		(1,652,864	)		—			(2,059,630	)

Other income (expense)
Other income		39,749			—			—			—			39,749
Other expense		—			(1,070	)		—			—			(1,070	)
Interest expense, net		(1,212	)		(2,647	)		—			—			(3,859	)
Change in fair value of contingent purchase consideration		—			(450,013	)		—			—			(450,013	)
Gain on marketable securities		—			—			77,500			—			77,500
Total other income (expense)		38,537			(453,730	)		77,500			—			(337,693	)

Income (Loss) before Income Taxes		575,370			(1,397,329	)		(1,575,364	)		—			(2,397,323	)
Income tax provision		(229,534	)		72,641			—			—			(156,893	)
Net Income (Loss)	$	345,836		$	(1,324,688	)	$	(1,575,364	)	$	—		$	(2,554,216	)

ELYS GAME TECHNOLOGY, CORP.

Notes to Unaudited Condensed Consolidated Financial Statements

21. Subsequent Events

On May 5, 2023 (the "Closing Date"), the Company closed a private placement offering of up to 1,500 units and entered into a Subscription Agreement with a single accredited investor, Gold Street Capital Corp. (the "Investor"), which is a company owned by Gilda Pia Ciavarella, a related party and spouse of the Company’s Executive Chairman, Michele Ciavarella. Each Unit sold to the Investor was sold at a per unit price of $1,000 and was comprised of (i) a 12% convertible debenture in the principal amount of $1,000 (the “Debentures”), and (ii) warrants to purchase shares of the Company’s common stock (the “Warrants”).

The Investor purchased a total of 1,500 units and the Company issued Debentures for the total principal amount of $1,500,000 (the "Principal Amount") to the Investor and warrants to purchase 3,138,075 shares of common stock of the Company.

The Debentures mature three years from their date of issuance and bear interest at a rate of 12% per annum compounded annually and payable on the maturity date. Each Debenture is convertible, at the option of the holder, at any time, into such number of shares of common stock of the Company equal to the principal amount of the Debenture plus all accrued and unpaid interest at a price equal to $0.48 per share or the Nasdaq consolidated closing bid price of the Company common stock on the Nasdaq stock market on the Closing Date, subject to adjustment as provided in the Debenture, at any time up to the Maturity Date. The Debentures are initially convertible into 3,138,075 shares of common stock, subject to anti-dilution adjustment as provided in the Debentures. The holder is guaranteed to receive a minimum of five months of interest in the event of an early repayment by the Company.

In addition, the Company may accelerate this right of conversion on at least ten business days prior written notice to the Holder if there is an effective Registration Statement registering, or a current prospectus available for, the resale of the common shares issuable on the conversion and (i) the closing price of the Company’s common shares exceeds two hundred percent of the Conversion Price for five trading days in a thirty day period or (ii) the Company wishes to redeem or pre-pay the Debentures prior to the Maturity Date.

If at any time that the common shares issuable to the Investor on conversion of the Debentures in whole or in part would be free trading without resale restrictions or statutory hold periods, the Debentures are redeemable by the Company at any time or times prior to the Maturity Date on not less than ten Business Days prior written notice from the Company to the Investor of the proposed date of Redemption (the “Redemption Date”), without bonus or penalty, provided, however, that prior to the Redemption Date, the Investor has the right to convert the whole or any part of the principal and accrued and unpaid interest of the Debentures into common shares of the Company.

The Warrants are exercisable at an exercise price equal to $0.48 per share or the Nasdaq consolidated closing bid price of the Company common stock on the Nasdaq stock market on the Closing Date, subject to adjustment as provided in the Warrant and expire three years after the issuance date. Each Warrant is exercisable on a cashless basis in the event that there is not an effective registration statement registering the shares underlying the Warrant at the time of exercise.

The Company may accelerate the right to exercise the Warrants on at least ten business days prior written notice to the Holder if there is an effective Registration Statement registering, or a current prospectus available for, the resale of the common shares issuable on exercise of the Warrants and the closing price of the Company’s common shares exceeds two hundred percent of the Exercise Price for five trading days in a thirty day period.

The number of shares of common stock that may be issued upon conversion of the Debentures and exercise of the Warrants is subject to an Exchange Cap (as defined in the Debenture and Warrant) unless shareholder approval to exceed the Exchange Cap is approved. The parties agree to amend the Debentures and Warrants as necessary in order to comply with the requirements of the Nasdaq Capital Markets.

The Debentures are secured by a senior security interest in all of the assets of the Company pursuant to a Security Agreement. The Company’s primary assets consist of certain business operations and licenses in multiple jurisdictions, trademarks and other intellectual property, betting technology and products. Following an event of default under the Debenture, the Investor will have all available rights under the Security Agreement and applicable law to enforce their rights as a secured creditor, including to sell, assign, transfer, pledge, encumber or otherwise dispose of the secured assets, and to exercise any other available rights and remedies upon the occurrence of an event of default as described in the Debenture.

Other than disclosed above, the Company has evaluated subsequent events through the date the financial statements were issued and did not identify any other subsequent events that would have required adjustment or disclosure in the financial statements.

3235

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act, and Section 21E of the Exchange Act. All statements other than statements of historical fact could be deemed forward-looking statements. Statements that include words such as “may,” “might,” “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “pro forma” or the negative of these words or other words or expressions of and similar meaning may identify forward-looking statements. For example, forward-looking statements include any statements of the plans, strategies and objectives of management for future operations, including the execution of integration and restructuring plans and the anticipated timing of filings; any statements concerning proposed new products, services or developments; any statements regarding future economic conditions or performance; statements of belief and any statement of assumptions underlying any of the foregoing. Factors that might cause such differences include, but are not limited to, those discussed in our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 filed with the Securities and Exchange Commission on April ~~15, 2022~~17, 2023 under the heading “Risk Factors” and the Risk Factors as described in Item 1A of this Quarterly Report on Form 10-Q for the quarter ended ~~September~~March 30, ~~2022.~~2023.

Overview

Except as expressly stated, the financial condition and results of operations discussed throughout the Management's Discussion and Analysis of Financial Condition and Results of Operations are those of Elys Game Technology, Corp. and its consolidated subsidiaries.

We currently provide our B2C gaming services in Italy through our subsidiary, Multigioco, ~~Srl (“Multigioco”),~~ which operations are carried out via both land-based retail or online ~~retail~~interactive gaming licenses regulated by the Agenzia delle Dogane e dei Monopoli (“ADM”) that permits us to distribute leisure betting products such as sports betting, and virtual sports betting products through both physical, land-based ~~retail~~ locations as well as online through our licensed website www.newgioco.it or commercial webskins linked to our licensed website and through mobile devices. Management implemented a consolidation strategy in the Italian market by integrating all B2C operations into Multigioco and allowed the Austria Bookmaker license that was regulated by the ~~Austrian Federal Finance Ministry (“BMF”)~~BMF to terminate.

We also provide bookmaking services in the U.S. market via our ~~recently acquired~~ subsidiary ~~Bookmakers Company~~ US ~~LLC (dba USBookmaking or “USB”)~~Bookmaking and ~~Elys~~ Gameboard ~~Technologies, LLC~~ in certain regulated states where we offer B2B bookmaking and platform services to our customers. Our intention is to focus our attention on expanding the U.S. market. ~~We recently began operating~~The Company operates in Washington D.C. through a Class B Managed Service Provider and Class B Operator license to operate a sportsbook within the Grand Central Restaurant and Sportsbook located in the Adams Morgan ~~area of~~district and the Over Under Sportsbook Rooftop Lounge in Washington, D.C., In March 2022 the Company began providing platform and ~~in October 2021 we entered into an agreement with~~bookmaking services at Ocean Casino Resort in Atlantic City, ~~and commenced operations in the state of~~ New Jersey, and through its acquisition of US Bookmaking, the Company also provides sportsbook services to tribal casinos in ~~March 2022.~~New Mexico, North Dakota, Colorado and Michigan.

Additionally, we provide B2B gaming technology through our Odissea subsidiary which owns and operates a betting software designed with a unique “distributed model” architecture colloquially named ~~Elys (the “Platform”).~~Elys. The Platform is a fully integrated “omni-channel” framework that combines centralized technology for updating, servicing and operations with multi-channel functionality to accept all forms of customer payment through the two distribution channels described above. The omni-channel software design is fully integrated with a ~~built in~~built-in player gaming account management system, built-in sports book and a virtual sports platform through our Virtual Generation subsidiary. The Platform also provides the seamless integration of application programming interface ~~integration~~ of third-party supplied products such as online casino, poker, lottery and horse racing and has the capability to incorporate e-sports and daily fantasy sports providers. Management implemented a growth strategy to expand B2B gaming technology operations in the U.S. and is considering further expansion in Canada and Latin American countries in the near future.

Our corporate group is based in North America, which includes an executive suite situated in Las Vegas, Nevada and an office in Toronto, Ontario, Canada through which we carry-out corporate activities, handle day-to-day reporting and U.S. development planning, and through which various employees, independent contractors and vendors are engaged.

For the ~~period~~three months ended ~~September 30, 2022,~~March 31, 2023, transaction revenue generated through our subsidiary Multigioco consisted of wagering and gaming transaction income broken down to: (i) spread on sports bet wagers, and (ii) fixed rate commissions on casino, poker, lotto and horse racing wagers from online based betting web-shops and websites as well as land-based retail betting shops located throughout Italy; while our service revenue generated by our Platform is primarily derived from bet and wager processing in Italy through Multigioco, and in the U.S., through ~~Elys~~ Gameboard ~~Technologies~~ and USB. During the second quarter of 2021, management simplified our Italian footprint by focusing investments towards our Multigioco operations and discontinued Ulisse since the majority of CTD locations were not expected to re-open after the COVID-19 related lockdowns in Italy subsided.US Bookmaking.

We believe that our Platform is considered one of the newest betting software platforms in the world and our plan is to expand our Platform offering to new jurisdictions around the world on a B2B basis, including expansion through Europe, South America, South Africa and the developing market in the United States. During the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ we also generated service revenue from royalties through authorized agents by providing our virtual sports products through our Virtual Generation subsidiary and generated service revenues through the provision of bookmaking and platform services through our ~~USB subsidiary.~~subsidiaries, US Bookmaking and Gameboard. We intend to leverage our partnerships in Europe, South America, South Africa and the developing market in the United States to cross-sell our Platform services to expand the global distribution of our betting solutions.

We operate two business segments in the leisure gaming industry and our revenue is derived as follows:

1.	Betting establishments

Transaction revenue through our offering of leisure betting products to retail customers directly through our online distribution on websites or a betting shop establishment or through third party agents that operate white-label websites and/or land-based retail venues; and

2.	Betting platform software and services

SaaS based service revenue through ~~providing~~the provision of our Platform and virtual sports products to betting operators.

This Management’s Discussion and Analysis includes a discussion of our operations for the three months ended March 31, 2023 and ~~nine months ended September 30,~~ 2022, ~~and 2021,~~ which includes the operations of ~~USB~~Engage IT for the ~~three months and nine~~two months ended ~~September 30, 2022 and the three months ended September 30, 2021.~~March 31, 2023.

~~Recent Developments~~

Operational Developments

Management ~~has implemented a strategic business initiative~~continues to ~~reduce~~focus on reducing operating expenditure ~~improve efficiencies and maximize profitability within~~wherever possible without impacting negatively on operations. During the ~~underlying operating units. As a result, during the nine~~three months ended ~~September 30, 2022, Multigioco achieved net income of approximately $0.8 million, while on a combined basis,~~March 31,2023, our European operations, ~~which consists~~consisting of Multigioco, Odissea, Ulisse, and Virtual Generation and Elys Technology Services ~~achieved a net income position of approximately $0.28 million overall. The performance of our USB subsidiary in the U.S. has been disappointing, producing~~had a net loss of ~~$1.62~~approximately $0.4 million ~~on revenues~~compared to a net profit of ~~$0.9~~approximately $0.08 million ~~which is~~in the prior period, primarily due to an increase in selling expenses of $0.6 million associated with the increase in promotional activity in our newly launched land-based locations. We have worked diligently and reduced the operating expenditure at our US Bookmaking subsidiary from $1.0 million in the prior period to $0.2 million in the current period, an improvement of $0.8 million. We reduced our corporate expenses from $1.7 million in the prior period to $1.5 million in the current period, primarily due to a reduction in personnel costs ~~that increased to $1.08~~of $0.5 million, ~~and amortization~~which included an increase in stock based compensation of ~~intangibles of $0.8~~$0.08 million for the nine months ended September 30, 2022. We have recently assumed operational management of USB and are currently assessing the viability of its customers and the current level of overhead. We also expect to enter mediation with the existing management in an attempt to address the sustainability of the operations in its current format. Our other U.S. operation, Elys Gameboard, commenced operations in October 2021 and had produced a net loss of $0.45 million, with one operational customer. We are pursuing several new customers both in the Washington D.C. area as well as in Maryland and Ohio and once secured we expect to achieve profitable operations within the next twelve to eighteen months.

We are also taking steps to reduce corporate overhead and have restructured our operations by streamlining roles and reducing non-essential operating expenditures. Corporate overhead expenditures, net of one-time severance and restructuring expenses of $1.2 million, and non-cash option and compensation expense of $4.39 million were reduced by approximately $0.87 million during the nine month period. Non-cash stock option expense increased by $3.0 million over the prior year primarily due to the issuance of restricted ~~stock grant during September 2022~~shares to our group IT personnel, offset by an increase in professional fees of $0.08 million, primarily related to a consulting arrangement with a European based professional and ~~stock options granted~~an adverse movement in foreign currency losses of $0.16 million due to ~~key members~~the weakening of ~~management~~the dollar against the Euro during the ~~prior year.~~ current period.

Global Issues

~~Global issues~~

~~Russia’s invasion of Ukraine~~Inflation

~~Russia recently invaded Ukraine with Belarus complicit in the invasion.~~Macro-economic conditions could affect consumer spending adversely and consequently our future operating results. The ~~conflict between these two countries is ongoing.~~

~~We do not have any direct or indirect exposure to Ukraine, Belarus or Russia, through~~U.S. has entered a period of significant inflation, and this may impact consumption of our operations, employee base or any investments in any of these countries. In addition, our securities are not traded on any stock exchanges in these three countries. We do not believe that the sanction levied against Russia or Belarus or individualsproducts and ~~entities associated with these two countries will have a material impact on our operations or business, if any.~~

~~We do not believe that we have any direct or indirect reliance on goods sourced from Russia, Ukraine or Belarus or countries that are supportive of Russia.~~

~~We provide online gaming~~ services and ~~platform services to several customers, including~~may increase our ~~own internal usage of our developed software, we employ the latest encryption techniques and firewall practices and constantly monitor the usage of our software~~costs overall. However, as is required for the regulated markets which we operate in, this, however, may not be sufficient to prevent the heightened risk of cybersecurity attacks emanating from Russia, Ukraine, Belarus, or any other country.

~~The impact~~ of the ~~invasion by Russia~~date of ~~Ukraine has increased volatility in trading prices and commodities throughout the world, to date,~~this report, we have not seen a material impact on our ~~operations, however, a prolonged conflict may impact on consumer spending, in general, which could have an adverse impact on the leisure gaming industry as a whole.~~

~~Inflation~~

~~The uncertain financial markets, disruptions in supply chains, mobility restraints, and changing priorities as well as volatile asset values could impact our~~ business plan due to recent inflationary concerns in the future. The outbreak and government measures taken in response to the COVID-19 pandemic have also had a significant impact, both direct and indirect, on businesses and commerce, as worker shortages have occurred; supply chains have been disrupted; facilities and production have been suspended; and demand for certain goods and services, such as our land based retail locations decreased. The future progression of the pandemic and its effects on our business and operations are uncertain. We may face difficulties recruiting employees because of the outbreak. Further, although we have not experienced any material adverse effects on our business due to increasing inflation, it has raised operating costs for many businesses and, in the future, could impact demand for our services foreign exchange rates or employee wages. We are actively monitoring the effects these disruptions and increasing inflation could have on our operations.U.S.

Foreign Exchange Risks

We operate in several foreign countries, including ~~Austria,~~ Italy ~~Malta, Colombia~~ and Canada and we incur operating expenses and have foreign currency denominated assets and liabilities associated with these operations. Transactions involving our corporate expenditures are generally denominated in U.S. dollars and Canadian dollars while the functional currency of our subsidiaries is in Euro and Colombian Pesos.Colombia. Changes and fluctuations in the foreign exchange rate between the U.S. ~~dollar~~Dollar and other foreign currencies, including the Euro and the ~~Euro, Canadian dollar and~~ Colombian Peso, ~~will~~may in future have an effect on our results of operations.

Recent Developments

Convertible debenture issuance

On May 5, 2023, we closed a private placement offering of 1,500 units and entered into a Subscription Agreement with a single accredited investor, Gold Street Capital Corp., which is a company owned by Gilda Pia Ciavarella, a related party and spouse of our Executive Chairman, Michele Ciavarella. Each Unit sold to the Investor was sold at a per unit price of $1,000 and was comprised of (i) a 12% convertible debenture in the principal amount of $1,000 (the “Debentures”), and (ii) warrants to purchase shares of the Company’s common stock (the “Warrants”). A total of 1,500 units were sold and a warrant to purchase 3,138,075 shares of our common stock was issued.

The Debentures mature three years from their date of issuance and bear interest at a rate of 12% per annum compounded annually and payable on the maturity date. Each Debenture is convertible, at the option of the holder, at any time, into such number of shares of our common stock equal to the principal amount of the Debenture plus all accrued and unpaid interest at a price equal to $0.48 per share or the Nasdaq consolidated closing bid price of the Company common stock on the Nasdaq stock market on the Closing Date, subject to adjustment as provided in the Debenture, at any time up to the Maturity Date. The Debentures are initially convertible into 3,138,075 shares of common stock, subject to anti-dilution adjustment as provided in the Debentures. The holder is guaranteed to receive a minimum of five months of interest in the event of an early repayment by us.

In addition, we may accelerate this right of conversion on at least ten business days prior written notice to the Holder if there is an effective Registration Statement registering, or a current prospectus available for, the resale of the common shares issuable on the conversion and (i) the closing price of our common shares exceeds two hundred percent of the Conversion Price for five trading days in a thirty day period or (ii) we wish to redeem or pre-pay the Debentures prior to the Maturity Date.

If at any time that the common shares issuable to the Investor on conversion of the Debentures in whole or in part would be free trading without resale restrictions or statutory hold periods, the Debentures are redeemable by us at any time or times prior to the Maturity Date on not less than ten Business Days prior written notice from us to the Investor of the proposed date of Redemption (the “Redemption Date”), without bonus or penalty, provided, however, that prior to the Redemption Date, the Investor has the right to convert the whole or any part of the principal and accrued and unpaid interest of the Debentures into our common shares.

The Warrants are exercisable at an exercise price equal to $0.48 per share or the Nasdaq consolidated closing bid price of our common stock on the Nasdaq stock market on the Closing Date, subject to adjustment as provided in the Warrant and expire three years after the issuance date. Each Warrant is exercisable on a cashless basis in the event that there is not an effective registration statement registering the shares underlying the Warrant at the time of exercise.

We may accelerate the right to exercise the Warrants on at least ten business days prior written notice to the Holder if there is an effective Registration Statement registering, or a current prospectus available for, the resale of the common shares issuable on exercise of the Warrants and the closing price of our common shares exceeds two hundred percent of the Exercise Price for five trading days in a thirty day period.

The Warrants and Debentures provide that if we issue or sells common stock of securities convertible or exercisable into common stock for a price lower than the exercise price of conversion price that the exercise price and conversion price will be reduced to such price, subject to a floor price of $0.35 and subject to certain exempt issuances set forth in the Debenture and Warrant.

The Debentures are secured by a senior security interest in all of our assets, pursuant to a Security Agreement. Our primary assets consist of certain business operations and licenses in multiple jurisdictions, trademarks and other intellectual property, betting technology and products. Following an event of default under the Debenture, the Investor will have all available rights under the Security Agreement and applicable law to enforce their rights as a secured creditor, including to sell, assign, transfer, pledge, encumber or otherwise dispose of the secured assets, and to exercise any other available rights and remedies upon the occurrence of an event of default as described in the Debenture.

Critical Accounting Estimates

The critical accounting policies that involved significant estimation included the following:

Preparation of our consolidated financial statements in accordance with U.S. generally accepted accounting principles ("GAAP") requires us to make estimates and assumptions that affect the reported amounts of certain assets, liabilities, revenues and expenses, as well as related disclosure of contingent assets and liabilities. Significant accounting policies are fundamental to understanding our financial condition and results as they require the use of estimates and assumptions which affect the financial statements and accompanying notes. See Note 2 - Summary of Significant Accounting Policies of the Notes to the condensed Consolidated Financial Statements included in Part I, Item I of this Form 10-Q for further information.

~~The critical accounting policies that involved significant estimation included the following:~~

~~Impairment of Indefinite Lived Assets and Goodwill~~

We carried intangible assets in the amount of $14.4 million and goodwill in the amount of $16.2 million as more fully described in Notes 7 and 8 to the condensed consolidated financial statements. The intangible assets and goodwill are allocated between reporting units. The Company tests its goodwill and intangible assets with an indefinite useful life annually for impairment or more frequently if indicators for impairment exist. Impairment for goodwill is determined by comparing the fair value of the respective reporting unit to their carrying amount. For impairment testing of indefinite-lived intangibles. The Company determines the fair value of the reporting units using an income-based approach which estimates the fair value using a discounted cash flow model. Key assumptions in estimating fair values include projected revenue growth and the weighted average cost of capital. In addition, management recently reviewed the future revenue and profit projections of USB based on the forecasts provided by the vendors at the time of performing the business valuation, which factored in the ability to source new customers. The customer acquisition process has proven to take longer than expected with a resultant downward revision of new customers acquired over the forecast period and the resultant downward impact on forecasted revenue streams. We reviewed the forecasts and made appropriate adjustments based on our current understanding of the addressable market, the growth rates forecast by third party market analysts, our expected share of revenue and the expectation of how many new clients we would realistically be able to add over the forecast period. Since performing this analysis, we have assumed operational management of this entity and are currently assessing the revenues and expenditures associated with the operation, currently we do not believe that further impairment is necessary, however, once we have reviewed the revenue base and improved the operational efficiencies, which we expect to have completed by year end, we will readdress the impairment analysis.

~~Fair Value of Contingent Consideration~~

As of September 30, 2022, the Company carried contingent purchase consideration in the amount of $14.3 million as more fully described in Note 12 to the condensed consolidated financial statements. The contingent consideration relates to the business combination of USB on July 15, 2021. The contingent consideration is based upon achievement of certain EBITDA milestones during the next 4 years, payable 50% in cash and 50% in stock, the contingent consideration is up to $41.8 million. At each reporting period, the Company estimates changes in the fair value of the contingent consideration and any change in fair value is recognized in the consolidated statements of operations and comprehensive (loss) income.

The basis for determining contingent purchase consideration at each reporting period is based on cumulative EBITDA for the period July 15, 2021 to December 31, 2025, with the first measurement period being December 31, 2022. The forecasts provided by the vendors at the time of performing the business valuation was based on achieving a certain number of new customers on an annual basis. The customer acquisition process has proven to take longer than expected with a resultant impact on forecasted revenue streams over the contingent earnout period. Management revised its estimated revenues as of December 31, 2021. These forecasts were reviewed and adjusted to ensure they appeared reasonable based on our current understanding of the addressable market, the growth rates forecast by third party market analysts, our expected share of revenue and the expectation of how many new clients we would realistically be able to add in a fiscal period. Based on our discussion under impairment of indefinite lived assets and goodwill, we are currently assessing the USB business and expect to have completed our analysis by December 31, 2022, the result which may impact the carrying value of intangibles, goodwill and ~~the contingent purchase consideration.~~

Recently Issued Accounting Pronouncements

See Note 2 - Summary of Significant Accounting Policies of the Notes to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for information regarding recently issued accounting standards.

Results of Operations

Results of Operations for the three months ended ~~September 30, 2022~~March 31, 2023 and the three months ended ~~September 30, 2021~~March 31, 2022

Revenues

The following table represents disaggregated revenues from our gaming operations for the three months ended ~~September 30, 2022~~March 31, 2023 and ~~2021.~~2022. Net Gaming Revenues represents Turnover (also referred to as “Handle”), the total bets processed for the period, less customer winnings paid out, and taxes due to government authorities, Service Revenues is revenue invoiced for our Elys software service and royalties invoiced for the sale of virtual products.

	Three Months Ended									Three months ended
	September 30, 2022		September 30, 2021		Increase (decrease)		Percentage change			March 31, 2023			March 31, 2022			Increase (decrease)			Percentage change
Turnover
Turnover web-based	$	163,563,603	$	162,471,799	$	1,091,804		0.7	%	$	199,923,035		$	215,780,282		$	(15,857,247	)		(7.4	)%
Turnover land-based		2,924,866		1,193,779		1,731,087		145.0	%		8,568,521			1,785,107			6,783,414			380.0	%
Total Turnover		166,488,469		163,665,578		2,822,891		1.7	%		208,491,556			217,565,389			(9,073,833	)		(4.2	)%

Winnings/Payouts
Winnings web-based		152,545,450		152,328,199		217,251		0.1	%		186,131,151			200,853,821			(14,722,670	)		(7.3	)%
Winnings land-based		2,208,100		1,031,217		1,176,883		114.1	%		6,765,964			1,400,413			5,365,551			383.1	%
Total Winnings/payouts		154,753,550		153,359,416		1,394,134		0.9	%		192,897,115			202,254,234			(9,357,119	)		(4.6	)%

Gross Gaming Revenues
Web-Based		11,018,153		10,143,600		874,553		8.6	%
Land-Based		716,766		162,562		554,204		340.9	%
Gross Gaming Revenues		11,734,919		10,306,162		1,428,757		13.9	%
Gross Gaming Revenues Web-based											13,791,884			14,926,461			(1,134,577	)		(7.6	)%
Gross Gaming Revenues Land-based											1,802,557			384,694			1,417,863			368.6	%
											15,594,441			15,311,155			283,286			1.9	%
Less: ADM Gaming Taxes		2,822,830		2,515,570		307,260		12.2	%

Less: Gaming Taxes											(3,739,751	)		(3,730,830	)		(8,921	)		0.2	%

Net Gaming Revenues		8,912,089		7,790,592		1,121,497		14.4	%		11,854,690			11,580,325			274,365			2.4	%

Add: Service Revenues		679,205		239,490		439,717		183.6	%		577,456			655,661			(78,205	)		(11.9	)%

Total Revenues	$	9,591,294	$	8,030,082	$	1,561,214		19.4	%	$	12,432,146		$	12,235,986		$	196,160			1.6	%

Total Revenues

The change in ~~turnover (handle)~~total revenues is primarily due to the following:

Web-based turnover

Our web-based turnover was approximately $199.9 million (€186.3 million) and $215.8 million (€192.2 million) for the three months ended March 31, 2023 and 2022, respectively, a decrease of $15.9 million or 7.4%, but a decrease in in Euro based turnover of €5.9 million or 3.1%. Refer to currency impact on web-based turnover below.

We highlight the following movements in our web-based Euro turnover; (i) sports betting turnover increased significantly by €10.0 million or 26.6%; (ii) our casino gaming turnover increased by approximately €3.3 million or 2.7%; offset by (iii) a reduction in on-line poker gaming turnover of €18.7 million or 68.4%. This is in line with our strategy to focus our attention on higher margin turnover.

For the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ all of our web-based turnover was generated by ~~Multigioco after the closure~~Multigioco.

Currency impact on Web-based turnover

Our web-based turnover expressed in Euro decreased by approximately €5.9 million or 3.1%, however in U.S dollars we recorded a decrease in turnover of ~~our Ulisse CTD operations in the second quarter of the prior year.~~$15.9 million or 7.4%. The strengthening of the average U.S. dollar exchange rate against the Euro during the 2023 current ~~year had an adverse foreign currency impact~~quarter from $1.122538 to $1.073241 or 4.4%, using the 2022 average exchange rate of ~~approximately $25.5~~$1.1122538, we would have realized turnover of $209.1 million ~~or 15.7%~~compared to $215.8 million for the three months ended ~~September 30,~~March 31, and 2022, ~~compared to~~respectively a decrease of $6.7 million. The strengthening of the ~~three months ended September 30, 2021.~~ U.S. dollar against the Euro resulted in a $9.2 million adverse swing in our turnover.

Land-based turnover

Our ~~web-based~~land-based turnover ~~in Euro increased by €24.9~~was approximately $8.6 million ~~from €138.5~~(€8.0 million) and $1.8 million ~~to €163.4 million or 18.0%~~(€1.6 million) for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~compared to the three months ended September 30, 2021, however our web-based turnover reported in U.S. dollars increased by $1.1 million from $162.4 million to $163.5~~respectively, an increase of $6.8 million or ~~0.7%~~380.0%, but an increase in Euro based turnover of €6.4 million or 402.1%. ~~The softening of COVID restrictions in Italy has also driven some web-based~~Refer to currency impact on land-based turnover to the land-based channel, and despite this effect, we managed to increase web-based turnover due to market share growth in Italy. The percentage of payouts on web-based turnover improved slightly to 93.3% from 93.8% for the three months ended September 30, 2022 and 2021 respectively.

~~Land-based turnover~~ below.

During the three months ended ~~September 30, 2022, we~~March 31, 2023, the 53 newly activated ~~approximately 30 new~~ land-based locations had a significantly positive impact on our land-based turnover and our GGR, discussed below.

We highlight that our land-based Euro turnover increased by €6.4 million or 402.1%, including an increase in ~~Multigioco with recently acquired operating rights.~~sports betting turnover of €5.4 million or 720.1% and virtual sports betting increased by €1.0 million or 173.3%, as a direct result of the increase in our number of land-based locations. Sports betting and virtual sports betting is typically higher margin turnover for us.

For the three months ended March 31, 2023, all of our land-based turnover was generated by Multigioco.

Currency impact on land-based turnover

Our land-based turnover expressed in Euro increased by approximately €6.4 million or 402.1%, however in U.S dollars we recorded an increase in turnover of $6.8 million or 380.0%. The strengthening of the average U.S. dollar exchange rate against the Euro during the 2023 current ~~year had an adverse foreign currency impact~~quarter from $1.122538 to $1.073241 or 4.4%, using the 2022 average exchange rate of ~~approximately $0.1~~$1.122538, we would have realized turnover of $8.9 million ~~or 12.4%~~compared to $1.8 million for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~compared to~~respectively an increase of $7.1 million. The strengthening of the ~~three months ended September 30, 2021. Our land-based turnover~~U.S. dollar against the Euro resulted in ~~Euro increased by €1.8~~a $0.3 million ~~from €1.0~~adverse swing in our turnover.

Gross Gaming Revenue (“GGR”)

Gross gaming revenue was approximately $15.6 million ~~to €2.8~~(€14.5 million) and $15.3 million ~~or 180.0%~~(€13.6 million) for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~compared to the three months ended September 30, 2021, however our land-based turnover reported in U.S. dollars increased by $1.7 million from $1.2 million to $2.9~~respectively, an increase of $0.3 million or ~~145%~~1.9%, but an increase in Euro based GGR of €0.9 million or 6.5%. ~~The softening of COVID restrictions during the current year resulted in more walk-in patrons frequenting our land-based locations and we expect this revenue~~Refer to ~~continue increasing as the remaining 70 land-based locations from our recently acquired operating rights are rolled out.~~ currency impact on gross gaming revenues below.

The percentage of payouts on web-based turnover remained constant at 93.1% and on land-based turnover ~~improved~~declined to ~~75.5%~~79.0% from ~~86.4%~~78.4%, for the three months ended ~~September 30,~~March 31, 2023 and 2022, respectively.

The return on casino type games is typically fixed at a certain percentage while the return on skill games is dependent on the skill of the players but does not vary significantly from year to year, however the return on sports betting is dependent on the outcome of the sporting games which is unpredictable and ~~2021 respectively.~~is managed by our risk management team, generally producing a better return than the other revenue streams.

The turnover mix impacts our Gross Gaming Revenue (“GGR”). Our turnover for the three months ended ~~September 30, 2022~~March 31, 2023, is as follows: sports betting turnover represented ~~19.1% (September 30, 2021~~27.6% (March 31, 2022 – ~~19.3%~~19.7%); casino style games represented ~~80.3% (September 30, 2021~~71.3% (March 31, 2022 – ~~80.0%~~79.5%); and other was ~~0.6% (September 30, 2021~~1.1% (March 31, 2022 – ~~0.7%~~0.8%).

The margin earned on our sports book averaged ~~18.8% (September 30, 2021~~15.9% (March 31, 2022 – ~~14.9%~~18.3%) and our casino style games averaged ~~4.3% (September 30, 2021~~4.2% (March 31, 2022 - ~~4.2%~~4.3%), resulting in a blended GGR of ~~7.0% (September 30, 2021~~7.5% (March 31, 2022 – ~~6.3%~~7.0%). The ~~slight shift towards lower margin casino type products during~~significant increase in sports betting turnover had a positive impact on blended GGR, despite the ~~current period was offset by the higher margin earned on~~decline in the sports ~~book during~~betting margins from the ~~current~~prior period.

~~Gaming taxes~~Currency impact on gross gaming revenues

Our GGR expressed in Euro increased by approximately €0.9 million or 6.5%, however in U.S dollars we recorded an increase in GGR of $0.3 million or ~~12.2% due~~1.9%. The strengthening of the average U.S. dollar exchange rate against the Euro during the 2023 current quarter from $1.122538 to $1.073241 or 4.4%, using the ~~improvement in~~2022 average exchange rate of $1.122538, we would have realized GGR of ~~approximately $1.4 million. The relative rate of our gaming taxes, which is based on Gross Gaming Revenues was 24.1% and 24.4%~~$16.3 million compared to $15.3 million for the three months ended ~~September 30,~~March 31, 2023 and 2022, respectively an increase of $1.0 million. The strengthening of the U.S. dollar against the Euro resulted in a $0.7 million adverse swing in our GGR.

Gaming Taxes

Gaming taxes decreased by approximately $0.009 million or 0.2%. Gaming taxes are a percentage of GGR and ~~2021 respectively, in line~~decreased to 24.0% from 24.4%, for the three months ended March 31, 2023 and 2022, respectively. The decrease is primarily due to the mix of our Gross Gaming revenues with ~~expectations.~~lower overall tax on sports betting operations compared to other casino type products.

Service Revenues

Service revenues ~~increased~~decreased by approximately ~~$0.4~~$0.08 million or ~~183.6%~~11.9%. This is primarily due ~~to; (i)~~to a reduction in service revenues ~~generated by USB~~from our US operations ~~of approximately $0.3 million and (ii) a general increase in our other service-based revenues across our platform companies.~~as we work on stabilizing the US Bookmaking operation This revenue remains insignificant to total revenues during the periods presented.

Selling expenses

~~We incurred selling expenses of approximately $6.9 million and $6.0 million for the three months ended September 30, 2022 and 2021, respectively, an increase of approximately $0.9 million or 13.5%.~~ Selling expenses ~~are~~includes both commissions that are paid to our sales agents as a percentage of turnover (handle) ~~and are~~, which is not affected by ~~the~~ winnings ~~that are~~paid out, and a percentage of GGR which is affected by winnings paid out. We also incur fees paid to third party providers, based on Net Gaming Revenues (“NGR”). Therefore, increases in turnover (handle), will ~~typically~~mostly result in increases in selling expenses ~~but~~and may ~~not~~ result in only a slight increases in overall revenue if winnings/payouts, that are subject to the unknown outcome of sports events that we have no control over, are very high. The percentage of selling expenses to turnover increased to ~~4.1% compared to 3.7%~~4.7% from 4.3% for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively. ~~The increase is primarily due~~Based on the mix of commissions paid on turnover to commissions paid on GGR and NGR, the percentage and dollar value of commissions increased.

We incurred selling expenses of approximately $9.9 million and $9.3 million for the three months ended March 31, 2023 and 2022, respectively, an increase of approximately $0.6 million or 6.3%. Selling expenses denominated in Euro amounted to ~~new land~~approximately $9.8 million (€9.2 million), the strengthening of the average U.S. dollar exchange rate against the Euro during the 2023 current quarter from $1.122538 to $1.073241 or 4.4%, using the 2022 average exchange rate of $1.122538, we would have incurred Euro based ~~locations as part~~selling expenses of ~~our marketing efforts.~~$10.3 million compared to $9.3 million for the three months ended March 31, 2023 and 2022, respectively, an increase of $1.0 million.

General and Administrative Expenses

General and administrative expenses were approximately ~~$5.8~~$4.4 million and ~~$5.1~~$4.6 million for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively, ~~an increase~~a decrease of approximately ~~$0.7~~$0.2 million or ~~14.5%~~2.7%. The ~~increase~~decrease over the prior year is attributable to the following: (i) ~~an increase~~a decrease in personnel costs of ~~$1.2~~costs of $0.3 million, which includes an increase in ~~stock based~~stock-based compensation expense of approximately ~~$1.4~~$0.2 million, resulting in a net decrease in personnel costs, excluding stock based compensation expense, of approximately ~~$0.2~~$0.5 million, which is in line with our mandate to reduce operating expenditure. The increase in ~~stock based~~stock-based compensation of approximately ~~$1.4~~$0.2 million is primarily due to the issuance of restricted stock to key IT management ~~as an incentive for reducing operating expenditure in terms~~with the acquisition of ~~our mandate;~~Engage IT during the current period; and (ii) an increase in ~~foreign exchange gain~~platform related fees of approximately ~~$0.2~~$0.1 million ~~predominantly at corporate level, based on~~associated with fees paid by Odissea for outside services.

Depreciation and amortization

Depreciation and amortization was approximately $0.35 million and $0.44 million for the ~~strength~~three months ended March 31, 2023 and 2022, respectively, a decrease of ~~the U.S. dollar~~$0.09 million, primarily due to the ~~Euro during~~impairment, in the ~~current period. The balance~~prior year, of long-lived intangible assets associated with the ~~decrease~~acquisition of ~~approximately $0.5 million consists of numerous individually insignificant expenses that have been managed by operational management in terms of our mandate to reduce operating expenditure.~~US Bookmaking.

Loss from Operations

The loss from operations was approximately ~~$3.1~~$2.2 million and ~~$3.1~~$2.1 million for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021.~~an increase of $0.1 million or 8.3%. The increase in revenue and the reduction in general and administrative expenses and depreciation and amortization was offset by an increase in selling expenses, ~~and general and administrative expenses, of which approximately $1.4 million was non-cash compensation expense.~~as discussed above.

Interest Expense, Net

Interest expense, net, was approximately $0.04 million and $0.004 million for the three months ended March 31, 2023 and 2022, respectively, an increase of approximately $0.032 million. The increase is primarily due to the convertible debt funding advanced to us during the current quarter and the promissory note funding advanced to us during the second and third quarters of the prior year.

Amortization of debt discount

Amortization of debt discount was approximately $0.02 million and $0 million for the three months ended March 31, 2023 and 2022, respectively, an increase of approximately $0.02 million. The increase is due to the amortization of debt discount on the convertible notes issued during the current quarter.

Other income

Other income was approximately ~~$0.02~~$0.008 million and ~~$0.07~~$0.04 million for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively, a decrease of approximately ~~$0.05~~$0.032 million or ~~71.4%~~77.7%. Other income includes additional Covid relief funds received in Ulisse during the prior period.

~~Other expense~~

~~Other expense was approximately $0.04 million and $0 for the three months ended September 30, 2022 and 2021, respectively, an increase of approximately $0.04 million, the amount is immaterial.~~

~~Interest Expense, Net of Interest Income~~

Interest expense was approximately $0.009 million and $0.004 million for the three months ended September 30, 2022 and 2021, respectively, an increase of approximately $0.005. The amount is immaterial.

Change in fair value of contingent purchase consideration

Change in fair value of contingent purchase consideration was approximately ~~$0.5~~$0 million and ~~$0.6~~$0.5 million for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively, a decrease of approximately ~~$0.1~~$0.5 million. The decrease is due to the prior year reduction in the estimated contingent purchase consideration due on the acquisition of USB of approximately $11.9 million, thereby reducing the future accretion expense associated with the present valueimpairment of the contingent purchase ~~consideration.~~consideration in 2022 as we do not believe these is any possibility of the contingent consideration being earned by the US Bookmaking sellers.

Other expense

Other expense was approximately $0.009 million and $0.001 million for the three months ended March 31, 2023 and 2022, respectively, an increase of approximately $0.008 million, the amount is immaterial.

(Loss) gain on Marketable Securities

The loss on marketable securities was approximately ~~$0.05~~$0.019 million and ~~$0.2~~the gain on marketable securities was $0.078 million for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively, ~~a decrease~~an increase of approximately ~~$0.15~~$0.097 million or ~~75.0%~~124.5%. The losses and gains on marketable securities is directly related to the stock price of our investment in Zoompass which is marked-to-market each quarter. The shares in Zoompass were acquired by the Company as settlement of a litigation matter, we have no influence over the performance of Zoompass.

Loss Before Income Taxes

Loss before income taxes was approximately ~~$3.7~~$2.3 million and ~~$3.8~~$2.4 million for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively, a decrease of approximately $0.1 million or ~~2.6%~~3.9%. The ~~loss from operations was stable at approximately $3.1 million, as discussed above, the~~ decrease in loss before income taxes ~~is related to other expenses and income and is~~was primarily due to the increase in loss from operations of $0.2 million offset by the reduction in ~~the~~changes in fair value of contingent purchase consideration ~~charge~~of $0.5 million and ~~the reduction in the loss on marketable securities.~~other immaterial movements as discussed above.

Income Tax Provision

The income tax provision was a credit of approximately $0.01 million and a charge of approximately ~~$(0.2) million and a credit of approximately $0.3~~$(0.16) million for the three months ended ~~September 30,~~March 31, 2023 and 2022, respectively, a decrease of approximately $0.17 million or 106.6%. The income tax charge was $0.22 million and ~~2021,~~$0.24 million for the three months ended March 31, 2023 and 2022, respectively, a decrease of $0.02 million, and represents taxation on the profits in our European operations. The deferred tax credit was $0.23 million and $0.08 million for the three months ended March 31, 2023 and 2022, respectively, an increase of ~~approximately $0.5 million or 166.7%. The prior period credit was due~~$0.15 million. the increase is primarily related to ~~a reduction in profitability in our Multigioco and Odissea operations in~~deferred tax credits realized on capitalized platform development costs which reverse over the ~~third quarter~~life of the prior year resulting in reversal of the tax provision raised in the previous quarters. During the current period, the operations of Multigioco have improved substantially, resulting in an increase in the income tax provision.platform.

Net Loss

Net loss was approximately ~~$3.8~~$2.3 million and ~~$3.5~~$2.6 million for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively, ~~an increase~~a decrease of approximately $0.3 million or ~~8.6%~~10.2%, primarily due to the decrease in loss before income taxes ~~offset by~~and the ~~increase~~decrease in the income tax provision, as discussed above.

Comprehensive Loss

Our reporting currency is the U.S. dollar while the functional currency of our Italian, Maltese and Austrian subsidiaries is the Euro, the functional currency of our Canadian subsidiary is the Canadian dollar and the functional currency of our Colombian operation is the Colombian Peso. The financial statements of our subsidiaries are translated into United States dollars in accordance with ASC 830, using ~~year-end~~period-end rates of exchange for assets and liabilities, and average rates of exchange for the period for revenues, costs, and expenses and historical rates for equity. Translation adjustments resulting from the process of translating the local currency financial statements into U.S. dollars are included in determining other comprehensive income.

We recorded a foreign currency translation gain of approximately $0.09 million and a foreign currency translation loss of ~~approximately $0.4 million and $0.2~~$0.15 million for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, respectively, primarily due to~~respectively. During the ~~strengthening of~~current quarter the U.S. dollar weakened slightly against the year-end Euro ~~over both reporting periods.~~

~~Results of Operations for the nine months ended September 30, 2022~~closing rate and ~~the nine months ended September 30, 2021~~

~~Revenues~~

The following table represents disaggregated revenues from our gaming operations for the nine months ended September 30, 2022 and 2021. Net Gaming Revenues represents Turnover (also referred to as “Handle”), the total bets processed for the period, less customer winnings paid out, and taxes due to government authorities, while Service Revenues represents revenue invoiced for our Elys software service and royalties invoiced for the sale of virtual products.

Nine Months Ended
September 30, 2022 September 30, 2021 Increase (decrease) Percentage change
Turnover
Turnover web-based $ 565,785,709 $ 613,678,568 $ (47,892,859 ) (7.8 )%
Turnover land-based 6,528,054 13,237,738 (6,709,684 ) (50.7 )%
Total Turnover 572,313,763 626,916,306 (54,602,543 ) (8.7 )%

Winnings/Payouts
Winnings web-based 527,323,323 572,975,466 (45,652,143 ) (8.0 %
Winnings land-based 5,166,387 11,362,524 (6,196,137 ) (54.5 )%
Total Winnings/payouts 532,489,710 584,337,990 (51,848,280 ) (8.9 )%

Gross Gaming Revenues
Web-Based 38,462,386 40,703,102 (2,240,716 ) (5.5 )%
Land-Based 1,361,667 1,875,214 (513,547 ) (27.4 )%
39,824,053 42,578,316 (2,754,263 ) (6.5 )%

Less: ADM Gaming Taxes 9,671,040 9,129,881 541,159 (5.9 )%
Net Gaming Revenues 30,153,013 33,448,435 (3,295,422 ) (9.9 )%

Add: Service Revenues 2,022,002 428,924 1,593,078 371,4 %
Total Revenues $ 32,175,015 $ 33,877,359 $ (1,702,344 ) (5.0 )%

~~The change in turnover (handle) is primarily due to the following:~~

~~Web-based turnover~~

For the nine months ended September 30, 2022, all of our web-based turnover was generated by Multigioco after the closure of our Ulisse CTD operations in the second quarter of the prior year. As a result, Multigioco web-based turnover in Euro for the nine months ended September 30, 2022 increased €46.9 million or 9.7% compared to Ulisse turnover of €28.7 million in the prior period. The strengthening of the average U.S. dollar exchange rate against the Euro during the current year had an adverse foreign currency impact of approximately $67.2 million or 11.0% for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. Overall web-based turnover in Euro increased by €18.2 million from €512.8 million to €531.0 million or 3.5% for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021, however, our web-based turnover reported in U.S. dollars decreased by $47.9 million from $613.7 million to $565.8 million or 7.8%. The softening of COVID restrictions in Italy has also driven some web-based turnover to the land-based channel, and despite this effect, we managed to grow web-based turnover due to market share growth in Italy. The percentage of payouts on web-based turnover improved slightly to 93.2% from 93.4% for the nine months ended September 30, 2022 and 2021 respectively.

~~Land-based turnover~~

During the nine months ended September 30, 2022, we activated approximately 30 new land-based locations in Multigioco with recently acquired operating rights. As a result, Multigioco land-based turnover in Euro increased by €4.9 million, offsetting the decrease of €9.8 million in prior period turnover from Ulisse which was closed in the second quarter of the prior year. The strengthening of the average U.S. dollar exchange rate against the Euro during the current year had an adverse foreign currency impact of approximately $1.5 million or 11.0% for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. Overall, our land-based turnover in Euro decreased by €4.9 million from €11.0 million to €6.1 million or 44.6% for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021, however our land-based turnover in U.S. dollars decreased by $6.7 million from $13.2 million to $6.5 million or 50.7%. The softening of COVID restrictions during the current year resulted in more walk-in patrons frequenting our land-based locations and we expect this revenue to continue increasing as the remaining 70 land-based locations from our recently acquired operating rights are rolled out. The percentage of payouts on land-based turnover improved to 79.1% from 85.8% for the nine months ended September 30, 2022 and 2021 respectively.

The turnover mix impacts our Gross Gaming Revenue (“GGR”). Our turnover for the nine months ended September 30, 2022 is as follows: sports betting turnover represented 19.5% (September 30, 2021 – 22.7%); casino style games represented 79.7% (September 30, 2021 – 76.4%); and other was 0.8% (September 30, 2021 – 0.9%). The margin earned on our sports book averaged 17.9% (September 30, 2021 – 15.7%) and our casino style games averaged 4.4% (September 30, 2021 – 4.2%), resulting in a blended GGR of 7.0% (September 30, 2021 – 6.8%). The shift towards lower margin casino type products during the current period was offset by the higher margin earned on the sports book during the current period.

Gaming taxes increased by approximately $0.5 million or 5.9%. The relative rate of our gaming taxes, which is based on Gross Gaming Revenues was 24.3% and 21.1% for the nine months ended September 30, 2022 and 2021 respectively. The increase is attributable to the shift of our gaming business to Multigioco which has an average gaming tax of approximately 24.5% compared to Ulisse, which was discontinued in the prior year, ~~with a significantly lower tax rate due to its incorporation being situated outside of Italy.~~

~~The impact of the strengthening of~~ the U.S. dollar weakened against the Euro, ~~by approximately 11.0% during the nine months ended September 30, 2022, was approximately $3.7 million. The increase in GGR in Euro was~~ €~~0.4 million compared to a decrease in U.S. dollar GGR of $3.3 million.~~

Service revenues increased by approximately $1.6 million or 371.4%. This is primarily due to; (i) revenues generated by USB operations of approximately $0.8 million and (ii) a general increase in our other service-based revenues across our platform companies. This revenue remains insignificant to total revenues during the periods presented.

~~Selling expenses~~

We incurred selling expenses of approximately $24.0 million and $26.3 million for the nine months ended September 30, 2022 and 2021, respectively, a decrease of approximately $2.3 million or 8.8%. Selling expenses are commissions that are paid to our sales agents as a percentage of turnover (handle) and are not affected by the winnings that are paid out. Therefore, increases in turnover (handle), will typically result in increases in selling expenses but may not result in increases in overall revenue if winnings/payouts, that are subject to the unknown outcome of sports events that we have no control over, are very high. The percentage of selling expenses to turnover was 4.2% and 4.3% for the nine months ended September 30, 2022 and 2021, respectively.

~~General and Administrative Expenses~~

General and administrative expenses were approximately $15.6 million and $14.0 million for the nine months ended September 30, 2022 and 2021, respectively, an increase of approximately $1.6 million or 11.5%. The increase over the prior year is attributable to the following: (i) an increase in personnel costs of approximately $2.8 million, primarily due to the acquisition of USB in July 2021, resulting in ~~an increase~~the swing in ~~payroll costs of approximately $0.9 million; and~~ the increase in stock based compensation by approximately $2.0 million primarily due to the issuance of restricted stock to key management as an incentive for reducing operating expenditure in terms of our mandate and the periodic amortization expense of options granted to senior management during the second half of the prior year and the current period; (ii) an increase in depreciation and amortization expense of approximately $0.4 million primarily due to the amortization of intangibles on the acquisition of USB; (iii) offset by an exchange gain of approximately $0.4 million predominantly at corporate level, based on the strength of the U.S. dollar to the Euro during the current period; (iv) a decrease in professional fees of approximately $0.1 million, primarily due to reductions in legal fees incurred on licensing, acquisitions and corporate restructuring; (v) a reduction in investor relations expense of approximately $0.3 million and (vi) a decrease in platform and IT related services of approximately $0.5 million due to the restructuring of our Italian operations with the closure of Ulisse. The balance of the decrease of approximately $0.3 million consists of numerous individually insignificant expenses that have reduced in line with our mandate to reduce operating expenditure.

~~Restructuring and severance expenses~~

Restructuring and severance expenses was approximately $1.2 million and $0 for the nine months ended September 30, 2022 and 2021, respectively. As mentioned above, management has embarked on a cost reduction exercise, streamlining operations and eliminating duplicated effort wherever possible, ensuring that management is lean and efficient. We eliminated a senior role within the corporate office resulting in a severance expense of approximately $0.4 million and an acceleration of a non-cash stock based compensation charge of approximately $0.75 million, for an immediate vesting of options.

~~Loss from Operations~~

The loss from operations was approximately $8.6 million and $6.4 million for the nine months ended September 30, 2022 and 2021, respectively, an increase of approximately $2.2 million or 34.4%. The decrease in revenue of approximately $1.7 million, primarily due to the strength of the U.S. dollar against the euro, impacting revenue by approximately $3.7 million, the decrease in selling expenses of approximately $2.3 million, offset by the increase in general and administrative expenses of approximately $1.6 million, primarily due to restricted stock awarded to management for reducing operating expenditure in terms of our mandate, and the severance and restructuring expense of approximately $1.2 million.

~~Other income~~

Other income was approximately $0.09 million and $0.4 million for the nine months ended September 30, 2022 and 2021, respectively, a decrease of approximately $0.31 million or 77.5%. In the prior year, other income included a COVID tax credit of approximately $0.09 million received from the Agenzia delle Dogane e dei Monopoli (“ADM”) for taxes previously charged and approximately $0.2 million of COVID relief funds received by Ulisse during the prior period.

~~Other expense~~

Other expense was approximately $0.06 million and $0.03 million for the nine months ended September 30, 2022 and 2021, respectively, an increase of approximately $0.03 million or 100.0%. This amount is immaterial.

~~Interest Expense, Net of Interest Income~~

Interest expense was approximately $0.02 million and $0.01 million for the nine months ended September 30, 2022 and 2021, respectively, an increase of approximately $0.01 million or 100.0%. The increase is primarily due to interest calculated on funds advanced by Mr. Salerno to USB, which are subject to dispute.

~~Change in fair value of contingent purchase consideration~~

Change in fair value of contingent purchase consideration was approximately $1.4 million and $0.6 million for the nine months ended September 30, 2022 and 2021, respectively, an increase of approximately $0.8 million. The change in fair value of contingent purchase consideration is the accretion expense associated with the present value of contingent purchase consideration due on the acquisition of USB. The charge in the prior period represents accretion expense for three months, the current period represents a nine month period.

~~(Loss) gain on Marketable Securities~~

The gain on marketable securities was approximately $0.04 million and the loss on marketable securities was approximately $(0.3) million for the nine months ended September 30, 2022 and 2021, respectively, an increase of approximately $0.34 million or 113.3%. The losses and gains on marketable securities is directly related to the stock price of our investment in Zoompass which is marked-to-market each quarter. The shares in Zoompass were acquired by the Company as settlement of a litigation matter, we have no influence over the performance of Zoompass.

~~Loss Before Income Taxes~~

Loss before income taxes was approximately $10.0 million and $6.9 million for the nine months ended September 30, 2022 and 2021, respectively, an increase of approximately $3.1 million or 44.9%. The increase is primarily due to the severance and restructuring expense of approximately $1.2 million and the increase in payroll expenses, primarily related to non-cash restricted stock expense of approximately $1.6 million, refer to General and administrative expenses above.

~~Income Tax Provision~~

The income tax provision was a charge of approximately $(0.2) million and a credit of approximately $0.01 million for the nine months ended September 30, 2022 and 2021, an increase of approximately $0.21 million. The increase in income tax provision is due to the profitability of our Italian subsidiary, Multigioco during the current period.

~~Net Loss~~

Net loss was approximately $10.2 million and $6.9 million for the nine months ended September 30, 2022 and 2021, respectively, an increase of approximately $3.3 million or 47.8% due to the increase in loss before income taxes and the increase in income tax provision, discussed above.

~~Comprehensive Loss~~

Our reporting currency is the U.S. dollar while the functional currency of our Italian, Maltese and Austrian subsidiaries is the Euro, the functional currency of our Canadian subsidiary is the Canadian dollar and the functional currency of our Colombian operation is the Colombian Peso. The financial statements of our subsidiaries are translated into United States dollars in accordance with ASC 830, using year-end rates of exchange for assets and liabilities, and average rates of exchange for the period for revenues, costs, and expenses and historical rates for equity. Translation adjustments resulting from the process of translating the local currency financial statements into U.S. dollars are included in determining other comprehensive income.

~~We recorded a~~ foreign currency translation loss of approximately $0.9 million and $0.4 million for the nine months ended September 30, 2022 and 2021, respectively, primarily due to the strengthening of the U.S. dollar against the Euro during the current period. difference.

Liquidity and Capital Resources

Our principal cash requirements have included the funding of acquisitions, repayments of convertible debt and deferred purchase consideration, the purchase of plant and equipment, and working capital needs. Working capital needs generally result from expenses incurred in developing our gaming platform for the various markets we operate in and new markets we are developing as well as our intention to ~~aggressively expand into~~continue our expansion plans in the U.S. market.

We finance our business primarily though debt and equity placements and cash generated from operations. Our ability to generate sufficient cash flow from operations is dependent on the continued demand for our gaming services we offer to our customers through our ~~land based~~land-based and ~~web based~~web-based locations as well as the gaming platforms we license to third parties.

We finance our business to provide adequate funding for at least 12 months, based on forecasted ~~profitability~~operating results and working capital needs, and in the future, we anticipate that we would need to raise additional cash through equity or debt funding.

To date, we financed our business primarily ~~though~~through the issuance of debt and equity placements and cash generated from operations. WeRecently we have financed our business through convertible debt placements due to unfavorable equity market conditions, previously we financed our business from registered direct offerings and to a very limited extent, the sale of shares of our common stock pursuant to the terms of ~~the~~an Open Market Sales Agreement^SM that we entered into with Jefferies LLC on November 19, ~~2021, and a registered direct offering and concurrent private placement with an investor that closed on June 15, 2022.~~2021.

~~Between March 28, 2022 and April 13, 2022,~~On January 30, 2023, we ~~sold 168,016~~closed a convertible note funding for gross proceeds of $850,000, we issued warrants exercisable for 2,179,487 shares of common stock ~~for~~to the convertible note holders as part of the funding arrangement. The funding included gross proceeds of ~~$0.4 million, less brokerage fees~~$500,000 from related parties. Subsequent to March 31, 2023, on May 8, 2023, we raised an additional $1,500,000 of ~~$0.01 million pursuant to the Open Market Sales Agreement~~^SM ~~that we entered into~~convertible note funding from related parties with ~~Jefferies LLC on November 19, 2021.~~

~~On June 13, 2022, we entered into a~~ ~~Securities Purchase Agreement with a single investor (the “investor”) whereby we issued an aggregate of 2,625,000 shares of our common stock and Pre-Funded Warrants to purchase 541,227~~warrants exercisable for 3,138,075 shares of common stock in a registered direct offering, in addition we issued a warrant for 3,166,227 shares of common stock, exercisable at $0.9475 per share with a maturity date of December 15, 2027, to the Investor in a concurrent private placement. The registered direct offering and concurrent private placement closed on June 15, 2022. The gross proceeds from the offering were approximately $3.0 million and the net proceeds from the offering were approximately $2.6 million after deducting certain fees due to the Placement Agent and our estimated transaction expenses.stock.

Our ability to generate sufficient cash flow from operations is dependent on the continued demand for our gaming services we offer to our customers through our ~~land based~~land-based and ~~web based~~web-based locations as well as the gaming platforms we license to third parties.

Based on our forecasts, we believe that we will have to source additional funding through either debt or equity funding, if such debt or equity is available at terms that are acceptable to us, if at all, to continue executing on our growth plan and to continue operating for the next twelve months from the date of filing this report. We plan to continue our expansion plans in both the U.S. and Italian markets at a rate of growth that we believe is sustainable and achievable by us.

The ongoing COVID-19 pandemic has impacted our Italian based operations, we have seen a shift towards web-based turnover (Handle) from our land-based turnover with the permanent closure of our Ulisse betting shop locations. The percentage Hold or Gross Gaming Revenue generated from our turnover is typically lower on web-based business which generally favors more casino type gaming at lower margins, as discussed above.

Assets

At ~~September 30,~~March 31, 2023 and December 31, 2022, we had total assets of approximately ~~$42.6~~$24.3 million and ~~$44.6~~$21.4 million, ~~at December 31, 2021, a decrease~~respectively, an increase of ~~$2.0~~$2.9 million. The ~~decrease~~increase is primarily due to ~~a decrease~~an increase in ~~cash balances~~goodwill of ~~approximately $2.6~~$1.75 million ~~a decrease~~related to the acquisition of Engage IT on January 29, 2023, an increase in ~~gaming receivables~~property and equipment and intangibles of ~~approximately $1.3~~$1.0 million, offset by ~~an increase in prepaid expenditure~~depreciation expense of approximately ~~$2.0~~$0.3 million ~~primarily related to prepaid software development expenses for the U.S. market, the~~and an increase in right of use assets of ~~$0.7~~approximately $0.24 million, due to new vehicle lease agreements entered into and the right of use property related to the ~~new property leases entered into by Multigioco and the decrease in intangibles~~acquisition of ~~$1.2 million due to the amortization of these intangibles. The balance of the movement is made up of several individually insignificant asset movements.~~Engage IT.

Liabilities

At ~~September 30,~~March 31, 2023 and December 31, 2022, we had approximately ~~$28.4~~$16.2 million and ~~$26.8~~$14.2 million in total liabilities, ~~at December 31, 2021.~~respectively, an increase of $2.0 million. The increase ~~of $1.6 million~~ is primarily attributable to an increase in ~~contingent purchase consideration~~convertible notes payable of ~~$1.4~~a gross $0.8 million, ~~due to accretion expense related to the present value~~net of debt discount of ~~the contingent purchase consideration, an increase in operating lease liabilities of $0.7~~$$0.5 million, an increase ~~in equipment funding by related parties of $0.4 million and an increase in related party promissory notes of $0.3 million advanced by Mr. Salerno, offset by a decrease~~ in accounts payable and accrued liabilities of ~~approximately $1.6~~$1.5 million ~~primarily due~~and an increase in other long-term liabilities of $0.2 million related to statutory severance accruals included in the acquisition of Engage IT, offset by the reduction in related party payables of $0.3 million, in the prior period, prior to the ~~concerted effort~~acquisition of Engage IT, the balance owing by the Company to ~~reduce expenditure and the payment of several significant corporate legal bills during the current period~~Engage IT was recorded as a related party payable.

Working Capital

~~Working~~The working capital deficit was approximately ~~$0.5~~$5.2 million and ~~$1.5~~$3.9 million at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022, respectively.

Accumulated Deficit

~~As of September 30, 2022, we~~We had an accumulated deficit of ~~approximately $58.4~~$68.8 million ~~compared to accumulated deficit~~and $66.5 million as of ~~approximately $48.2 million at~~March 31, 2023 and December 31, ~~2021.~~2022, respectively.

Cash Flows from Operating Activities

Net cash used in operating activities was approximately ~~$4.6~~$0.2 million and ~~$5.3~~$0.4 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively, a decrease of approximately ~~$0.7 million.~~ $0.2 million or 50.0%.

The decrease in cash used in operating activities is primarily due to the increase in operating loss of approximately $3.3 million as discussed under results of operations above, offset by an increase in non-cash movements of approximately $3.8 million, primarily due to an increase in the movement in stock based compensation expense of approximately $1.1 million, including the accelerated amortization of stock options granted to a severed executive whose options vested immediately and the increase in restricted stock awards of $1.9 million for awards to management for reducing operating expenditure in terms of our mandate, the movement in the change in the fair value of contingent purchase consideration of approximately $0.8 million, due to the accretion expense expected on the USB earnout, and the increase in the movement of depreciation and amortization of approximately $0.4 million, primarily due the amortization of intangibles on the acquisition of USB.following:

A decrease in operating losses of approximately $0.3 million, as discussed under results of operations above;

an increase in the movement of changes in operating assets and liabilities of $0.6 million, primarily due to the following; (i) an increase in accounts payable and accrued liabilities of $1.2 million, primarily due to the timing of payments to our suppliers and vendors; (ii) a decrease in prepaid expenses of $0.5 million due to the capitalization of developments costs during the fourth quarter of the prior year and; (iii) an increase in gaming account liabilities of $0.4 million due to the timing of payments to our end customers; offset by; (iv) an increase in gaming accounts receivable of $1.2 million due to the timing of receipts from our gaming customers and an increase in other current assets of $0.4 million related to miscellaneous unused credits issued to our agents. The balance of the movement of $0.1 million is made up of the movement of other individually insignificant movements.

A decrease of $0.7 million in non-cash movements, primarily due to the following; (i) the change in fair value of contingent purchase consideration of $0.5 million, the contingent purchase consideration was impaired during December 2022 as we believe that the US Bookmaking sellers will not reach their earnout targets; (ii) a reduction in the movement of share based compensation of $0.2 million, in the prior year as certain salaries owed to our chairman was paid in shares of common stock and during the current year restricted shares were issued to six IT related individuals as a retention incentive; deferred tax movements was $0.15 million, primarily due to deferred taxation on platform costs capitalized and (iv) a reduction in the movement of depreciation and amortization of $0.1 million due to the impairment of certain long-lived intangibles related to US Bookmaking in the prior year, offset by; (v) the movement in unrealized losses on marketable securities of $0.97 million.

Cash Flows from Investing Activities

Net cash used in investing activities for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022 was ~~approximately $0.4~~$0.9 million ~~compared~~and $0.1 million, an increase of $0.8 million. The increase is primarily due to ~~net cash used in investing activities~~the capitalization of ~~approximately $6.1~~platform development expenses of $0.5 million ~~for the nine months ended September 30, 2021. In the prior period we made an~~ ~~initial net cash payment on~~and the acquisition of ~~USB~~computer software to support the Multigioco operations of ~~$6.0~~$0.4 million. ~~During the current period we invested funds in computer related software and hardware predominantly for the U.S. based expansion strategy.~~

On January 29, 2023, we acquired Engage IT, by issuing 3,018,461 shares of common stock valued at $1,735,615, included in the assets acquired was cash of $0.094 million.

Cash Flows from Financing Activities

Net cash provided by financing activities for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022 was ~~approximately $3.7~~$0.85 million ~~compared to approximately $2.9~~and $0.1 million, ~~for the nine months ended September 30, 2022. In~~an increase of $0.75 million. During the current period, ~~a net amount of~~we raised $0.85 million from convertible note funding to support the operations, in the prior year, we raised approximately ~~$3.1~~$0.13 million ~~was raised from a registered direct offering discussed above, after broker fees and expenses of approximately $0.4 million, and a further, approximately $0.25 million was raised~~ from ATM sales we also raised approximately $0.4 million to fund equipment purchases required for expansion into the Ohio market and a further $0.3 million was provided by Mr. Salerno to fund the USB operation. In the prior year net cash provided by financing activities consisted primarily of ~~net proceeds of approximately $4.0 million raised from the exercise of warrants related to the underwritten public offering in August 2020,~~our common stock, offset by the repayment of ~~the~~ bank ~~letter~~loans of ~~credit of approximately $0.5 million and the payment of deferred purchase consideration of approximately $0.4~~$0.03 million.

Contractual Obligations

~~Current accounting standards require disclosure~~Contractual obligations consist of ~~material obligations and~~the certain short term funding commitments to ~~make future payments under contracts, such~~acquire kiosks, and operating and finance lease obligations as ~~debt, lease agreements, and purchase obligations.~~disclosed in the noes to the financial statements.

~~The amount~~We do not believe that we have any obligations for contingent purchase consideration based on our assessment of ~~future minimum lease payments under finance leases are as follows:~~US Bookmaking’s ability to reach the pre-set earnout targets.

Amount

Remainder of 2022 $ 1,810
2023 6,068
2024 704
8,582

~~The amount of future minimum lease payments under operating leases are as follows:~~

Amount

Remainder of 2022 $ 92,278
2023 334,306
2024 267,418
2025 242,980
2026 and thereafter 424,226
1,361,208

Off-Balance-Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources that we expect to be material to investors. We do not have any non-consolidated, special-purpose entities.

Related Party Transactions

~~Deferred Purchase consideration,~~Promissory notes payable – Related ~~Party~~Parties

~~During the first and second quarter of the prior year, we paid the remaining balance of €312,500 (approximately $385,121) to related parties in terms of the Virtual Generation promissory note.~~

The movement on ~~deferred purchase consideration~~promissory notes payable – Related Parties, consists of the following:

December 31, 2021
Principal Outstanding
Promissory notes due to related parties $ 382,128
Repayment in cash (385,121 )
Foreign exchange movements 2,993
—
Present value discount on future payments
Present value discount (5,174 )
Amortization 5,133
Foreign exchange movements 41
—
Deferred purchase consideration, net

	March 31, 2023		December 31, 2022
Principal outstanding
Opening balance	$	715,000	$	50,000
Loans advanced – Braydon Capital Corp		—		360,000
Loans advanced – Victor Salerno		—		305,000
Closing balance		715,000		715,000

Accrued Interest
Opening balance		37,000		1,878
Accrued interest		17,523		35,122
Closing balance		54,523		37,000

Total	$	769,523	$	752,000

~~Equipment loan - Related Party~~

Convertible notes payable – Related parties

On ~~September 26, 2022,~~January 30, 2023, the Company ~~entered into an equipment loan agreement with~~issued convertible notes payable, as disclosed under note 12 above. Braydon Capital ~~Corp,~~subscribed for ~~the principal sum of~~ $500,000 of which an initial advance of $360,000 was received. The loan bears interest at 9% per annum, compounded monthly and is repayable on October 31, 2022. The loan agreement also provides for additional compensation to the ~~lender of 1% of the gross income received from equipment funded by this loan, capped at 2% of the principal sum advanced.~~

convertible notes, Braydon Capital ~~Corp~~ is ~~managed~~owned by Mr. Claudio Ciavarella, the ~~bother~~brother of ~~the~~our Chairman ~~of the Board.~~and interim CEO.

~~The movement on the equipment loan - Related Party,~~Convertible notes payable – related party, consists of the following:

September 30,
2022
Opening balance —
Loan advanced $ 360,000
Loan repayments —
Interest accrued 355
Closing balance $ 360,355

	March 31, 2023
Principal outstanding
Opening balance	$	—
Advances to the Company		500,000
Closing balance		500,000

Accrued Interest
Opening balance		—
Accrued interest		10,000
Closing balance		10,000

Debt Discount
Opening balance		—
Debt discount on valuation of warrants		(285,836	)
Amortization of debt discount		10,329
		(275,507	)

Total	$	234,493

Related Party (Payables) Receivables

Related party payables and receivables represent non-interest-bearing (payables) receivables that are due on demand.

The balances outstanding are as follows:

September 30,
2022 December 31,
2021
Related Party payables
Luca Pasquini $ (161 ) $ (502 )
Victor Salerno (374,346 ) (51,878 )
$ (374,507 ) $ (52,380 )

Related Party Receivables
Luca Pasquini $ — $ 1,413

	March 31, 2023			December 31, 2022
Related Party payable
Engage IT Services, Srl	$	—		$	(406,467	)
Luca Pasquini		(130,468	)		(459	)
Michele Ciavarella		(16,468	)		(15,203	)
	$	(143,936	)	$	(422,129	)

Related Party Receivable
Victor Salerno	$	22,511		$	22,511
	$	22,511		$	22,511

44Engage IT Services, Srl

The Company acquired Engage IT with effect from January 29, 2023. Engage IT performed software development work for the Company's wholly owned subsidiary, Gameboard. As of December 31, 2022, Gameboard owed Engage IT $406,467 for development work performed. The intercompany balance eliminates on consolidation for the three months ended March 31, 2023.

Luca Pasquini

On January 31, 2019, the Company acquired Virtual Generation for €4,000,000 (approximately $4,576,352), Mr. Pasquini, who at the time of acquisition was an executive officer and director of the Corporation, was a 20% owner of Virtual Generation and was due gross proceeds of €800,000 (approximately $915,270). The gross proceeds of €800,000 was to be settled by a payment in cash of €500,000 over a twelve month period and by the issuance of common stock valued at €300,000 over an eighteen month period. As of June 30, 2021, the Company has paid Mr. Pasquini the full cash amount of €500,000 (approximately $604,380) and issued 112,521 shares valued at €300,000 (approximately $334,791).

~~On January 22, 2021, the Company issued Mr. Pasquini 44,968 shares of common stock valued at $257,217, in settlement of accrued compensation due to him.~~

On July 11, 2021, the Company entered into an agreement with Engage IT Services Srl.("Engage"), to provide gaming software and maintenance and support of the system, the total contract price was €390,000 (approximately $459,572), in addition, on October 14, 2021, the Company entered into a further agreement with Engage, to provide gaming software and maintenance and support of the system for a period of 12 months, the total contract price was €1,980,000 (approximately $2,192,000). Mr. Pasquini owns 34% of Engage

On September 26, 2022, Mr. Pasquini was awarded 500,000 restricted shares of common stock valued at ~~$226,750.~~

~~Michele Ciavarella~~

~~Mr. Ciavarella,~~$226,800 for services rendered to the Company’s Executive Chairman of the Board, agreed to receive $140,000 of his 2021 fiscal year compensation as a restricted stock award, on January 22, 2021, the Company issued Mr. Ciavarella 24,476 shares of common stock valued at $140,000 on the date of issue.Company.

On January ~~22, 2021,~~29, 2023, the Company ~~issued~~acquired Engage IT. Mr. ~~Ciavarella 175,396~~Pasquini owned 34% of Engage IT prior to the acquisition. The purchase price was settled by the issuance of common stock, of which Mr. Pasquini received 1,026,277 shares of common stock, ~~valued at $1,003,265,~~which resulted in ~~settlement~~him becoming an effective 5.7% shareholder of ~~accrued compensation due to him.~~the Company.

~~Mr.~~Michele Ciavarella agreed to receive his 2021 bonus and a portion of his 2022 salary as a restricted stock award. On January 7, 2022, the Company issued Mr. Ciavarella 162,835 shares of common stock valued at $425,000 on the date of issue.

On September 26, 2022, Mr. Ciavarella was awarded 300,000 restricted shares of common stock valued at $136,080 for services rendered to the Company.

Carlo Reali

On January 5, 2022, the Company promoted Carlo Reali to the role of Interim Chief Financial Officer.

On March 29, 2022, the Company issued Mr. Reali ten-year options exercisable for 100,000 shares of common stock, at an exercise price of $2.50 per share, vesting equally over a ~~4 year~~4-year period commencing on January 1, 2023.

The Company does not have a formal employment ~~or other compensation related agreement~~ with Mr. ~~Reali; however,~~Reali and awarded him €40,000 (approximately $42,930) as compensation for the Interim Chief Financial Officer role; Mr. Reali will continue to receive the ~~same~~ compensation that he currently receives which is an annual base salary of ~~€76,631~~€76,632 (approximately ~~$83,847)~~$82,244).

On September 26, 2022, Mr. Reali was awarded 200,000 restricted shares of common stock valued at $90,720 for services rendered to the ~~Company..~~Company.

Victor Salerno

On July 15, 2021 the Company consummated the acquisition of USB and in terms of the Purchase Agreement the Company acquired 100% of USB, from its members (the “Sellers”). Mr. Salerno was a 68% owner of USB and received $4,080,000 of the $6,000,000 paid in cash upon closing and 860,760 of the 1,265,823 shares of common stock issued on closing.

~~On September 13, 2021, the Board appointed Mr. Salerno, the President and founder of the Company’s newly acquired subsidiary, USB, to serve as a member of the Board.~~

Prior to the acquisition of ~~USB, Mr.~~US Bookmaking, Victor Salerno had advanced ~~USB $100,000~~US Bookmaking $100,000 of which $50,000 was forgiven and the remaining $50,000 is still owing to Mr. Salerno, which amount earns interest at 8% per annum, compounded monthly and is repayable on ~~December 31, 2023.~~ October 1, 2022.

Between February 23, 2022 and September 22, 2022, Mr. Salerno advanced ~~USB a total of~~US Bookmaking an additional $305,000 in terms of purported promissory notes, bearing interest at 10% per annum and repayable between June 30, 2022 and November 30, 2022. These purported promissory notes contain a default clause whereby any unpaid principal would attract an additional 25% ~~penalty.~~penalty and additional interest of 5% per annum. These notes were advanced to ~~USB~~ US Bookmaking without the consent of the Company, which is required as per the terms of the Members Interest Purchase Agreement entered into on July 15, 2021. Therefore, the Company acknowledges the advance of funds to ~~USB~~ US Bookmaking by Mr. Salerno, however the terms of the advance and the default penalty have not been accepted and are subject to negotiation or dispute. As of ~~September 30, 2022,~~March 31, 2023, these notes remain outstanding, interest has been accrued on these notes, however we intend to dispute the validity of these notes and have accordingly not repaid them or accrued penalty interest in terms of these ~~disputed~~ notes.

On January 23, 2023, Mr. Salerno voluntarily resigned as a member of the Board.

Paul Sallwasser

On ~~September 13, 2021,~~February 14, 2023, the Company granted Mr. Sallwasser ~~ten year~~ten-year options exercisable for ~~21,300~~154,132 shares of common stock at an exercise price of ~~$5.10,~~$0.89 per share, of which 77,254 vested immediately and the remaining 76,878 vesting equally over a ~~twelve~~ten- month period commencing on ~~September 13, 2021.~~March 1, 2023.

Steven Shallcross

On ~~January 22, 2021, the Company issued to Mr. Shallcross, a director of the Company, 5,245 shares of common stock valued at $30,000, in settlement of directors’ fees due to him.~~

~~On September 13, 2021,~~February 14, 2023, the Company granted Mr. Shallcross ~~ten year~~ten-year options exercisable for ~~13,600~~131,631 shares of common stock at an exercise price of ~~$5.10,~~$0.89 per share, of which 54,753 vested immediately and the remaining 76,878 vesting equally over a ~~twelve~~ten- month period commencing on ~~September 13, 2021.~~March 1, 2023.

Andrea Mandel-Mantello

~~On September 13, 2021,~~February 14, 2023, the Company granted Mr. Mandel-Mantello ~~ten year~~ten-year options exercisable for ~~13,600~~131,631 shares of common stock at an exercise price of ~~$5.10,~~$0.89 per share, of which 54,753 vested immediately and the remaining 76,878 vesting equally over a ~~twelve month~~ten-month period commencing on ~~September 13, 2021.~~March 1, 2023.

46 On February 14, 2023, the Company issued Mr. Mandel-Mantello 44,944 shares of common stock valued at $40,000 from the 2018 equity incentive plan in lieu of 2022 cash directors fees owing to Mr. Mandel-Mantello.

Aiden Ciavarella

The Company recently employed Aiden Ciavarella to train as part of our U.S. project management and risk management team lead. Aiden earns an annual salary of $75,000. there is no formal employment agreement with Aiden who is the son of our chairman and interim CEO, Michele Ciavarella.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

Elys Game Technology, Corp is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information required under this item.

Item 4. Controls and Procedures.

Management's Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, that are designed to ensure that information required to be disclosed in our reports under the Exchange Act, is recorded, processed, summarized and reported within the time periods required under the SEC's rules and forms and that the information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow for timely decisions regarding required disclosure.

As required by SEC Rule 13a-15(b), our management, under the supervision and with the participation of our Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer), carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of ~~September 30, 2022.~~March 31, 2023. Based on the foregoing evaluation, our Chief Executive Officer (principal executive officer) and our Chief Financial Officer (principal financial officer), concluded that due to our limited resources our disclosure controls and procedures were not effective. Specifically, our internal control over financial reporting was not effective due to material weaknesses related to a limited segregation of duties due to our limited resources and the small number of employees. Management has determined that this control deficiency constitutes a material weakness which can result in material misstatements of significant accounts and disclosures that would result in a material misstatement to our interim or annual financial statements that would not be prevented or detected. In addition, due to limited staffing, we are not always able to detect minor errors or omissions in reporting.

Management has increased its number of staff in accounting functions and currently has a consulting agreement with a seasoned financial expert who, together with senior management will ensure that: (i) a formal accounting policy framework is put in place; (ii) policies and procedures are implemented to ensure that all significant accounting, legal, regulatory and risk management procedures are adequately documented and communicated effectively to all management and staff, as appropriate; and (iii) an approval framework will be implemented and adequately documented to ensure that management responsible for financial reporting is aware of all material aspects of the business that may impact financial reporting.

Changes in Internal Control Over Financial Reporting

There were no further changes made to our available personnel during the three months ended ~~September 30, 2022,~~March 31, 2023, we continue to address our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) over the next 12 to 24 months. These changes included assigning clear tasks to an outside consultant that occurred during the previous quarter and is reasonably likely to materially affect our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

On ~~August 1, 2019,~~November 14, 2022, the Company held a mediation with Messrs. Salerno, Kocienski and Walker. There was no agreed upon outcome at the mediation. On November 17, 2022, the Company (“Plaintiff”) filed suit in the District Court, Clark County, Nevada, Case No. A-22-861452-B against Victor J. Salerno and Robert Kocienski, as “Sellers Representatives” and Robert Walker, John F. Kocienski, Farrell Drozd, William M. Bigelow, Edwin Spaunhurst, Louis Anthony Defilippis and Pennie Bigelow, as “Sellers” together with the Sellers Representatives (collectively the “Defendants”), for Breach of Contract, Breach of Implied Covenant of Good Faith and Fair Dealing, Breach of Fiduciary Duty, Fraudulent Misrepresentation and Inducement, Business Disparagement, Conversion, and Unjust Enrichment. The Company seeks judgment against Defendants for: damages caused by Defendants in an ~~action was~~amount in excess of $15,000 for each claim for relief; exemplary and punitive damages in an amount no less than three times the amount awarded to Plaintiff for compensatory damages; pre-judgment and post-judgment interest as provided by law; an award of attorney’s fees and costs as special damages; an award of Plaintiff’s costs, disbursements, and attorney’s fees incurred in the action; and for such other and further relief as the Court may deem just and proper. On December 5, 2022, the Defendants filed an Answer and Counterclaim wherein they asserted counterclaims against the Company ~~by Elizabeth J. MacLean, the Company’s former CFO,~~for Breach of Contract, Breach of Implied Covenant of Good Faith and Fair Dealing, Negligent, Misrepresentation, Intentional/Fraudulent Misrepresentation, and Intentional Interference with Contract. The Company and Defendants are currently engaged in the Superior Court of Arizona, Maricopa County (the “Arizona Court”), Case No. C2019-008383. The action challenged the Company’s termination of Ms. MacLean’s employment in May 2019 as unlawful under her employment agreement, dated September 19, 2018, withdiscovery and the Company ~~and seeks damages in~~is vigorously disputing the ~~amount of $1,050,204. On October 10, 2019, a default judgment was filed in~~counterclaims asserted by the Arizona Court. On November 4, 2019, the Company filed a motion to set aside the default judgment based on, among other things, the failure by plaintiff’s counsel to follow the notice provisions of Arizona law which led to the default judgment. On January 29, 2020, the Arizona Court ruled in favor of the Company to set aside the default judgement. On March 16, 2021, the Arizona Court of Appeals denied Ms. MacLean’s appeal of the trial court’s decision to set aside a default judgement previously obtained by Ms. MacLean and has awarded costs to the Company, which Ms. MacLean contested. On August 12, 2022, the Company and Ms. McLean entered into a Settlement Agreement and Mutual Release pursuant to which the Company paid the amount provided for of $51,569, as such, the matter is definitively concluded.Defendants.

On ~~July 20,~~December 2, 2022, ~~the Company received notice that on July 17, 2022,~~Messrs. Salerno, Kocienski, Walker, and J. Salerno (“Plaintiffs”) commenced an action ~~was commenced~~against Bookmakers Company US, LLC, dba US Bookmaking in the Eighth Judicial District Court, Clark County, Nevada, Case No. ~~A-22-855524-B, by Victor J. Salerno, Robert Kocienski~~A-22-862001-C. Plaintiffs asserted claims for Breach of Contract, Failure to Repay Promissory Note, Unjust Enrichment, and ~~Robert Walker (“Plaintiffs”),~~Breach of Covenant of Good Faith and Fair Dealing. Plaintiffs seek damages against ~~the Company and~~ Bookmakers Company US, LLC ~~d/b/a USBookmaking (“USB,”~~in an amount in excess of $15,000 and ~~together with~~various other forms of relief. The Company, only on behalf of its subsidiary US Bookmaking, answered the complaint and asserted counterclaims for Breach of Fiduciary Duty, Breach of Loyalty, Breach of Contract, Breach of Implied Covenant of Good Faith and Fair Dealing, Equitable Indemnification, and Contribution. The parties are currently engaged in discovery and the Company, ~~collectively “Defendants”). Plaintiffs’~~on behalf of US Bookmaking, is vigorously disputing the claims ~~against~~asserted by the ~~Company relate~~Plaintiffs.

From time to ~~the Membership Interest Purchase Agreement, dated July 5, 2021, pursuant to~~time, we may become involved in various lawsuits and legal proceedings, which ~~Plaintiffs sold their membership interests in USB to the Company. Plaintiffs’ claims for relief asserted~~arise in the ~~complaint include, without limitation, breach~~ordinary course of ~~contract, breach~~business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are not presently a party to and currently are not aware of implied covenants, intentional interference with contract and negligent misrepresentation. Plaintiffs seek a judgment for damages against the Company, including punitive damages, as well as declaratory relief against both the Company and USB. The Company believes theany legal proceedings or claims ~~made by Plaintiff’s against the Defendants are completely without merit and intends to vigorously defend against the claims.~~

On September 29, 2022, the Eighth Judicial District Court denied the Plaintiffs motion for preliminary injunction and on September 30, 2022, the Plaintiff’s filed a notice of voluntary dismissal without prejudice. Wethat will have, ~~set a preliminary mediation date of November 14, 2022.~~

In addition, we received a letter from new attorneys representing Mr. R Kocienski, Mr. V Salerno, Mr. J Salerno and Mr. R Walker for unpaid salaries in terms of their employment agreements for the period ended October 16, 2022individually or in the ~~amount of $75,000 each, totaling $300,000. This is expected to be addressed as part of the mediation.~~aggregate, a material adverse effect on our business, financial condition or operating results.

Item 1A. Risk Factors.

Investing in our common stock involves a high degree of risk. You should consider carefully the following risks, together with all the other information in this Form 10-Q, including our condensed consolidated financial statements and notes thereto. If any of the following risks actually materializes, our operating results, financial condition and liquidity could be materially adversely affected. As a result, the trading price of our common stock could decline and you could lose part or all of your investment. The following information updates, and should be read in conjunction with, the information disclosed in Part I, Item1A, “Risk Factors,” contained in our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022. Except as disclosed below, there have been no material changes from the risk factors disclosed in our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

Risks related to our financial position

~~Because we have a limited operating history, we may not be able to successfully manage our business or achieve profitability.~~

We have a limited operating history with respect to our gaming operations upon which you can evaluate our prospects and our potential value. We began our gaming operations in 2014, when we completed the acquisition of Multigioco, a corporation organized under the laws of the Republic of Italy, which is now our wholly owned subsidiary and was granted its ADM Comunitaria GAD (Online Gaming) license on July 4, 2012. As a result of the acquisition of Multigioco, our principal business became a licensed leisure gaming operator offering web-based and land-based sports betting, lottery and gaming products for our customers. The subsidiary that owns our Platform, Odissea, was acquired by us along with our Austrian bookmaker subsidiary, Ulisse in June 2016. In January 2019, we acquired Virtual Generation, a company that owns and has developed a virtual gaming software platform and we acquired USB in July 2021. In addition, we commenced processing sports bets in the U.S. on a B2B basis in Washington D.C. in October 2021. Therefore, it is difficult to evaluate our business. If we cannot successfully manage our business, we may not be able to generate future profits and may not be able to support our operations.

The likelihood of our success and performance must be considered in light of the expenses, complications and delays frequently encountered in connection with the establishment and expansion of new business and the highly competitive environment in which we operate.

We have incurred substantial losses in the past and it may be difficult to achieve profitability.

We have a history of losses and ~~are anticipated to~~we anticipate that we will incur additional losses in the development of our business. For the ~~year~~three months ended ~~December~~March 31, ~~2021,~~2023 we had a net loss of ~~$15.1~~$2.3 million and for the year ended December 31, 2022 we had a net loss of $18.3 million, after an intangible impairment charge of ~~$17.4~~$20.6 million and a revised contingent purchase consideration credit of ~~$11.9 million and a net loss of $10.2 million for the nine months ended September 30, 2022. As of September 30, 2022 and December 31, 2021 we~~$12.9 million. We had accumulated deficits of ~~$58.4~~$68.8 million and ~~$48.2~~$66.5 million for the periods ended March 31, 2023 and December 31, 2022, respectively. Since we are currently in the early stages of our development and strategy, we intend to continue to invest in sales and marketing, product and solution development and operations, including the hiring of additional personnel, upgrading our technology and infrastructure and expanding into new geographical markets. Even if we are successful in increasing our customer base, we expect to also incur increased losses in the short term. Costs associated with entering new markets, acquiring clients, customers and operators are generally incurred up front, while service and transactional revenues are generally recognized at future dates if at all. Our efforts to grow our business may be more costly than we expect, and we may not be able to increase our revenues enough to offset our higher operating expenses. We may incur significant losses in the future for a number of reasons, including the other risks described in this section, and unforeseen expenses, difficulties, complications and delays and other unknown events. If we are unable to achieve and sustain profitability, the value of our business and common stock may significantly decrease.

We have material weaknesses and other deficiencies in our internal control and accounting procedures.

Section 404 of Sarbanes-Oxley requires annual management assessments of the effectiveness of our internal control over financial reporting. Our management assessed the effectiveness of our disclosure controls and procedures as of December 31, ~~2021~~2022 and as of ~~September 30, 2022~~March 31, 2023 and concluded that we had a material weakness in our internal controls due to our limited resources and therefore our disclosure controls and procedures are not effective in providing material information required to be included in our periodic SEC filings on a timely basis and to ensure that information required to be disclosed in our periodic SEC filings is accumulated and communicated to our management to allow timely decisions regarding required disclosure about our internal control over financial reporting. More specifically, our internal control over financial reporting was not effective due to material weaknesses related to a segregation of duties due to our limited resources and small number of employees. Due to limited staffing, we are not always able to detect minor errors or omissions in financial reporting. If we fail to comply with the rules under Sarbanes-Oxley related to disclosure controls and procedures in the future, or, if we continue to have material weaknesses and other deficiencies in our internal control and accounting procedures and disclosure controls and procedures, our stock price could decline significantly and raising capital could be more difficult. If additional material weaknesses or significant deficiencies are discovered or if we otherwise fail to address the adequacy of our internal control and disclosure controls and procedures our business may be harmed. Moreover, effective internal controls are necessary for us to produce reliable financial reports and are important to helping prevent financial fraud. If we cannot provide reliable financial reports or prevent fraud, our business and operating results could be harmed, investors could lose confidence in our reported financial information, and the trading price of our securities could drop significantly.

Risks Related to our Business

~~Changes in general economic conditions, geopolitical conditions, domestic~~Our research and ~~foreign trade policies, monetary policies~~development efforts are costly and ~~other factors beyond our control~~subject to international risks and may ~~adversely impact our business and operating results.~~not contribute significantly to revenues for several years, if at all.

~~Our operations~~In order to remain competitive, we must continue to invest in research and ~~performance depend~~development. During the three months ended March 31, 2023 and 2022, we spent approximately $0.3 million and $0.3 million for research and development and during the years ended December 31, 2022 and 2021, we spent approximately $1.1 million and $2.0 million for research and development, respectively, this R&D is mainly compromised of salary and wages at Odissea our platform supply company and a third party vendor, Engage IT, which the Company acquired subsequent to the date of this report on ~~global, regional~~January 29, 2023. This company is creating a custom-made platform for us. We have made and ~~U.S. economic~~continue to make significant investments in development and geopolitical conditions. Russia’s invasion and military attacks on Ukraine have triggered significant sanctions from U.S. and European leaders. Resulting changes in U.S. trade policy and European policies could trigger retaliatory actions by Russia, its allies and other affected countries, including China, resulting in a “trade war.” Furthermore, if the conflict between Russia and Ukraine continues for a long period of time, or if other countries, including the U.S., become further involved in the conflict, we could face significant adverse effects to our business and financial condition. Although we have not experienced any material adverse effects on its business due to increasing inflation, it has raised operating costs for many businesses and, in the future, could impact demand for our services foreign exchange rates or employee wages. We are actively monitoring the effects these disruptions and increasing inflation could have on its operations.

The above factors, including a number of other economic and geopolitical factors both in the U.S. and abroad, could ultimately have material adverse effects on our business, financial condition, results of operations or cash flows, including the following:

~~effects of significant changes in economic, monetary and fiscal policies in the U.S. and abroad including currency fluctuations, inflationary pressures and significant income tax changes;~~

~~a global or regional economic slowdown in any of our market segments;~~

~~changes in government policies and regulations affecting the Company or its significant customers;~~

~~industrial policies in various countries that favor domestic industries over multinationals or that restrict foreign companies altogether;~~

~~new or stricter trade policies and tariffs enacted by countries, such as China, in response to changes in U.S. trade policies and tariffs;~~

~~postponement of spending, in response to tighter credit, financial market volatility and other factors;~~

~~rapid material escalation of the cost of regulatory compliance and litigation;~~

~~difficulties protecting intellectual property;~~

~~longer payment cycles;~~

~~credit risks and other challenges in collecting accounts receivable; and~~

~~the impact of each of the foregoing on outsourcing and procurement arrangements~~.

~~USB has had limited operations to date.~~

USB has had limited operations to date. USB is subject to many of the risks common to an entity in operations for only a short number of years, including its ability to implement its business plan, market acceptance of its proposed business and products, under-capitalization, cash shortages, limitations with respect to personnel, financing and other resources, competition from better funded and experienced companies, and uncertainty of its ability to generate revenues. There is no assurance that its activities will be successful or will result in any revenues or profit, and the likelihood of its success must be considered in light of the stage of its development. Even if it generates revenue, there can be no assurance that it will be profitable. In addition, no assurance can be given that it will be able to consummate its business strategy and plans, as described herein, or that financial, technological, market, or other limitations may force it to modify, alter, significantly delay, or significantly impede the implementation of such plans, including due to COVID-19.

~~If our acquired intangible assets become impaired, we may be required to record a significant charge to earnings.~~

We regularly review acquired intangible assets for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable. We test goodwill and indefinite-lived intangible assets for impairment at least annually. Factors that may be considered a change in circumstances, indicating that the carrying value of the intangible assets may not be recoverable, include: macroeconomic conditions,related opportunities, such as ~~deterioration in general economic conditions; industry~~our acquisition of US Bookmaking and ~~market considerations, such as deterioration in the environment in which we operate; cost factors, such as increases in labor or other costs that have a negative effect on earnings~~Engage IT, and cash flows; our financial performance, such as negative or declining cash flows or a decline in actual or planned revenue or earnings compared with actual and projected results of relevant prior periods; other relevant entity-specific events, such as changes in management, key personnel, strategy, or customers; and sustained decreases in share price.

We are currently in dispute with the executive management of USB and will enter into a process of mediation with them, if the outcome of the mediation process is not favorable, we may seek relief from the courts, thisthese investments could ~~impact on our decision to continue operations in this entity which would impact on the carrying value of intangible assets, including goodwill.~~

~~We have and may in the future become the subject of Italian federal and provincial investigations and our business may be adversely affected.~~

~~A governmental investigation or criminal trial could divert our management’s attention, result in significant expenses, forfeiture of our licenses, as well as result in negative publicity and~~ adversely affect our business. Both Italian federal and provincial government agencies have heightened and coordinated civil and criminal enforcement efforts as part of numerous ongoing national investigations to detect and prevent anti-money laundering and the misuse of licenses issuedoperating results if not offset by ~~state authorities~~increases in revenues. However, we may not receive significant revenue from these investments for banking, money transfer, gaming and other such businesses. A national probe conducted by Guardia di Finanza (the Italian tax police) known as Operation Fantascommesse (Phantom Bet), has targeted for investigation several online licensed gaming operators in Italy for alleged gaming law violations, including the Company and certain members of its senior management that reside and work in Italy. These investigations could lead to criminal proceedings against both licensed businesses and its management because European corporations impose individual responsibility on the legal representatives of each company. In this regard, certain third-party webshop owners have been accused of violations of Italian gaming or tax laws for inappropriate land-based wagering via an online channel. Based thereon, a similar accusation towards the Company was reported to the ADM, the Italian regulatory authority. The ADM completed its inspection of the Company’s operations and Platform and determined that the Platform performed in compliance with the ADM certification requirements. Although no action has been taken by the ADM, there can be no assurance that any action,years, if any, will not be taken in the future. Due to their positions as the legal representatives of the subsidiary, two senior officers of our Italian subsidiary, have been investigated for and are now believed by the Italian tax police to have criminal legal responsibility for, gaming law violations based on the alleged actions performed at webshops. No charges have been brought against the Company, its senior officers or our Italian subsidiary, and we intend to vigorously defend our two senior officers from any claim or criminal proceeding that may be commenced against them on the basis that they acted improperly in any way or should be personally responsible. We expect that the matter will come before an Italian judge in the next few months for a preliminary hearing to determine whether criminal indictment is warranted and if court proceedings should commence. At the hearing, the judge can dismiss the matter, settle the matter or it can decide to send the matter to a criminal trial to be decided by a jury of trial judges. There can be no assurance that our two senior officers will be successful. If unsuccessful, we could incur significant legal expenses and could be forced to terminate the employment of such officers with whom we are dependent.all.

~~Risks Related to our Common Stock~~

We50

Further, our competitors may ~~not be able~~expend a greater amount of funds on their research and development programs. Our failure to ~~meet~~maintain adequate research and development resources or to compete effectively with the ~~continued listing requirements for the NASDAQ Stock Market. If our common stock is delisted from the NASDAQ Stock Market, our stock price could be adversely affected~~research and ~~the liquidity~~development programs of our ~~stock~~competitors could materially and ~~our ability to obtain financing could be impaired.~~

Our common stock is currently listed on the NASDAQ Capital Market. If we fail to satisfy the continued listing requirements of The Nasdaq Capital Market, such as the corporate governance requirements, minimum bid price requirement or the minimum stockholder’s equity requirement, The Nasdaq Capital Market may take steps to de-list our common stock. On July 25, 2022, we received a NASDAQ Staff Determination letter notifying us that for the preceding 30 consecutive business days we were not in compliance with the requirement that our common stock maintain a minimum bid price of $1.00 per share.

We have until January 23, 2023 to comply with the $1.00 per share minimum bid price requirement. To remain listed, our common stock must have a closing bid price of at least $1.00 per share for ten consecutive business days prior to January 23, 2023. We intend to actively monitor the bid price of our common stock and will consider available options to regain compliance with the Nasdaq listing requirements.

If we do not achieve compliance with the $1.00 per share minimum bid price requirement, the NASDAQ Staff would be required to issue us a delisting notice. We would have the opportunity to appeal a delisting notice to a NASDAQ Hearings Panel, which would delay any delisting until at least the date of the hearing. The NASDAQ Hearings Panel has discretion to grant an exception for up to 180 days after the initial delisting determination but it is not required to do so and may order a lesser exception period or order an immediate delisting. We may also fail to satisfy other NASDAQ continued listing requirements in the future.

~~Any delisting of our common stock by NASDAQ could~~ adversely affect our ~~ability to attract new investors, impair stockholders’ ability to sell or purchase their common stock when they wish to do so, decrease the liquidity~~business and results of the outstanding shares of common stock, reduce the price at which such shares trade and increase the transaction costs inherent in trading such shares with overall negative effects for our shareholders. In addition, delisting of the common stock could deter broker-dealers from making a market in or otherwise seeking or generating interest in our common stock, and might deter certain institutions and persons from investing in our stock at all.operations.

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

None that were not previously disclosed in other filings with the Securities and Exchange Commission.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information.

None.

Item 6. Exhibits

Exhibit Number		Description
3.1		Amended and Restated Certificate of Incorporation dated September 18, 2018 (Incorporated by reference to the Registrant’s Form 8-K, File No. 000-50045, filed with the Securities and Exchange Commission on October 3, 2018)
3.2		Bylaws (Incorporated by reference to the Registrant’s Form 8-K, File No. 000-50045, filed with the Securities and Exchange Commission on October 22, ~~2002~~2002))
3.3		Certificate of Amendment dated December 9, 2019 to the Amended and Restated Certificate of Incorporation dated December 18, 2018 (Incorporated by reference to the Registrant’s Form 8-K, File No. 000-50045, filed with the Securities and Exchange Commission on December 12, 2019)
3.4		Certificate of Amendment dated November 2, 2020 to the Certificate of Incorporation of Elys Game Technology, Corp. dated September 18, 2018 (Incorporated by reference to the Registrant’s Form 8-K, File No. 001-39170, filed with the Securities and Exchange Commission on November 6, 2020)
3.5		Certificate of Correction of Elys Game Technology, Corp. dated November 6, 2020 to Certificate of Incorporation dated September 18, 2018 (Incorporated by reference to the Registrant’s Form 8-K, File No. 001-39170, filed with the Securities and Exchange Commission on November 6, 2020)
10.1*4.1		~~Demand Promissory Note, dated~~Form of Consultant Warrant (Incorporated by reference to Exhibit 4.1 the Registrant’s Form 8-K, File No. 001-39170, filed with the Securities and Exchange Commission on February ~~23, 2022, in the principal amount of $50,000 from Bookmakers Company US, LLC payable to Victor Salerno~~22, 2023)
10.2*10.1		~~Demand Promissory Note, dated March 4, 2022, in~~Form of Subscription Document between the ~~principal amount of $100,000 from Bookmakers~~ Company ~~US, LLC payable~~and the Investors (Incorporated by reference to ~~Victor Salerno~~Exhibit 10.1 the Registrant’s Form 8-K, File No. 001-39170, filed with the Securities and Exchange Commission on February 7, 2023
10.3*10.2		~~Demand Promissory Note, dated April~~Form of Debenture (Incorporated by reference to Exhibit 10.2 the Registrant’s Form 8-K, File No. 001-39170, filed with the Securities and Exchange Commission on February 7 ~~2022, in the principal amount of $50,000 from Bookmakers Company US, LLC payable to Victor Salerno~~2023)
10.4*10.3		~~Demand Promissory Note, dated May 4, 2022, in~~Form of Warrant (Incorporated by reference to Exhibit 10.2 the ~~principal amount of $50,000 from Bookmakers Company US, LLC payable to Victor Salerno~~
10.5*		~~Demand Promissory Note, dated May 18, 2022, in~~Registrant’s Form 8-K, File No. 001-39170, filed with the ~~principal amount of $10,000 from Bookmakers Company US, LLC payable to Victor Salerno~~
10.6*		~~Demand Promissory Note, dated August 9, 2022, in the principal amount of $30,000 from Bookmakers Company US, LLC payable to Victor Salerno~~
10.7*		~~Demand Promissory Note, dated September 22, 2022, in the principal amount of $15,000 from Bookmakers Company US, LLC payable to Victor Salerno~~Securities and Exchange Commission on February 7 2023
31.1*		Certification of Chief Executive Officer pursuant to the Securities Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*		Certification of Chief Financial Officer pursuant to the Securities Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*		Certification of Chief Executive Officer ~~and~~pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS		XBRL Instance Document.
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).*

* Filed herewith

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: ~~November 14, 2022~~May 22, 2023

Elys Game Technology, Corp.

By: /s/ Michele Ciavarella

Michele Ciavarella

Interim Chief Executive Officer and President

(Principal Executive Officer)

By: /s/ Carlo Reali

Carlo Reali

Interim Chief Financial Officer

(Principal Financial Officer and Principal Accounting Officer)


	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2022			2021			2022			2021
Revenue	$	9,591,294		$	8,030,082		$	32,175,015		$	33,877,359

Costs and Expenses
Selling expenses		6,874,581			6,054,757			24,029,532			26,333,156
General and administrative expenses		5,808,768			5,075,300			15,589,410			13,975,455
Restructuring and severance expenses		—			—			1,205,689			—
Total Costs and Expenses		12,683,349			11,130,057			40,824,631			40,308,611

Loss from Operations		(3,092,055	)		(3,099,975	)		(8,649,616	)		(6,431,252	)

Other (Expenses) Income
Other income		21,931			74,327			90,783			444,689
Other expense		(45,528	)		(384	)		(56,539	)		(28,522	)
Interest expense, net of interest income		(9,104	)		(4,705	)		(22,641	)		(14,748	)
Change in fair value of contingent purchase consideration		(482,059	)		(569,076	)		(1,397,833	)		(569,076	)
Amortization of present value discount		—			—			—			(12,833	)
(Loss) gain on marketable securities		(49,250	)		(200,000	)		43,250			(292,500	)
Total Other (Expenses) Income		(564,010	)		(699,838	)		(1,342,980	)		(472,990	)

Loss Before Income Taxes		(3,656,065	)		(3,799,813	)		(9,992,596	)		(6,904,242	)
Income tax provision		(167,574	)		284,636			(200,518	)		8,136
Net Loss		(3,823,639	)		(3,515,177	)		(10,193,114	)		(6,896,106	)

Other Comprehensive Loss
Foreign currency translation adjustment		(367,765	)		(154,572	)		(877,996	)		(413,917	)

Comprehensive Loss	$	(4,191,404	)	$	(3,669,749	)	$	(11,071,110	)	$	(7,310,023	)

Loss per common share – basic and diluted	$	(0.14	)	$	(0.15	)	$	(0.41	)	$	(0.33	)
Weighted average number of common shares outstanding – basic and diluted		26,942,389			23,080,193			24,871,319			22,205,785


	For the nine months ended September 30,
	2022			2021
Cash Flows from Operating Activities
Net Loss	$	(10,193,114	)	$	(6,896,106	)
Adjustments to reconcile net loss to net cash Used in Operating Activities
Depreciation and amortization		1,315,593			885,437
Change in fair value of contingent purchase consideration		1,397,833			569,076
Amortization of present value discount		—			12,833
Restricted stock awards		2,012,600			140,000
Stock option compensation expense		2,381,974			1,251,808
Non-cash interest		17,637			6,788
Unrealized (gain) loss on trading securities		(43,250	)		292,500
Movement in deferred taxation		(238,616	)		(116,896	)
Gain on Government relief loan forgiven		—			(7,992	)
Changes in Operating Assets and Liabilities (Net of assets acquired and liabilities assumed)
Prepaid expenses		(2,043,015	)		(458,601	)
Accounts payable and accrued liabilities		(1,013,194	)		(1,095,287	)
Accounts receivable		(282,002	)		79,467
Gaming accounts receivable		981,478			89,293
Gaming accounts liabilities		693,455			516,302
Taxes payable		391,339			(110,385	)
Due from related parties		(8,026	)		(1,968	)
Other current assets		(19,838	)		(134,648	)
Long term liabilities		76,916			(280,230	)
Net Cash Used in Operating Activities		(4,572,230	)		(5,258,609	)

Cash Flows from Investing Activities
Acquisition of subsidiary, net of cash of $26,161		—			(5,973,839	)
Acquisition of property, plant and equipment and intangible assets		(355,939	)		(135,835	)
Net Cash Used in Investing Activities		(355,939	)		(6,109,674	)

Cash Flows from Financing Activities
Proceeds from warrants exercised		—			3,962,482
Proceeds from bank overdraft		—			1,045
Repayment of bank overdraft		(7,043	)		—
Repayment of bank credit line		—			(500,000	)
Repayment of bank loan		(33,041	)		(100,850	)
Redemption of convertible debentures		—			(27,562	)
Proceeds from promissory notes, related party		305,000			—
Proceeds from equipment funding, related party		360,000			—
Repayment of Government relief loan		—			(25,438	)
Proceeds from subscriptions – net of fees		2,616,679			—
Proceeds from. Pre-funded warrants		512,813			—
Repayment of deferred purchase consideration, non-related parties		—			(385,121	)
Repayment of deferred purchase consideration, related parties		—			(25,262	)
Repayment of financial leases		(5,926	)		(8,108	)
Net Cash Provided by Financing Activities		3,748,482			2,891,186

Effect of change in exchange rate		(1,504,030	)		(766,233	)

Net decrease in cash		(2,683,717	)		(9,243,330	)
Cash, cash equivalents and restricted cash – beginning of the period		7,706,357			20,044,769
Cash, cash equivalents and restricted cash – end of the period	$	5,022,640		$	10,801,439

Reconciliation of cash, cash equivalents and restricted cash within the Balance Sheets to the Statement of Cash Flows
Cash and cash equivalents	$	4,690,034		$	9,408,035
Restricted cash included in non-current assets		332,606			1,393,404
	$	5,022,640		$	10,801,439

Description	Useful Life

Leasehold improvements	Life of the underlying lease
Computer and office equipment	3	to	5	years
Furniture and fittings	7	to	10	years
Computer Software	3	to	5	years
Vehicles	4	to	5	years

	Revenue		Earnings

Actual for the nine months ended September 30, 2022	$	872,366	$	(1,786,317	)

2021 Supplemental pro forma from January 1, 2021 to September 30, 2021	$	34,288,462	$	(7,154,851	)

2020 Supplemental pro forma from January 1, 2020 to September 30, 2020	$	24,992,504	$	(4,810,317	)

	September 30, 2022
Opening balance		—
Loan advanced	$	360,000
Loan repayments		—
Interest accrued		355
Closing balance	$	360,355

	Nine months ended September 30, 2022
Exercise price	$	0.454	to	2.50
Risk free interest rate		2.41	to	3.69	%
Expected life of options		10 years
Expected volatility of underlying stock		204.2	to	205.3	%
Expected dividend rate		0			%


	Three Months Ended				Nine Months Ended
	September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021
Turnover
Turnover web-based	$	163,563,603	$	162,471,799	$	565,785,709	$	613,678,568
Turnover land-based		2,924,866		1,193,778		6,528,054		13,237,738
Total Turnover		166,488,469		163,665,577		572,313,763		626,916,306

Winnings/Payouts
Winnings web-based		152,545,450		152,328,198		527,323,323		572,975,466
Winnings land-based		2,208,100		1,031,217		5,166,387		11,362,524
Total Winnings/payouts		154,753,550		153,359,415		532,489,710		584,337,990

Gross Gaming Revenues		11,734,919		10,306,162		39,824,053		42,578,316

Less: ADM Gaming Taxes		2,822,830		2,515,570		9,671,040		9,129,881
Net Gaming Revenues		8,912,089		7,790,592		30,153,013		33,448,435

Service Revenues		679,205		239,490		2,022,002		428,924
Revenue	$	9,591,294	$	8,030,082	$	32,175,015	$	33,877,359


	Nine months ended September 30, 2022
	Betting establishments			Betting platform software and services			All other			Adjustments			Total
Revenue	$	30,408,624		$	1,766,391		$	—		$	—		$	32,175,015
Intercompany Service revenue		74,584			1,517,807			—			(1,592,391	)		—
Total revenue		30,483,208			3,284,198			—			(1,592,391	)		32,175,015
Operating expenses
Intercompany service expense		1,517,807			74,584			—			(1,592,391	)		—
Selling expenses		23,896,814			132,718			—			—			24,029,532
General and administrative expenses		4,387,356			5,724,166			5,477,888			—			15,589,410
Restructuring and Severance expenses		—			—			1,205,689			—			1,205,689
Total operating expenses		29,801,977			5,931,468			6,683,577			(1,592,391	)		40,824,631

Income (Loss) from operations		681,231			(2,647,270	)		(6,683,577	)		—			(8,649,616	)

Other income (expense)
Other income		90,781			2			—			—			90,783
Other expense		(47,959	)		(8,580	)		—			—			(56,539	)
Interest expense, net		(1,069	)		(21,572	)		—			—			(22,641	)
Change in fair value of contingent purchase consideration		—			(1,397,833	)		—			—			(1,397,833	)
Amortization of present value discount
Gain on marketable securities		—			—			43,250			—			43,250
Total other income (expense)		41,753			(1,427,983	)		43,250			—			(1,342,980	)

Income (Loss) before Income Taxes		722,984			(4,075,253	)		(6,640,327	)		—			(9,992,596	)
Income tax provision		(437,042	)		236,524			—			—			(200,518	)
Net Income (Loss)	$	285,942		$	(3,838,729	)	$	(6,640,327	)	$	—		$	(10,193,114	)

	Amount

Remainder of 2022	$	92,278
2023		334,306
2024		267,418
2025		242,980
2026 and thereafter		424,226
		1,361,208

	December 31, 2021
Principal Outstanding
Promissory notes due to related parties	$	382,128
Repayment in cash		(385,121	)
Foreign exchange movements		2,993
		—
Present value discount on future payments
Present value discount		(5,174	)
Amortization		5,133
Foreign exchange movements		41
		—
Deferred purchase consideration, net