(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

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.

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☒

The registrant had ~~13,048,769~~14,666,830 shares of common stock outstanding aton May ~~17, 2021.~~3, 2022.

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that involve substantial risks and uncertainties. All statements, other than statements of historical fact, contained in this Quarterly Report on Form 10-Q, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans and objectives of management, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “would,” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

The forward-looking statements in this Quarterly Report on Form 10-Q include, but are not limited to those described under the “Risk Factors” section and include, among other things:

We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information.

We have included important factors in the cautionary statements included in this Quarterly Report on Form 10-Q, particularly in the “Risk Factors” section, that we believe could cause actual results or events to differ materially from the forward-looking statements that we make. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, collaborations, joint ventures or investments we may make or enter into.

The accompanying notes are an integral part of these unaudited consolidated financial statements.


	Three Months Ended						Six Months Ended						Three Months Ended						Six Months Ended
	March 31,						March 31,						March 31,						March 31,
	2021			2020			2021			2020			2022			2021			2022			2021

Revenue	$	33,834		$	40,750		$	44,628		$	77,878		$	19,002,588		$	33,834		$	26,142,515		$	44,628
Cost of revenue		(12,465	)		(27,002	)		(24,724	)		(52,167	)		(12,009,596	)		(12,465	)		(16,618,683	)		(24,724	)

Gross profit (loss)		21,369			13,748			19,904			25,711
Gross profit														6,992,992			21,369			9,523,832			19,904

Operating expenses:
Sales and marketing expenses		234,691			��			273,944			–			9,474,087			234,691			13,448,872			273,944
Product and technology expenses		603,445			–			1,109,380			15,635			1,139,914			603,445			2,155,162			1,109,380
Acquisition costs														1,190			0			2,240,147			0
General and administrative expenses		1,189,410			8,675			2,783,121			28,431			5,446,776			1,189,410			8,591,195			2,783,121
Total operating expenses		2,027,546			8,675			4,166,445			44,066			16,061,967			2,027,546			26,435,376			4,166,445

Income (loss) from operations		(2,006,177	)		5,073			(4,146,541	)		(18,355	)		(9,068,975	)		(2,006,177	)		(16,911,544	)		(4,146,541	)

Other expenses:
Interest expense		(367,214	)		–			(967,620	)		–			(2,764,819	)		(367,214	)		(3,741,237	)		(967,620
Foreign currency loss		(2,269	)		–			(12,230	)		–			(7,277	)		(2,269	)		(69,328	)		(12,230	)
Total other expense		(369,483	)		–			(979,850	)		–			(2,772,096	)		(369,483	)		(3,810,565	)		(979,850

Income (loss) before provision for income taxes		(2,375,660	)		5,073			(5,126,391	)		(18,355	)
Loss before provision for income taxes														(11,841,071	)		(2,375,660	)		(20,722,109	)		(5,126,391	)
Provision for income taxes		–			–			–			–			0			0			0			0

Net income (loss)	$	(2,375,660	)	$	5,073		$	(5,126,391	)	$	(18,355	)
Net loss													$	(11,841,071	)	$	(2,375,660	)	$	(20,722,109	)	$	(5,126,391	)

Net income (loss) per common share – basic and diluted	$	(0.22	)	$	0.00		$	(0.52	)	$	(0.00	)
Preferred stock dividends														(1,367,260	)		0			(1,851,077	)		0
Net loss attributable to common shareholders														(13,208,331	)		(2,375,660	)		(22,573,186	)		(5,126,391

Net loss per common share – basic and diluted													$	(0.93	)	$	(0.22	)	$	(1.61	)	$	(0.52	)

Weighted average common shares outstanding – basic and diluted		10,587,654			7,340,421			9,878,185			7,340,421			14,236,755			10,587,654			13,980,720			9,878,185

The accompanying notes are an integral part of these unaudited consolidated financial statements.

	Common stock				Additional
	Number of				paid-in		Accumulated						Common stock				Preferred Stock
	Shares		Amount		capital		deficit			Total			Number of				Number of				Additional paid-in			Accumulated Other Comprehensive			Accumulated
													Shares		Amount		Shares		Amount		capital			Income			deficit			Total

Balance at September 30, 2019		7,340,421	$	7,340	$	953,660	$	(876,271	)	$	84,729
Balance at September 30, 2020														7,340,421	$	7,340		–	$	–	$	3,053,660		$	–		$	(1,449,526	)	$	1,611,474
Shares issued for cash, net														2,000,000		2,000		–		–		3,646,071			–			–			3,648,071
Stock-based compensation														683,334		683		–		–		1,321,343			–			–			1,322,026
Shares issued due to conversion of notes payable														375,000		375		–		–		187,125			–			–			187,500
Stock warrants issued for asset acquisition														–		–		–		–		57,252			–			–			57,252
Net loss														–		–		–		–		–			–			(2,750,731	)		(2,750,731	)
Balance at December 31, 2020														10,398,755		10,398		–		–	$	8,265,451			–			(4,200,257	)		4,075,592

Shares issued for cash, net														250,014		251		–		–		719,435			–			–			719,686
Stock-based compensation														–		–		–		–		700,000			–			–			700,000
Net loss		–		–		–		(23,429	)		(23,429	)		–		–		–		–		–			–			(2,375,660	)		(2,375,660	)

Balance at December 31, 2019		7,340,421		7,340		953,660		(899,700	)		61,300

Net income		–		–		–		5,073			5,073

Balance at March 31, 2020		7,340,421	$	7,340	$	953,660	$	(894,627	)	$	66,373
Balance at March 31, 2021														10,648,769		10,649		–		–	$	9,684,886			–			(6,575,917		$	3,119,618



Balance at September 30, 2020		7,340,421	$	7,340	$	3,053,660	$	(1,449,526	)	$	1,611,474
Balance at September 30, 2021														13,315,414	$	13,315		–		–	$	26,834,354		$	53,911		$	(16,649,550	)	$	10,252,030
Shares & warrants issued for cash, net														–		–		37,700		38		37,699,962			–			–			37,700,000
Shares issued to Aspire Global plc														186,838		187		–		–		13,326,565			–			–			13,326,752
Cashless exercise of warrants														244,346		244		–		–		(244	)		–			–			–
Shares issued for conversion of debt														423,141		423		–		–		112,077			–			–			112,500
Exercise of stock options for cash														2,000		2		–		–		5,998			–			–			6,000
Stock-based compensation														20,000		20		–		–		1,435,296			–			–			1,435,316
Preferred share dividends																		484				483,817						(483,817	)		–
Issuance costs														–		–		–		–		(2,100,000	)		–			–			(2,100,000	)
Net loss														–		–		–		–		–			–			(8,881,038	)		(8,881,038	)
Comprehensive income														–		–		–		–		–			187,428			–			187,428
Balance at December 31, 2021														14,191,739	$	14,191		38,184	$	38	$	77,797,825		$	241,339		$	(26,014,405	)	$	52,038,988

Shares issued for cash, net		2,000,000		2,000		3,646,071		–			3,648,071

Cashless exercise of warrants and RSU														225,091		225		–		–		(225	)		–			–			–
Stock-based compensation		683,334		683		1,321,343		–			1,322,026			–		–		–		–		1,814,607			–			–			1,814,607

Shares issued due to conversion of notes payable		375,000		375		187,125		–			187,500

Stock warrants issued for asset acquisition		–		–		57,252		–			57,252

Preferred share dividends																–		1,367		2		1,367,258			–			(1,367,260	)		–
Net loss		–		–		–		(2,750,731	)		(2,750,731	)		–		–		–		–		–			–			(11,841,071	)		(11,841,071	)

Balance at December 31, 2020		10,398,755		10,398		8,265,451		(4,200,257	)		4,075,592

Shares and warrants issued for cash, net		250,014		251		719,435		–			719,686

Stock-based compensation		–		–		700,000		–			700,000

Net loss		–		–		–		(2,375,660	)		(2,375,660	)

Balance at March 31, 2021		10,648,769	$	10,649	$	9,684,886	$	(6,575,917	)	$	3,119,618
Comprehensive income														–		–		–		–		–			(1,156,825	)		–			(1,156,825	)
Balance at March 31, 2022														14,416,830	$	14,416		39,551	$	40	$	80,979,465		$	(915,486	)	$	(39,222,736	)	$	40,855,699

The accompanying notes are an integral part of these unaudited consolidated financial statements.


							For the Six Months Ended March 31,
	For the Six Months Ended March 31,						2022			2021
	2021			2020
Cash flow from operating activities:
Net loss	$	(5,126,391	)	$	(18,355	)	$	(20,722,109	)	$	(5,126,391	)

Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of debt discount		867,593			–
Depreciation expense		12,346			–
Amortization of debt discount, issuance costs								1,368,188			867,593
Depreciation and amortization expense								2,795,880			12,346
Stock-based compensation		2,022,026			–			3,249,923			2,022,026
Bad debt expense		50,932			–
Gain on cryptocurrency settlement		(35,140	)		(2,428	)		0			(35,140	)
Derivative (gain)/loss								73,083			0
Foreign exchange (gain)/loss								(216,678	)		50,932
Changes in operating assets and liabilities:
Accounts receivable		(35,251	)		(76,755	)		(1,711,122	)		(35,251	)
Prepaid expenses		(53,926	)		–
Prepaid expenses and other								(717,505	)		(91,220	)
Accounts payable and accrued liabilities		502,268			73,192			7,301,761			426,368
Accounts payable - related parties		2,340			–			–			2,340
Other assets		(37,294	)		–
Deferred revenue		(75,900	)		–
Liabilities to users		32,924			2,783			960,693			32,924
Net cash used in operating activities		(1,873,473	)		(21,563	)		(7,617,886	)		(1,873,473	)

Cash flow from investing activities:
Purchase of software and equipment		(90,899	)		–
Purchase of fixed assets								(902,469	)		(90,899	)
Cash paid for business combinations								(56,229,526	)		0
Purchase of other long term assets		(133,770	)		–			0			(133,770	)
Net cash used by investing activities		(224,669	)		–			(57,131,995	)		(224,669	)

Cash flow from financing activities:
Proceeds from equity issuance, net of costs of capital		4,367,757			–
Proceeds from debt issuance, net of issuance costs								27,130,837			0
Proceeds from equity issuance, net of issuance costs								35,606,000			4,367,757
Net cash provided by financing activities		4,367,757			–			62,736,837			4,367,757

NET CHANGE IN CASH		2,269,615			(21,563	)		(2,013,044	)		2,269,615
CASH AT BEGINNING OF PERIOD		–			67,717			9,064,859			0
CASH AT END OF PERIOD	$	2,269,615		$	46,154		$	7,051,815		$	2,269,615

Supplemental disclosure of cash flow information:
Cash paid for interest	$	–		$	–		$	1,427,915		$	0
Cash paid for income taxes	$	–		$	–

Non-cash transactions
Stock warrant issued for asset acquisition	$	19,179		$	–
Preferred shares issued for dividends							$	1,851,077		$	0
Stock warrants issued in connection with Senior Notes							$	7,661,382		$	0
Stock issued for conversion of notes payable	$	187,500		$	–		$	112,500		$	0

The accompanying notes are an integral part of these unaudited consolidated financial statements.

~~Esports Technologies,~~EBET, Inc. (“~~Esports Tech”~~EBET” or “the Company”) was formed on September 24, 2020 as a Nevada corporation. ~~Esports Tech~~EBET is a technology company creating and operating platforms focused on esports and competitive gaming. The Company operates under a Curacao gaming sublicense and can provide online betting services to various countries around the world. ~~The majority of~~On May 5, 2022, the ~~Company’s customers are based in the Philippines. The Company’s consolidated financial statements include~~Company changed its ~~accounts and the accounts of its 100% owned subsidiaries, namely~~name to EBET, Inc. from Esports Technologies, Inc.

On September 24, 2020, ESEG Limited (“ESEG”) was acquired by Global E-Sports Entertainment Group, LLC (“Global E-Sports”), in exchange for 50% of the membership interest in Global E-Sports held by the former owners of ESEG. The remaining 50% interest of Global E-Sports is held by EBET. Prior to this transaction both ESEG ~~Limited~~and Global E-Sports shared common ownership. This transaction was accounted for as a combination of entities under common control and as such both operations have been combined from their inception. In addition, on September 24, 2020, EBET executed a Share Exchange Agreement (“~~ESEG”~~Share Exchange”) resulting in the acquisition of 100% of the membership interest of Global E-Sports in exchange for the issuance of 7,340,421 shares of common stock.

Pursuant to the Share Exchange, the merger between Global E-Sports and the Company was accounted for as a reverse merger. Under this method of accounting, EBET was treated as the “acquired” company for financial reporting purposes. The net assets of Global E-Sports are stated at historical cost, with no goodwill or other intangible assets recorded.

On October 1, 2021, the Company, and Esports Product Technologies Malta Ltd. (“Esports Malta”) entered into a Share Purchase Agreement (the “Acquisition Agreement”) with Aspire Global plc, (“Aspire”) and ~~Gogawi Entertainment Group (“Gogawi”) (collectively referred~~various Aspire group companies to acquire all of the issued and outstanding shares of Karamba Limited. The total acquisition price was €65,000,000 paid as follows: (i) cash amount of €50,000,000; (ii) €10,000,000, payable in accordance with the ~~“Company,” “we,” “our,” or “us”~~terms of an unsecured subordinated promissory note (the “Note”); and (iii) shares of Company common stock, which are valued at €5,000,000 (based on the weighted-average per-share price of the ten days prior to the execution date of the Acquisition Agreement (the “Exchange Shares”). Global E-Sports, a Nevada limited liability company, was incorporated in Nevada on June 28, 2016. ESEG, a Belize company was incorporated on October 31, 2016. Gogawi, a Cypress company was incorporated on December 8, 2018See Notes 3, 4 and has always been a wholly owned subsidiary of ESEG. On December 8, 2020, the Company incorporated Esportsbook Technologies Limited (“Esportsbook”) in Ireland as a wholly-owned subsidiary of Esports Tech. All amounts included in this Form 10-Q are expressed in U.S. Dollars, unless otherwise noted.5 for additional information.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company has recurring losses and generated negative cash flows from operations since inception. In April 2021, the Company completed its Initial Public Offering (“IPO”) and issued 2,400,000 shares of common stock for gross cash proceeds of ~~$14,400,000. See note 9~~$14,400,000, receiving net proceeds of $13,514,200. The Company's forecasts for ~~further information.~~2022 and beyond indicate that it we will need additional funding in order to have sufficient financial resources to continue to settle its debts as they fall due. In making this assessment, the Directors considered the going concern status for a period of at least 12 months from the date of signing the financial statements. For this reason, they continue to adopt the going concern basis in preparing the financial statements.

The outbreak of the 2019 novel coronavirus disease (“COVID-19”), which was declared a global pandemic by the World Health Organization on March 11, 2020, and the related responses by public health and governmental authorities to contain and combat its outbreak and spread, has severely impacted the U.S. and world economies. Economic recessions, including those brought on by the COVID-19 outbreak may have a negative effect on the demand for the Company’s products and the Company’s operating results. The range of possible impacts on the Company’s business from the coronavirus pandemic could include: (i) changing demand for the Company’s online betting products; and (ii) increasing contraction in the capital markets.

The significant accounting policies followed in the preparation of the consolidated financial statements are as follows:

The accompanying unaudited financial statements of the Company, include the accounts of the Company and its wholly-owned subsidiaries, and have been prepared in accordance with generally accepted accounting principles accepted in the United States (“U.S. GAAP”) for interim unaudited financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The unaudited financial statements include all adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary in order to make the condensed financial statements not misleading. Operating results for the three ~~and six~~ months ended March 31, ~~2021~~2022, are not necessarily indicative of the final results that may be expected for the year ended September 30, ~~2021.~~2022. For more complete financial information, these unaudited financial statements should be read in conjunction with the audited consolidated financial statements for the year ended September 30, ~~2020~~2021 included in our Form ~~S-1~~10-K filed with the SEC. Notes to the consolidated financial statements which would substantially duplicate the disclosures contained in the audited consolidated financial statements for the most recent fiscal period, as reported in the Form ~~S-1,~~10-K, have been omitted. All intercompany accounts, transactions and balances have been eliminated in consolidation.

Certain reclassifications have been made to prior period amounts to conform to the current year presentation.

There is currently no specific guidance under GAAP or alternative accounting framework for the accounting for cryptocurrencies recognized as revenue or held, and management has exercised significant judgment in determining the appropriate accounting treatment. In the event authoritative guidance is enacted by the FASB, the Company may be required to change its policies, which could have an effect on the Company’s consolidated financial position and results from operations.

~~Cryptocurrencies held are accounted for as an indefinite-lived intangible asset under ASC 350,~~ ~~Intangible – Goodwill and Other~~. An intangible asset with an indefinite useful life is not amortized but assessed for impairment annually, or more frequently, when events or changes in circumstances occur indicating that it is more likely than not that the indefinite-lived asset is impaired. Impairment exists when the carrying amount exceeds its fair value, which is measured using the quoted price of the cryptocurrency at the time its fair value is being measured. In testing for impairment, the Company has the option to first perform a qualitative assessment to determine whether it is more likely than not that an impairment exists. If it is determined that it is not more likely than not that an impairment exists, a quantitative impairment test is not necessary. If the Company concludes otherwise, it is required to perform a quantitative impairment test. To the extent an impairment loss is recognized, the loss establishes the new cost basis of the asset. Subsequent reversal of impairment losses is not permitted.Business combinations

The Company ~~uses its cryptocurrencies~~accounts for business combinations under the acquisition method of accounting, in accordance with ASC 805, which requires assets acquired and liabilities assumed to ~~pay vendors~~be recognized at their fair values as of the acquisition date. Any fair value of purchase consideration in excess of the fair value of the assets acquired less liabilities assumed is recorded as goodwill. The fair values of the assets acquired, and ~~users. The Company also receives payments on its~~liabilities assumed are determined based upon the valuation of the acquired business and involve management making significant estimates and assumptions.

Accounts receivables ~~and player deposits in cryptocurrency. Gains and losses realized upon settlement~~are recorded at amortized cost, less any allowance for doubtful accounts. Accounts receivable consists primarily of ~~cryptocurrencies are also recorded in general and administrative expense in~~amounts due from our ~~consolidated statements of operations.~~platform provider.

The Company’s other intangible ~~asset~~assets consist of customer relationships, trademarks and internet domain ~~names, which~~names. Certain intangible assets have a defined useful life and others are anclassified as indefinite-lived ~~intangible.~~intangible assets. Other intangible assets with a defined useful life are amortized over their estimated useful economic lives on a straight-line basis. An intangible asset with an indefinite useful life is not amortized but assessed for impairment annually, or more frequently, when events or changes in circumstances occur indicating that it is more likely than not that the indefinite-lived asset is impaired. Impairment exists when the carrying amount exceeds its fair value. In testing for impairment, the Company has the option to first perform a qualitative assessment to determine whether it is more likely than not that an impairment exists. If it is determined that it is more likely than not that an impairment exists, a quantitative impairment test is not necessary. If the Company concludes otherwise, it is required to perform a quantitative impairment test. To the extent an impairment loss is recognized, the loss establishes the new cost basis of the asset. Subsequent reversal of impairment losses is not permitted.

See Note 3 for intangible assets acquired in a business acquisition transaction.

The Company records liabilities for user account balances at a given reporting period based on deposits made by players either to the Company or the sales affiliate, less any losses on wagers and payout made to players. Liabilities to users amounts are not required to be backed by cash reserves of the Company.

Long-lived assets consist of software and equipment, finite-lived acquired intangible assets, such as license agreements, and indefinite-lived assets such as internet domain names. Long-lived assets are tested for recoverability whenever events or changes in business circumstances indicate that the carrying amount of the asset may not be fully recoverable. Impairment expense is recognized to the extent an asset’s expected undiscounted future cash flows are less than the asset’s carrying amount.

The Company accounts for leases under ASC 842. The Company assesses whether a contract contains a lease on its execution date. If the contract contains a lease, lease classification is assessed upon its commencement date under ASC 842. For leases that are determined to qualify for treatment as operating leases, rent expense is recognized on a straight-line basis over the lease term. Leases that are determined to qualify for treatment as finance leases recognize interest expense as determined using the effective interest method with corresponding amortization of the right-of-use assets. For leases with terms of 12 months and greater, an asset and liability are initially recorded at an amount equal to the present value of the unpaid lease payments over the lease term. In determining the lease term for each lease, the Company includes options to extend the lease when it is reasonably certain that the option will be exercised. The Company uses the interest rate implicit in the lease, when known, or its estimated incremental borrowing rate, which is derived from information available at the lease commencement date including prevailing financial market conditions, in determining the present value of the unpaid lease payments.

The Company recognizes revenue in accordance with ASC Topic 606, Revenue From Contracts With Customers, which was adopted on October 1, 2018 using the modified retrospective method. ASC Topic 606 requires companies to recognize revenue in a manner that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, the standard requires disclosures of the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The adoption of ASC Topic 606 had no impact to the Company’s comparative consolidated financial statements. Revenue is recognized based on the following five step model:

No single customer exceeded more than 10% of revenue during the three ~~and six~~ months ended March 31, ~~2021~~2022 and 2020. In addition, no disaggregation of revenue is required because all current revenue is generated from gaming revenue.

The Company operates an online betting platform allowing users to place wagers on a variety of live sporting events and esports events. Each wager placed by users create a single performance obligation for the Company to administer each event wagered. Gross gaming revenue is the aggregate of gaming wins and losses based on results of each event that customers wager bets on. Variable commission fees are paid to sales affiliates based on a percentage of revenue generated from the affiliate. The commissions rebated to affiliates are recorded as a reduction to gross gaming revenue.

Cost of revenue consists of third-party costs associated with the betting software platform and ~~amortization of capitalized software costs.~~gaming taxes.

Sales and marketing expenses consist primarily of expenses associated with customer related acquisition costs, advertising and related software, strategic league and team partnerships and costs related to free to play contests, and the compensation of sales and marketing personnel, including stock-based compensation expenses. Advertising costs are expensed as incurred. Advertising costs incurred was $434,465 and $0 for the six months ended March 31, 2022 and 2021, respectively.

Product and technology expenses consist primarily of expenses which are not subject to capitalization or otherwise classified within Cost of Revenue. Product and Technology expenses include software licenses, depreciation of hardware and software and costs related to the compensation of product and technology personnel, including stock-based compensation.

General and administrative expenses include costs related to the compensation of the Company’s administrative functions, insurance costs, professional fees and consulting expense.

Deferred taxes are determined utilizing the "asset and liability" method, whereby deferred tax asset and liability account balances are determined based on differences between financial reporting and the tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company provides a valuation allowance, when it's more likely than not that deferred tax assets will not be realized in the foreseeable future. Deferred tax liabilities and assets are classified as current or non-current based on the underlying asset or liability or if not directly related to and asset or liability based on the expected reversal dates of the specific temporary differences.

The Company discloses fair value measurements for financial and non-financial assets and liabilities measured at fair value. Fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The accounting standard establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels, which are described below:

Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.

Level 2: Observable prices that are based on inputs not quoted on active markets but are corroborated by market data.

Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.

The Company’s reporting currency is the U.S. Dollar. Certain subsidiaries of the Company have a functional currency other than the U.S. Dollar, and are translated to the Company’s reporting currency at each reporting date. Non-monetary items are translated at historical rates. Monetary assets and liabilities are translated from British pounds and Euro into U.S. Dollars, at the period-end exchange rate, while foreign currency expenses are translated at the exchange rate in effect on the date of the transaction. The net effect of translation is reflected as other comprehensive income. The gains or losses on transactions denominated in currencies other than an entity’s functional currency are included in the consolidated statement of operations.

Goodwill represents the excess of the purchase price over the fair value of assets acquired and liabilities assumed. Goodwill is reviewed for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount may be impaired. When assessing goodwill for impairment, the Company uses qualitative and if necessary, quantitative methods in accordance with FASB ASC Topic 350, Goodwill. The Company also considers its enterprise value and if necessary, discounted cash flow model, which involves assumptions and estimates, including the Company’s future financial performance, weighted average cost of capital and interpretation of currently enacted tax laws.

Circumstances that could indicate impairment and require the Company to perform a quantitative impairment test include a significant decline in the Company’s financial results, a significant decline in the Company’s enterprise value relative to its book value, an unanticipated change in competition of the Company’s market share and a significant change in the Company’s strategic plans.

From time to time, new accounting pronouncements are issued by the Financial Accounting Standard Board (“FASB”) or other standard setting bodies that the Company adopts as of the specified effective date. The Company does not believe that the impact of recently issued standards that are not yet effective will have a material impact on the Company’s financial position or results of operations upon adoption.

On October 1, 2021, in order to accelerate the growth and expand market access for our esports product offerings, the Company and Esports Malta entered into the “Acquisition Agreement” with Aspire, Aspire Global International Limited, AG Communications Limited, Aspire Global 7 Limited (collectively the “Aspire Related Companies”), and Karamba Limited (“Karamba”) whereby Esports Malta acquired all of the issued and outstanding shares of Karamba. The total acquisition price, paid at the closing of the acquisition of the Karamba shares, was €65,000,000 paid as follows: (i) a cash amount of €50,000,000; (ii) €10,000,000, paid in accordance with the terms of an unsecured subordinated promissory note (the “Note”); and (iii) shares of Company common stock, which were valued at €5,000,000 (based on the weighted-average per-share price of the ten days prior to the execution date of the Acquisition Agreement). The transaction closed on November 29, 2021.

The Note provides for an interest rate of 10% per annum. The maturity date of the Note is the earlier of that date which is four years from the issuance date or a liquidity event. The Note requires repayment of the principal amount plus any accrued interest in three equal installments, payable annually starting on the second anniversary after issuance. No interest payment shall be due until that date which is the last day of the end of the second anniversary of issuance should the Note remain unpaid at such time. Should the Note remain unpaid at the second anniversary, the total accrued interest due at that time shall be paid at the second-year anniversary for accrued interest for the period from the issuance date through the second-year anniversary date. Thereafter, and on each anniversary date thereafter, the interest due for the prior annual period shall be paid. Notwithstanding the foregoing, if the Company owes greater than $15.0 million under the credit agreement with CP BF Lending, LLC entered into in connection with the acquisition (See Note 4 – Borrowings – Senior Notes, then then the parties agree that the Company shall repay any principal amount plus any accrued interest due through the issuance of Company common stock in lieu of any cash payment and the amount of said common stock shares to be issued by the Company shall be determined by using the Conversion Price as defined below. Should an event of default occur on the Note, then at the election of Aspire, either (i) the Operator Services Agreement will be amended such that the fees payable shall increase by 5% during the continuation of the event of default, or (ii) Aspire may elect to convert the entire outstanding principal amount plus any accrued interest into fully-paid and non-assessable shares of common stock of the Company at a price per share based on the weighted-average per-share price for the ten days prior to the date of the occurrence of the event of default (“Conversion Price”). In no event shall the Conversion Price be lower than $18.00 per share (as adjusted for stock splits, stock dividends, or similar events occurring after the date hereof) and the total maximum number of common stock shares that may be issued to Aspire upon any such conversion in the aggregate shall be 650,000 shares (as adjusted for stock splits, stock dividends, or similar events occurring after the date hereof).

The acquired assets were recorded at their estimated fair values. The purchase price allocation is preliminary, and as additional information becomes available, the Company may further revise the preliminary purchase price allocation, including the fair value of identified intangible assets, during the remainder of the measurement period, which will not exceed 12 months from the closing of the acquisition. Measurement period adjustments will be recognized in the reporting period in which the adjustment amounts are determined. Any such adjustments may be material.

The purchase price of this acquisition was allocated on a preliminary basis as follows:

Useful life is the period over which an asset is expected to add to the future cash flows of an entity. Useful life for identifiable assets is generally estimated using a modified straight-line method or a usage period. The Company has determined that the useful life of the trademarks vary from 5 years to an indefinite life and determined that the useful life of the Customer Relationships was three years.

Goodwill represents the excess of the gross considerations transferred over the fair value of the underlying net assets acquired and liabilities assumed. Goodwill recognized is not deductible for local tax purposes.

Upon completing the acquisition of Aspire, the company incurred the following costs:

Debt issuance costs relate to costs associated with acquiring the loan from the CP BF Lending LLC. These have been recorded as reduction of the face value of the debt and are amortized over the life of the loan. Equity issuance costs relate to the costs associated with the private placement. These have been recorded as reduction of the equity proceeds. Transactions costs relate to all direct and indirect costs associated with the acquisition, and expensed as incurred.

The following is a summary of borrowings outstanding as at March 31, 2022 and September 30, 2021:

On November 29, 2021, the Company entered into a credit agreement (the “Credit Agreement”) with CP BF Lending, LLC (“Lender”), pursuant to which the Lender agreed to make a single loan to the Company of $30,000,000 (the “Loan”). The Loan bears interest on the unpaid principal amount at a rate per annum equal to 15.0% as follows: (1) cash interest on the unpaid principal amount of the Loan at a rate equal to 14.0% per annum, plus (2) payable-in-kind interest (“PIK Interest”) on the unpaid principal amount of the Loan at a rate equal to 1.0% per annum. The Company paid to Lender on the closing date a non-refundable origination fee in an amount equal to $750,000.

The Loan matures in 36 months, provided that the Company may receive two 12-month extensions of the maturity date by paying to the Lender (1) an extension fee equal to 1.0% of the unpaid principal balance of the Loan as of the date of such extension, and (2) all reasonable and documented out-of-pocket fees and expenses paid or incurred by Lender, in each case in connection with the extension request, including but not limited to fees and expenses for appraisals, collateral exams and audits, and legal counsel. The foregoing extension right is subject to, among other items, (i) the Loan not being in default, (ii) the representations and warranties contained in Credit Agreement being true and correct; and (iii) the Lender granting its written approval thereof in its sole discretion.

The Loan may be prepaid by the Company at any time. In addition, the Credit Agreement provides that in the event there shall be excess cash flow from the Aspire Business (as such concept is defined in the Credit Agreement) for any calendar month, commencing with the month ended December 31, 2022, the Company shall apply such excess cash flow amount to prepay the outstanding principal balance of the Loan; provided that no such prepayment shall be required once the unpaid principal balance of the Loan has been reduced to $15,000,000.

The Credit Agreement requires the Company to meet certain financial covenants commencing March 31, 2022. The Loan is secured by all of the assets of the Company and its subsidiaries. The Loan may be accelerated by the Lender upon an event of default, which in addition to customary events of default include: (i) if (1) any of the Company or its subsidiaries shall fail to maintain in full force and effect any gaming approval (as defined in the Credit Agreement) required for the operation of its business or (2) any gaming regulator shall impose any condition or limitation on any of the foregoing entities that could be reasonably expected to have a material adverse effect; or (ii) the suspension from trading or failure of the Company’s common stock to be trading or listed on the Nasdaq exchange for a period of three consecutive trading days.

As of March 31, 2022, the Company had not maintained compliance with the covenants of the Senior Notes and obtained a waiver from its lender which waiver is contingent on the completion of an equity raise of $3.5 million prior to May 31, 2022. In consideration for obtaining a waiver from the compliance with certain covenants, the Company has agreed to amend the Senior Notes such that $5 million of principle loan balance becomes convertible at the effective average share price (giving effect to any warrants or other economic consideration) from which the Company raises the first $10,000,000 of common equity through one or more qualified equity offerings immediately following the receipt of the foregoing $3.5 million.

In connection with the Loan, the Company issued the Lender a warrant (the “Lender Warrant”) to purchase 1,567,840 shares of Company common stock at an exercise price of $25.00 per share expiring on the earlier to occur of (i) five years following the issue date or (ii) the second anniversary of the satisfaction of all obligations of the Company under the Credit Agreement. The exercise price is subject to appropriate adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting the Company’s common stock. In addition, the exercise price of the Lender Warrant is subject to “weighted-average” anti-dilution protection for issuances by the Company below the exercise price (other than certain defined exempt issuances), and, upon shareholder approval, which was received on February 9, 2022, the number of shares underlying the Lender Warrant shall also be adjusted for issuances to which the “weighted-average” anti-dilution protection applies. The Lender will not have the right to exercise any portion of the Lender Warrant if the Lender (together with its affiliates) would beneficially own in excess of 4.99% of the number of shares of Company common stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the Lender Warrant, which beneficial ownership amount, at the election of the Lender may be increased to any other percentage not in excess of 19.99% as specified by the Lender. If a fundamental transaction occurs, then the successor entity will succeed to, and be substituted for the Company, and will assume all of the Company’s obligations under the Lender Warrant with the same effect as if such successor entity had been named in the Lender Warrant itself.

The Note provides for an interest rate of 10% per annum. The maturity date of the Note will be the earlier of that date which is four years from the issuance date or a liquidity event. The Note will require repayment of the principal amount plus any accrued interest in three equal installments, payable annually starting on the second anniversary after issuance. No interest payment shall be due until that date which is the last day of the end of the second-year anniversary of issuance should the Note remain unpaid at such time. Should the Note remain unpaid at the second-year anniversary, the total accrued interest due at that time shall be paid at the second year anniversary for accrued interest for the period from the issuance date through the second year anniversary date. Thereafter, and on each annual anniversary date thereafter, the interest due for the prior annual period shall be paid. Notwithstanding the foregoing, if the Company owes greater than $15,000,000 under the Credit Agreement, then the parties agree that the Company shall repay any principal amount plus any accrued interest due through the issuance of Company common stock in lieu of any cash payment and the amount of said common stock shares to be issued by the Company shall be determined by using the Conversion Price as defined below. Should an event of default occur on the Note, then at the election of Aspire, either (i) the Operator Services Agreement will be amended such that the fees payable shall increase by 5% during the continuation of the event of default, or (ii) Aspire may elect to convert the entire outstanding principal amount plus any accrued interest into shares of common stock of the Company at a price per share based on the weighted-average per-share price for the ten trading days prior to the date of the occurrence of the event of default (“Conversion Price”). In no event shall the Conversion Price be lower than $18.00 per share (as adjusted for stock splits, stock dividends, or similar events occurring after the date hereof) and the total maximum number of shares of common stock that may be issued to Aspire upon any such conversion in the aggregate shall be 650,000 shares (as adjusted for stock splits, stock dividends, or similar events occurring after the date hereof).

On September 1, 2020, ESEG entered into three promissory notes, with a combined principal amount of $2,100,000. The notes bore interest at the rate of 10% per annum and matured on March 1, 2022 and are now convertible at the noteholder’s option. The Company also agreed to pay two of the lenders a total of $675,000 on September 1, 2025, bearing no interest. The Company issued each of the lenders a conversion option at a fixed price of $0.50 per share and issued 2,015,000 warrants to purchase shares of the Company’s common stock at an exercise price of $0.30 per share, each with a term of five years. The convertible notes bear interest at 10% per annum and mature on March 1, 2022. The holder may convert the note into shares of common stock at any time throughout the maturity date, to the extent and provided that no holder of the notes was or will be permitted to convert such notes so long as it or any of its affiliates would beneficially own in excess of 4.99% of the Company’s common stock after such conversion. The Company determined that the assignment of the notes payable by the subsidiary to the parent company was an extinguishment of the original notes payable due to the addition of a substantive conversion feature, and the Company recognized a loss on extinguishment of $265,779 during the year ended September 30, 2020.

The Company evaluated the conversion option and concluded a beneficial conversion feature was present at issuance. The Company recognized the beneficial conversion feature and relative fair value of the warrants as a debt discount and additional paid in capital. The fair value of the warrants at the grant date was estimated using a Black-Scholes model and the following assumptions: 1) volatility of approximately 85% based on a peer group of companies; 2) dividend yield of 0%; 3) risk-free rate of 0.26%; and 4) an expected term of five years. The $2,100,000 debt discount will be amortized through the maturity date of the convertible notes payable. During the three months ended December 31, 2020, a total of $187,500 of principal was converted into 375,000 shares of common stock. As of December 31, 2021, the balance due under these notes, net of unamortized discount of $826,189, is $1,086,311, with accrued interest of $116,774. During the three months ended March 31, 2022, the Company recorded a charge of $1,187,913 in the accompanying consolidated statement of operations from the amortization of its debt discount related to the convertible notes payable and other liabilities described above.

~~The Company’s software and equipment consisted of the following as of March 31, 2021 and September 30, 2020:~~

On November 5, 2020, the Company entered into an asset purchase agreement with a third party to acquire certain proprietary technology data. The Company made a cash payment of $61,425 and granted warrants to purchase 32,000 shares of common stock at an exercise price of $0.25 per share for a period of five years. The fair value of the warrants was estimated to be $57,252 as of the grant date. The total consideration paid of $118,677 is included as part of software costs within property and equipment on the Company’s consolidated balance sheet. The Company also entered into an employment agreement with the seller, effective November 1, 2020. The employee will be compensated at a rate of $110,000 per year and will receive a common stock award of 100,000 shares, which vest annually over four years.

~~The software costs above relate to acquired components of the Company’s new platform which is being depreciated over an expected useful life of two years.~~

On September 1, 2020, the Company’s wholly-owned subsidiary, ESEG, entered into domain purchase agreements to acquire the rights to certain domain names from third parties. The cost to acquire the domain names was $2,239,606, based on the estimated fair value of the consideration transferred to the sellers. ESEG issued notes payable with a combined principal amount of $2,100,000, which were to mature on March 1, 2022, bearing interest at 10%. These notes were exchanged for notes of the Company in September 2020. The Company also agreed to pay a total of $675,000 on September 1, 2025, with no interest. The Company estimated discount of these liabilities totaling $535,394 at the date of the transaction, to be amortized over the maturity period of the liabilities. The domain names were recorded as an intangible asset with an indefinite useful life. The Company’s management evaluated the domain names at September 30, 2020 and determined no impairment was necessary.

~~The following table presents the activities of the Company’s cryptocurrency holdings for the three and six months ended March 31, 2021:~~

Additions of cryptocurrency during the six months ended March 31, 2021 represent settlement of outstanding accounts receivable of $18,158 and net deposits from players of $118. Payments of cryptocurrency during the six months ended March 31, 2021 included payments of accounts payable and accrued expenses of $89,197. Use of cryptocurrency to settle receivables and payables during the period are reflected as a component of changes in operating assets and liabilities in the consolidated statement of cash flows.

On October 1, 2020, the Company entered into an option agreement which gives the Company the right to acquire a license for proprietary technology related to online betting. The Company paid $133,770 upon execution of the option agreement, and in the event the option is exercised and the license agreement is executed, the Company will pay an additional £200,000 (or approximately $270,000 as of March 31, 2021) in cash and issue 65,000 shares of common stock. The option was to initially expire on May 1, 2021, and was extended until May 6, 2021. The option was exercised on or about May 3, 2021. The Company recorded an other long-term asset of $133,770 related to the initial payment.

On September 1, 2020, ESEG entered into three promissory notes, with a combined principal amount of $2,100,000. The notes bore interest at the rate of 10% per annum and matured on March 1, 2022. The Company also agreed to pay two of the lenders a total of $675,000 on September 1, 2025, bearing no interest. The Company estimated total debt discount of these liabilities to be $535,394 at the date of the transaction, of which $279,516 related to the promissory notes payable, and $255,878 related to the other long-term liabilities. The discounts will be amortized over the maturity period of each liability. As of March 31, 2021 and September 30, 2020, the carrying amount of the other long-term liabilities was $442,680 and $422,409, respectively, which is net of the remaining discount totaling $232,320 and $252,591, respectively. The carrying amount of the convertible notes payable and associated discount is further discussed below.

On September 26, 2020, the Company assumed the notes payable with principal of $2,100,000 from ESEG. In connection with this assumption, Esports Tech issued each of the lenders a conversion option at a fixed price of $0.50 per share and issued 2,015,000 warrants to purchase shares of the Company’s common stock at an exercise price of $0.30 per share, each with a term of five years. The convertible notes bear interest at 10% per annum and mature on March 1, 2022. The holder may convert the note into shares of common stock at any time throughout the maturity date, to the extent and provided that no holder of the notes was or will be permitted to convert such notes so long as it or any of its affiliates would beneficially own in excess of 4.99% of the Company’s common stock after such conversion. The Company determined that the assignment of the notes payable by the subsidiary to the parent company was an extinguishment of the original notes payable due to the addition of a substantive conversion feature, and the Company recognized a loss on extinguishment of $265,779 during the year ended September 30, 2020.

During the three months ended December 31, 2020, a total of $187,500 of principal was converted into 375,000 shares of common stock. As of March 31, 2021, the balance due under these notes, net of unamortized discount of $1,136,012, is $776,488, with accrued interest of $116,774. During the six months ended March 21, 2021, the Company recorded a charge of $867,593 in the accompanying consolidated statement of operations from the amortization of its debt discount.

The Company is currently authorized to issue up to 100,000,000 shares of common stock with a par value of ~~$0.001.~~$0.001. In addition, the Company is authorized to issue 10,000,000 shares of preferred stock with a par value of ~~$0.001.~~$0.001. The specific rights of the preferred stock, when so designated, shall be determined by the board of directors.

On October 1, 2021, in connection with the Acquisition, the Company entered into subscription agreements (the “Subscription Agreements”) with certain investors (the “Investors”). Pursuant to the Subscription Agreements, the Investors agreed to subscribe for and purchase, and the Company agreed to issue and sell to such Investors, simultaneous with the closing of the Acquisition Agreement, an aggregate of 37,700 shares of Series A Convertible Preferred Stock (the “Preferred Stock”) for a purchase price of $1,000.00 per share, for aggregate gross proceeds of $37,700,000 (the “Private Placement”). For each share of Preferred Stock issued, the Company issued the Investor a warrant to purchase 150% of the shares of Company common stock underlying the Preferred Stock (the “Warrants”).

Pursuant to the Subscription Agreement, the Company has obtained shareholder approval of the conversion of the Preferred Stock and Warrants into Company common stock in compliance with the rules and regulations of the Nasdaq Stock Market (“Shareholder Approval”).

The Preferred Stockholders are entitled to receive dividends, at a rate of 14.0% per annum, which shall be payable quarterly in arrears on January 1, April 1, July 1 and October 1, beginning on the first such date after the issuance date. With limited exceptions, the Preferred Stockholders will have no voting rights. The dividends can be paid in either cash or in the issuance of additional preferred shares. Upon any liquidation, dissolution or winding-up of the Company, the holders of the Preferred Stock shall be entitled to receive out of the assets, whether capital or surplus, of the Company available to shareholders, an amount equal to the greater of: (i) the purchase price for each share of Preferred Stock then held, or (ii) the amount the holders would have received had the holders fully converted the Preferred Stock to Company common stock, in each case, before any distribution or payment shall be made to the holders of the Company’s common stock. The Preferred Stock is convertible into Company common stock at an initial conversion price of $28.00 per share (“Conversion Price”); provided that the Conversion Price is subject to anti-dilution protection upon any subsequent transaction at a price lower than the Conversion Price then in effect. In addition, nine months from the issuance date (the “Adjustment Date”), the Conversion Price shall be adjusted to the lesser of: (i) the Conversion Price in effect on the Adjustment Date, or (ii) 85% of the average closing price of the Company’s common stock for the fifteen trading days prior to the Adjustment Date. If the Company’s EBITDA is equal to or greater than $2.0 million for the quarter ending March 31, 2022, then no adjustment pursuant to the foregoing sentence will cause the Conversion Price to be less than $20.00.

The Warrants are exercisable and expire on the fifth anniversary thereafter. The Warrants will initially be exercisable at an exercise price of $30.00 per share, provided that the exercise price is subject to anti-dilution protection upon any subsequent transaction at a price lower than the exercise price then in effect. The Warrants can be exercised on a cashless basis if there is no effective registration statement registering, or no current prospectus available for, the resale of the ordinary shares underlying the Warrants.

The holders of the Preferred Stock and Warrants will not have the right to convert or exercise any portion of the Preferred Stock and Warrants to the extent that, after giving effect to such conversion, such holder (together with certain related parties) would beneficially own in excess of 4.99% of the Company’s common stock outstanding immediately after giving effect to such conversion or exercise.

During the three months ended December 31, 2020, the Company received gross cash proceeds of ~~$4,000,000~~$4,000,000 in exchange for 2,000,000 shares of common stock. In conjunction with this fundraising, broker commission and expenses of ~~$351,929~~$351,929 were paid and 173,625 common stock warrants with an exercise price of ~~$2.00~~$2.00 and a five-year term were issued. The fair value of the warrants issued in connection with the financing was estimated to be ~~$228,500~~$228,500 as discussed below.

In January 2021, the Company sold 250,014 shares of common stock to investors for $3 per share, receiving gross proceeds of ~~$750,042.~~$750,042. The company paid ~~$30,314~~$30,314 of broker fees and commissions related to this fundraising and issued 8,750 warrants to purchase common stock with an exercise price of $3$3 per share and a term of 5 years. The fair value of the warrants issued in connection with the financing was estimated to be ~~$228,500~~$228,500 as discussed below.

In February 2021, the Company entered into an agreement with a consultant where the Company agreed to issue warrants to purchase 4,166 shares of stock with a term of 5 years at an exercise price of $3 per share, and pay $37,500 of cash for services rendered. The consultant will also receive $50,000 of consideration per year for an additional two years in a combination of cash and common stock warrants.

In April 2021, the Company completed its IPO and issued 2,400,000 shares of common stock for gross cash proceeds of ~~$14,400,000. See note 9 for further information.~~$14,400,000 and received net proceeds of $13,514,200 after costs of $885,800 which were recorded in shareholders’ equity. The Company also issued 168,000 common stock warrants with a five-year term and exercise price of $7.20 to the underwriter. These warrants have an estimated fair value of $5,474,076.

In December 2020, the Company adopted the ~~Esports Technologies, Inc.~~ 2020 Stock Plan, or the 2020 Plan. The 2020 Plan is a stock-based compensation plan that provides for discretionary grants of stock options, stock awards, stock unit awards and stock appreciation rights to key employees, non-employee directors and consultants.

Under the 2020 Plan, the aggregate value of all compensation granted or paid to any individual for service as a non-employee director with respect to any calendar year, including awards granted under the 2020 Plan and cash fees paid to such non-employee director, will not exceed $300,000 in total value. For purposes of this limitation, the value of awards is calculated based on the grant date fair value of such awards for financial reporting purposes.

The number of shares of the common stock that may be issued under the 2020 Plan is ~~4,000,000.~~4,000,000. As of ~~March~~December 31, 2021, the Company had awarded a total ~~3,526,598~~3,868,098 shares under the 2020 Plan, with ~~473,402~~131,902 remaining under the 2020 Plan.

During the six months ended March 31, ~~2021,~~2022, the Company agreed to award a total of ~~1,110,250~~381,100 restricted stock units that convert into common stock to various employees, consultants and officers under the 2020 Plan. Of the restricted stock unit ~~awards, 610,250~~awarded, 281,100 will vest annually over a period of ~~two~~one to four years, 300,000 will vest upon the completion of various performance goals related to the operations of the Company, and 200,000 shares of common stock underlying awards made to the Company’s CEO will vest equally upon reaching trailing twelve months revenue of $10 million and $20 million. The Company estimated the fair value of the awards at $2 per share based on recent sales of common stock for cash as described above.

In November 2020, the Company entered into four consulting agreements under which the Company issued a total of 683,334 shares of common stock, which vest equally over terms ranging from three to twelve months.years.

During the ~~three and~~ six months ended March 31, ~~2021,~~2022, the Company recognized a total of ~~$353,313 and $1,438,532~~$2,281,520 of stock-based compensation expense related to common stock awards and expects to recognize additional compensation cost of ~~$2,148,636~~$9,981,520 upon vesting of all awards.

As discussed above, the Company has issued common stock warrants in connection with its fundraising activities to ~~brokers, an asset purchase agreement~~preference shareholders, its lender and convertible notes issued during the ~~year~~six months ended ~~September 30, 2020.~~March 31, 2022. The following table summarizes warrant activity during the ~~three and~~ six months ended March 31, ~~2021:~~2022:

Schedule of warrant activity
	Common Stock Warrants
	Shares		Weighted Average Exercise Price		Weighted average Remaining Life in years		Common Stock Warrants
Outstanding at September 30, 2020		2,015,000	$	0.30		4.99
							Shares			Weighted Average Exercise Price			Weighted average Remaining Life in years
Outstanding at September 30, 2021								2,199,541		$	0.93			4.04
Granted		218,541		1.80		5.00		3,697,225			27.82			4.67
Cancelled		–		–		–		0			0			–
Expired		–		–		–		0			0			–
Exercised		–		–		–		(711,375	)		(2.21	)		(3.73	)
Outstanding at March 31, 2021		2,233,541	$	0.45		4.50
Exercisable at March 31, 2021		2,233,541	$	0.45		4.50
Outstanding at March 31, 2022								5,185,391		$	19.92			4.49
Exercisable at March 31, 2022								5,185,391		$	19.92			4.49

~~The~~At March 31, 2022, the outstanding and exercisable common stock warrants had an estimated intrinsic value of ~~$5,702,125.~~$9,579,541. The Company estimated the fair value of the warrants using a Black-Scholes option pricing model and the following assumptions: 1) stock price of $2$2 to $3$28.95 per share; 2) dividend yield of 0%0%; 3) risk-free rate of between ~~0.18%~~0.18% and ~~0.52%~~1.18%; 4) expected term of between 2.5 and 5 years; 5) an exercise price of ~~$0.25,~~$0.25, $2 $3, $25, or $3$28 and 6) expected volatility of ~~between 84.1% and 99.0%~~42.14% based on a peer group of public companies. The warrants granted to brokers in connection with sales of common stock during the six months ended March 31, 2021 had an estimated fair value of $247,108 which was reflected as a cost of capital, warrants granted to consultants for services had a fair value of $8,819, and the warrants granted in connection with the asset purchase agreement had an estimated fair value of $57,252.

During the three months ended March 31, 2021, the Company entered into various agreements with employees, consultants and directors whereby the Company agreed to award a total of 402,000 common stock options, including 150,000 to two members of the Board of Directors under the 2020 Plan. These awards vest over a period of six months to four years, with 20,000 options issued to a consultant vesting immediately.

During the three months ended December 31, 2020, the Company entered into various agreements with employees and consultants whereby the Company agreed to award a total of 2,014,348 common stock options, including 90,000 to consultants and 100,000 to a member of the Board of Directors under the 2020 Plan. Of the total, 1,390,000 vest equally over periods of between one and four years, 70,313 vested upon completion of the Company’s IPO, 200,000 to the Company’s Chief Operating Officer would have vested in the event that the Company’s IPO raised gross proceeds of at least $18 million (as the IPO proceeds were less than $18 million, these shares did not vest), 16,785 vest upon the earlier of 1 year or the completion of the Company’s IPO, and 57,250 to the Company’s prior interim CFO vested upon the hiring of the Company’s full time CFO.

The following table summarizes option activity during the three months ended March 31, 2022:

~~During the three and six months ended March 31, 2021,~~2022, the Company recognized stock-based compensation expense of ~~$337,869 and $574,676~~$968,401 related to common stock options awarded. The exercisable common stock options had an intrinsic value as of March 31, ~~2021~~2022, of ~~$157,438.~~$6,645,579. The Company expects to recognize an additional ~~$3,739,510~~$4,996,713 of compensation cost related to stock options expected to vest.

The Company estimated the fair value of the stock options awarded using a Black-Scholes option pricing model and the following assumptions: 1) stock price of $2$3 to $3$31.33 per share; 2) dividend yield of 0%0%; 3) risk-free rate of between ~~0.22%~~0.85% and ~~0.90%~~1.20%; 4) expected term of between 3.5 and 6.25 years; 5) an exercise price ~~of $0.25, $2 or $3~~between $0.25 and $31.33 and 6) expected volatility of ~~between 82.3% and 95.33%~~42.14% based on a peer group of public companies.

The Company’s fixed assets consisted of the following as of March 31, 2022 and September 30, 2021:

On ~~September 2,~~November 5, 2020, the Company entered into ~~a financial advisor~~an asset purchase agreement with ~~Boustead Securities LLC, the representative of the underwriters in the Company’s initial public offering,~~a third party to ~~provide services related to fundraising on the Company’s planned public listing.~~acquire certain proprietary technology data. The Company ~~agreed to pay the financial advisor~~made a ~~success fee~~cash payment of ~~4% of any gross proceeds from any debt financing,~~ $61,425 and a 7% success fee related to any equity or convertible debt financing, subject to customary approval by the regulatory authorities. In April 2021, the Company completed its IPO and issued 2,400,000 shares of common stock for gross cash proceeds of $14,400,000. The Company paid underwriting fees of $820,800 and issued 168,000granted warrants to purchase 32,000 shares of ~~common stock at a price of $7.20 per share for a period of five years.~~

On September 26, 2020, the Company entered into a consulting agreement with a registered foreign broker dealer for fundraising services and paid 10% of any gross proceeds through capital raises from non-US investors introduced by the consultant, up to a maximum payment to the consultant of $200,000 and the consultant also received warrants to purchase shares of the Company’s common stock at an exercise price of ~~$2.00~~ $0.25 per ~~share.~~share for a period of five years. The fair value of the warrants was estimated to be $57,252 as of the grant date. The total consideration paid of $118,677 is included as part of software costs within property and equipment on the Company’s consolidated balance sheet. The Company also entered into an employment agreement with the seller, effective November 1, 2020. The employee will be compensated at a rate of $110,000 per year and will receive a common stock award of 100,000 shares, which vest annually over four years.

The software costs above relate to acquired components of the Company’s new platform which is being depreciated over an expected useful life.

On September 1, 2020, the Company’s wholly-owned subsidiary, ESEG, entered into domain purchase agreements to acquire the rights to certain domain names from third parties. The cost to acquire the domain names was $2,239,606, based on the estimated fair value of the consideration transferred to the sellers. ESEG issued notes payable with a combined principal amount of $2,100,000, which were to mature on March 1, 2022, bearing interest at 10%. These ~~warrants~~notes were ~~exercised in April 2021 and were converted into 62,386 shares~~exchanged for notes of the Company ~~stock.~~in September 2020. The Company also agreed to pay a total of $675,000 on September 1, 2025, with no interest. The Company estimated discount of these liabilities totaling $535,394 at the date of the transaction, to be amortized over the maturity period of the liabilities. The domain names were recorded as an intangible asset with an indefinite useful life. The Company’s management evaluated the domain names at September 30, 2020 and determined no impairment was necessary.

On October 1, 2020, the Company entered into an option agreement which gave the Company rights to acquire a license for proprietary technology related to online betting. The Company paid $133,770 upon execution of the option agreement and paid an additional $286,328 in cash and agreed to issue 65,000 shares of common stock upon exercise of the option on or about May 3, 2021. The shares were issued in July 2021 and had a fair value of $1,456,650 at the date of exercise of the option and execution of the license agreement resulting in total value for the license agreement of $1,876,748. During the three months ended March 31, 2022, the Company recognized amortization expense of $156,396 included in product and technology expenses.

The basic net loss per common share is calculated by dividing the Company's net loss available to common shareholders by the weighted average number of common shares during the year. The diluted net loss per common share is calculated by dividing the Company's net loss available to common shareholders by the diluted weighted average number of common shares outstanding during the year. The diluted weighted average number of common shares outstanding is the basic weighted number of common shares adjusted for any potentially dilutive debt or equity. Common shares issuable under convertible debt, stock options and common stock warrants were excluded from the calculation of diluted net loss per share due to their antidilutive effect.

As of March 31, 2021, the Company owed $155,228 to Gogawi Inc. (a company controlled by certain initial shareholders of the Company) (see note 1). At September 30, 2020 the amounts owed to these related parties was $152,888. The advances are due on demand and are non-interest bearing. In May 2021, the Company repaid the advances in full.COMMITMENTS AND CONTINGENCIES

On ~~November 10,~~September 2, 2020, the Company entered into ~~an employment~~a financial advisor agreement with ~~Michal Barden, a family member~~Boustead Securities LLC, the representative of the ~~Company’s Chief Operating Officer, to serve as~~underwriters in the Company’s ~~marketing director.~~initial public offering, to provide services related to fundraising on the Company’s planned public listing. The ~~employment agreement provides for an annual salary~~Company agreed to pay the financial advisor a success fee of ~~$132,000,~~4% of any gross proceeds from any debt financing, and a ~~technology allowance of $5,000, and an award of 30,000 shares of common stock in~~7% success fee related to any equity or convertible debt financing, subject to customary approval by the ~~Company, vesting in four equal annual installments.~~

regulatory authorities. In April 2021, the Company completed its IPO and issued 2,400,000 shares of common stock for gross cash proceeds of ~~$14,400,000.~~$14,400,000. The Company paid underwriting fees of ~~$820,800~~$885,800 and issued 168,000 warrants to purchase shares of common stock at a price of ~~$7.20~~$7.20 per share for a period of five 5years.

Subsequent to quarter end, the Company’s previous financial advisors (together, “Advisor”) have alleged a breach by the Company over the termination of the engagement and timing of the payment and amount of the fees. The fees the Company expects to pay are accrued in the accompanying balance sheet. The Company disputes the allegations of the Advisor. The Company and the Advisor are currently seeking a resolution to this dispute, but there is no certainty that the parties will amicably resolve this matter.

As disclosed in Note 4, the Company had not maintained compliance with the covenants of the Senior Notes and obtained a waiver from its lender which waiver is contingent on the completion an equity raise of $3.5 million prior to May 31, 2022. In consideration for obtaining a waiver from the compliance with certain covenants, the Company has agreed to amend the Senior Notes such that $5 million of principle loan balance becomes convertible at the effective average share price (giving effect to any warrants or other economic consideration) from which the Company raises the first $10,000,000 of common equity through one or more qualified equity offerings immediately following the receipt of the foregoing $3.5 million.

item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This section of this report includes forward-looking statements that reflect our current views with respect to future events and financial performance. Forward looking statements are often identified by words like, believe, expect, estimate, anticipate, intend, project and similar expressions or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements, which apply only as of the date of this report. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or our predictions.

We ~~are~~develop products and operate platforms to provide a ~~technology company creating and operating platforms~~real money online gambling experience focused on esports and competitive gaming. ~~Founded in late 2016, our focus has been operating our primary platform, gogawi.com,~~We operate licensed online gambling platforms which are real money betting platforms. Our mission is ~~an online esports/sportsbook focused on gamers located in Asia~~to define, shape and ~~Latin America. Although we are focused on~~drive growth of the current and future esports wagering ~~we also offer iGaming, which is online casino~~ecosystem by providing advanced product, platform and ~~table games such as blackjack, virtual sport computer simulated games~~marketing solutions directly to service providers and ~~slot machines,~~customers. We accept wagers on major esports titles including: Counter-Strike: GO, League of Legends, Dota 2, StarCraft 2, Rocket League, Rainbow Six, Warcraft 3, King of Glory and FIFA; as well as ~~traditional~~professional sports ~~betting~~including the National Football League, National Basketball Association, Major League Baseball, soccer and more.

On October 1, 2021, the Company, and Esports Product Technologies Malta Ltd. entered into a Share Purchase Agreement with Aspire Global plc, (“Aspire”) and various Aspire group companies to acquire its business to consumer (“B2C”) business. The total acquisition price was €65,000,000 paid as follows: (i) cash amount of €50,000,000; (ii) €10,000,000, payable in ~~jurisdictions~~accordance with the terms of an unsecured subordinated promissory note (the “Note”); and (iii) shares of Company common stock, which were valued at €5,000,000 (based on the weighted-average per-share price of the ten days prior to the execution date of the Acquisition Agreement.

This acquisition expands our product offerings and increases the number of markets in which we ~~are licensed~~can operate. The B2C business offers a portfolio of distinctive proprietary brands to ~~do so. We currently hold~~ a diverse customer base operating across regulated markets.

The acquisition of Aspire’s B2C business provides the following strategic benefits:

Our gaming ~~sublicense~~license from the Curacao Gaming ~~Authority. Under our existing sublicense, we can~~Authority and the licenses made available to us from the Acquisition of the Aspire B2C business allows us to accept esports and sports wagers from residents of more than ~~149~~160 jurisdictions. ~~Historically, virtually all of our wagers have been sourced in the Philippines.~~

Results of operations in dollars and as a percentage of net revenue were as follows:

Three Months Ended March 31, ~~2021~~2022 compared to March 31, ~~2020~~2021

During the three months ended March 31, ~~2021,~~2022, we generated ~~$33,834~~$19.0 million in revenue ~~and $21,369~~an increase from $0.033 million in ~~gross profit. For~~ the ~~three months ended March 31, 2020, we generated $40,750~~same period of the prior year. The increase in revenue ~~and $13,748 in gross profit. The decrease in revenue and gross profit~~ was ~~primarily~~ driven by the ~~disruption~~Acquisition which continues to ~~our~~generate significant revenue in the UK, Germany, Denmark, Ireland, Austria and other regulated markets. The acquisition of the Aspire B2C business ~~stemming from our launching our improved wagering platform, which resulted in less outreach to new and existing customers, thus causing a decrease~~accounted for substantially all of the increase in revenue for the three months ended March 31, ~~2021~~2022, as compared to the three months ended March 31, ~~2020.~~2021.

During the three months ended March 31, 2022, cost of sales was $12.0 million as compared with $0.012 million in the same period in the prior year. The ~~new~~increase in cost of sales is due entirely to the Acquisition and is consistent with the increase in revenue and consists primarily of platform ~~was launched in beta format in February 2021~~fees, which are charged as a percentage of revenue and ~~for general release in March 2021.~~ gaming taxes.

Sales and marketing expense was ~~$234,691~~$9.5 million for the three months ended March 31, ~~2021,~~2022, an increase from ~~zero~~$0.2 million in the same period in the prior year. ~~This~~The increase in sales and marketing expense is driven by increase in revenue from the acquisition of the Aspire B2C business, increase in stock-based compensation and increased levels of staff. Stock-based compensation was ~~a result of adding marketing staff to prepare~~approximately $0.964million for ~~our outreach campaign related to our new wagering products and services and the initial roll out of our marketing campaigns.~~three-month period ended March 31, 2022. We expect sales and marketing expenses to increase in future periods as our marketing campaigns increase in both number and volume.

Product and technology expense ~~was $603,445~~increased to $1.1 million for the three months ended March 31, ~~2021, as compared to zero~~2022, from $0.6 million for the three months ended March 31, ~~2020, representing an~~2021. The increase ~~of $603,445, as~~is a result of increased hiring of both employees and consultants ~~focused~~as we focus on expanding our product offerings. ~~The~~Product and technology expense, for the three months ended March 31, ~~2021~~2022, included payroll-related costs of ~~$306,536,~~approximately $613,000 and stock-based compensation of ~~$148,690 and development costs of $148,219.~~$367,000.

General and administrative expense was ~~$1,189,410~~$5.4 million for the three months ended March 31, ~~2021~~2022, as compared to ~~$8,675~~$1.2 million for the three months ended March 31, ~~2020, representing an increase of $1,180,735.~~2021. The increase in general and administrative expense was mainly attributable to an increase in employee costs from adding new employees, ~~$545,697~~$483,000 of stock-based compensation cost, ~~(of which $307,048 was to outside consultants),~~ and professional fees including legal, accounting, investor relations and other professional fees, depreciation and amortization of ~~approximately $230,000 as we prepared for our initial public offering.~~intangible assets.

During the three months ended March 31, ~~2021,~~2022, we recognized interest expense of ~~$367,214,~~$2.7 million, which included amortization of debt discount of ~~$309,822~~$0.8 million related to the convertible debt issued to acquire certain intangible assets consisting of acquired domain ~~names.~~names and our recent loan completed as part of the Acquisition. We also incurred ~~a foreign currency loss~~interest on the term loan completed on November 29, 2021 of ~~$2,269.~~$1.9 million.

Net loss for the three months ended March 31, ~~2021~~2022, was ~~$2,375,660~~$11.8 million compared to a net ~~profit~~loss of ~~$5,073~~$2.4 million for the three months ended March 31, ~~2020.~~2021. The increase in net loss was primarily due to the significant in increase in cost of sales and sales and marketing costs to support the Acquisition as well as increased general and administrative expenses ~~of $1,180,735 described above, an increase in~~ product and technology expenses ~~of $603,445~~ as a result of our efforts to develop our new products and ~~services, and~~services. Increased interest ~~on convertible~~expense from the issuance of the senior notes, ~~and~~also contributed to the increase in our net loss ~~on extinguishment of convertible notes described above, which totaled $309,822.~~for the period.

Six Months Ended March 31, ~~2021~~2022 compared to March 31, ~~2020~~2021

During the six ~~month period~~months ended March 31, ~~2021,~~2022, we generated ~~$44,628~~$26.1 million in revenue ~~and $19,904~~an increase from $0.045 million in ~~gross profit. For~~ the ~~six month~~same period ~~ended March 31, 2020, we generated $77,878 in revenue and $25,711 in gross profit.~~of the prior year. The increase in revenue was ~~primarily~~ driven by the ~~expansion~~Acquisition which continues to generate significant revenue in the UK, Germany, Denmark, Ireland, Austria and other regulated markets. The acquisition of ~~our existing player base. The slight decrease~~the Aspire B2C business accounted for substantially all of the increase in ~~gross profit was due to decreased technology platform costs during~~revenue for the six ~~month period~~months ended March 31, 2022, as compared to the six months ended March 31, 2021. ~~Increased technology~~

During the six months ended March 31, 2022, cost of sales was $16.6 million as compared with $0.025 million in the same period in the prior year. The increase in cost of sales is due entirely to the Acquisition and is consistent with the increase in revenue and consists primarily of platform ~~costs were related to support~~fees, which are charged as a percentage of ~~our affiliate program in 2021 compared to 2020 along with additional fees incurred from Amazon Web Services.~~revenue and gaming taxes.

Sales and marketing expense was ~~$273,944~~$13.4 million for the six months ended March 31, ~~2021,~~2022, an increase from ~~zero~~$0.3 million in the same period in the prior year. ~~This~~The increase in sales and marketing expense is driven by increase in revenue from the acquisition of the Aspire B2C business, increase in stock-based compensation and increased levels of staff. Stock-based compensation was ~~a result of adding marketing staff to prepare~~approximately $1.842 million for ~~our outreach campaign related to our new wagering products and services and the initial roll out of our marketing campaigns.~~six-month period ended March 31, 2022. We expect sales and marketing expenses to increase in future periods as our marketing campaigns increase in both number and volume.

Product and technology expense ~~was $1,109,380~~increased to $2.2 million for the six months ended March 31, ~~2021, as compared to $15,635~~2022, from $1.1 million for the six months ended March 31, ~~2020, representing an~~2021. The increase ~~of $1,093,745, as~~is a result of ~~increasing development activities~~increased hiring of both employees and consultants as we focus on expanding our ~~products and services. The increase in~~ product offerings. Product and technology expense, ~~was partially attributable to an increase in~~for the six months ended March 31, 2022, included payroll-related costs of approximately $955,000, stock-based compensation of ~~$251,330.~~$696,000.

Acquisition costs was $2.2 million for the six months ended March 31, 2022, as compared to zero for the six months ended March 31, 2021. Acquisition costs included a non cash hedging loss of $1.570 million from executing a forward contract on the purchase price of the Acquisition. Acquisition costs also included various legal and consultant fees associated with completing the Acquisition.

General and administrative expense was ~~$2,783,121~~$8.6 million for the six ~~month period~~months ended March 31, ~~2021~~2022, as compared to ~~$28,431~~$2.8 million for the six ~~month period~~months ended March 31, ~~2020, representing an increase of $2,754,690.~~2021. The increase in general and administrative expense was mainly attributable to an increase in employee costs from adding new employees, ~~$1,762,583~~$711,000 of stock-based compensation cost, and professional fees ~~as we prepared for our initial public offering.~~including legal, accounting, investor relations and other professional fees, depreciation and amortization of intangible assets.

During the six ~~month period~~months ended March 31, ~~2021,~~2022, we recognized interest expense of ~~$967,620, including~~$3.7 million, which included amortization of debt discount of ~~$867,593~~$1.4 million related to the convertible debt issued to acquire certain intangible assets consisting of acquired domain ~~names.~~names and our recent loan completed as part of the Acquisition. We also incurred interest on the term loan completed on November 29, 2021 of $2.3 million.

Net loss for the six ~~month period~~months ended March 31, ~~2021~~2022, was ~~$5,126,391~~$20.7 million compared to a net loss of ~~$18,355~~$5.1 million for the six ~~month period~~months ended March 31, ~~2020.~~2021. The increase in net loss was primarily due to ~~interest on convertible notes and~~ the ~~loss on extinguishment of convertible notes described above, which totaled $867,593, stock-based compensation of $2,022,026 and an~~significant in increase in ~~payroll related~~cost of sales and sales and marketing costs to support the Acquisition as well as increased general and administrative expenses product and technology expenses as ~~we add~~a result of our efforts to develop our new ~~employees~~products and services. Increased interest expense from the issuance of the senior notes, also contributed to ~~support~~the increase in our ~~growth, as described above.~~net loss for the period.

On March 31, ~~2021,~~2022, we had cash of ~~$2,269,615,~~$7.1 million, and had working capital deficit of ~~$1,820,825.~~$0.82 million. We have historically funded our operations from proceeds from debt and equity sales, and ~~through the use of bitcoin cryptocurrency~~funds received from customers. The Company's forecasts for fiscal year 2022 indicate that it will need additional funding during such period in order to have sufficient financial resources to continue to settle its debts as they fall due. The Company does not have any commitments for such funding and there is no assurance that it will be able to raise additional financing on favorable terms, if at all.

In order to accelerate the growth and expand market access for our esports product offerings, on November 29, 2021, we completed the acquisition of Aspire Global’s B2C business for €65,000,000 payable as follows: (i) a cash amount of €50,000,000; (ii) €10,000,000, payable in accordance with the terms of an unsecured subordinated promissory note; and (iii) 186,838 shares of our common stock, which were valued at €5,000,000.

On September 30, 2021, the Company entered into subscription agreements (the “Subscription Agreements”) with certain investors (the “Investors”). Pursuant to the Subscription Agreements, the Investors agreed to subscribe for and purchase, and the Company agreed to issue and sell to such Investors, simultaneous with the closing of the Acquisition Agreement, shares of Series A Convertible Preferred Stock (the “Preferred Stock”) for a purchase price of $1,000.00 per share (the “Private Placement”). For each share of Preferred Stock issued, the Company issued the Investor a warrant to purchase 150% of the shares of Company common stock underlying the Preferred Stock (the “Warrants”). The aggregate Private Placement, which was completed on the closing date of the Acquisition Agreement was $37.7 million.

On November 29, 2021, the Company entered a credit agreement (the “Credit Agreement”) with CP BF Lending, LLC (“Lender”), pursuant to which the Lender agreed to make a single loan to the Company of $30.0 million (the “Loan”). The Loan bears interest on the unpaid principal amount at a rate per annum equal to 15.0% as follows: (1) cash interest on the unpaid principal amount of the Loan at a rate equal to 14.0% per annum, plus (2) payable-in-kind interest (“PIK Interest”) on the unpaid principal amount of the Loan at a rate equal to 1.0% per annum. The Company paid to Lender on the closing date a non-refundable origination fee in an amount equal to $750,000.

As of March 31, 2022, the Company had not maintained compliance with the covenants of the Senior Notes and obtained a waiver from its lender which waiver is contingent on the completion an equity raise of $3.5 million prior to May 31, 2022. In consideration for obtaining a waiver from the compliance with certain covenants, the Company has agreed to amend the Senior Notes such that $5 million of principle loan balance becomes convertible at the effective average share price (giving effect to any warrants or other economic consideration) from which the Company raises the first $10,000,000 of common equity through one or more qualified equity offerings immediately following the receipt of the foregoing $3.5 million.

During ~~October and November 2020,~~fiscal year September 30, 2021, we completed atwo private ~~placement of 2,000,000~~placements totaling 2,250,000 shares of our common stock for gross proceeds of ~~$4.0~~$4.75 million.

~~During January and February 2021, we completed a private placement of 250,014 shares of our common stock at $3.00 per share for gross proceeds of $0.75 million.~~

~~As of March 31, 2021, we have incurred an accumulated deficit of $6,575,917 since inception and have not yet generated any meaningful income from operations.~~ In April 2021, wethe Company completed ~~our initial public offering~~its IPO and issued 2,400,000 shares of common stock for gross cash proceeds of $14,400,000. WeThe Company paid underwriting fees and other expenses of ~~$820,800~~$885,800 and issued 168,000 warrants to purchase shares of common stock at a price of $7.20 per share for a period of five years.

As of March 31, 2021, we have incurred an accumulated deficit of $39.9 million since inception and have not yet generated any meaningful income from operations.

Net cash used in operating activities was ~~$1,873,473~~$7.6 million for the six months ended March 31, ~~2021~~2022, as compared to cash used in operating activities of ~~$21,563~~$1.8 million for the six months ended March 31, ~~2020.~~2021. Net cash used in operating activities during the ~~three months ended March 31, 2021 mainly included~~period were primarily impacted by the increase in Accounts Receivable due to the growth in our business, which was collected in April 2022. Cash flow from operations also benefitted from deferred payments ~~made~~ for ~~employee costs,~~ professional fees to our consultants, attorneys and accountants ~~for services related~~primarily required to ~~completion of our audit, development of our new wagering platform and preparation of our public offering filings.~~complete the Acquisition.

Net cash used in investing activities was ~~$224,669~~$57.1 million for the six months ended March 31, ~~2021 and was~~2022, as compared to cash used in investing activities of $0.2 million for the six months ended March 31, 2021. Net cash used in investing activities during the period related to the completion of the Acquisition. Also contributing to the cash used in investing activities were purchase of fixed assets of $0.9 million due primarily to opening of our office in Malta and purchase of software assets to support the new wagering ~~platform, and the purchase of long term assets related to intellectual property rights.~~platform.

Net cash provided by financing activities was ~~$4,367,757~~$62,7 million for the six months ended March 31, ~~2020 and was related~~2022 due to the ~~sale~~issuance of ~~2,000,000 shares~~Preferred Shares and Senior Notes of ~~common stock at $2.00 per share in a private placement, partially offset by costs of capital to brokers of $351,929 as well as private placements of our common stock completed in January~~$37.7 million and ~~February 2021, at $3.00 per share for gross proceeds of $750,000.~~$30.0 million, respectively. Offsetting these amounts were the direct issuance costs.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.

Our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)) are designed to ensure that information required to be disclosed by us in reports we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the appropriate time periods, and that such information is accumulated and communicated to the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely discussions regarding required disclosure. We, under the supervisions of and with the participation of our management, including our Chief Executive Officer, who is our principal executive officer, and Chief Financial Officer, who is our principal financial officer, have evaluated the effectiveness of our disclosure controls and procedures. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the design and operation of our disclosure controls and procedures were effective as of March 31, ~~2021.~~2022.

There were no changes to our internal control over financial reporting during the three months ended March 31, ~~2021,~~2022, that have materially affected, or are reasonable likely to materially effect, our internal controls over financial reporting.

Due to a transition period established by SEC rules applicable to newly public companies, our management is not required to evaluate the effectiveness of our internal control over financial reporting until after the filing of our Annual Report on Form 10-K for the year ended December 31, 2020. As a result, this Quarterly Report on Form 10-Q does not address whether there have been any changes in our internal control over financial reporting.

For a discussion of potential risks or uncertainties, see “Risk Factors” in the Company’s ~~registration statement~~most recent annual report on Form ~~S-1, as amended (File No. 333-254068), on~~10-Kon file with the SEC. Except as set forth below, there have been no material changes to the risk factors disclosed in such ~~registration statement.~~annual report.

Although our common stock is traded on Nasdaq under the symbol “EBET,” there is a very limited trading history and an active trading market for our common stock may not be sustained. Accordingly, no assurance can be given as to the following:

· ~~the likelihood that an active trading market for our common stock will be sustained;~~

If an active market for our common stock with meaningful trading volume is not maintained, the market price of our common stock may decline materially. Consequently, you may not be able to sell our common stock at prices equal to or greater than the price you paid.

Future sales of shares by ~~existing~~our preferred stockholders could cause our stock price to decline.

~~If our existing stockholders, which acquired their~~On November 29, 2021, in connection with the Acquisition, we issued an aggregate of 37,700 shares of Preferred Stock for a purchase price of $1,000.00 per share, for aggregate gross proceeds of $37,700,000 (the “Private Placement”). For each share of Preferred Stock issued, we issued the investors a warrant to purchase 150% of the shares of common stock ~~at prices substantially below our current trading price, sell, or indicate an intention to sell, substantial amounts of our~~underlying the Preferred Stock (the “Warrants”). The Preferred Stock is convertible into common stock ~~in the public market after the contractual lock-up agreements described below expire and other restrictions on resale lapse, the trading~~at an initial conversion price of ~~our~~$28.00 per share (“Conversion Price”); provided that the Conversion Price is subject to anti-dilution protection upon any subsequent transaction at a price lower than the Conversion Price then in effect. In addition, nine months from the issuance date (the “Adjustment Date”), the Conversion Price shall be adjusted to the lesser of: (i) the Conversion Price in effect on the Adjustment Date, or (ii) 85% of the average closing price of the Company’s common stock ~~could be adversely impacted.~~

~~Certain~~for the fifteen trading days prior to the Adjustment Date. The Warrants are initially exercisable at an exercise price of ~~our initial stockholders holding an aggregate of 4,428,106 shares and our officers and directors, have agreed not to offer, sell, dispose of or hedge such shares of our common stock,~~$30.00 per share, provided that the exercise price is subject to ~~specified limited exceptions, during~~anti-dilution protection upon any subsequent transaction at a price lower than the period continuing through the date that is fifteen months after the date of our IPO, or July 15, 2022. In addition, certain of our pre-IPO stockholders holding an aggregate of 683,334 shares have agreed not to offer, sell, dispose of or hedge such shares of our common stock, subject to specified limited exceptions, during the period continuing through the date that is six months after the date of our IPO, or October 15, 2021. Finally, holders of an aggregate of 2,250,014 shares of common stock have agreed not to offer, sell, dispose of or hedge such shares of our common stock, subject to specified limited exceptions, during the period continuing through the date that is 180 days after the date of our IPO, or October 12, 2021; provided if our common stockexercise price ~~is over $11.00 the lock-up on these shares will end on July 14, 2021. Upon the expiration of the lock-up agreements, all such shares will be eligible for resale~~then in ~~the public market, subject to applicable securities laws, including the Securities Act. Upon expiration of each of these lock-up periods or upon the ability to sell shares pursuant to Rule 144, the~~effect. The trading price of our common stock could be adversely impacted if these preferred stockholders sell, or ~~indicate an intention to~~if the market believes such holders may sell, substantial amounts of our common stock in the public market.

~~On April 19, 2021, we closed our initial public offering~~As disclosed in Note 4, the Company had not maintained compliance with the covenants of ~~2,400,000 shares~~its Senior Notes and obtained a waiver from its lender which waiver is contingent on the completion an equity raise of $3.5 million prior to May 31, 2022. In consideration for obtaining a waiver from the compliance with certain covenants, the Company has agreed to amend the Senior Notes such that $5 million of principle loan balance becomes convertible at the effective average share price (giving effect to any warrants or other economic consideration) from which the Company raises the first $10,000,000 of common ~~at a price to~~equity through one or more qualified equity offerings immediately following the ~~public of $6.00 per share. The gross proceeds from our initial public offering, before deducting underwriting discounts and commissions, was $14.4 million. The offer and sale of all~~receipt of the ~~shares in the offering were registered under the Securities Act pursuant to a registration statement on Form S-1 (File No. 333-254068), which was declared effective by the SEC on April 14, 2021. Boustead Securities, LLC acted as underwriter for the offering.~~foregoing $3.5 million

There has been no material change in the planned use of proceeds from our IPO as described in our final prospectus filed with the SEC on April 16, 2021 pursuant to Rule 424(b). No direct or indirect payments were made by us to any of our directors or officers or their associates, to persons owning ten percent or more of our common stock or to their associates, or to our affiliates, other than payments in the ordinary course of business to officers for salaries. Pending the uses described, we intend to invest the net proceeds in short-term, interest-bearing obligations, investment-grade instruments, certificates of deposit or direct or guaranteed obligations of the U.S. government.

~~There is no other information required to be disclosed under this item which was not previously disclosed.~~None.

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

~~720 South 7th Street, 3rd Floor,~~ 197 E. California Ave. Ste. 302, Las Vegas, NV		~~89101~~89104
(Address of Principal Executive Offices)		(Zip Code)

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	EBET	The NASDAQ Stock Market LLC

Large Accelerated Filer ☐	Accelerated Filer ☐
Non-Accelerated Filer ☒	Smaller Reporting Company ☒
	Emerging Growth Company ☒

				Page
PART I.	FINANCIAL INFORMATION

	Item 1.	Financial Statements

	~~Item 1.~~	~~Financial Statements~~a)

		a)	Consolidated Balance Sheets as of March 31, ~~2021~~2022 and September 30, ~~2020~~2021		4
		b)	Consolidated Statements of Operations for the Three and Six Months Ended March 31, ~~2021~~2022 and ~~2020~~2021	5
		c)	Consolidated Statements of ~~Stockholders’~~Changes in Shareholders’ Equity for the Three and Six Months Ended March 31, ~~2021~~2022 and ~~2020~~2021	6
		e)d)	Consolidated Statements Cash Flows ~~Statements~~ for the ~~Three and~~ Six Months Ended March 31, ~~2021~~2022 and ~~2020~~2021	7
		f)e)	Notes to Consolidated Financial Statements	8

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		15	21

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk		18	25

	Item 4.	Controls and Procedures		18	26

PART II.	OTHER INFORMATION

	~~Item 1.~~	~~Legal Proceedings~~			18

	~~Item 1A.~~	~~Risk Factors~~			18

	~~Item 2.~~	~~Unregistered Sales of Equity Securities and Use of Proceeds~~			19

	Item 3.1.	~~Defaults Upon Senior Securities~~Legal Proceedings		19	27

	Item 4.1A.	~~Mine Safety Disclosure~~Risk Factors		19	27

	Item 5.2.	~~Other Information~~Unregistered Sales of Equity Securities and Use of Proceeds		2027

	Item 3.	Defaults Upon Senior Securities		27

	Item 4.	Mine Safety Disclosure		27

	Item 6.5.	~~Exhibits~~Other Information		20	27


~~SIGNATURE~~Item 6.	21Exhibits		28

SIGNATURE				29


	March 31,			September 30,
	2022			2021

ASSETS
Current assets:
Cash	$	7,051,815		$	9,064,859
Accounts receivable, net		1,732,097			21,636
Prepaid expenses and other current assets		1,504,086			690,637
Right of use asset, operating lease, current portion		171,819			170,512

Total current assets		10,459,817			9,947,644

Long term assets:
Fixed assets, net		924,692			85,334
Right of use asset, operating lease		76,971			172,915
Intangible assets - license agreement, net		1,308,846			1,616,088
Intangible assets - domain names, net		2,249,033			2,240,510
Goodwill		34,912,645			0
Acquired intangibles, net		34,889,210			0

Total assets	$	84,821,214		$	14,062,491

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	8,114,433		$	1,721,103
Current lease liabilities		171,818			170,511
Derivative liabilities		66,457			0
Borrowings		1,906,894			1,396,133
Liabilities to users		1,019,482			58,789
Total current liabilities		11,279,084			3,346,536

Long-Term Liabilities
Borrowings		32,686,431			463,925

Total liabilities		43,965,515			3,810,461

COMMITMENTS AND CONTINGENCIES		–			–

Stockholders' equity:
Preferred Stock, $0.001 par value, 10,000,000 shares authorized, 39,551 and 0 issued and outstanding as of March 31, 2022 and September 30, 2021, respectively		40			0
Common stock; $0.001 par value, 100,000,000 shares authorized,14,416,830 and 13,315,414 shares issued and outstanding as of March 31, 2022 and September 30, 2021, respectively		14,416			13,315
Additional paid-in capital		80,979,465			26,834,354
Accumulated other comprehensive (deficit) income		(915,486	)		53,911
Accumulated deficit		(39,222,736	)		(16,649,550	)
Total stockholders’ equity		40,855,699			10,252,030

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	84,821,214		$	14,062,491

Schedule of allocation of purchase price

	Fair Value
Trademarks	$	21,836,528
Customer relationships		16,162,202
Goodwill		35,620,270
Total	$	73,619,000

Schedule of acquisition costs

Debt issuance costs		2,869,163
Equity issuance costs		2,100,000
Transaction expenses		2,615,098
Total acquisition expenses	$	7,584,261

Schedule of borrowings outstanding
			March 31, 2022												September 30, 2021
	Contractual Interest		Principal outstanding balance		Principal outstanding balance		Unamortized debt discount			Issuance costs			Carrying amount		Principal outstanding balance		Unamortized debt discount			Issuance costs		Carrying amount
	rate	Cur	Local		USD		USD			USD			USD		USD		USD			USD		USD
Senior notes	15%	USD		30,000,000		30,000,000		(7,150,623	)		(1,750,134	)		21,099,243		0		0			0		0
Note due to Aspire	10%	EUR		10,000,000		11,101,000		0			0			11,101,000		0		0			0		0
Convertible notes	10%	USD		1,906,894		1,906,894		0			0			1,906,894		1,912,500		(516,366	)		0		1,396,134
Other	0%	USD		675,000		675,000		(188,812	)		0			486,188		675,000		(211,076	)		0		463,924
Total borrowings						43,682,894		(7,339,435	)		(1,750,134	)		34,593,325		2,587,500		(727,442	)		0		1,860,058

Current														1,906,894									1,396,133
Long-term														32,686,431									463,925
Total borrowings														34,593,325									1,860,058

		March 31, 2021			September 30, 2020
Software	$	148,151		$	–
Total software and equipment		148,151			–
Accumulated depreciation		(12,346	)		–
Software and equipment, net	$	135,805		$	–

Cryptocurrency at September 30, 2020	$	44,562
Additions of cryptocurrency		18,276
Payments of cryptocurrency		(89,197	)
Gain on cryptocurrency		35,140
Cryptocurrency at March 31, 2021	$	8,781

Schedule of option activity

	Common Stock Options
	Shares			Weighted Average Exercise Price			Weighted average Remaining Life in years
Outstanding at September 30, 2021		2,344,348		$	2.57			8.39
Granted		154,000			11.78			9.20
Cancelled		(23,000	)		(5.57	)		9.76
Expired		0			0			–
Exercised		0			0			–
Outstanding at March 31, 2022		2,475,348		$	3.12			8.34
Exercisable at March 31, 2022		1,143,348		$	0.93			8.45

Schedule of fixed assets

	March 31, 2022			September 30, 2021
Software	$	677,287		$	214,996
Furniture and fixtures		418,976			0
Total fixed assets		1,096,263			214,996
Accumulated depreciation		(171,571	)		(129,662	)
Fixed assets, net	$	924,692		$	85,334

Schedule of earnings per share
	Three Months Ended						Six Months Ended
	March 31, 2022			March 31, 2021			March 31, 2022			March 31, 2021
Numerator
Net income (loss)	$	(11,841,071	)	$	(2,375,660	)	$	(20,722,109	)	$	(5,126,391	)
Preferred stock dividends		(1,367,260	)		0			(1,851,077	)		0
Net income (loss) attributable to common stockholders	$	(13,208,331	)	$	(2,375,660	)	$	(22,573,186	)	$	(5,126,391	)

Denominator
Basic and diluted weighted average common shares		14,236,755			10,587,654			13,980,720			9,878,185
Basic and diluted net income (loss) per common share	$	(0.93	)	$	(0.22	)	$	(1.61	)	$	(0.52	)

	Three Months Ended March 31,										Six Months Ended
	2022					2021					2022					2021
	$			%		$			%		$			%		$			%

Revenue		19,002,588			100%		33,834			100%		26,142,515			100%		44,628			100%
Cost of revenue		12,009,596			63%		12,465			37%		16,618,683			64%		24,724			55%

Gross profit		6,992,992			37%		21,369			63%		9,523,832			36%		19,904			45%

Operating expenses:
Sales and marketing expenses		9,474,087			50%		234,691			694%		13,448,872			51%		273,944			614%
Product and technology expenses		1,139,914			6%		603,445			1,784%		2,155,162			8%		1,109,380			2,486%
Acquisition costs		1,190			0%		–			0%		2,240,147			9%		–			0%
General and administrative expenses		5,446,776			29%		1,189,409			3,516%		8,591,195			33%		2,783,121			6,236%
Total operating expenses		16,061,967			85%		2,027,546			5,993%		26,435,376			101%		4,166,445			9,336%

Income (loss) from operations		(9,068,975	)		(48)%		(2,006,177	)		(5,930)%		(16,911,544	)		(65)%		(4,146,541	)		(9,291)%

Other expenses:
Interest expense		(2,764,819	)		(15)%		(367,214	)		(1,085)%		(3,741,237	)		(14)%		(967,620	)		(2,168)%
Loss on derivatives		(67,031	)		(0)%		–			0%		(73,083	)		(0)%		–			0%
Foreign currency gain/(loss)		(59,754	)		0%		(2,269	)		(7)%		3,755			0%		(12,230	)		(27)%
Total other expense		(2,772,096	)		(15)%		(369,483	)		(1,092)%		(3,810,565	)		(15)%		(979,850	)		(2,196)%

Income (loss) before provision for income taxes		(11,841,071	)		(62)%		(2,375,660	)		(7,022)%		(20,722,109	)		(79)%		(5,126,391	)		(11,487)%
Provision for income taxes		–			0%		–			0%		–			0%		–			0%

Net income (loss)		(11,841,071	)		(62)%		(2,375,660	)		(7,022)%		(20,722,109	)		(79)%		(5,126,391	)		(11,487)%

	Three Months Ended March 31,							Six Months Ended March 31,
	2021				2020			2021				2020
	$			%	$		%	$			%	$			%

Revenue	$	33,834		100%	$	40,750	100%	$	44,628		100%	$	77,878		100%
Cost of revenue		12,465		37%		27,002	66%		24,724		55%		52,167		67%

Gross profit		21,369		63%		13,748	34%		19,904		45%		25,711		33%

Operating expenses:
Sales and marketing		234,691		694%		–	0%		273,944		614%		–		00%
Product and technology		603,445		1,784%		–	0%		1,109,380		2,486%		15,635		20%
General and administrative		1,189,410		3,515%		8,675	21%		2,783,121		6,236%		28,431		37%
Total operating expenses		2,027,546		5,993%		8,675	21%		4,166,445		9,336%		44,066		57%

Loss from operations		(2,006,177	)	(5,930)%		5,073	12%		(4,146,541	)	(9,291)%		(18,355	)	(24)%

Other expenses:
Interest expense		(367,214	)	(1,085)%		–	0%		(967,620	)	(2,168)%		–		0%
Foreign currency loss		(2,269	)	(7)%		–	0%		(12,230	)	(27)%		–		0%
Total other expense		(369,483	)	(1,092)%		–	0%		(979,850	)	(2,196)%		–		0%

Net (loss)/profit	$	(2,375,660	)	(7,022)%	$	5,073	12%	$	(5,126,391	)	(11,487)%	$	(18,355	)	(24)%

Exhibit Number		Description
3.1		Articles of Merger(incorporated by reference to exhibit 3.1 of the Form 8-K filed May 5, 2022)
31.1*3.2		Amended and Restated Bylaws (incorporated by reference to exhibit 3.2 of the Form 8-K filed May 5, 2022)
31.1*		Certification of the Principal Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934
31.2*		Certification of the Principal Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934
32.1*(1)		Certification of the Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*(1)		Certification of the Principal 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		Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)
101.INS*101.SCH		~~XBRL Instance Document~~
101.SCH*		Inline XBRL Taxonomy Extension Schema Document
101.CAL*101.CAL		~~SXRL~~Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File (formatted in IXBRL, and included in exhibit 101).

*(1)	~~Filed herewith.~~
**	~~Management contract or compensatory plan, contract or arrangement.~~

	~~ESPORTS TECHNOLOGIES,~~EBET, INC.

Date: May ~~17, 2021~~16, 2022	By:	/s/ Aaron Speach
		Aaron Speach Chief Executive Officer, President and Director (Principal Executive Officer)


Date: May ~~17, 2021~~16, 2022	By:	/s/ James Purcell
		James Purcell Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)