ELYS Elys Game Technology Corporation

Elys Game Technology, Corp. (“Elys” or the “Company”) (OTC:ELYS) (BER:3UW), an interactive gaming and sports betting technology company, today provided a business update and reported financial results for the third quarter ended September 30, 2023.

Third Quarter and Recent Operational Highlights

• Established a multiyear market access agreement with Caesars Entertainment, unlocking access to the Colorado sports betting market. The strategic agreement signals Elys’ first entry into the North American mobile sports betting landscape. Pending regulatory approvals, the Company expects to launch its U.S. mobile sportsbook operations in Colorado in 2024.

• Introduced www.SportBet.com, the Company’s new online and mobile sports betting brand for the United States market. The “5D by Elys” mobile app is included under the brand, forming a comprehensive sports betting platform with cross-platform compatibility. This development positions Elys’ online sports betting launch under a highly recognizable, consumer-friendly brand.

• Completed installation of its North American hub infrastructure, successfully establishing a robust technology footprint for the expansion of Elys’ platform.

• Multigioco, an Elys subsidiary, unveiled its enhanced offerings in Italy with a revamped online casino, sports betting site, and mobile app. The significant relaunch in the Italian market improves player experience with optimized performance, speed, and a robust security profile while also setting the stage for meaningful cost savings by eliminating expenses associated with trading and risk management, platform development, and iGaming aggregation.

• Secured a third sportsbook location in Washington, D.C., expanding the Company’s footprint in the city and building upon the success of its small business sportsbook business model.

Third Quarter 2023 Financial ResultsResults compare 2023 fiscal third quarter end (September 30, 2023) to 2022 fiscal third quarter end (September 30, 2022) unless otherwise indicated.

• Total revenue decreased 11.8% to $8.5 million from $9.6 million in the prior year. The change is primarily attributable to higher payouts benefiting Elys’ sportsbook customers as well as a decrease in web-based turnover due to a reduction in online casino and poker offerings during the third quarter, thereby reducing our blended revenue conversion. At the end of September 2023, a historically quiet period for sports betting, the Company underwent a platform switchover that provides significantly enhanced online casino and poker offerings for our Italian operations. The switchover had an immaterial impact on online sportsbook revenue that was partially offset by an increase in land-based sportsbook revenue due to the activation of new physical locations. For the first nine months of 2023, total revenue increased by approximately $0.06 million.

• Total handle (turnover) decreased 2.4% to $162.6 million from $166.5 million in the prior year period. The decrease in handle in the third quarter was due to the reduction in web-based turnover caused by the aforementioned online casino and poker reduction ahead of the platform switchover. For the first nine months of 2023, the total handle increased 2.4% to $585.8 million consistent with the Company’s growth expectations.

• Operating expenses decreased 10.2% to $11.4 million from $12.7 million in the prior year period. The change is primarily attributable to decreases in general and administrative costs as well as a reduction in technology development costs. For the first nine months of 2023, overall operating costs continued to downtrend, with a reduction of $0.13 million, reflecting management’s commitment to profitability, despite the additional expenses incurred for U.S. and Canadian facing investments during the first nine months of 2023.

• Net loss from continuing operations was $(3.2) million, or $(0.10) per share, compared to $(3.8) million, or $(0.14) per share, in the prior year period. The change is primarily attributable to the decrease in loss from operations, despite lower revenues and a reduction in other non-operating expenses of $0.3 million compared to the prior year period. For the first nine months of 2023, net loss was $(9.1) million, or $(0.27) per share, compared to $(11.1) million, or $(0.41) per share, in the prior year period.

• Cash and cash equivalents were $2.6 million at September 30, 2023, compared to $3.4 million at December 31, 2022.

Management Commentary“In Q3, we laid critical foundations for a large-scale expansion into the rapidly growing online sports betting market in the United States and Canada,” said Mike Ciavarella, Executive Chairman of Elys Game Technology Corp. “Over the past few years, we have executed our go-to-market strategy by making significant investments related to our product platform and infrastructure development for our future commercial operations in North America. Elys now stands at the inflection point where these investments begin to convert into revenues in 2024.

“Our www.SportBet.com website, complemented by our advanced platform and recent market access partnership with Caesars Entertainment, equips us to attract players nationwide over the coming quarters. The impending launch in Colorado serves as our initial online sports betting market entry point, and we regard our partnership with Caesars as a gateway to future opportunities in other states. At the same time, we are maintaining our solid and stable operations in the Italian market, where we recently introduced a revamped platform and all-new product lineup. This platform not only enhances the overall player experience but also incorporates changes that significantly reduce expenses and puts our Multigioco subsidiary on track to meet the Company’s profit goals through 2024.

“As we begin our strategic rollout into the vast addressable online sports betting market in the United States, we are confident in our ability to replicate our Italian success story. The U.S. sports betting opportunity contains decades of pent-up demand, and we expect to carve out significant market share with our ‘best odds’ approach and user-friendly platform as our experience in Italy demonstrates. Our measured and strategic approach to this vast market sets us apart. Through meticulous study of player behavior and regulatory dynamics, we aim to emerge as a responsible and formidable operator in the budding U.S. market, extracting long-term value for Elys shareholders.”

Update on the Listing of Common SharesOn October 13, 2023, Elys Game Technology received written notice from the Listing Qualifications Department of The Nasdaq Stock Market LLC (“Nasdaq”) informing the Company that trading of its common shares would be suspended as of the opening of business on October 17, 2023. As a result, Elys’ common shares began trading on the OTC markets in October, where they continue to trade today.

To prioritize the value for its shareholders, the Company will remain listed on the OTC Markets until further analysis of the exchange listing of our common shares is completed. Elys’ management team and board of directors are diligently assessing various major listing venues to determine the most strategic path forward, one that will ultimately offer the best opportunity to maximize shareholder value in the long term.

About Elys Game Technology, Corp.Elys Game Technology, Corp. is a global gaming technology company operating in multiple countries worldwide. Elys offers its clients a full suite of omnichannel leisure gaming products and services, such as online sports betting, e-sports, virtual sports, online casino, poker, bingo, interactive games, and online slots on a B2C basis in Italy and has B2B operations in five states as well as the District of Columbia in the U.S. market. The Company provides sports betting software, online casino software, services for commercial and tribal casinos, retail betting establishments, and franchise distribution networks.

Elys’ vision is to become a global gaming industry leader by developing pioneering and innovative online casino software. Additional information is available on our corporate website at www.elysgame.com.

Investors may also find us on Twitter @ELYS5D; Instagram @elys5d; LinkedIn Elys America; YouTube @Elys5D; and on Facebook @Elys5D.

Forward-Looking StatementsThis press release contains certain forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are identified by the use of the words “could,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “may,” “continue,” “predict,” “potential,” “project,” and similar expressions that are intended to identify forward-looking statements and include statements regarding Elys. These forward-looking statements are based on management’s expectations and assumptions as of the date of this press release and are subject to a number of risks and uncertainties, many of which are difficult to predict that could cause actual results to differ materially from current expectations and assumptions from those set forth or implied by any forward-looking statements. Important factors that could cause actual results to differ materially from current expectations include, among others, the risk factors described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, and its subsequent filings with the U.S. Securities and Exchange Commission, including subsequent periodic reports on Form 10-Q and current reports on Form 8-K. The information in this release is provided only as of the date of this release. The Company undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events, except as required by law.

Investor Contact:Tom Colton and Alec WilsonGateway Group, Inc.949-574-3860ELYS@gateway-grp.com

-Financial Tables to Follow-

ELYS GAME TECHNOLOGY, CORP.Consolidated Balance Sheets(Unaudited)
		September 30,2023				December 31,2022
Current Assets
Cash and cash equivalents		$	2,551,000			$	3,400,166
Accounts receivable			735,725				731,962
Gaming accounts receivable			1,841,921				1,431,497
Prepaid expenses			2,637,882				900,205
Related party receivable			22,511				22,511
Other current assets			379,781				338,871
Total Current Assets			8,168,820				6,825,212
Non - Current Assets
Restricted cash			—				364,701
Property and equipment			975,211				610,852
Right of use assets			1,471,190				1,498,703
Intangible assets			10,069,843				10,375,524
Goodwill			1,662,016				1,662,278
Marketable securities			—				19,999
Total Non - Current Assets			14,178,260				14,532,057
Total Assets		$	22,347,080			$	21,357,269
Current Liabilities
Accounts payable and accrued liabilities		$	8,917,952				6,790,523
Gaming accounts payable			3,492,128				2,213,532
Taxes payable			61,187				179,720
Related party payable			46,916				422,129
Promissory notes payable - related parties			411,939				752,000
Operating lease liability			381,439				369,043
Financial lease liability			1,895				6,831
Bank loan payable - current portion			2,987				3,151
Total Current Liabilities			13,316,443				10,736,929
Non-Current Liabilities
Deferred tax liability			1,391,102				1,696,638
Operating lease liability			1,059,970				1,157,979
Financial lease liability			1,244				2,288
Bank loan payable			152,643				148,169
Convertible notes payable, net of discount of $169,003			209,347				—
Convertible notes payable – related parties, net of discount of $2,039,673			2,936,049				—
Other long-term liabilities			577,725				464,851
Total Non – Current Liabilities			6,328,080				3,469,925
Total Liabilities			19,644,523				14,206,854
Stockholders' Equity
Common stock, $0.0001 par value, 80,000,000 shares authorized; 35,794,381 and 30,360,810 shares issued and outstanding as of September 30, 2023 and December 31, 2022			3,579				3,036
Additional paid-in capital			78,952,510				74,249,244
Accumulated other comprehensive loss			(609,554	)			(600,619	)
Accumulated deficit			(75,643,978	)			(66,501,246	)
Total Stockholders' Equity			2,702,557				7,150,415
Total Liabilities and Stockholders’ Equity		$	22,347,080			$	21,357,269

 

ELYS GAME TECHNOLOGY, CORP.Consolidated Statements of Changes in Stockholders' EquityNine months ended September 30, 2023 and September 30, 2022(Unaudited)
		For the Three Months EndedSeptember 30,								For the Nine Months EndedSeptember 30,
		2023				2022				2023				2022
Revenue		$	8,464,591			$	9,591,294			$	32,233,378			$	32,175,015
Costs and Expenses
Selling expenses			6,724,275				6,874,581				26,158,349				24,029,532
General and administrative expenses			4,318,720				5,385,407				13,498,145				14,273,817
Depreciation and amortization			354,334				423,361				1,043,432				1,315,593
Restructuring and severance expenses			—				—				—				1,205,689
Total Costs and Expenses			11,397,329				12,683,349				40,699,926				40,824,631
Loss from Operations			(2,932,738	)			(3,092,055	)			(8,466,548	)			(8,649,616	)
Other (Expenses) Income
Interest expense, net of interest income			(162,474	)			(9,104	)			(273,701	)			(22,641	)
Amortization of debt discount			(142,381	)			—				(215,651	)			—
Other income			9,994				21,931				13,521				90,783
Changes in fair value of contingent purchase consideration			—				(482,059	)			—				(1,397,833	)
Other expense			—				(45,528	)			(7,017	)			(56,539	)
Gain (loss) on marketable securities			—				(49,250	)			(19,999	)			43,250
Total Other (Expenses) Income			(294,861	)			(564,010	)			(502,847	)			(1,342,980	)
Loss Before Income Taxes			(3,227,599	)			(3,656,065	)			(8,969,395	)			(9,992,596	)
Income tax provision			4,240				(167,574	)			67,199				(200,518	)
Net Loss from continuing operations			(3,223,359	)			(3,823,639	)			(8,902,196	)			(10,193,114	)
Discontinued operations
Operating loss			(34,690	)			—				(198,335	)			—
Loss on recission			(42,201	)			—				(42,201	)			—
Net loss from discontinued operations			(76,891	)			—				(240,536	)			—
Net loss		$	(3,300,250	)		$	(3,823,639	)		$	(9,142,732	)		$	(10,193,114	)
Other Comprehensive (Loss) Income
Foreign currency translation adjustment			(102,111	)			(367,765	)			(8,935	)			(877,996	)
Comprehensive Loss		$	(3,402,361	)		$	(4,191,404	)		$	(9,151,667	)		$	(11,071,110	)
Loss per common share – basic and diluted
Continuing operations		$	(0.10	)		$	(0.14	)		$	(0.27	)		$	(0.41	)
Discontinued operations			(0.00	)			0.00				(0.00	)			0.00
			(0.10	)			(0.14	)			(0.27	)			(0.41	)
Weighted average number of common shares outstanding – basic and diluted			31,886,832				26,942,389				32,758,530				24,871,319

ELYS GAME TECHNOLOGY, CORP.Consolidated Statements of Cash Flows(Unaudited)
		For the nine monthsended September 30,
		2023				2022
Net Loss		$	(9,142,732	)		$	(10,193,114	)
Net loss from discontinued operations			240,536				—
Net loss from continuing operations			(8,902,196	)			(10,193,114	)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization			1,043,431				1,315,593
Gain on disposal of property and equipment			(5,136	)			—
Amortization of debt discount			215,651				—
Restricted stock awards			685,688				2,012,600
Stock-based compensation expense			1,611,635				2,381,974
Non-cash interest			268,320				17,637
Loss on dissolution of subsidiary			325				—
Change in fair value of contingent purchase consideration			—				1,397,833
Unrealized loss (gain) on marketable securities			19,999				(43,250	)
Movement in deferred taxation			(124,437	)			(238,616	)
Changes in Operating Assets and Liabilities, net of assets acquired and liabilities assumed
Prepaid expenses			(1,757,254	)			(2,043,015	)
Accounts payable and accrued liabilities			1,307,024				(1,013,194	)
Accounts receivable			1,957				(282,002	)
Gaming accounts receivable			(440,090	)			981,478
Gaming accounts liabilities			1,339,804				693,455
Taxes payable			(122,333	)			391,339
Due from related parties			31,279				(8,026	)
Other current assets			(39,764	)			(19,838	)
Long term liability			122,022				76,916
Net Cash Used in Operating Activities – continuing operations			(4,744,075	)			(4,572,230	)
Net Cash Used in Operating Activities – discontinued operations			(76,697	)			—
NET CASH USED IN OPERATING ACTIVITIES			(4,820,772	)			(4,572,230	)
Cash Flows from Investing Activities
Acquisition of property and equipment and intangible assets			(1,112,830	)			(355,939	)
Net Cash Used in Investing Activities – continuing operations			(1,112,830	)			(355,939	)
Net Cash Provided by Investing Activities – discontinued operations			76,459				—
NET CASH USED IN INVESTING ACTIVITIES			(1,036,371	)			(355,939	)
Cash Flows from Financing Activities
Proceeds from convertible notes			350,000				—
Proceeds from convertible notes, related parties			4,400,000				—
Proceeds from Subscriptions – Net of Fees			—				2,616,679
Proceeds from pre-funded warrants			—				512,813
Proceeds from related party promissory notes			—				665,000
Repayment of bank overdraft			—				(7,043	)
Repayment of bank loan			—				(33,041	)
Repayment of financial leases			(5,996	)			(5,926	)
NET CASH PROVIDED BY FINANCING ACTIVITIES			4,744,004				3,748,482
Effect of change in exchange rate			(100,728	)			(1,504,030	)
Net decrease in cash			(1,213,867	)			(2,683,717	)
Cash, cash equivalents and restricted cash – beginning of the period			3,764,867				7,706,357
CASH, CASH EQUIVALENTS AND RESTRICTED CASH – END OF THE PERIOD		$	2,551,000			$	5,022,640

ELYS GAME TECHNOLOGY, CORP.Consolidated Statements of Cash Flows(Unaudited)
Reconciliation of cash, cash equivalents and restricted cash within the Balance Sheets to the Statement of Cash Flows
Cash and cash equivalents		$	2,551,000			$	4,690,034
Restricted cash included in non-current assets			—				332,606
		$	2,551,000			$	5,022,640

Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest		$	5,735			$	5,855
Income tax		$	199,745			$	84,988
Supplemental cash flow disclosure for non-cash activities
Fair value of common stock issued on acquisition of Engage IT Services Srl		$	1,735,615			$	—
Fair value of common stock returned on recission of acquisition of Engage IT Services Srl		$	(1,938,456	)
Fair value of warrant issued with convertible debt		$	2,424,327			$	—
Fair value of restricted stock issued to settle liabilities		$	60,000			$	—
Fair value of options issued to settle liabilities		$	125,000			$	—