This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act, and Section 21E of the Exchange Act. All statements other than statements of historical fact could be deemed forward-looking statements. Statements that include words such as "may," "might," "anticipate," "estimate," "expect," "project," "intend," "plan," "believe," "pro forma" or the negative of these words or other words or expressions of and similar meaning may identify forward-looking statements. For example, forward-looking statements include any statements of the plans, strategies and objectives of management for future operations, including the execution of integration and restructuring plans and the anticipated timing of filings; any statements concerning proposed new products, services or developments; any statements regarding future economic conditions or performance; statements of belief and any statement of assumptions underlying any of the foregoing. Factors that might cause such differences include, but are not limited to, those discussed in our Annual Report on Form 10-K for the year ended
December 31, 2021filed with the Securities and Exchange Commissionon April 15, 2022under the heading "Risk Factors" and the Risk Factors as described in Item 1A of this Quarterly Report on Form 10-Q for the quarter
March 31, 2022. Overview Except as expressly stated, the financial condition and results of operations discussed throughout the Management's Discussion and Analysis of Financial Condition and Results of Operations are those of Elys Game Technology, Corp.and its consolidated subsidiaries. We currently provide our B2C gaming services in Italythrough our subsidiary, Multigioco Srl ("Multigioco"), which operations are carried out via both land-based or online retail gaming licenses regulated by the Agenzia delle Dogane e dei Monopoli ("ADM") that permits us to distribute leisure betting products such as sports betting, and virtual sports betting products through both physical, land-based retail locations as well as online through our licensed website www.newgioco.it or commercial webskins linked to our licensed website and through mobile devices. Management implemented a consolidation strategy in the Italian market by integrating all B2C operations into Multigioco and allowed the Austria Bookmaker license that was regulated by the Austrian Federal Finance Ministry("BMF") to terminate. We also provide bookmaking services in the U.S. market via our recently acquired subsidiary US Bookmaking in certain regulated states where we offer B2B bookmaking and platform services to our customers. Our intention is to focus our attention on expanding the U.S. market. We recently began operation is Washington, D.C.through a Class B Managed Service Provider and Class B Operatorlicense to operate a sportsbook within the Grand Central Restaurantand Sportsbook located in the Adams Morgan area of Washington, D.C., and in October 2021we entered into an agreement with Ocean Casino Resortin Atlantic Cityand commenced operations in the state of New Jerseyin March 2022. Additionally, we provide B2B gaming technology through our Odissea subsidiary which owns and operates a betting software designed with a unique "distributed model" architecture colloquially named Elys Game Board (the "Platform"). The Platform is a fully integrated "omni-channel" framework that combines centralized technology for updating, servicing and operations with multi-channel functionality to accept all forms of customer payment through the two distribution channels described above. The omni-channel software design is fully integrated with a built in player gaming account management system, built-in sports book and a virtual sports platform through our Virtual Generation subsidiary. The Platform also provides seamless application programming interface integration of third-party supplied products such as online casino, poker, lottery and horse racing and has the capability to incorporate e-sports and daily fantasy sports providers. Management implemented a growth strategy to expand B2B gaming technology operations in the U.S.and is considering further expansion in Canadaand Latin American countries in the near future. Our corporate group is based in North America, which includes an executive suite situated in Las Vegas, Nevadaand a Canadian office in Toronto, Ontariothrough which we carry-out corporate activities, handle day-to-day reporting and U.S.development planning, and through which various employees, independent contractors and vendors are engaged. For the period ended March 31, 2022, transaction revenue generated through our subsidiary Multigioco consisted of wagering and gaming transaction income broken down to: (i) spread on sports bet wagers, and (ii) fixed rate commissions on casino, poker, lotto and horse racing wagers from online based betting web-shops and websites as well as land-based retail betting shops located throughout Italy; while our service revenue generated by our Platform is primarily derived from bet and wager processing in Italythrough Multigioco, and in the U.S., through Elys Gameboard Technologies and USB. Since the majority of CTD locations were not expected to re-open after the COVID-19 related lockdowns in Italysubsided, management simplified our Italian footprint by focusing our investment towards the Multigioco operations and discontinued Ulisse presence in Italyduring the second quarter of 2021. 29 We believe that our Platform is considered one of the newest betting software platforms in the world and our plan is to expand our Platform offering to new jurisdictions around the world on a B2B basis, including expansion through Europe, South America, South Africaand the developing market in the United States. During the three months ended March 31, 2022and 2021, we also generated service revenue from royalties through authorized agents by providing our virtual sports products through our Virtual Generation subsidiary and generated service revenues through the provision of bookmaking and platform services through our recently acquired subsidiary, US Bookmaking. We intend to leverage our partnerships in these countries to cross-sell our Platform services to expand the global distribution of our betting solutions.
We operate two business segments in the leisure games industry and our revenues are derived as follows:
1. Betting establishments Transaction revenue through our offering of leisure betting products to retail customers directly through our online distribution on websites or a betting shop establishment or through third party agents that operate white-label websites and/or land-based retail venues; and 2. Betting platform software and services
Revenues from SaaS-based services through the provision of our virtual sports platform and products to betting operators.
This MD&A includes an analysis of our operations for the three months ended
We do not have any direct or indirect exposure to
Ukraine, Belarusor Russia, through our operations, employee base or any investments in any of these countries. In addition, our securities are not traded on any stock exchanges in these three countries. We do not believe that the sanction levied against Russiaor Belarusor individuals and entities associated with these two countries will have a material impact on our operations or business, if any.
We do not believe that we are directly or indirectly dependent on goods from
We provide online gaming services and platform services to several customers, including our own internal usage of our developed software, we employ the latest encryption techniques and firewall practices and constantly monitor the usage of our software as is required for the regulated markets which we operate in, this, however, may not be sufficient to prevent the heightened risk of cybersecurity attacks emanating from
Russia, Ukraine, Belarus, or any other country. The impact of the invasion by Russiaof Ukrainehas increased volatility in trading prices and commodities throughout the world, to date, we have not seen a material impact on our operations, however, a prolonged conflict may impact on consumer spending, in general, which could have an adverse impact on the leisure gaming industry as a whole. Inflation
Macroeconomic conditions could negatively affect consumer spending and therefore our operations, but we have not seen any material impact to date.
Foreign Exchange We operate in several foreign countries, including
Austria, Italy, Malta, Colombiaand Canadaand we incur operating expenses and have foreign currency denominated assets and liabilities associated with these operations. Transactions involving our corporate expenditures are generally denominated in U.S.dollars and Canadian dollars while the functional currency of our subsidiaries is in Euro. Changes and fluctuations in the foreign exchange rate between the US Dollar and the Euro, Canadian dollar and Colombian Peso will have an effect on our results of operations. 30
Significant Accounting Policies and Estimates
Preparation of our consolidated financial statements in accordance with
U.S.generally accepted accounting principles ("GAAP") requires us to make estimates and assumptions that affect the reported amounts of certain assets, liabilities, revenues and expenses, as well as related disclosure of contingent assets and liabilities. Significant accounting policies are fundamental to understanding our financial condition and results as they require the use of estimates and assumptions which affect the financial statements and accompanying notes. See Note 2 - Summary of Significant Accounting Policies of the Notes to the condensed Consolidated Financial Statements included in Part I, Item I of this Form 10-Q for further information.
Critical accounting policies that involved a significant estimate included the following:
Impairment of assets with indefinite life and
We carried intangible assets in the amount of
$15.2 millionand goodwill in the amount of $16.2 millionas more fully described in Notes 7 and 8 to the condensed consolidated financial statements. The intangible assets and goodwill are allocated between reporting units. The Company tests its goodwill and intangible assets with an indefinite useful life annually for impairment or more frequently if indicators for impairment exist. Impairment for goodwill is determined by comparing the fair value of the respective reporting unit to their carrying amount. For impairment testing of indefinite-lived intangibles. The Company determines the fair value of the reporting units using an income-based approach which estimates the fair value using a discounted cash flow model. Key assumptions in estimating fair values include projected revenue growth and the weighted average cost of capital. In addition, management recently reviewed the future revenue and profit projections of US Bookmaking based on the forecasts provided by the vendors at the time of performing the business valuation, which factored in the ability to source new customers. The customer acquisition process has proven to take longer than expected with a resultant downward revision of new customers acquired over the forecast period and the resultant downward impact on forecasted revenue streams. We reviewed the forecasts and made appropriate adjustments based on our current understanding of the addressable market, the growth rates forecast by third party market analysts, our expected share of revenue and the expectation of how many new clients we would realistically be able to add over the forecast period. Since performing this analysis we have no reason to believe that further impairment is necessary as of March 31, 2022.
Fair value of contingent consideration
March 31, 2022, the Company carried contingent purchase consideration in the amount of $13.3 millionas more fully described in Note 12 to the condensed consolidated financial statements. The contingent consideration relates to the business combination of US Bookmaking on July 15, 2021. The contingent consideration is based upon achievement of certain EBITDA milestones during the next 4 years, payable 50% in cash and 50% in stock, the contingent consideration is up to $41.8 million. At each reporting period, the Company estimates changes in the fair value of the contingent consideration and any change in fair value is recognized in the consolidated statements of operations and comprehensive (loss) income. The basis for determining contingent purchase consideration at each reporting period is based on cumulative EBITDA for the period July 15, 2021to December 31, 2025, with the first measurement period being December 31, 2022. The forecasts provided by the vendors at the time of performing the business valuation was based on achieving a certain number of new customers on an annual basis. The customer acquisition process has proven to take longer than expected with a resultant impact on forecasted revenue streams over the contingent earnout period. Management revised its estimated revenues as of December 31, 2021. These forecasts were reviewed and adjusted to ensure they appeared reasonable based on our current understanding of the addressable market, the growth rates forecast by third party market analysts, our expected share of revenue and the expectation of how many new clients we would realistically be able to add in a fiscal period. We have no reason to believe that the contingent purchase consideration, which was remeasured at December 31, 2021, needs to be re-evaluated as of March 31, 2022.
Recently issued accounting pronouncements
See Note 2 – Summary of Significant Accounting Policies in the Notes to the Summary Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for information on recently issued accounting standards.
Results of operations for the three months ended
Revenues The following table represents disaggregated revenues from our gaming operations for the three months ended
March 31, 2022and 2021. Net Gaming Revenues represents Turnover (also referred to as "Handle"), the total bets processed for the period, less customer winnings paid out, and taxes due to government authorities. Service Revenues is revenue invoiced for our Elys software service and royalties invoiced for the sale of virtual products. Three months ended March 31, March 31, Increase 2022 2021 (decrease) Percentage change Turnover Turnover web-based $ 215,780,282 $ 231,332,159 $ (15,551,877 )(6.7 )% Turnover land-based 1,785,107 11,825,830 (10,040,723 ) (84.9 )% Total Turnover 217,565,389 243,157,989 (25,592,600 ) (10.5 )% Winnings/Payouts Winnings web-based 200,853,821 215,598,415 (14,744,594 ) (6.8 )% Winnings land-based 1,400,413 10,164,937 (8,764,524 ) (86.2 )% Total Winnings/payouts 202,254,234 225,763,352 (23,509,118 ) (10.4 )% Gross Gaming Revenues
Gross Gaming Revenues Web-based 14,926,461 15,733,744 (807,283 ) (5.1 )% Gross Gaming Revenues Land-based 384,694 1,660,893
(1,276,199 ) (76.8 )% 15,311,155 17,394,637 (2,083,482 ) (12.0 )% Less: Gaming Taxes (3,730,830 ) (3,329,038 ) (401,792 ) 12.1 % Net Gaming Revenues 11,580,325 14,065,599 (2,485,274 ) (17.7 )% Add: Service Revenues 655,661 91,729 563,932 614.8 % Total Revenues
$ 12,235,986 $ 14,157,328 $ (1,921,342 )(13.6 )%
The change in turnover (round) is mainly explained by:
Web-based turnover decreased by
$15,551,877or 6.7%. The decrease is directly attributable to the closure of the Ulisse CTD locations at the end of June 2021, turnover from Ulisse was $0for the three months ended March 31, 2022, a decrease of $18,645,885. This decrease was partially recouped by an increase in Multigioco web-based revenue of $3,054,867, an increase of 1.4%. Due to a softening on COVID restrictions, the growth in web based turnover has slowed, however we still experienced growth on a larger turnover base. We expect the business mix to continue to trend towards online channels, and we still expect quarterly growth as we gain market share. The percentage of payouts on web-based turnover improved slightly to 93.1% from 93.2% for the three months ended March 31, 2022and 2021 respectively. Land-based turnover decreased by $10,040,723or 84.9%. The decrease is directly attributable to the closure of the Ulisse CTD locations at the end of June 2021. Turnover from Ulisse was $11,825,828for the three months ended March 31, 2021. The Multigioco land based operations had no revenues for the three months ended March 31, 2021, we have managed to recoup some of our land based turnover during the three months ended March 31, 2022, generating turnover of $1,785,096for the three month period. We expect to see moderate growth in our land based turnover for the remainder of the year as we expect the business mix to continue trending towards online channels. The percentage of payouts on land-based turnover improved to 78.5% from 86.0% for the three months ended March 31, 2022and
The turnover mix impacts our Gross Gaming Revenue ("GGR"). Our turnover for the three months ended
March 31, 2022is as follows; Sports betting turnover represented 51.4% ( March 31, 2021- 58.2%); casino style games represented 46.7% ( March 31, 2021- 39.7%); and other was 1.9% ( March 31, 2021- 2.1%). The shift towards more casino style games during the three months ended March 31, 2022, has a negative impact on our gross gaming revenues as the margin earned on our sports book averaged 18.3% ( March 31, 2021- 16.9%) and for our casino style games averaged 4.3% ( March 31, 2021- 4.0%), resulting in a blended GGR of 7.0% ( March 31, 20217.2%). The percentage decrease in sports book turnover and GGR is primarily due to the closure of all Ulisse Italian based locations in June 2021. Although the sports betting hold improved to 18.3% from 16.9%, the lower sports betting turnover and GGR as a percentage of overall turnover and revenue had a negative impact on our overall blended hold despite the improvement in the casino style games hold to 4.3% ( March 31, 2021- 4.0%). 32 Gaming taxes increased by $401,792or 12.1% over the prior period. The relative rate of our gaming taxes, which is based on Gross Gaming Revenues was 24.4% and 19.1% for the three months ended March 31, 2022and 2021 respectively. The increase is attributable to the closure of the Ulisse CTD operations in June 2021, Ulisse had a significantly lower tax rate due to its incorporation being situated outside of Italy.
Service revenues increased by
$563,932or 614.8%. This is primarily due to; (i) revenues generated by USB operations of $294,366and a general increase in our other service-based revenues across our platform companies. This revenue remains insignificant to total revenues during the periods presented. Selling expenses We incurred selling expenses of $9,286,232and $10,661,815for the three months ended March 31, 2022and 2021 respectively, a decrease of $1,375,583or 12.9%. Selling expenses are commissions that are paid to our sales agents as a percentage of turnover (handle) and are not affected by the winnings that are paid out. Therefore, increases in turnover (handle), will typically result in increases in selling expenses but may not result in increases in overall revenue if winnings/payouts increase based on the unknown outcome of sports events that we have no control over. The percentage of selling expenses to turnover improved to 4.3% compared to 4.4% for the three months ended March 31, 2022and 2021 respectively.
General and administrative expenses
General and administrative expenses were
$5,009,384and $4,145,210for the three months ended March 31, 2022and 2021 respectively, an increase of $864,174or 20.8%. The increase over the prior year is attributable to the following: (i) an increase in personnel costs of $382,787, primarily due to the acquisition of USB, (ii) an increase in stock option compensation expense of $297,754primarily due to the periodic amortization expense of options granted to senior management during the past twelve months; (iii) an increase in professional fees of $246,925primarily due to legal fees incurred on the expansion in the U.S. market, offset by a net reduction in miscellaneous general and administrative expenses of $63,292. Loss from Operations The loss from operations was $2,059,626and $649,697for the three months ended March 31, 2022and 2021 respectively, an increase of $1,409,929or 217.0%. The increase in operating loss is directly attributable to the decrease in revenues of $1,921,342and the increase in general and administrative expenses of $864,170offset by a reduction in selling expenses of $1,375,583as discussed above.
Interest expense, net of interest income
Interest expense was
$3,859and $7,849for the three months ended March 31, 2022and 2021, respectively, a decrease of $3,990or 50.8%. The decrease is primarily related to the repayment and the conversion into equity of convertible debentures during the prior year resulting in lower interest-bearing debt.
Amortization of debt discount
The amortization of the debt discount was
Other income was
and 2021 respectively, a decrease of
Change in fair value of contingent consideration on purchase
Change in fair value of contingent purchase consideration was
$450,013and $0for the three months ended March 31, 2022and 2021 respectively, an increase of $450,013. The change in fair value of contingent purchase consideration is the accretion expense associated with the present value of contingent purchase consideration due on the acquisition of USB. 33 Other expense Other expense was $1,070and $26,930for the three months ended March 31, 2022and 2021, respectively, a decrease of $25,860or 96.0% The prior period amount related to an administrative penalty of $26,930. Gain on Marketable SecuritiesThe gain on marketable securities was $77,500and $195,000for the three months ended March 31, 2022and 2021 respectively, a decrease of $117,500or 60.3%. The losses and gains on marketable securities is directly related to the stock price of our investment in Zoompass which is marked-to-market each quarter. The shares in Zoompass were acquired by the Company as settlement of a litigation matter, we have no influence over the performance of Zoompass. Loss Before Income Taxes Loss before income taxes was $2,397,323and $220,965for the three months ended March 31, 2022and 2021 respectively, an increase of $2,176,358or 984.9%. The increase is primarily attributable to the increase in loss from operations and the change in fair value of contingent purchase consideration, as discussed
above. Income Tax Provision The income tax provision was a charge of
$156,893and $388,614for the three months ended March 31, 2022and 2021 respectively, a decrease of $231,721or 59.6%. The decrease is attributable to lower overall revenues and an increase in operating expenditure, resulting in lower taxable income. Net Loss Net loss was $2,554,216and $609,579for the three months ended March 31, 2022and 2021 respectively, an increase of $1,944,637or 319.0% due to the increase in loss before income taxes and the reduction in income tax provision, discussed above. Comprehensive Loss
Our reporting currency is the
U.S.dollar while the functional currency of our Italian, Maltese and Austrian subsidiaries is the Euro, the functional currency of our Canadian subsidiary is the Canadian Dollar and the functional currency of our Colombian operation is the Colombian Peso. The financial statements of our subsidiaries are translated into United Statesdollars in accordance with ASC 830, using year-end rates of exchange for assets and liabilities, and average rates of exchange for the period for revenues, costs, and expenses and historical rates for equity. Translation adjustments resulting from the process of translating the local currency financial statements into U.S.dollars are included in determining other comprehensive income. We recorded a foreign currency translation loss of $(151,775)and $(344,088)for the three months ended March 31, 2022and 2021 respectively, primarily due to the strengthening of the US Dollar against the Euro during the current period and the weakening against the Euro in the prior period.
Cash and capital resources
Our principal cash requirements have included the funding of acquisitions, repayments of convertible debt and deferred purchase consideration, the purchase of property and equipment, and working capital needs. Working capital needs generally result from expenses incurred in developing our gaming platform for the various markets we operate in and new markets we are developing as well as our intention to aggressively expand into the US market. To date, we finance our business primarily though debt and equity placements and cash generated from operations. Recently, we have financed our business from the sale of shares of our common stock pursuant to the terms of the Open Market Sales AgreementSMthat we entered into with
Jefferies LLCon November 19, 2021. Between March 28, 2022and March 31, 2022, we sold 56,472 shares of common stock for gross proceeds of $131,564, less brokerage fees of $3,947pursuant to the Open Market Sales AgreementSM and from April 1, 2022through April 15, 2022, we sold an additional 111,544 shares of common stock for net proceeds of $247,824after commission of $7,665. Our ability to generate sufficient cash flow from operations is dependent on the continued demand for our gaming services we offer to our customers through our land based and web based locations as well as the gaming platforms we license to third parties. Based on our forecasts, we believe that we have adequate resources to continue operating for the next twelve months. We plan to continue our expansion plans in both the U.S.and Italian markets at a rate of growth that we believe is sustainable and achievable by us. If additional accretive opportunities arise during the execution of our business plans, we might consider raising additional cash through either debt or equity funding, if such debt or equity raise is available at terms that are acceptable to us, if at all. 34
The ongoing Covid-19 pandemic has impacted our Italian based operations, we have seen a significant increase in Turnover (Handle) from our web-based operations and a significant decline in turnover from our land-based operations with the permanent closure of our Ulisse betting shop locations. The percentage Hold or Gross Gaming Revenue generated from our turnover is typically lower on web-based business which generally favors more casino type gaming at lower margins, as discussed above. Assets At
March 31 2022, we had total assets of $43,598,513compared to $44,578,841at December 31, 2021, a decrease of $980,328The decrease is primarily related to the decrease in Gaming Receivables of $1,280,564which is affected by the timing of the weekly settlement of gaming receivables, and increase in prepaid expenses of $544,484, primarily related to the software development costs incurred for the US market, an increase in the right of use assets of $662,508, primarily due to a new property lease for larger premises to accommodate the growth of our Multigioco operation, a decrease in intangibles of $387,891due to periodic amortization and a decrease in cash balances of $714,503, primarily used for working capital purposes and the acquisition of property and equipment. Liabilities
March 31 2022, we had $27,412,399in total liabilities compared to total liabilities of $26,837,324at December 31, 2021, an increase of $575,075. The increase is primarily attributable to an increase in Operating lease liability of $670,995, due to the new property lease entered into for Multigioco, an increase in taxes payable of $224,704attributable to the first quarter profitability in Multigioco, offset by, a decrease in gaming accounts payable of $337,806due to the timing of weekly settlements , an increase in Contingent Purchase Consideration of $450,013due to the amortization of accretion expense, and a decrease in accounts payable of $333,321primarily due to a reduction in trade payables in our Multigioco operation. Working Capital We had $6,605,262in cash and cash equivalents at March 31, 2022compared to $7,319,765on December 31, 2021. The decrease is due to an increase in working capital movement of $436,033, the purchase of property and equipment of $105,129, a reduction in the dollar value of Euro cash balances by $267,703, offset by cash provided by financing activities of $84,818, primarily from open market sales of shares of common stock. We had a working capital surplus of $619,667at March 31,2022, compared to a working capital surplus of $1,556,306at December 31, 2021. The decrease in working capital is primarily attributable to the decrease in cash balances of $714,503the decrease in gaming receivables of $1,215,364, offset by the decrease in accounts payable of $1,096,743. Accumulated Deficit
Cash flow from operating activities
Net cash used in operating activities was
$436,033and net cash generated from operating activities was $735,876for the three months March 31, 2022and 2021, respectively. The decrease of $(1,171,907)was primarily related to; (i) the increase in net loss of $(1,944,635); (ii) the increase in the movement of non-cash items of $1,301,059, consisting primarily of the movement in the fair value of contingent purchase consideration of $450,013related to accretion expense of the discounted contingent purchase consideration due on the acquisition of USB, the increase in stock based compensation of $309,004due to the number of options granted over the past twelve months, the increase in share based compensation due to our CEO electing to take his bonus and a portion of his compensation in stock and an increase in depreciation and amortization expense of $212,256, primarily related to the amortization of intangible assets which arose on the acquisition of USB; and (iii) the movement in working capital of $(528,325)primarily due to the increase in the movement of prepaid expenses of $(555,947)primarily due to software development costs for the US market, a reduction in the movement of gaming account liabilities of $(875,195), a decrease in the movement of taxes payable of $(183,476)due primarily to the lower profitability of the European operations, offset by an increase in the movement of accounts receivable of $1,002,879due to the timing of our weekly settlements with our agents and customers.
Cash flow from investing activities
Net cash used in investing activities was
Cash flow from financing activities
Net cash provided by financing activities was
$84,820and $2,912,498for the three months March 31, 2022and 2021, respectively, a decrease of $2,827,678. The decrease is primarily due to the lack of proceeds from warrant exercises during the three months ended March 31, 2022compared to proceeds from warrants exercised in the prior period of $3,909,981which warrant exercises in the prior period were offset by repayment of the bank credit line of $500,000, the movement in deferred purchase consideration paid in the prior period. The decrease was offset by proceeds derived from the open market sales of $127,618in the current period. Contractual Obligations
Current accounting standards require disclosure of material obligations and commitments to make future payments under contracts, such as debts, leases and purchase obligations.
The amount of future minimum lease payments under finance leases are as follows: Amount Remainder of 2022
$ 6,4072023 6,879 2024 798 Total undiscounted minimum future lease payments $ 14,084Operating lease liability The amount of future minimum lease payments under operating leases are as follows: Amount Remainder of 2022 $ 274,7662023 299,845 2024 227,145 2025 207,177 2026 and thereafter 341,105 Total undiscounted minimum future lease payments $ 1,350,038
Off-balance sheet arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources that we expect to be material to investors. We do not have any non-consolidated, special-purpose entities. Related Party Transactions
Deferred Purchase Consideration,
During the first and second quarter, the Company paid the remaining balance of €312,500 (approximately
$385,121) to related parties in terms of the Virtual Generation promissory note.
The movement on deferred purchase consideration consists of the following:
December 31, 2021
Principal Outstanding Promissory notes due to related parties $382,128 Cash reimbursement
(385,121 ) Foreign exchange movements 2,993 - Present value discount on future payments Present value discount (5,174 ) Amortization 5,133 Foreign exchange movements 41 - Deferred purchase consideration, net $ - 36
Payables and receivables from related parties represent non-interest-bearing receivables (debts) that are due on demand.
The outstanding balances are as follows:
March 31, December 31, 2022 2021
Related Partypayables Luca Pasquini $ (3,159 ) $ (502 )Victor Salerno (52,922 ) (51,878 ) $ (56,081 ) $ (51,380 )Related Party Receivables Luca Pasquini $ 1,378 $ 1,413Luca Pasquini On January 31, 2019, we acquired Virtual Generation for €4,000,000 (approximately $4,576,352), Mr. Pasquiniwas a 20% owner of Virtual Generation and was due gross proceeds of €800,000 (approximately $915,270). The gross proceeds of €800,000 was to be settled by a payment in cash of €500,000 over a twelve month period and by the issuance of common stock valued at €300,000 over an eighteen month period. As of June 30, 2021, we paid Mr. Pasquinithe full cash amount of €500,000 (approximately $604,380) and issued 112,521 shares valued at €300,000 (approximately $334,791).
July 11, 2021, we entered into an agreement with Engage IT Services Srl. ("Engage"), to provide gaming software and maintenance and support of the system, the total contract price was €390,000 (approximately $459,572), in addition, on October 14, 2021, we entered into a further agreement with Engage to provide gaming software and maintenance and support of the system for a period of 12 months, the total contract price was €1,980,000 (approximately $2,192,000). Mr. Pasquiniowns 34% of Engage.
July 15, 2021, Michele Ciavarella, Executive Chairman of the Company, was appointed as our interim Chief Executive Officer and President, effective July 15, 2021. Mr. Ciavarellawill serve as our Executive Chairman and Interim Chief Executive Officer until the earlier of his resignation or removal from office. Mr. Ciavarellaagreed to take his 2021 bonus and a portion of his 2022 salary as a restricted stock award, on January 7, 2022, we issued Mr. Ciavarella162,835 shares of common stock valued at $425,000on the date of issue. Carlo Reali
March 29, 2022, we issued Mr. Realiten-year options exercisable for 100,000 shares of common stock, at an exercise price of $2.50per share, vesting equally over a 4 year period commencing on January 1, 2023. We do not have a formal employment or other compensation related agreement with Mr. Reali; however, Mr. Realiwill continue to receive the same compensation that he currently receives which is an annual base salary of $71,200. 37 Victor Salerno
Together with the consummation of the acquisition of USB, we entered into a 4 year employment agreement with
Mr. Salernoterminating on July 14, 2025(the "Salerno Employment Agreement"), automatically renewable for a period of one year unless notified by either party of non-renewal. The employee will earn an initial base salary of $0and thereafter $150,000per annum commencing on January 1, 2022. Mr. Salernois entitled to bonuses, equity incentives and benefits consistent with those of other senior employees. Mr. Salernomay be terminated for no cause or resign for good reason, which termination would entitle him to the greater of one year's salary or the remaining term of the employment agreement plus the highest annual incentive bonus paid to him during the past two years. If Mr. Salernois terminated for cause he is entitled to all unpaid salary and expenses due to him at the time of termination. If the employment agreement is terminated due to death, his heirs and successors are entitled to all unpaid salary, unpaid expenses and one times his annual base salary. Termination due to disability will result in Mr. Salernobeing paid all unpaid salary and expenses and one times annual salary. Pursuant to the Salerno Employment Agreement, Mr. Salernohas also agreed to customary restrictions with respect to the disclosure and use of our confidential information and has agreed that work product or inventions developed or conceived by him while employed with us relating to our business is our property. In addition, during the term of his employment and if terminated for cause for the 12 month period following his termination of employment, Mr. Salernohas agreed not to (1) perform services on behalf of a competing business which was the same or similar to the type of services he was authorized, conducted, offered or provided to us, (2) solicit or induce any of our employees or independent contractors to terminate their employment with us, (3) solicit any actual or prospective customers with whom he had material contact on behalf of a competing business or (4) solicit any actual or prospective vendors with whom he had material contact to support a competing business.
Prior to the acquisition of USB,
Mr. Salernohad advanced USB $100,000of which $50,000was forgiven and the remaining $50,000is still owing to Mr. Salerno, which amount earns interest at 8% per annum, compounded monthly and repayable on December 31, 2023. Paul SallwasserOn September 13, 2021, we granted Mr. Sallwasserten year options exercisable for 21,300 shares of common stock at an exercise price of $5.10, vesting equally over a twelve month period commencing on September 13, 2021. Steven Shallcross
September 13, 2021, we granted Mr. Shallcrossten year options exercisable for 13,600 shares of common stock at an exercise price of $5.10, vesting equally over a twelve month period commencing on September 13, 2021. Andrea Mandel-MantelloOn June 29, 2021, the Board appointed Mr. Mandel-Mantello to serve as a member of the Board. The appointment was effective immediately and Mr. Mandel-Mantello will serve on the audit committee.
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