On February 17, Esports Entertainment Group, a Malta-based esports and online gambling company, reported that it had signed a share purchase deal on February 14, 2023 for the sale of its Bethard iGaming business, an operator of online casino and sportsbook brands licensed by Malta and Sweden, which the company acquired in July 2021.
Total price agreement:
The parties have agreed that the total payment for the purchase in the purchase agreement is around €9.5 million, consisting of €1.65 million in cash income payable to the company at closing, with an extra €6.5 million purchase payment attributed to the release of the company from paying its contingent liability under the acquisition of Bethard.
The buyer of the Bethard business will also accept financial obligation of around €1.2 million. The terms of the purchase agreement allow a cash retention of €0.15 million, which the buyer can retain in the event that the financial obligation exceed the sum agreed in the purchase agreement. The sale of the Bethard business is projected to close within two weeks of the signing of the purchase agreement, subject to usual closing conditions.
Amendment and Waiver agreement:
However, on February 16, the company signed an Amendment and Waiver Agreement, which was a condition for the successful closing of the sale of the Bethard business. Under this agreement, the company must deposit 50% of the proceeds from the sale of the Bethard business into a bank account for the benefit of the holder of its Senior Convertible Note, effective February 22, 2022.
Also, pursuant to this agreement, the company must deposit 50% of the proceeds of any allowed future sale of properties or any subsequent offer or sale of debt or equity and 100% of the proceeds of any extra debt incurred in the future, in such bank account for the benefit of the debt holder, or, at the choice of the debt holder redeem amounts under the Senior Convertible Note using such income.
The Amendment also modifies the Senior Convertible Note for a principal increase of $2.95 million for extra interest and other sums previously recorded by the company as financial liabilities to the debt holder, as well as for amendment fees.
Furthermore, the Amendment offers a voluntary decrease of the conversion price (as defined in the Senior Convertible Note) when the company delivers or is deemed to deliver common stock in a future registered offering at a cost below the conversion price then in effect, for a lower issue price in such offer, with certain deviations. The Amendment also entitles the debt holder to take part in future Securities Transactions for a period of two years from the later of the date of Amendment and the date on which there are no outstanding debt payments to the debt holder.
The anticipated sale of the Bethard business comes after the company’s previous report on December 7, 2022 that it was officially closing its Argyll company, a licensed gambling facility in the UK. With the sale of the Bethard business and the official closure of the Argyll business, the company intends to focus on its Lucky Dino iGaming brands running on the Idefix platform owned and operated by Esports.
What’s more, the company also reported:
- Impairment of goodwill mainly related to its iGaming reporting unit at December 31, 2022. The amount of the impairment will result in a material non-cash charge in the company’s statement of operations for the fiscal quarter ended December 31, 2022;
- A $16.7 million decrease in outstanding principal from conversions of the Senior Convertible Note into common stock. The company decreased its debt from $32.2 million at September 30, 2022 to $15.5 million at February 16, 2023, before adjusting for the effects of the Amendment;
- Completed sale of Spanish gambling license on January 18, 2023 resulting in company proceeds of €2.1 million, of which 50% will be deposited into a bank account for the benefit of debt holder;
- Real property lease termination on January 26, 2023, eliminating $0.8 million of total remaining lease obligation throughout the lease term.
Alex Igelman, CEO, said: “I am very pleased at the work that is being undertaken to reduce debt and focus on our core iGaming and esports assets. We remain committed to building a world-class esports gambling operation that is global in reach and that provides esports content and strategic services to those involved in esports gambling, as well as those seeking to enter the market. I am extremely encouraged and pleased with the speed and efficiency in which senior management effectuated these important actions.”