Item
2.01 Completion of Acquisition or Disposition of Assets.
OVERVIEW
As
used in this report, unless otherwise indicated, the terms “we”, “us”, “our”, “Company”
and “Parsec” refer to Parsec Capital Acquisition Corp. (“Parsec”). We refer to the transactions contemplated
by the Acquisition Agreement as the “Acquisition”.
Our
shares of common stock, par value $0.0001 per share, are referred to herein as our “shares”. “Canadian Dollars”
or “CN$” refers to the legal currency of Canada and “$” or “U.S. Dollars” refers to the legal currency
of the United States.
Parsec
is a Delaware corporation incorporated on February 11, 2021 and formed as a “SPAC” to effect a merger, capital stock exchange,
asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. On October 8, 2021, Parsec
closed its initial public offering of 8,625,000 units at an offering price of $10.00 per unit. Each unit consisted of one of the Company’s
shares of Class A common stock and one redeemable warrant entitling the holder thereof to purchase one share of Class A common stock
at a price of $11.50 per share.
On
October 13, 2022, Parsec executed an Agreement and Plan of Merger with Enteractive Media Inc., a Canadian corporation (“Enteractive”).
Closing of the Agreement and Plan of Merger was subject to stockholder approval by the stockholders of Parsec as well other customary
closing conditions.
As
of December 8, 2022, Parsec stockholder approval had not yet been obtained and as a result of Parsec having failed to make a required
payment to extend the date required to consummate a business combination, all Class A Shares were redeemed and all outstanding warrants
expired worthless. In addition, on December 16, 2022, Nasdaq Stock Market LLC filed with the United States Securities and Exchange Commission
a Form 25 pursuant to 17 CFR 240.12d2-2(a)(1) cancelling the Nasdaq listing of Parsec’s Class A Common Stock and warrants on the
basis that the entire class of those securities had been redeemed or paid at maturity or retirement.
On
March 9, 2023, Parsec and the holders of 56.7% of Enteractive’s common stock (the “Enteractive Majority Stockholders”),
entered into a Stock Exchange and Reorganization Agreement, pursuant to which Parsec acquired all shares of common stock owned by the
Enteractive Majority Stockholders in exchange for a total of 3,402,560 newly issued shares of Parsec Class B common stock. The March
9, 2023 Stock Exchange and Reorganization Agreement cancelled and superseded the October 13, 2022 Agreement and Plan of Merger.
About
Enteractive
Enteractive, which was formed in 2013, is a business
that acts as the gateway between consumers and gambling operators. Enteractive’s PlayerVision platform provides consumers
with gambling themed television broadcasts, on demand video, “Join in Play” synchronous live video streamed sports wagering
programming (available on the web, mobile and television), which include gambling strategies, tips and advice, leaderboards, contests,
and incentives where people who like to gamble can: Meet each other; Learn how to play new games and gamble; Compete with each other
in free games and real money games, and Win prizes and money.
On June 29, 2021, Bill C-218 received Royal Assent
and became law whereby the Parliament of Canada amended the Criminal Code to decriminalize licensed private entities to operate single
outcome sport event wagering.1 This new development is allowing Enteractive’s PlayerVision platform (“PlayerVision”)
to monetize this exciting new opportunity through the PlayerVision brand name to provide consumers with a comprehensive gambling themed
platform and community, the PlayerVision Affiliate Gaming Network (“PlayerVision Network”). Through the PlayerVision Network,
consumers can enjoin gambling themed television broadcasts, on demand video, Join in Play synchronous live video streamed sports wagering
programming (available on the web, mobile and television), which include gambling strategies, tips and advice, leaderboards, contests,
and incentives where people who like to gamble can:
Meet
each other;
Learn
how to play new games and gamble;
Compete
with each other in free games and real money games; and
Win
prizes and money.
PlayerVision
acts as an “Gaming Affiliate” to partner sportsbook and casino gaming operators (collectively, “Gaming Operators”).
PlayerVision generates revenue from the traffic that it sends to the Game Operators. PlayerVision’s revenues are based on a percentage
of the players spend with the Gaming Operators. PlayerVision carries no payout risk as it does not have any liability for payouts to
players. If a player wins or loses on a Gaming Operator’s platform, PlayerVision receives a commission (“Affiliate Commission”).
Affiliate Commission payments can be based on “One-Time Bounties” or as part of a percentage of “Lifetime Revenue”
agreements.
The
Company is building the PlayerVision Network that is supported by world class online Gaming Operators. Enteractive’s business model
through the PlayerVision Network is now designed to engage and monetize gamblers through revenues that include membership fees, affiliate
commissions and advertising revenues.
Enteractive’s
Affiliate strategy provides a strong competitive edge as the PlayerVision Network offers access to the comprehensive range of products
and services that the Company has built from advertising, promoting and hosting events, broadcasting and recording events in a multi-platform
network model and stream produced programs on its own cable, satellite and digital services.
PlayerVision
requires a low level of corporate regulatory approval as the services it provides to players are “Marketing” related and
not “Operational” in nature. PlayerVision does not act as the Gaming Book or the House/Casino nor does it operate gambling
equipment or gambling software and as such it does not require approval as an operator. PlayerVision does not “hold” player
funds or require complex Fintrac, KYC and AML infrastructure. PlayerVision does not require gaming operators licencing or significant
probity for its key management or shareholders.
1https://openparliament.ca/bills/43-2/C-218/
PlayerVision
provides its services only to licenced Gaming Operators who provide their services in accordance with all applicable Government licencing
and taxation rules and regulations. PlayerVision’s Gaming Operators are 100% responsible for all the regulatory licencing, compliance,
audit, know-your-customer (“KYC”), anti-money laundering (“AML”), the Financial Transactions and Reports Analysis
Centre of Canada (“FINTRAC”) and Responsible Gambling Council (“RGC”) compliance as well as the costs for platform
operation, game design, game operation, game liquidity, financial processing, and related technical support services.
PlayerVision
provides its services in accordance with all applicable advertising and marketing rules and regulations in each market (Province by Province,
State by State, Country by Country). The Company is now ready to deliver its “Meet, Learn, Compete and Win” content via video
streaming, on demand and broadcast networks to gamblers worldwide.
Industry
The
penetration of digital media and the internet in general has led to the evolution of gambling and sports betting. Consumers of digital
media platforms have leveraged online gaming platforms to satisfy their urge of gambling. Over the past few years there has been a rise
in online poker gamblers, rummy players offering a vast prospect for gaming companies to expand their reach through digital interactive
platforms. The interactive media and services industry is expected to grow at a rate of 16% over the next five years. The U.S interactive
media and services industry generated a total revenue of US $416.7 billion at the end of 2021.2 According to PWC’s global
entertainment and media outlook 2021 – 2025, this is a US $2 trillion market growing at a rate of 5% over the period.3
2
https://simplywall.st/markets/us/telecom/interactive-media-services
3
https://www.pwc.com/gx/en/entertainment-media/outlook-2021/perspectives-2021-2025.pdf
Sports
betting refers to the activity of foretelling sports results and placing bets on the result. Bets are placed on sports such as football,
baseball, basketball, hockey, cricket, boxing and auto racing. It also extends to non-athletic events such as horse racing and eSports.
The
global sports betting market is expected to reach US $140.26 billion by 2028 growing at a CAGR of 10.1% from 2021 – 2028.4 The
online gambling market generated $60 billion in 2021 according to another research.5 The key factors driving this market are
the penetration of digital media and connected devices, growing digital infrastructure and increasing number of sports events and leagues.
A survey of online betting and gambling finds that gambling deregulation has boosted the shift towards pervasive forms of gambling. The
valuation of this market is expected to be more than US $134.5 billion by the end of 2027.
The
legal sports betting market in Canada is expected to generate $25 billion in retail and online wagering annually in the case that all
provinces and territories legalize single game wagering.6 In 2021, Canadian lawmakers passed the C-218 bill to remove the
federal prohibition on single-game betting throughout Canada and allow individual provinces to regulate single sports betting. According
to the Canadian Gaming Association, an estimated $10 billion is bet annually through illegal operators with ties to organized crime.
An estimated $4 billion is bet with offshore unlicensed operators and another $500 million is bet through legal lottery run sportsbooks.
A study by PricewaterhouseCoopers estimates that the single game betting market could reach CA $2.4 billion within two years of legalization
and a study by Deloitte Canada estimated that Canadians could grow the legal sports betting market to $28 billion within the next five
years. Prospective bettors intend to place 49% of their wagers online compared to 45.4% earmarked for retail locations, casinos, or sportsbooks,
while 5.6% will bet using other channels.7 Ontario is the first province set to legalize followed by Alberta. It is projected
that Calgary’s creative industries will spend CA $566 million on interactive digital media from 2022 to 2024, making way for gaming,
esports and other immersive technologies.8
4
https://www.globenewswire.com/news-release/2021/10/28/2322730/28124/en/Global-Sports-Betting-Market-2021-to-2028-Size-Share-Trends-Analysis-Report.html
5
https://www.flytonic.com/make-money-on-sports-betting-affiliate-marketing/
6
https://www.prnewswire.com/news-releases/canada-could-grow-into-2-billion-a-year-sports-betting-market-according-to-white-paper-from-playcanada-301363941.html
7
https://sportshandle.com/canada-study-sports-betting-education/
8
https://www.calgaryeconomicdevelopment.com/sectors/interactive-digital-media/
The
COVID-19 pandemic accelerated the growth of the online gambling and betting market as users had more time to spare on their phones and
computers and players rigorously promoted online betting as betters shifted from land-based betting facilities to online platforms. However,
the cancellation of sports events did reduce sports betting opportunities.
Affiliate
marketing is one of the most lucrative ways to profit in the sports betting industry. Their revenue is generated through a percentage
profit generated by the sportsbook to attract players and the revenue share commission ranges from 15%-60%. Affiliate marketers also
earn a fee for each cost per acquisition to redirect customers to the sportsbook.
Many
sports betting companies are spending on media deals and partnering with media companies for their digital campaigns to acquire customers.
This is becoming a big business for media companies. In July 2021, Gannett signed a five-year long deal with European sportsbook Tipico
– Germany’s top sports betting company and the sportsbook would compensate the publisher through cash, stock and commissions.
In February 2021, WynBET also signed a 3-year long deal with Blue Wire that is a $3.5 million investment in the media company in exchange
for partial ownership in advertising revenue.9
The
online gambling industry is expected to grow from $76,792.7 million in 2020 to $127,451.4 million in 2025 at a rate of 10.7%. The market
is then expected to grow at a CAGR of 8.6% from 2025 and reach $192,264.4 million in 2030.10 The online sports betting market
post COVID is expected to grow to US $59,530.7 million by 2026 at a CAGR of 13.6% in the period 2019-2026.11
We
rely on a combination of patent, trademark and trade secret protection and other unpatented proprietary information to protect our intellectual
property rights and to maintain and enhance our competitiveness in the jewelry industry.
Foreign
Currency Exchange
Monetary
assets and liabilities denominated in foreign currencies are translated at the rate of exchange in effect at the statement of financial
position date. Non-monetary items are translated using the historical rate on the date of the transaction. Foreign exchange gains and
losses are included in profit or loss.
Employees
At
February 28, 2023, we had no employees, four full time consultants and two part time consultants.
Properties
The
Company rents office space at 736 8th Ave. SW, Suite 510, Calgary, AB T2P 1H4.
Legal
Proceedings
We
are not aware of any pending or threatened legal proceedings involving the Company or its assets.
9
https://digiday.com/media/we-are-the-media-company-sportsbooks-are-spending-millions-on-media-deals-but-publishers-should-hedge-their-bets/
10
https://www.businesswire.com/news/home/20220323005542/en/Global-Online-Gambling-Market-Opportunities-and-Strategies-Report-2022-2030—ResearchAndMarkets.com#:~:text=The%20market%20is%20expected%20to,reach%20%24192%2C264.4%20million%20in%202030.
11 https://www.marketresearchfuture.com/reports/online-sports-betting-market-10480
RISK
FACTORS
Any
investment in our common stock involves a high degree of risk. Investors should carefully consider the risks described below and all
of the information contained in this Current Report on Form 8-K before deciding whether to purchase our common stock. Our business, financial
condition or results of operations could be materially adversely affected by these risks if any of them actually occur. Further, the
trading price of our shares could decline due to any of these risks, and an investor may lose all or part of his or her investment. Some
of these factors have affected our financial condition and operating results in the past or are currently affecting us. This Current
Report on Form 8-K also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially
from those anticipated in these forward-looking statements as a result of certain factors, including the risks described below and elsewhere
in this Current Report on Form 8-K.
RISKS
RELATED TO OUR BUSINESS AND INDUSTRY
We
rely on traffic to our websites to grow revenue. Our business could be negatively affected by changes in search engine algorithms and
dynamics.
We
rely heavily on Internet search engines, such as Google. We have employed search engine marketing (SEO) to make our website more findable
to search engines so that it ranks favorably in the search engines’ results pages for certain queries. Although we believe that
Google and other search engines are increasingly adept at identifying the truly high-quality content that deserves prominence, the factors
affecting the appearance and rankings of search results are determined by search engines and are therefore not under our direct control.
For example, search engines change their algorithms periodically, which could cause our websites to appear lower or not at all in the
search engines’ results pages. In the future, search engines may change the search results pages to promote search engines’
own products or services. In addition, search engines may favor paid searches over natural searches.
As
a result, our competitors’ pay-per-click advertising could receive higher prominence than our own website. Our website has experienced
fluctuations in search rankings in the past. While the amount of natural search traffic from Google varies based on a variety of factors
related to both search rankings and consumer demand, the amount of natural search traffic can shift up or down more significantly when
Google implements a core update to their search algorithm. Such updates can lead to larger than normal changes in Google search engine
rankings which in turn effect traffic, although some updates have no impact on certain sites.
Our
industry continues to evolve, which makes it difficult to evaluate our current business and future prospects.
We
launched operations in 2013. Our evolving business make it difficult to forecast our future results of operations. Our historical revenue
growth should not be considered indicative of our future performance. These risks and challenges include our ability to:
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attract
and retain new customers; |
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continue
to earn and preserve a reputation for providing meaningful and reliable reviews of local businesses; |
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successfully
manage our growth; |
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successfully
develop and deploy new features and products; |
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manage
and integrate successfully any acquisitions of businesses; |
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avoid
interruptions or disruptions on our platform; and |
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recruit,
integrate and retain talented personnel. |
If
we fail to address the risks and difficulties that we face, including those associated with the challenges listed above as well as those
described elsewhere in this “Risk Factors” section, our business, financial condition, and results of operations could be
adversely affected. Further, because we have limited historical financial data and operate in a rapidly evolving market, any predictions
about our future revenue and expenses may not be as accurate as they would be if we had a longer operating history or operated in a more
predictable market. We have encountered in the past, and will encounter in the future, risks and uncertainties frequently experienced
by growing companies with limited operating histories in rapidly changing industries. If our assumptions regarding these risks and uncertainties,
which we use to plan and operate our business, are incorrect or change, or if we do not address these risks successfully, our results
of operations could differ materially from our expectations and our business, financial condition, and results of operations could be
adversely affected.
We
may not be able to adequately track the amount of payments due to us.
After
we have directed an online gambler to an online gambling operator, we cannot directly track the online gambler’s activities in
the online gambling operator’s system. We, therefore, rely on the net revenue calculations by the online gambling operator to determine
our entitled payment. Consequently, there is a risk of miscalculation and misrepresentation, whether due to error, negligence or fraud.
If such miscalculations occur undetected, subsequently remedied or retroactively adjusted, we could receive a lower fee than we are entitled
to under our agreements, which in turn could result in lost revenue and have a material adverse effect on our business, financial condition
and results of operations.
The
estimates of market opportunity and forecasts of market growth included in this prospectus may prove to be inaccurate. Even if the market
in which we compete achieves the forecasted growth, our business could fail to grow at similar rates, if at all.
Market
opportunity estimates and growth forecasts included in this Form 8-K are subject to significant uncertainty and are based on assumptions
and estimates that may not prove to be accurate. Not every online gambling operator covered by our market opportunity estimates will
necessarily purchase our solutions at all, and some or many of those online gambling operators may choose to use the solutions offered
by our competitors. It is impossible to build every product feature that every customer wants, and our competitors may develop and offer
features that our platform does not provide. The variables that go into the calculation of our market opportunity are subject to change
over time, and there is no guarantee that any particular number or percentage of the online gambling operators covered by our market
opportunity estimates will purchase our solutions at all or generate any particular level of revenue for us. Even if the market in which
we compete meets the size estimates and growth forecasts in this prospectus, our business could fail to grow for a variety of reasons
outside of our control, including competition in our industry or changing regulation. If any of these risks materialize, it could harm
our business and prospects.
We
depend on key personnel to operate our business. An inability to retain, attract, and integrate qualified personnel would harm our ability
to develop and successfully grow our business.
Our
success and growth strategy depend on our ability to attract and retain key management and operating personnel, including skilled developers,
marketing personnel, project managers, product managers and content editors. Our future success depends on our continuing ability to
attract, develop, motivate and retain highly qualified and skilled employees. Qualified individuals are in high demand, and we may incur
significant costs to attract and retain them. Experienced developers and marketing personnel, who are critical to the success of our
business, are also in particularly high demand. Competition for their talents is intense and retaining such individuals can be difficult.
Our
ability to increase our revenue depends on our ability to introduce successful new products and services. Our ongoing investments in
developing products and services involve significant risks which could disrupt our current operations and may not produce the long-term
benefits that we expect.
We
compete in rapidly evolving and highly competitive markets, and we expect competition to intensify further in the future with the emergence
of new technologies and new market entrants. We face competition from new and established local and international players in the online
marketing industry, traditional marketing providers such as TV, printed publications and radio, and online gambling operators who conduct
extensive marketing activities of their own.
Our
competitors may enjoy competitive advantages, such as greater name recognition, longer operating histories, substantially greater market
share, large existing user bases and substantially greater financial, technical and other resources. These companies may use these advantages
to offer services similar to ours at a lower price and respond more effectively than we do to new opportunities and customer demands.
To
attract new visitors, we must offer and develop new features on a continuous basis and perform regular system updates. As a result, we
have invested, and expect to continue to invest, significant resources in developing products and services to drive traffic to our platform
and engage our customers. Our product development efforts may include significant changes to our existing products or new products that
are unproven. Such investments may not prioritize short-term financial results and may involve significant risks and uncertainties, including
distracting management and disrupting our current operations. We cannot assure you that any resulting new or enhanced products and services
will engage online gamblers and online gambling operators. We may fail to generate sufficient revenue, operating margin or other value
to justify our investments in such products, thereby harming our ability to generate and increase revenue.
An
actual, alleged or perceived security incident, inadvertent disclosure or breach of sensitive information, including confidential and
personal information, we process, or of the security of our or our customers’, vendors’, or partners’ networks and
systems could be detrimental to our business, reputation, financial information and results of operations.
Advances
in technology, discoveries of new weaknesses and other developments with software generally used by the Internet community may increase
the risk we will suffer a security incident. As part of our business we process certain personal, confidential and sensitive information.
We may in the future fail to detect or prevent security incidents, inadvertent disclosure or breach of sensitive information, including
from malware, ransomware, viruses, worms or similar threats for any number of reasons, such as our failure to enhance and expand our
platform to reflect industry trends, new technologies and new operating environments, the complexity of the environment, network or systems
of our clients, vendors, or partners. We, our customers, vendors or partners may experience such incidents due to data being misappropriated
by a malicious insider or unauthorized party, such as employee error, rogue employee activity, or other unlawful or unauthorized acts,
which if successful, may result in either threatened or actual exposure leading to unauthorized access, disclosure and misuse of sensitive
information or other information regarding customers, vendors, partners, employees, or our company and business, and our technologies,
systems and networks have been subject to attempted cyberattacks. If we experience any such incidents, we may incur significant costs
in protecting against or remediating such incidents, which include investing in resources to address these incidents. We may not be able
to remedy any incidents or incidental problems in a timely manner, or at all. To the extent potential customers, industry stakeholders
or other third parties believe that the failure to detect or prevent any particular threat is a flaw or indicates that our platform is
not secure our reputation and business would be harmed. Any real or perceived defects, errors or vulnerabilities in our platform or business,
or any other failure of our platform to detect an incident, could result in:
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a
loss of existing or potential customers; |
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delayed
or lost revenue and adverse impacts to our business, financial condition and operating results; |
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a
delay in attaining, or the failure to attain, market acceptance; |
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the
expenditure of significant financial and research and development resources in efforts to analyze, correct, eliminate, or work around
errors or defects, and address and eliminate vulnerabilities; |
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an
increase in resources, including devoted customer service and support, which could adversely affect our gross margins; |
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decrease
in value to our reputation or brand; and |
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claims
and litigation, regulatory inquiries, or investigations, enforcement actions, including fines, and other claims and liabilities, all
of which may be costly and burdensome and further harm our reputation. |
Systems
failures and resulting interruptions in the availability of our websites, apps, or platforms could adversely affect our business, financial
condition, and results of operations.
Our
systems may experience service interruptions or degradation or other performance problems because of peak usage times, hardware and software
defects or malfunctions, distributed denial-of-service and other cyberattacks, infrastructure changes, human error, natural disasters,
power losses, disruptions in telecommunications services, fraud, military or political conflicts, terrorist attacks, computer viruses,
ransomware, malware, or other events. Our systems also may be subject to break-ins and other intentional acts of vandalism, including
by our own employees, independent contractors or other insiders. Some of our systems are not fully redundant and our disaster recovery
planning may not be sufficient for all eventualities.
We
may experience system failures and other events or conditions from time to time that could interrupt the availability, reduce or affect
the speed or functionality of our platform. These system failures generally occur either as a result of software updates being deployed
with unexpected errors or as a result of temporary infrastructure failures related to storage, network, or compute capacity being exhausted.
These events have resulted in losses in revenue, though such losses have not been material to date. System failures in the future could
result in significant losses of revenue. Further, in some instances, we may not be able to identify the cause or causes of these performance
problems within an appropriate period of time. A prolonged interruption in the availability or reduction in the availability, speed,
or other functionality of our platform could adversely affect our business and reputation and could result in the loss of users.
We
may acquire other companies or technologies, which could divert management’s attention and otherwise disrupt our operations and
harm our operating results, whether or not the acquisition is consummated. We may fail to acquire companies whose market power or technology
could be important to the future success of our business.
We
also may not achieve the anticipated benefits from any acquired business due to a number of factors, including:
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unanticipated
costs or liabilities associated with the acquisition, such as transaction-related lawsuits or claims; |
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failure
or material delay in closing a transaction; |
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Incurrence
of acquisition-related costs; |
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diversion
of management resources from existing business operations; |
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Regulatory
uncertainties; |
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weak,
ineffective, or incomplete data privacy compliance and strategies of an acquired company; |
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harm
to our existing business relationships with online gambling operators as a result of the acquisition; |
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harm
to our brand and reputation; |
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the
potential loss of our key employees; |
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Difficulties
in retaining customers or key employees of an acquired company; |
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difficulties
in integrating the technologies, operations, existing contracts, and employees of an acquired company; and |
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use
of substantial financial resources to consummate the acquisition. |
If
we fail to address the foregoing risks or other problems encountered in connection with past or future acquisitions of businesses, or
if we fail to successfully integrate such acquisitions or investments, our business, financial condition, and results of operations could
be adversely affected. In addition, acquisitions also could result in dilutive issuances of equity securities or the incurrence of debt,
which could adversely affect our operating results.
If
we fail to manage rapid growth effectively, our brand, business, financial condition and results of operations could be adversely affected.
Rapid
growth may impose significant responsibilities on our management, including the need to identify, recruit and integrate additional employees
with relevant expertise, expand the scope of our current technological platform and invest in improved controls over technology, financial
reporting and information disclosure. If we fail to manage the growth of our business and operations effectively, the quality of our
service and the efficiency of our operations could suffer, which could adversely affect our business, financial condition, and results
of operations.
In
addition, our rapid growth may make it difficult to evaluate our future performance. Our ability to forecast our future results of operations
is subject to a number of uncertainties, including our ability to model future growth. If we fail to achieve the necessary level of efficiency
in our company as it grows, or if we are not able to accurately forecast future growth, our business would be negatively impacted.
The
impact of economic conditions, including the resulting effect on consumer spending, may adversely affect our business, financial condition,
and results of operations.
Our
performance is subject to economic conditions and their impact on the levels of consumer spending. Demand for entertainment and leisure
activities, including online gambling, may decline if discretionary consumer spending declines, including during economic downturns,
when consumers generally earn less disposable income. Changes in discretionary consumer spending or consumer preferences are driven by
factors beyond our control, such as:
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unfavorable
changes in general economic conditions, including recessions, economic slowdowns; |
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Fears
of recession and changes in consumer confidence in the economy; |
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sustained
high levels of unemployment; |
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increases
in taxes, including gambling taxes or fees; |
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high
energy, fuel and other commodity costs; |
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the
potential for bank failures or other financial crises; and |
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terrorist
attacks or other global events. |
During
periods of economic contraction, our revenues may decrease while most of our costs remain fixed and some costs may even increase, resulting
in decreased earnings.
Consolidation
among the online gambling operators may reduce demand for our products and profitability.
Much
of the demand for our products derives from the desire of online gamblers to switch between different online gambling websites. The revenues
of an online gambling website from a particular online gambler are usually highest in the first month after that online gambler signs
up to the website. Therefore, online gamblers switching between platforms are likely to bring higher revenues to us. A consolidation
of the online gambling sector could significantly reduce the ability and desire of online gamblers to switch between platforms, thereby
potentially reducing our expected revenues. Furthermore, consolidation among online gambling operators may reduce competition for use
of our product and therefore reduce our pricing power in the market place. Any significant move towards consolidation within the online
gambling industry could therefore have a material adverse effect on our business, financial condition and results of operations.
Negative
events or negative media coverage relating to online gambling may adversely impact our ability to retain or attract online gamblers,
which could have an adverse impact on our business.
The
online gambling industry is subject to negative publicity relating to perceptions of underage gambling, exploitation of vulnerable customers
and the historic link between the gambling industry to criminal activities. As a service provider to the online gambling industry, our
reputation can be negatively affected and, accordingly, significantly influence our business. In addition, a negative shift in the perception
of online gambling by the public or by policymakers, lobbyists or others could affect future legislation of online gambling, which could
cause jurisdictions to abandon proposals to legalize online gambling, thereby limiting the number of jurisdictions in which we can operate.
Furthermore, illegal betting activity could result in negative publicity for our industry and could harm our brand reputation. Negative
public perception could also lead to new restrictions on or to the prohibition of online gambling in jurisdictions in which we currently
operate. Such negative publicity could also reduce could diminish confidence in, and the use of, our platform and result in decreased
revenue or slower customer growth rates, which could seriously harm our business.
We
and our customers may have difficulty accessing the services of banks or the financial system and our business could be materially adversely
affected.
Although
financial institutions are permitted to provide services to us and others in the online gambling industry, banks may be hesitant to offer
services to us because we are service providers for sports betting businesses. Consequently, we may encounter difficulties in establishing
and maintaining banking relationships with a full scope of services and generating market rate interest. If we were unable to maintain
our bank accounts, it would make it difficult for us to operate our business, increase our operating costs, and pose additional operational,
logistical and security challenges which could materially adversely impact our business. Similarly, our customers may be unable to access
the services of banks or the financial system, whether due to banks’ concerns with respect to providing services to sports betting
businesses in general or changes of laws and regulations that might limit our customers’ ability to access the financial system.
Risks
Related to Government Regulation
The
online gambling industry is heavily regulated. Changes to the regulatory framework in the jurisdictions in which we operate could restrict
our ability to advertise or harm our customers’ business, which could in turn negatively affect our financial performance.
As
an online gambling affiliate, our principal customers are online gambling operators. Any regulatory development that could harm the financial
performance or otherwise adversely affect online gambling operators could negatively affect our performance. The regulatory framework
for online gambling is complex and varies across the jurisdictions in which we operate. In some jurisdictions, online gambling regulations
are subject to debate and continuous development
We
cannot predict whether, in the future, regulations will be implemented in a market where we operate or the impact of these regulations
on our business. In addition, online gambling operators and their B2B providers, such as online gambling operator affiliates (directly
and/or directly by way of their commercial relationship with online gambling operators), are currently subject to significant taxes and
fees in addition to normal corporate income taxes, and such taxes and fees are subject to increase at any time. Tax authorities may interpret
laws originally enacted for mature industries and apply it to newer industries, such as online gambling. From time to time, various legislators
and other government officials have proposed and adopted changes in tax laws, or in the administration or interpretation of such laws,
affecting the gambling industry. It is not possible to determine with certainty the likelihood of changes in tax laws or in the administration
or interpretation or enforcement of such laws.
As
the legal framework for the online gambling industry is constantly developing, we are unable to predict whether or when additional restrictions
will be applied to online gambling operators in the jurisdictions in which we operate. Any development such as the above-mentioned could
have a material adverse effect on our business, results of operations and financial position.
We
may be subject to legislation that limits or restricts the marketing of online gambling services and we could fail to comply with such
legislation.
As
service providers to online gambling operators, online gambling affiliates are generally not subject to the same laws and regulations
governing online gambling operators. However, in many jurisdictions, we may be obligated to comply with the regulations and standards
around advertising in general. For example, the Advertising Standards Authority in the U.K. prescribes certain standards for online and
affiliate marketing in general as well as specific policies around gambling. In the U.S., the American Gaming Association, or the AGA,
has produced a Responsible Marketing Code for Sports Wagering which its members have pledged to follow. We are not a member of the AGA
currently but should we join in the future, we would be required to comply with their marketing codes.
In
addition, we are subject to general marketing legislation in all jurisdictions that we operate. In the future, we may be subject to additional
regulatory requirements aimed at the promotion of online gambling services, for example if we enter new geographical markets or if regulations
are expanded to include our operations. Regulatory compliance is costly and time-consuming. We have dedicated significant time and financial
resources to monitor our regulatory compliance and will continue to in the future.
We
are subject to governmental regulation and other legal obligations related to privacy, data protection and information security. If we
are unable to comply with these, we may be subject to governmental enforcement actions, litigation, fines and penalties or adverse publicity.
We
collect and process personal data about our customers. The collection, use and processing of such information about individuals are governed
by data privacy laws and regulations enacted in the E.U., U.K., U.S. (federal and state), and other jurisdictions around the world, including
U.S. marketing laws and FTC regulations. These data privacy laws and regulations are complex, continue to evolve, and on occasion may
be inconsistent between jurisdictions leading to uncertainty in interpreting such laws and it is possible that these laws, regulations
and requirements may be interpreted and applied in a manner that is inconsistent with our existing information processing practices,
and many of these laws are significantly litigated and/or subject to regulatory enforcement.
The
implication of this includes that various federal, state and foreign legislative or regulatory bodies may enact or adopt new or additional
laws and regulations concerning data privacy, data retention, data transfer, and data protection. Such laws may continue to restrict
or dictate how we collect, maintain, combine and disseminate information and could have a material adverse effect on our business, results
of operations, financial condition and prospects.
Most
of the jurisdictions in which we operate have established their own data privacy and security legal frameworks. For instance, in the
European Economic Area, or the E.E.A., we are subject to the General Data Protection Regulation 2016/679, the GDPR, and in the U.K.,
we are subject to the U.K. data protection regime consisting primarily of the U.K. General Data Protection Regulation, the U.K. GDPR,
and the U.K. Data Protection Act 2018, each of which imposes strict requirements on covered processing and provides for robust regulatory
enforcement and sanctions for non-compliance. The GDPR and the U.K. GDPR regimes enable competent authorities to issue fines up to the
greater of €20 million/£17.5 million or 4% of global annual turnover. Such penalties are in addition to any civil litigation
claims by data controllers, data processors, customers and data subjects. In addition, last year the Court of Justice of the E.U., or
the CJEU, invalidated the E.U.-U.S. Privacy Shield (a mechanism for the transfer of personal data from the E.E.A to U.S.) and also indicated
that reliance on standard contractual clauses (another such transfer mechanism) alone may not necessarily be sufficient in all circumstances.
We previously relied on our E.U.-U.S Privacy Shield certification and in some cases the Privacy Shield certification(s) of our vendors
and partners for the purposes of transferring personal data from the E.E.A. to the U.S. in compliance with the GDPR’s data export
conditions. We are monitoring the developments following the CJEU decision as well as implementing the standard contractual clauses and
reviewing other mechanisms for transfers from the E.E.A. and the U.K., including to the U.S. We are additionally subject to evolving
E.U. and U.K. privacy laws on electronic marketing and cookies. In recent years, European lawmakers and regulators have expressed concern
over electronic marketing and the use of nonessential cookies, web beacons and similar technology for online behavioral advertising,
or tracking technologies, leading to an effort to replace the current rules on e-marketing (currently set out in the 2002 Privacy &
Electronic Communication Directive 2002/58/EC, as amended, or the ePrivacy Directive, and national implementing laws) with a new ePrivacy
Regulation. When implemented, the new ePrivacy Regulation is expected to alter rules on tracking technologies and significantly increase
fining powers to the same levels as the GDPR.
We
will need to invest significant resources to comply with the GDPR and other privacy laws and regulations. Failure to meet any of the
requirements of these laws and regulations could result in significant penalties or legal liability, adverse publicity and/or damage
to our reputation, which could negatively affect our business, results of operations and financial condition.
The
international scope of our operations and our corporate and financing structure may expose us to potentially adverse tax consequences.
We
are subject to taxation in, and to the tax laws and regulations of, multiple jurisdictions due to the international scope of our operations
and our corporate and financing structure. We are also subject to intercompany pricing laws including those relating to the flow of funds
between our subsidiaries pursuant to, for example—purchase agreements, licensing agreements, or other arrangements. Adverse developments
in such laws or regulations, or any change in position regarding the application, administration or interpretation of these laws or regulations
in any applicable jurisdiction or our inability to comply with all applicable requirements of these laws could have a material adverse
effect on our business, financial condition, and results of operations. In addition, the application of withholding tax, social security
tax obligations, value added tax, goods and services tax, sales taxes and other non-income taxes is not always clear and we may be subject
to tax audits relating to such withholding, social security obligations, or non-income taxes. Further, the tax or labor authorities in
any applicable jurisdiction may disagree with the positions we have taken or intend to take regarding the tax treatment or characterization
of any of our activities or transactions, including the tax treatment or characterization of our tax residency, indebtedness or the transactions.
If any applicable tax authorities successfully challenge the tax treatment or characterization of any of these, it could result in the
disallowance of deductions; the imposition of additional or new taxation in certain jurisdictions; the imposition of withholding taxes
on internal deemed transfers or in general, capital gains taxes, including on transfers that have been made and/or deemed to have been
made in connection with the transactions; or otherwise, the reallocation of income, penalties; or other consequences that could have
a material adverse effect on our business, financial condition and results of operations.
Our
failure to comply with trade restrictions such as economic sanctions and export controls could negatively impact our reputation and results
of operations.
We
are subject to trade restrictions, including economic sanctions and export controls, imposed by governments around the world with jurisdiction
over our operations, which prohibit or restrict transactions involving certain designated persons and certain designated countries or
territories, including Cuba, Iran, Syria, Sudan, North Korea, and the Crimea Region of Ukraine. Our failure to successfully comply with
these laws and regulations may expose us to reputational harm as well as significant sanctions, including criminal fines, imprisonment,
civil penalties, disgorgement of profits, injunctions, debarment from government contracts and other remedial measures. Investigations
of alleged violations can be expensive and disruptive. We maintain policies and procedures designed to comply with these laws and regulations.
As part of our business, we may, from time to time, engage in limited sales and transactions involving certain countries that are targets
of economic sanctions, provided that such sales and transactions are authorized pursuant to applicable economic sanctions laws and regulations.
However, we cannot predict the nature, scope, or effect of future regulatory requirements, including changes that may affect existing
regulatory authorizations, and we cannot predict the manner in which existing laws and regulations may be administered or interpreted.
In
addition, any perceived or actual breach of compliance by us with respect to applicable laws, rules, and regulations could have a significant
impact on our reputation; could cause us to lose existing customers; prevent us from obtaining new customers; negatively impact investor
sentiment about our company; require us to expend significant funds to remedy problems caused by violations and to avert further violations;
and expose us to legal risk and potential liability—all of which may have a material adverse effect on our reputation, business,
financial condition and results of operations.
Our
failure to comply with the anti-corruption laws of the U.S. and various international jurisdictions could negatively impact our reputation
and results of operations.
Doing
business on a worldwide basis requires us to comply with anti-corruption laws and regulations imposed by governments around the world
with jurisdiction over our operations, which includes the U.S. Foreign Corrupt Practices Act, or the FCPA, and the U.K. Bribery Act 2010,
or the U.K. Bribery Act, as well as the laws of the countries where we do business. These laws and regulations may restrict our operations,
trade practices, investment decisions, and partnering activities. The FCPA and the U.K. Bribery Act prohibit us and our officers, directors,
employees, and business partners acting on our behalf, including agents, or representatives, from corruptly offering, promising, authorizing,
or providing anything of value, directly or indirectly, to foreign government officials for the purposes of influencing official decisions
or obtaining or retaining business or otherwise obtaining favorable treatment. The U.K. Bribery Act also prohibits non-governmental commercial
bribery, soliciting or accepting bribes, and “facilitation payments,” or small payments to low-level government officials
to expedite routine approvals. We also are subject to the jurisdiction of various governments and regulatory agencies around the world,
which may bring our personnel and representatives into contact with foreign government officials responsible for evaluating and implementing
legislative and regulatory changes relevant to our industry and issuing or renewing permits, licenses or approvals or for enforcing other
governmental regulations. In addition, some of the international locations in which we operate lack a developed legal system, and some
jurisdictions have been perceived to have elevated levels of public corruption. Our global operations expose us to the risk of violating,
or being accused of violating, anti-corruption laws and regulations.
Other
companies, including some that may compete with us, may not be subject to the prohibitions listed above, and therefore may have a competitive
advantage over us. We are in the process of developing policies and procedures reasonably designed to comply with applicable anti-corruption
laws and regulations. However, there can be no guarantee that our policies and procedures will effectively prevent violations by our
officers, directors, employees, and business partners acting on our behalf for which we may be held responsible, and any such violation
could adversely affect our reputation, business, financial condition, and results of operations. Our failure to successfully comply with
these laws and regulations may expose us to reputational harm as well as significant sanctions, including criminal fines, imprisonment,
civil penalties, disgorgement of profits, injunctions, and debarment from government contracts, as well as other remedial measures. Responding
to any enforcement action or internal investigation related to alleged misconduct may result in a significant diversion of management’s
attention and resources and significant defense costs and other professional fees.
Risks
Related to Intellectual Property
If
we fail to protect or enforce our rights in our proprietary technology, brands or other intellectual property, our competitive position
and our business could be materially adversely affected.
We
primarily rely on a combination of trademark, copyright and other intellectual property laws and contractual restrictions to protect
our intellectual property and proprietary rights. However, we cannot be certain that the steps we have taken or will take to protect
and enforce our intellectual property and proprietary rights will be successful. We currently hold rights to the Gambling.com domain
name and various other related domain names in multiple jurisdictions. If we lose the ability to use a domain name, whether due to trademark
claims, failure to renew the applicable registration, or any other cause, we may be forced to market our solutions under a new domain
name, which could cause us substantial harm, or to incur significant expense to purchase rights to the domain name in question. In addition,
our competitors could attempt to capitalize on our brand recognition by using domain names similar to ours. We may fail to prevent third
parties from acquiring and using domain names that are similar to our brand. Protecting and enforcing our rights in our domain names
may require litigation, which could result in substantial costs and diversion of management’s attention, and ultimately may not
be successful.
We
also have certain registered trademarks that are important to our brand, such as the combined mark, Gambling.com. If we fail to protect
or enforce our rights under our trademarks, we may lose the ability to use the trademarks or prevent others from using them, which could
adversely harm our reputation, business, results of operations and financial condition.
We
cannot be certain that the steps we have taken will prevent infringement, misappropriation or other violations of our intellectual property
rights, particularly in foreign countries where the laws may not protect our proprietary rights as fully as they do in the U.S. Further,
we may be required to enforce our intellectual property or other proprietary rights through litigation, which, regardless of success,
could result in substantial costs and diversion of management’s attention.
We
may face potential liability and expense for legal claims alleging that the content on our platform or the operation of our business
infringes intellectual property rights of third parties, who may assert claims against us for unauthorized use of such rights.
On
our publishing platform, we publish both our own content and content from third parties. We cannot be certain that the published content
on our platform and the operation of our business do not, or will not, infringe or otherwise violate the intellectual property rights
of third parties. Third parties may assert claims against us alleging that we are infringing or otherwise violating their intellectual
property rights, including claims for copyright or trademark infringement, or other claims based on the nature and content of the material
that we publish or distribute. These claims, whether or not successful, could divert management time and attention away from our business
and harm our reputation and financial condition. In addition, the outcome of litigation is uncertain, and third parties asserting claims
could secure a judgment awarding substantial damages, as well as injunctive or other equitable relief against us, which could require
us to rebrand, redesign, or reengineer our platforms or websites, and/or effectively block our ability to distribute or market our products
and services.
Our
use of “open source” software in our applications could subject our proprietary software to general release, adversely affect
our ability to sell our services and subject us to possible litigation, claims or proceedings.
We
may use open source software in connection with the development and deployment of our solutions and services, and we expect to continue
to use open source software in the future. Companies that use open source software in connection with their products have, from time
to time, faced claims challenging the use of open source software and/or compliance with open source license terms. As a result, we could
be subject to suits by parties claiming ownership of what we believe to be open source software or claiming noncompliance with open source
licensing terms. Some open source software licenses may require users who distribute software containing or linked to open source software
to publicly disclose all or part of the source code to such software and/or make available any derivative works of the open source code
to their licensees, which could include proprietary code of the user. In such cases, the open source software license may restrict users
from charging fees to licensees for use of their software. While we monitor the use of open source software and try to ensure that none
is used in a manner that would subject our proprietary source code to these requirements and restrictions, such use could inadvertently
occur, in part because open source license terms are often ambiguous and have generally not been interpreted by U.S. or foreign courts.
Further,
in addition to risks related to license requirements, use of certain open source software carries greater technical and legal risks than
does the use of third-party commercial software. For example, open source software is generally provided without any support or warranties
or other contractual protections regarding infringement or the quality of the code, including the existence of security vulnerabilities.
To the extent that our platform depends upon the successful operation of open source software, any undetected errors or defects in open
source software that we use could prevent the deployment or impair the functionality of our systems and injure our reputation. In addition,
the public availability of such software may make it easier for others to compromise our platform. Any of the foregoing risks could materially
and adversely affect our business, financial condition and results of operations.
Our
international operations involve additional risks, and our exposure to these risks will increase as our business continues to expand.
We
operate in a number of jurisdictions and intend to continue to expand our global presence. To date, we have focused our efforts on the
EU. International operations are subject to the legal, political, regulatory, requirements and economic conditions in the jurisdictions
in which they are conducted. Risks inherent to international operations include, but are not limited to:
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exposure
to local economic or political instability; |
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compliance
with various laws and regulatory requirements relating to anti-corruption, antitrust or competition, economic and trade sanctions,
data content, data protection and privacy, employment and labor laws and health and safety; |
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obtaining
any required government approvals, licenses or other authorizations; |
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difficulties
in attracting and retaining qualified employees in certain international markets, as well as managing staffing and operations due
to increased complexity, distance, time zones, language and cultural differences; |
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difficulties
in enforcing agreements, judgments, and arbitration awards in various legal systems; and |
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inability
to obtain, maintain or enforce our intellectual property rights. |
We
believe that our overall success as a global business depends on our ability to succeed in different legal, regulatory, economic, social,
and political situations and conditions. We may not be able to develop and implement effective policies and strategies in each jurisdiction
where we may conduct operations or do business in the future.
We
may need to raise additional funds in the future. These funds may not be available on acceptable terms or at all, and, without additional
funds, we may not be able to maintain or expand our business.
Our
operations require substantial funds to finance our operating expenses, to expand our marketing, to develop product offerings and to
cover public company costs. Without these funds, we may not be able to meet our goals.
We
may seek additional funding through public or private financing or through collaborative arrangements with strategic partners. However,
you should also be aware that in the future:
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cannot be certain that additional capital will be available on favorable terms, if at all; |
| ● | any
available additional financing may not be adequate to meet our goals; and |
| ● | any
equity financing would result in dilution to stockholders. |
If
we cannot raise additional funds when needed, or on acceptable terms, we may not be able to effectively execute our growth strategy (including
entering the retail market), take advantage of future opportunities, or respond to competitive pressures or unanticipated requirements.
In addition, we may be required to scale back or discontinue expansion plans, or obtain funds through strategic alliances that may require
us to relinquish certain rights.
Our
quarterly results may fluctuate because of many factors and, as a result, investors should not rely on quarterly operating results as
indicative of future results.
Fluctuations
in operating results or the failure of operating results to meet the expectations of public market analysts and investors may negatively
impact the value of our securities. Quarterly operating results may fluctuate in the future due to a variety of factors that could affect
revenues or expenses in any particular quarter. Fluctuations in quarterly operating results could cause the value of our securities to
decline. Investors should not rely on quarter-to-quarter comparisons of results of operations as an indication of future performance.
As a result of the factors listed below, it is possible that in future periods the operation results may be below the expectations of
public market analysts and investors. This could cause the market price of our securities to decline. Factors that may affect our quarterly
results include:
| ● | vulnerability
of our business to a general economic downturn; |
| ● | seasonality
of our business; and |
| ● | changes
in the laws that affect our operations. |
We
may not maintain sufficient insurance coverage for the risks associated with our business operations. As a result, we may incur uninsured
losses.
Except
for property, accident and automobile insurance, we do not have other insurance such as business liability or disruption insurance coverage
for our operations. As a result, we may incur uninsured liabilities and losses as a result f the conduct of our business. There can be
no guarantee that we will be able to obtain additional insurance coverage in the future, and even if we are able to obtain additional
coverage, we may not carry sufficient insurance coverage to satisfy potential claims. Should uninsured losses occur, any purchasers of
our common stock could lose their investment.
We
are an emerging growth company within the meaning of the JOBS Act and will take advantage of certain exemptions from various reporting
requirements, which may make our ordinary shares less attractive to investors.
We
are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 effective on April 5, 2012,
or the JOBS Act, and we may take advantage of certain exemptions from various requirements that are applicable to other public companies
that are not emerging growth companies. Most of such requirements relate to disclosures that we would only be required to make if we
cease to be a foreign private issuer in the future, including exemptions from the requirements of holding a nonbinding advisory vote
on executive compensation and shareholder approval of any golden parachute payments not previously approved. Nevertheless, as a foreign
private issuer that is an emerging growth company, we will not be required to comply with the auditor attestation requirements of Section
404(b) of the Sarbanes-Oxley Act for up to five fiscal years after the date of this offering. We are also only required to report two
years of financial results and selected financial data as an emerging growth company, compared to three and five years, respectively,
for comparable data reported by other public companies. We may take advantage of these exemptions as long as we remain an emerging growth
company, which could be for up to five years, although circumstances could cause us to lose that status earlier, including if our total
annual gross revenues reach $1.07 billion, if the aggregate market value of our ordinary shares held by non-affiliates exceeds $700 million
or if we issue more than $1.0 billion in non-convertible debt over a three year period. We cannot predict if investors will find our
ordinary shares less attractive because we may rely on the above emerging growth company exemptions. If some investors find our ordinary
shares less attractive as a result, there may be a less active trading market for our ordinary shares and the price of our ordinary shares
may be more volatile.
If
we fail to maintain effective internal controls over financial reporting, the price of our common stock may be adversely affected.
We
are required to establish and maintain appropriate internal controls over financial reporting. Failure to establish those controls, or
any failure of those controls once established, could adversely impact our public disclosures regarding our business, financial condition
or results of operations. Any failure of these controls could also prevent us from maintaining accurate accounting records and discovering
accounting errors and financial fraud.
In
addition, management’s assessment of internal controls over financial reporting may identify weaknesses and conditions that need
to be addressed or other matters that may raise concerns for investors. Any actual or perceived weaknesses and conditions that need to
be addressed in our internal control over financial reporting, disclosure of management’s assessment of our internal controls over
financial reporting, or disclosure of our public accounting firm’s attestation to or report on management’s assessment of
our internal controls over financial reporting may have an adverse impact on the price of our common stock.
Compliance
with changing regulation of corporate governance and public disclosure will result in additional expenses.
Changing
laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002 and
related Commission regulations, have created uncertainty for public companies and significantly increased the costs and risks associated
with accessing the public markets and public reporting. Our management team will need to invest significant management time and financial
resources to comply with both existing and evolving standards for public companies, which will lead to increased general and administrative
expenses and a diversion of management time and attention from revenue generating activities to compliance activities.
Our
common stock may be considered a “penny stock,” and thereby be subject to additional sale and trading regulations that may
make it more difficult to sell.
Our
common stock, which is currently quoted for trading on OTC BB, may be considered to be a “penny stock” if it does not qualify
for one of the exemptions from the definition of “penny stock” under Section 3a51-1 of the Securities Exchange Act for 1934,
as amended (the “Exchange Act”). Our common stock may be a “penny stock” if it meets one or more of the following
conditions: (i) the stock trades at a price less than $5.00 per share; (ii) it is NOT traded on a “recognized” national exchange;
(iii) it is NOT quoted on the NASDAQ Capital Market, or even if so, has a price less than $5.00 per share; or (iv) is issued by a company
that has been in business less than three years with net tangible assets less than $5 million.
The
principal result or effect of being designated a “penny stock” is that securities broker-dealers participating in sales of
our common stock will be subject to the “penny stock” regulations set forth in Rules 15-2 through 15g-9 promulgated under
the Exchange Act. For example, Rule 15g-2 requires broker-dealers dealing in penny stocks to provide potential investors with a document
disclosing the risks of penny stocks and to obtain a manually signed and dated written receipt of the document at least two business
days before effecting any transaction in a penny stock for the investor’s account. Moreover, Rule 15g-9 requires broker-dealers
in penny stocks to approve the account of any investor for transactions in such stocks before selling any penny stock to that investor.
This procedure requires the broker-dealer to (i) obtain from the investor information concerning his or her financial situation, investment
experience and investment objectives; (ii) reasonably determine, based on that information, that transactions in penny stocks are suitable
for the investor and that the investor has sufficient knowledge and experience as to be reasonably capable of evaluating the risks of
penny stock transactions; (iii) provide the investor with a written statement setting forth the basis on which the broker-dealer made
the determination in (ii) above; and (iv) receive a signed and dated copy of such statement from the investor, confirming that it accurately
reflects the investor’s financial situation, investment experience and investment objectives. Compliance with these requirements
may make it more difficult and time consuming for holders of our common stock to resell their shares to third parties or to otherwise
dispose of them in the market or otherwise.
We
do not foresee paying cash dividends in the foreseeable future and, as a result, our investors’ sole source of gain, if any, will
depend on capital appreciation, if any.
We
do not plan to declare or pay any cash dividends on our shares of common stock in the foreseeable future and currently intend to retain
any future earnings for funding growth. As a result, investors should not rely on an investment in our securities if they require the
investment to produce dividend income. Capital appreciation, if any, of our shares may be investors’ sole source of gain for the
foreseeable future. Moreover, investors may not be able to resell their shares of our company at or above the price they paid for them.
Item
2.02 Results of Operations and Financial Condition.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The
following is a discussion of the financial condition and results of operations of Enteractive Media, Inc. This management’s discussion
and analysis of financial condition and results of operations should be read in conjunction with our financial statements and the related
notes, and the other financial information included in this current report. All amounts set forth below are expressed in Canadian Dollars.
Forward-Looking
Statements
We
make forward-looking statements in this Form 8-K that are subject to risks and uncertainties. These forward-looking statements include
information about possible or assumed future results of our business, financial condition, results of operations, liquidity, plans and
objectives. In some cases, you can identify forward-looking statements by terminology such as “believe,” “may,”
“estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,”
“expect,” “predict,” “potential,” “could,” “will,” “would,” “ongoing,”
“future” or the negative of these terms or other similar expressions. Forward-looking statements include, but are not limited
to, such matters as:
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our ability to compete
in our industry; |
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our expectations regarding
our financial performance, including our revenue, costs and EBITDA; |
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the sufficiency of our
cash, cash equivalents, and investments to meet our liquidity needs; |
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our
ability to mitigate and address unanticipated performance problems on our websites, or platforms; |
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our
ability to attract, retain, and maintain good relations with our customers; |
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our
ability to anticipate market needs or develop new or enhanced offerings and services to meet those needs; |
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our
ability to stay in compliance with laws and regulations, including tax laws, that currently apply or may become applicable to our
business both in the U.S. and internationally and our expectations regarding various laws and restrictions that relate to our business; |
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our
ability to anticipate the effects of existing and developing laws and regulations, including with respect to taxation, and privacy
and data protection that relate to our business; |
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our
ability to effectively manage our growth and maintain our corporate culture; |
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our
ability to identify, recruit, and retain skilled personnel, including key members of senior management; |
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our
ability to successfully identify, manage, consummate and integrate any existing and potential acquisitions; |
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our
ability to maintain, protect, and enhance our intellectual property; |
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our
ability to manage the increased expenses associated and compliance demands with being a public company; and |
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other
factors detailed herein under “Risk Factors.” |
The
preceding list is not intended to be an exhaustive list of all of our forward-looking statements. The forward-looking statements are
based on our beliefs, assumptions and expectations of future performance, taking into account the information currently available to
us. These statements are only predictions based upon our current expectations and projections about future events. There are important
factors that could cause our actual results, levels of activity, performance or achievements to differ materially from the results, levels
of activity, performance or achievements expressed or implied by the forward-looking statements. In particular, you should consider the
risks provided under “Risk Factors” in this Form 8-K.
You
should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected
in the forward-looking statements are reasonable, we cannot guarantee that future results, levels of activity, performance and events
and circumstances reflected in the forward-looking statements will be achieved or will occur. Each forward-looking statement speaks only
as of the date of the particular statement. Except as required by law, we undertake no obligation to update publicly any forward-looking
statements for any reason after the date of this Form 8-K, to conform these statements to actual results or to changes in our expectations.
Overview
Enteractive
Media Inc. (the “Company”) was incorporated under the Canada Business Corporations Act on January 22, 2013. The Company is
an international media, event and entertainment company. The Company has acquired a Category B digital specialty license from the Canadian
Radio-television and Telecommunications Commission (“CRTC”) for a television network branded PokerVision Network.
The
Company’s head office is located at 736 8th Ave. SW, Suite 510, Calgary, AB T2P 1H4.
Critical
Accounting Policies and Estimates
Management’s
discussion and analysis of results of operations and financial condition are based upon our consolidated financial statements. These
statements have been prepared in accordance with accounting principles generally accepted in the United States of America. These principles
require management to make certain estimates and assumptions that affect amounts reported and disclosed in the financial statements and
related notes. The most significant estimates and assumptions include valuation of inventories, provisions for income taxes, allowance
for doubtful accounts, and the recoverability of the long-lived assets. Actual results could differ from these estimates. Periodically,
we review all significant estimates and assumptions affecting the financial statements and record the effect of any necessary adjustments.
The
following critical accounting policies rely upon assumptions and estimates and were used in the preparation of our consolidated financial
statements:
Foreign
currency translation. Transactions denominated in foreign currencies are translated using the exchange rate in effect on the transaction
date. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange in effect at the statement
of financial position date. Non-monetary items are translated using the historical rate on the date of the transaction. Foreign exchange
gains and losses are included in profit or loss.
Revenue
Recognition. The Company, though its website and other platforms provides broadcasting services featuring poker tournaments,
eSports and gaming lifestyle. Revenue associated with the rendering of services is recognized by reference to the stage of completion
of the transaction at the end of the reporting period when the amount of revenue can be measured reliably, it is probable that the economic
benefits associated with the transaction will flow to the Company, the stage of completion of the transaction at the end of the reporting
period can be measured reliably and the costs incurred for the transaction and the costs to complete the transaction can be measured
reliably. When the outcome of a transaction involving the rendering of services cannot be estimated reliably, revenue is recognized only
to the extent of the expenses recognized that are recoverable.
Income
Taxes. Deferred tax assets and liabilities are recognized where the carrying amount of an asset or liability differs from its
tax base, except for taxable temporary differences arising on the initial recognition of goodwill and temporary differences arising on
the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction
affects neither accounting nor taxable profit or loss.
Recognition
of deferred tax assets for unused tax losses, tax credits and deductible temporary differences is restricted to those instances where
it is probable that future taxable profit will be available against which the deferred tax asset can be utilized. At the end of each
reporting year the Company reassesses unrecognized deferred tax assets. The Company recognizes a previously unrecognized deferred tax
asset to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.
Recently
Issued Accounting Pronouncements
From
time to time, new accounting pronouncements are issued by FASB that are adopted by the Company as of the specified effective date. If
not discussed, management believes that the impact of recently issued standards, which are not yet effective, will not have a material
impact on the Company’s financial statements upon adoption. No new pronouncements that would affect these financial statements
had been issued during or subsequent to the issuance of these financial statements.
Results
of Operations
Nine
Months Ended December 31, 2022 and 2021
Total
sales for the, for the nine months ended December 31, 2022 increased to $745, from zero for the nine months ended December 31, 2021.
Expenses
primarily consists of general office expenses,, consulting fees, royalties, marketing expenses, travelling expenses, bank fees and professional
fees including audit, accounting, legal and financial. Expenses for the nine months ended December 31, 2022 were $641,301, an increase
of $122,039 or 24%, from $519,262 for the same period in 2021. The increase in expenses was primarily due to increase of consulting expenses
related to developing our business.
Loss
before other income increased to $640,556 for the nine months ended December 31, 2022 from $519,262 for the nine months ended December
31, 2021, an increase of $121,294, or 23%.
Net
loss increased to $636,893 for the nine months ended December 31, 2022 from a net gain o $127,080 for the nine months ended December
31, 2021, an increase of $763,972. The increase was primarily a result of a large realized gain on marketable securities during the nine
months ended December 31, 2021.
Years
Ended March 31, 2022 and 2021
Total
sales for the year ended March 31, 2022 were $354, a decrease of $11,067, from total sales of $11,427 for the year ended March 31, 2021.
The decrease was primarily the result of a pivoting of our business plan during 2021.
Expenses
primarily consists of general office expenses,, consulting fees, royalties, marketing expenses, travelling expenses, bank fees and
professional fees including audit, accounting, legal and financial. Expenses for the year ended March 31, 2022 were $776,082, an
increase of $372,175 or 92%, from $ 403,907 for the same period in 2021. The increase in expenses was primarily due to
increase of consulting expenses related to developing our business.
Loss
before other income increased to $775,728 for the year ended March 31, 2022 from $392,480 for the year ended March 31, 2021, an increase
of $382,602, or 97%.
Net
loss decreased to $242,943 for the year ended March 31, 2022 from $319,351 for the year ended March 31, 2021, a decrease of $76,408,
or 24%. The decrease as a result of a large realized gain on marketable securities.
Liquidity
and Capital Resources
At
December 31, 2022, we had total current assets of $548,905 including cash of $9,687. We have historically financed our operations through
the borrowing of long-term or short-term loans and the sales of equity,
We
will require additional cash resources to fund our product development and marketing. Our ability to maintain sufficient liquidity depends
partially on our ability to achieve anticipated levels of revenue, while continuing to control costs. If we do not have sufficient available
cash, we would have to seek additional debt or equity financing through other external sources, which may not be available on acceptable
terms, or at all. Failure to maintain financing arrangements on acceptable terms would have a material adverse effect on our business,
results of operations and financial condition.
Off-Balance
Sheet Arrangements
We
have no material off-balance sheet transactions.