Esports Entertainment Group (EEG) has entered into a share purchase agreement to sell its Bethard business for total consideration of €9.5m.
Terms of the agreement
Bethard is an operator of online casino and sportsbook brands licensed in both Malta and Sweden.
The total purchase consideration was determined to be around €9.5m, with €1.65m payable to EEG in cash upon closing.
A further €6.5m is attributed to EEG’s release from payment of its contingent consideration liability relating to its acquisition of Bethard in 2021.
EEG acquired the business from parent company Gameday Group for €16m in cash, plus consideration equal to 12% of the brand’s NGR for the following two years.
Now, Bethard’s buyer will also assume liabilities of around €1.2m, while the terms of the sale allow for a cash holdback of €150,000 which may be retained by the buyer should liabilities exceed the amounts agreed upon in the purchase agreement.
Esports Entertainment Group CEO Alex Igelman: “I am extremely encouraged and pleased with the speed and efficiency in which senior management effectuated these important actions.”
The sale is expected to close during the two-week period following the signing of the purchase agreement on 14 February.
As a further condition to the sale, EEG has entered into an amendment and waiver agreement that requires it to deposit 50% of the proceeds into a bank account in favour of the lender which provided it with a $16.7m senior convertible note last February.
As a result of the amendment, EEG must now also deposit 50% of the proceeds of any future sale of assets, or offer or sale of debt or equity, into an account in favour of the lender.
All proceeds of any additional indebtedness incurred into the future must also be transferred into such an account.
In other news
The sale of Bethard follows on from a previous announcement that EEG would close its UK-licensed Argyll Entertainment business in November last year.
With the sale of Bethard underway and Argyll now closed, the business plans to focus on its Lucky Dino iGaming brands that operate on its proprietary platform.
In addition to the sale of Bethard, EEG also closed the sale of its Spanish gambling licence in January, resulting in proceeds to the company of €2.1m, of which 50% will be deposited in a bank account in favour of its lender.
It also terminated its lease at an idle property in January, eliminating total lease liability over the lease term of $800,000.
These changes to the business’ structure have helped EEG reduce its debt from $32.2m as of 30 September 2022 to $15.5m as of 16 February 2023.
Last week, Kindred Group director of sportsbook Andreas Reimblad revealed on Twitter that Bethard was undergoing maintenance as it switched sportsbook providers from DraftKings B2B (SBTech) to BetConstruct.
BC? 😳 pic.twitter.com/ZIwfAZqfB6
— Andreas Reimblad (@Reimblad) February 17, 2023
He shared a message from Bethard which appeared to have been sent to customer accounts.
“I am very pleased at the work that is being undertaken to reduce debt and focus on our core iGaming and esports assets,” said Esports Entertainment Group CEO Alex Igelman.
“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.”
Igelman replaced former CEO Grant Johnson – who also acted as the firm’s chairman – in January, while industry veteran Jan Jones Blackhurst took up the head role on the company’s board of directors.
Johnson subsequently revealed plans to sue the business over an alleged breach of contract relating to his removal.
Igelman is a gambling industry lawyer and consultant with more than 25 years’ experience in the sector. He has worked in the online sector since the mid-1990s and has also spent several years in the esports industry.
He is also the MD and founder of Esports Capital Corp (ECC), a boutique advisory firm in the esports gambling sector.
Esports Entertainment Group (EEG) is set to drastically streamline its business model after posting a net loss of $63.6m during the first three months of 2022.
The faltering business reiterated “that certain factors raise substantial doubt about its ability to continue as a going concern for at least one year,” after failing to maintain compliance with certain debt covenants relating to a senior convertible note.
In its evaluation of going concern, EEG said it has also considered its historical losses and negative cash flows from operations. As of 31 March 2022, the business had $59.2m in net current liabilities and just $9.4m of available cash on hand. As of 20 May, EEG’s available cash on hand dropped even further, to $5.6m.
Esports Entertainment Group: “The company believes that its current level of cash and cash equivalents are not sufficient to fund its operations and obligations without additional financing.”
“The company believes that its current level of cash and cash equivalents are not sufficient to fund its operations and obligations without additional financing,” EEG said in its latest SEC filing.
As a result, the company will make significant changes to its business model, which currently sees it operate seven distinct brands across the iGaming, sports betting and esports ecosystems.
“Given our lack of liquidity, we have been unable to fully monetise our esports assets – including Helix, ggCircuit and EGL” explained EEG CEO Grant Johnson.
“As a result, we are taking a $38.6m impairment charge in the quarter across these three businesses. We do not see a path to attractive profitability in the Helix business given its significant overhead and ongoing capex and are currently working to divest our two existing centres. GgCircuit and EGL are two assets which we have not effectively been able to monetise due to liquidity constraints.”
Johnson added that EEG is now in the final stages of “dramatically simplifying” its esports offering, focusing on providing SaaS-based technology under its ggCircuit brand as well as in-person esports tournaments under its EGL brands and its peer-to-peer wagering platform.
In addition to implementing this asset-light strategy, EEG said it is working to cut costs across the rest of its brand portfolio by reducing marketing spend, removing duplicated functions between brands and de-emphasising its non-core assets.
Johnson said the firm has also identified further avenues to increase cost savings, which it will continue to pursue in the coming months.
All that considered, EEG said it has set a goal to achieve break-even on an annualised basis by early fiscal 2023, although it has also reduced its full-year revenue expectations for 2021-22 from $70m-$75m to $55m-$60m.
Revenue for the latest quarter (Q3 in EEG’s 2021-22 financial year) came to $15.7m, a dramatic increase from the prior comparative period’s $5.4m, driven by EEG’s acquired brands including Argyll Entertainment, Lucky Dino and Bethard.
Costs also increased significantly, however, leading the business to post a $63.6m net loss for the quarter – up from a net loss of just $12.4m in the prior corresponding period.
Those figures bring EEG’s year-to-date revenue for the first three quarters of its financial year to $46.6m and its net loss total to $98.5m.
The company’s share price has taken a monumental fall over the past 12 months, from a 52-week high of $13.74 to just $0.44 at the time of writing.