Business Acquisitions

6 Months Ended

Dec. 31, 2020

Business Combinations [Abstract]

Business Acquisitions

Note 3 – Business Acquisitions

Business acquisitions are accounted for under the purchase method of accounting in accordance with ASC 805. The results of operations of the acquired businesses since the date of acquisition are included in the unaudited condensed consolidated financial statements of the Company for the three and six months ended December 31, 2020. The total purchase consideration was allocated to the assets acquired and liabilities assumed at their preliminary estimated fair values as of the date of acquisition, as determined by management. The purchase price allocations are preliminary and a final determination of purchase accounting adjustments, which may be material, will be made upon the finalization of the Company’s integration activities, which are expected to be completed during the fiscal year ending 2021. The excess of the purchase price over the amounts allocated to assets acquired and liabilities assumed has been recorded as goodwill. The value of the goodwill from the acquisitions described below can be attributed to a number of business factors including, but not limited to, cost synergies expected to be realized and a trained technical workforce.

Acquisition of LHE Enterprises Limited.

On July 7, 2020, the Company entered into the “Argyll Purchase Agreement” between the Company, LHE, and AHG, whereby upon closing on July 31, 2020 the Company acquired all of the outstanding capital stock of LHE and its subsidiaries, (i) Argyll Entertainment AG, (ii) Nevada Holdings Limited and (iii) Argyll Productions Limited. Argyll Entertainment AG is licensed and regulated by the UK Gambling Commission and the Irish Revenue Commissioners to operate online sportsbook and casino sites in the UK and Ireland, respectively. Argyll has a flagship brand, www.SportNation.bet, as well as two white label brands, www.RedZone.bet and www.uk.Fansbet.com, with over 300,000 registered players at the end of calendar year 2020.

On July 31, 2020, the Company consummated the closing of the Argyll Purchase Agreement. As consideration for the Acquired Companies, the Company (i) paid AHG $1,250,000 in cash (the “Cash Purchase Price”) of which $500,000 was previously paid;  (ii) issued to AHG 650,000 shares of common stock of the Company (the “Consideration Shares”); and (iii) issued to AHG warrants to purchase up to 1,000,000 shares of common stock of the Company at an exercise price of $8.00 per share (the “Consideration Warrants” together with the Cash Purchase Price and the Consideration Shares the “Purchase Price”).  The Consideration Warrants are exercisable for a term of three (3) years.

The purchase price and purchase price allocation are preliminary pending the final determination of fair value for warrants issued as well as a final valuation of assets acquired and liabilities assumed. The preliminary purchase price and purchase price allocation as of the acquisition completion date follows:

Purchase price:
Cash	$	1,250,000
Value of common stock issued		3,802,500
Value of warrant issued		5,488,171
Total purchase price consideration	$	10,540,671
Allocation of the purchase price:
Current assets	$	833,769
Long-term assets		1,385,274
Player relationships		2,460,798
Betting platform software		2,698,968
Tradenames		839,189
Gaming licenses		144,000
Goodwill		6,358,592
Less:
Current liabilities assumed		(3,721,573	)
Non-current liabilities assumed		(458,346	)
Total allocation of purchase price consideration	$	10,540,671

The estimated useful life of the identifiable intangible assets is five years. The goodwill is not amortizable for tax purposes. Transaction related costs for the Argyll Purchase Agreement were $77,113 and included in general and administrative expenses on the unaudited condensed consolidated statements of operations.

Pro Forma Operating Results

The following table provides unaudited pro forma results for the three months ended December 31, 2019, as if the Argyll Purchase Agreement consummated on July 1, 2019. The pro forma results of operations for these three months ended were prepared for comparative purposes only and do not purport to be indicative of what would have occurred had the Argyll Purchase Agreement been made as of July 1, 2019 or results that may occur in the future.

Net revenue	$	2,944,522
Net loss	$	(4,089,348	)
Net loss per common share, basic and diluted	$	(0.62	)

The following table provides unaudited pro forma results for the six months ended December 31, 2020 and 2019, as if the Argyll Purchase Agreement consummated on July 1, 2019. The pro forma results of operations for these six month periods ended were prepared for comparative purposes only and do not purport to be indicative of what would have occurred had the Argyll Purchase Agreement been made as of July 1, 2019 or results that may occur in the future.

	Pro Forma (Unaudited) for the six months ended December 31,
	2020			2019
Net revenue	$	2,725,840		$	5,889,043
Net loss	$	(9,985,552	)	$	(7,303,115	)
Net loss per common share, basic and diluted	$	(0.76	)	$	(1.12	)

Acquisition of Flip

On September 3, 2020 the Company, entered into an Assignment of Intellectual Property Rights Agreement (the “IP Assignment Agreement”), by and among the Company, AHG and Flip Sports Limited (“Flip”) whereby the Company acquired all intellectual property rights in connection with the software developed by Flip and owned by AHG related to AHG’s online games and rewards platform and all other online software (the “Software”). This includes all works in relation to the same, including, but not limited to the source code of the Software and all technical and functional information and documentation required to operate the Software, all artwork, content and materials used in connection with the Software and any other works in respect of which AHG is the legal and beneficial owner and which are being used in connection with the Software (the “Works” together with the intellectual property rights in the Software the “Assigned Intellectual Property”).

As consideration for the Assigned Intellectual Property, the Company agreed to pay AHG an aggregate of $1,100,000 (the “Flip Purchase Price”) payable as follows: (a) $100,000 in cash on the Effective Date (“Cash Consideration”); and (b) that certain number of shares the Company’s restricted common stock, equal to $1,000,000 (the “Share Consideration”) at a price per share equal to the 30-day weighted average of the Company’s common stock immediately prior to the effective date, September 3, 2020, in accordance with the following payment schedule (i) that certain number of shares equal to $500,000 issued to AHG on the Effective Date (“Closing Shares”); and (ii) that certain number of shares equal to $500,000 of restricted common stock (the “Post Closing Shares”) issued to AHG on the sixth (6) month anniversary of the Effective Date (“Final Payment Date”), subject to the continued employment of certain key employees of Flip as identified in the IP Assignment Agreement (the “Key Employees”). The cash equivalent amount of the Post Closing Shares shall be reduced by $100,000 per Key Employee no longer with the Company on the Final Payment Date. On September 14, 2020, the Company issued 93,808 shares in accordance with the agreement.

The preliminary purchase price allocation of $1,100,000 as of the acquisition completion date of September 3, 2020 is as follows:

Purchase price:
Cash	$	100,000
Value of common stock issued		500,000
Value of contingent consideration		500,000
Total purchase price consideration	$	1,100,000
Allocation of the purchase price:
Rewards platform software	$	550,000
Goodwill		550,000
Total allocation of purchase price consideration	$	1,100,000

The unaudited pro forma financial results for Flip are immaterial for the three and six months ending December 31, 2020 and 2019. The estimated useful life of the identifiable intangible assets is five years. The goodwill is amortizable for tax purposes. Transaction related costs for the Flip acquisition were immaterial.