Goodwill and Intangible Assets

6 Months Ended

Dec. 31, 2022

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

Note 6 – Goodwill and Intangible Assets

A summary of the changes in the balance of goodwill by segment is as follows:

	EEG iGaming			EEG Games			Total
Goodwill, balance as of June 30, 2022		19,660,481			2,614,832			22,275,313
Impairment charges		(14,500,000	)		(1,635,000	)		(16,135,000	)
Foreign currency translation		443,801			-			443,801
Goodwill, balance as of December 31, 2022	$	5,604,282		$	979,832		$	6,584,114

During the three months ended December 31, 2022, the Company concluded that goodwill impairment indicators existed considering that the EEG iGaming revenues had declined significantly from levels seen in the previous year and in the previous quarters. This and uncertainties caused by inflation and world stability were determined to be a triggering event and the long-lived assets of the Company were quantitatively tested for impairment.

The Company performed its interim impairment tests on its long-lived assets, including its definite-lived intangible assets using an undiscounted cash flow analysis to determine if the cash flows expected to be generated by the asset groups over the estimated remaining useful life of the primary assets were sufficient to recover the carrying value of the asset groups, which were determined to be at the business component level. Based on the circumstances described above as of December 31, 2022, the Company determined that all its asset groups we recoverable under the undiscounted cash flow recoverability test. There were no asset impairment charges for long-lived assets, including definite-lived intangible assets, for the three and six months ended December 31, 2022.

In accordance with ASC 350, for goodwill, the Company performed an interim goodwill impairment test, which compared the estimated fair value of each reporting unit to its respective carrying values. The estimated fair value of each reporting unit was derived primarily by utilizing a discounted cash flows analysis. The results of the interim impairment tests performed indicated that the carrying value of the iGaming and GGC reporting units exceeded their estimated fair values determined by the Company. Based on the results of the goodwill impairment testing procedures, the Company recognized goodwill impairments of $14,500,000 for the iGaming Malta reporting unit of the EEG iGaming segment, and goodwill of $1,635,000 for the GGC reporting unit, in the EEG Games segment, totaling $16,135,000 for the three and six months ended December 31, 2022 in asset impairment charges in the unaudited condensed consolidated statements of operations. There were no asset impairment charges for goodwill or long-lived assets, including definite-lived intangible assets, for the three and six months ended December 31, 2021.

The assumptions used in the cost and undiscounted and discounted cash flow analyses require significant judgment, including judgment about appropriate growth rates, and the amount and timing of expected future cash flows. The Company’s forecasted cash flows were based on the current assessment of the markets and were based on assumed growth rates expected as of the measurement date. The key assumptions used in the cash flows were revenue growth rates, operating expenses and gross margins and the discount rates in the discounted cash flows. The assumptions used consider the current early growth stage of the Company, the current investment levels projected. The industry markets are currently at volatile levels and future developments are difficult to predict. The Company believes that its procedures for estimating future cash flows for each reporting unit, asset group and intangible asset are reasonable and consistent with current market conditions as of the testing date. If the markets that impact the Company’s business continue to deteriorate, the Company could recognize further goodwill and long-lived asset impairment charges.

The table below reflects the adjusted gross carrying amounts for these intangible assets. The intangible amounts comprising the intangible asset balance are as follows:

	December 31, 2022							June 30, 2022
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Tradename	$	5,949,595	$	(893,348	)	$	5,056,247	$	5,835,512	$	(578,960	)	$	5,256,552
Developed technology and software		10,244,592		(3,061,301	)		7,183,291		10,109,366		(1,935,018	)		8,174,348
Gaming licenses		1,348,025		(1,129,676	)		218,349		1,317,567		(774,760	)		542,807
Player relationships		21,395,918		(7,013,592	)		14,382,326		20,920,029		(4,757,813	)		16,162,216
Internal-use software		225,847		(17,830	)		208,017		225,086		(14,520	)		210,566
Total	$	39,163,977	$	(12,115,745	)	$	27,048,230	$	38,407,560	$	(8,060,653	)	$	30,346,489

Amortization expense was $1,912,257 and $3,186,353 for the three months ended December 31, 2022 and 2021 and $3,752,562 and $6,291,691 for the six months ended December 31, 2022 and 2021, respectively. The amortization for EEG iGaming segment was $1,663,671 and $2,197,691, and for the EEG Games segment was $248,586 and $910,000, for the three months ended December 31, 2022 and 2021, respectively. The amortization for EEG iGaming segment was $3,255,411 and $4,471,691, and for the EEG Games segment was $497,151 and $1,820,000, for the six months ended December 31, 2022 and 2021, respectively.

The estimated future amortization related to definite-lived intangible assets is as follows:

Remainder of Fiscal 2023	$	3,799,449
Fiscal 2024		7,123,766
Fiscal 2025		7,123,766
Fiscal 2026		5,982,199
Fiscal 2027		676,955
Thereafter		2,342,095
Total	$	27,048,230