Annual report pursuant to Section 13 and 15(d)

3. Acquisition of subsidiaries

3. Acquisition of subsidiaries
12 Months Ended
Dec. 31, 2021
Business Combination and Asset Acquisition [Abstract]  
3. Acquisition of subsidiaries

3. Acquisition of subsidiaries


On July 5, 2021, the Company entered into a Membership Purchase Agreement (the “Purchase Agreement”) to acquire 100% of Bookmakers Company US LLC, a Nevada limited liability company doing business as U.S. Bookmaking (“USB”), from its members (the “Sellers”). On July 15, 2021 the Company consummated the acquisition of USB and in terms of the Purchase Agreement the Company acquired 100% of USB, from its members (the “Sellers”) and USB became a wholly owned subsidiary of the Company.


USB is a provider of sports wagering services such as design and consulting, turn-key sports wagering solutions, and risk management.


Pursuant to the terms of the Purchase Agreement, the consideration paid for all of the equity of USB was $6 million in cash plus the issuance of 1,265,823 shares of the Company’s common stock with a market value of $4,544,304 on the date of acquisition.


The Sellers will have an opportunity to receive up to an additional $38,000,000 (undiscounted) plus a potential undiscounted premium of 10% (or $3,800,000) based upon achievement of stated adjusted cumulative EBITDA milestones during the next four years, payable 50% in cash and 50% in the Company’s stock at a price equal to volume weighted average price of the company’s common stock for the 90 consecutive trading days preceding January 1 of each subsequent fiscal year for the duration of the earnout period ending December 31, 2025, subject to obtaining shareholder approval, if the aggregate number of shares to be issued pursuant to the Purchase Agreement exceeds 4,401,020 and with a cap of 5,065,000 on the aggregate number of shares to be issued. Any excess not approved by shareholders or exceeding the cap will be paid in cash. The fair value of the contingent purchase consideration of $24,716,957 was estimated by applying the income approach, which uses significant assumptions (Level 3 assumptions) which are not readily available in the market.


The goodwill of $27,024,383 arising on consolidation consists largely of the reputation and knowledge of USB in the sports betting market in the US markets which should facilitate the Company’s penetration into the U.S. market.


None of the goodwill is expected to be deducted for income tax purposes.

In terms of the agreement, the purchase price was allocated to the fair market value of tangible and intangible assets acquired and liabilities assumed as follows:


Cash   $ 6,000,000  

1,265,823 shares of common stock at fair market value

Contingent purchase consideration   24,716,957  
Total purchase consideration   $ 35,261,261  
Recognized amounts of identifiable assets acquired and liabilities assumed        
Cash     26,161  
Other Current assets   151,284  
Property and equipment     788  
Other non-current assets     4,000  
Tradenames/Trademarks     1,419,000  
Customer relationships     7,275,000  
Non-compete agreements     2,096,000  
Less: liabilities assumed        
Current liabilities assumed   (264,135 )
Non-current liabilities assumed     (205,320 )
Imputed Deferred taxation on identifiable intangible acquired     (2,265,900 )
    (2,735,355 )
Net identifiable assets acquired and liabilities assumed     8,236,878  
Goodwill     27,024,383  
Total purchase consideration   $ 35,261,261  



The amount of revenue and earnings included in the Company’s consolidated statement of operations and comprehensive income (loss) for the year ended December 31, 2021 and the revenue and earnings of the combined entity had the acquisition date been January 1, 2020.


 Proforma Revenue and Earnings   Revenue   Earnings
Actual from July 15, 2021 to December 31, 2021   $ 363,030     $ (398,279
2021 Supplemental pro forma from January 1, 2021 to December 31, 2021   $ 45,957,894     $ (15,887,232
2020 Supplemental pro forma from January 1, 2020 to December 31, 2020   $ 37,607,873     $ (11,491,873 )


The 2021 Supplemental pro forma information was adjusted to exclude $125,479 of non-recurring acquisition costs, in addition, the 2021 and 2020 supplemental pro forma information was adjusted to account for amortization of intangibles on acquisition of $579,519 and $1,070,067, respectively.