ESE Entertainment Announces 2021 Audited Financial Results
02/23/2022 - 10:41 PM
Fiscal 2021 record revenue of $11.38 million , year-over-year increase of 2818% Q4 2021 record revenue of $6.24 million (unaudited), representing year-over-year increase of 3018% Financial results do not include recently completed acquisitions of Frenzy and GameAddik (subsequent events) VANCOUVER, British Columbia, Feb. 23, 2022 (GLOBE NEWSWIRE) -- ESE Entertainment Inc. (“ESE ” or the “Company ”) (TSXV: ESE) (OTCQB: ENTEF), a gaming and esports company that provides a range of services to leading video game developers and publishers, is pleased to announce that is has filed its audited annual consolidated financial statements (the “Financial Statements ”) and related Management Discussion and Analysis (the “MD&A ”) for the 12 months ended October 31, 2021 (“Fiscal 2021 ”) the highlights of which are presented in this news release. The Financial Statements and MD&A are available on www.sedar.com and on the Company’s website.
Financial Highlights:
Revenue of $6.24 million for the three months ended October 31, 2021 (unaudited), representing a 3018% increase from revenue for the three months ended October 31, 2020 of $0.20 million (unaudited). Annual consolidated revenue in Fiscal 2021 of $11.38 million , representing a 2818% increase from annual consolidated revenue for the 12 months ended October 31, 2020 (“Fiscal 2020 ”) of $0.39 million . Annual gross profit in Fiscal 2021 of $1.15 million , representing a 195% increase from annual gross profit in Fiscal 2020 of $0.39 million . Adjusted EBITDA¹ loss of $3.50 million in Fiscal 2021, compared to adjusted EBITDA loss of $2.04 million in Fiscal 2020. Total assets as at October 31, 2021 of $15.94 million , representing a 1793% increase from total assets as at October 31, 2020 of $0.84 million . ¹ Adjusted EBITDA is a non-IFRS measure. Refer to “Non-IFRS Measures” at the end of this press release. Cash balance as at October 31, 2021 of $4.83 million compared to $0.55 million as at October 31, 2020. “We are proud to publish a record year, with quadruple-digit revenue growth and financial performance that highlights the growth our company is experiencing. We are entering 2022 with momentum,” said Konrad Wasiela, CEO of ESE. “ESE generated record quarterly revenues in the fourth quarter of 2021, led by record organic growth in existing assets, our ability to acquire and integrate assets, our ability to attract and retain clients for expanded contracts, and ultimately our ability to deliver 360 esports and gaming technology and services for gaming publishers and developers. With the subsequent events of acquiring Frenzy and GameAddik, we anticipate strong continued quarterly growth.”
“Q4 2021 revenue growth was strong at 3018% year-over-year, but it is important to note these figures do not include the recently completed acquisitions of Frenzy and GameAddik. We anticipate continued growth from organic business plus these new key assets. As we move into 2022, we have an increased focus on revenue and gross profit margin expansion,” said Rob Kang, ESE’s Chief Financial Officer . “Increased revenues and higher gross margins are key to reaching our goals, and we believe our investments in operations will drive performance in the quarters ahead.”
Q4 2021 Operational Highlights:
Completion of the acquisition of Auto Simulation Ltd. DBA Digital Motorsports, an Ireland-based provider of advanced simulation racing infrastructure, technology and support. Entry into a binding share purchase agreement to acquire Frenzy sp. z.o.o., a European esports media and technology company (“Frenzy ”). Launch of a set of non-fungible tokens (NFTs) in collaboration with its esports team, K1CK esports, and Bitcoin Vault. Subsequent Events:
On November 12, 2021, the Company completed the acquisition of 100% of the issued and outstanding shares of Frenzy, a European esports media and technology company. On February 14, 2022, the Company completed the acquisition of 100% of the issued and outstanding shares of 9327-7358 Quebec Inc. DBA GameAddik (“GameAddik ”), a Canadian technology company focused on gaming and esports. The following table presents a reconciliation of Net income (loss) to Adjusted EBITDA for Fiscal 2021 and Fiscal 2020:
Year ended Year ended (In Canadian dollars) $ $ Net loss for the year (18,663,912) (3,802,333) Provision for income taxes 614 - Depreciation 38,974 - Commissions 54,861 - Finder's fees and stamp duty for acquisitions 1,669,923 - Share-based payments 9,630,008 150,651 Interest 11,459 - Impairment of K1CK assets 207,500 - Impairment of WPG assets 3,548,313 - Listing Cost - 1,600,287 Foreign exchange (gain) loss 2,142 14,150 Adjusted EBITDA¹ (3,500,118 ) (2,037,245 )
¹ Adjusted EBITDA is a non-IFRS measure. Refer to “Non-IFRS Measures” at the end of this press release.
The financial and operating results included in this news release are based on the audited results which were released on February 23, 2022. It is only in the context of the fulsome information and disclosures contained in the Financial Statements and MD&A that an investor can properly analyze this information. The Financial Statements and MD&A will be published under the Company’s profile on SEDAR at www.sedar.com.
All amounts are in Canadian dollars.
ESE Entertainment Inc.
Konrad Wasiela
About ESE Entertainment Inc. www.esegaming.com
CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATION
This news release contains certain statements that may constitute forward-looking information under applicable securities laws. All statements, other than those of historical fact, which address activities, events, outcomes, results, developments, performance or achievements that ESE anticipates or expects may or will occur in the future (in whole or in part) should be considered forward-looking information. Such information may involve, but is not limited to, statements with respect to anticipated revenue growth, financial results, and margin expansion and the drivers thereof. Often, but not always, forward-looking information can be identified by the use of words such as "plans", "expects", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates", or "believes" or variations (including negative variations) of such words and phrases, or statements formed in the future tense or indicating that certain actions, events or results "may", "could", "would", "might" or "will" (or other variations of the forgoing) be taken, occur, be achieved, or come to pass. Forward-looking information is based on currently available competitive, financial and economic data and operating plans, strategies or beliefs as of the date of this news release, but involve known and unknown risks, uncertainties, assumptions and other factors that may cause the actual results, performance or achievements of ESE to be materially different from any future results, performance or achievements expressed or implied by the forward-looking information. Such factors may be based on information currently available to ESE, including information obtained from third-party industry analysts and other third-party sources, and are based on management's current expectations or beliefs regarding future growth, results of operations, future capital (including the amount, nature and sources of funding thereof) and expenditures. Any and all forward-looking information contained in this press release is expressly qualified by this cautionary statement. Trading in the securities of ESE should be considered highly speculative.
This press release contains future-oriented financial information and financial outlook information (collectively, "FOFI ") about ESE’s prospective results of operations, revenues and margins and components thereof, all of which are subject to the same assumptions, risk factors, limitations, and qualifications as set forth in the above paragraph. FOFI contained in this document was approved by management as of the date of this document and was provided for the purpose of providing further information about ESE’s future business operations. ESE disclaims any intention or obligation to update or revise any FOFI contained in this document, whether as a result of new information, future events or otherwise, unless required pursuant to applicable law. Readers are cautioned that the FOFI contained in this document should not be used for purposes other than for which it is disclosed herein.
NON-IFRS MEASURES
This press release includes references to adjusted EBITDA. Adjusted EBITDA is a non-IFRS financial measure and is defined by the Company as net income or loss before income taxes, depreciation, commissions, finder's fees and stamp duty for acquisitions, share-based payments, interest, impairment of assets, listing costs, and foreign exchange gain or loss. We believe that adjusted EBITDA is a useful measure of financial performance because it provides an indication of the Company’s ability to capitalize on growth opportunities in a cost-effective manner, finance its ongoing operations and service its financial obligations.
This non-IFRS financial measure is not an earnings or cash flow measure recognized by IFRS and does not have a standardized meaning prescribed by IFRS. Our method of calculating such a financial measure may differ from the methods used by other issuers and, accordingly, our definition of this non-IFRS financial measure may not be comparable to similar measures presented by other issuers. Investors are cautioned that non-IFRS financial measures should not be construed as an alternative to net income determined in accordance with IFRS as indicators of our performance or to cash flows from operating activities as measures of liquidity and cash flows.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
For further information about ESE, please contact: investors@esegaming.com 647-492-1535
2021 2020 ASSETS Current assets Cash $ 4,825,072 $ 550,011 Receivables (Note 7) 844,148 262,596 Prepaid expense and deposits 448,616 29,486 Inventory 406,549 - 6,524,385 842,093 Property and equipment (Note 8) 346,995 - Deposit (Note 9) 311,219 - Unallocated purchase price (Note 6) 8,761,762 - Total assets $ 15,944,361 $ 842,093 LIABILITIES Current liabilities Accounts payable and accrued liabilities (Notes 10 and 16) $ 1,000,785 $ 263,425 Current portion of lease liabilities (Note 11) 71,574 - Deferred revenue (Note 17) 234,390 115,040 1,306,749 378,465 Lease liabilities (Note 11) 126,551 - 1,433,300 378,465 EQUITY Share capital (Note 13) 28,707,147 4,088,263 Share subscriptions received 1,050 - Commitment to issue shares (Note 6, 13 and 16) 4,755,754 50,000 Contributed surplus 2,388,107 305,416 Accumulated other comprehensive (loss) income (107,129) 5,983 Deficit (21,202,268) (3,986,034) Equity attributable to shareholders 14,542,661 463,628 Non-controlling interest (31,600) - Total equity 14,511,061 463,628 Total liabilities and equity $ 15,944,361 $ 842,093
2021 2020 Revenue $ 11,384,731 $ 390,171 Cost of sales 10,234,688 - Gross Profit 1,150,043 390,171 Expenses Advertising and event planning 1,101,358 282,192 Depreciation (Note 8) 38,974 - Bank charges 26,327 - Consulting fees (Note 16) 2,011,212 1,394,191 Commissions 54,861 - Finder’s fees and stamp duty for acquisitions (Note 5, 6 and 13) 1,669,923 - Office and miscellaneous 177,107 115,589 Professional fees (Note 16) 737,218 286,660 Rent 30,500 18,192 Share-based payments (Notes 13 and 16) 9,630,008 150,651 Transfer agent and filing fees 193,835 42,644 Travel and conferences 67,002 48,230 Wages and benefits 326,487 245,315 Website hosting and development 8,677 13,048 16,073,489 2,596,712 Loss before other items (14,923,446) (2,206,541) Other items: Other income 29,562 18,645 Interest (11,459) - Impairment of K1CK assets (Note 18) (207,500) - Impairment of WPG assets (Note 5) (3,548,313) - Listing cost (Note 4) - (1,600,287) Foreign exchange loss (2,142) (14,150) (3,739,852) (1,595,792) Net loss for the year before taxes (18,663,298) (3,802,333) Provision for income taxes (Note 20) (614) - Net loss for the year (18,663,912) (3,802,333) Other comprehensive income Gain (loss) on translation of foreign operations (113,112) 6,779 Total comprehensive loss for the year $ (18,777,024) $ (3,795,554) Net income (loss) attributable to: Shareholders of the company $ (17,216,234) $ (3,802,333) Non-controlling interest (1,447,678) - Net loss for the year $ (18,663,912) $ (3,802,333) Total comprehensive income (loss) attributable to: Shareholders of the company $ (17,329,346) $ (3,795,554) Non-controlling interest (1,447,678) - Total comprehensive loss for the year $ (18,777,024) $ (3,795,554) Basic and diluted loss per common share $ (0.38) $ (0.14) Weighted average number of common shares outstanding 45,500,947 26,785,387
2021 2020 CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES Loss for the year $ (18,663,912) $ (3,802,333) Items not affecting cash: Accretion on lease liabilities 3,785 - Consulting fees paid by shares - 50,000 Depreciation 38,974 - Finder’s fees for acquisitions paid by shares 1,475,956 - Impairment of assets 3,755,813 - Listing cost - 1,600,287 Provision for income taxes 614 - Share-based payments 9,630,008 150,651 Change in non-cash working capital items: Receivables (1,503) (242,944) Inventory (187,660) - Prepaid expenses and deposits (59,222) (29,246) Deferred revenue (33,530) 115,040 Accounts payable and accrued liabilities, income tax payable and shareholder loans (449,556) 191,135 Net cash used in operating activities (4,490,233) (1,967,410) INVESTING ACTIVITIES Cash paid to acquire WPG (128,019) - Cash paid to acquire Digital Motorsports (1,681,250) - Cash acquired on acquisition of subsidiaries 208,584 77,873 Funds to WPG prior to acquisition (290,000) - Cash paid to acquire K1CK assets (120,000) - Loan proceeds from Kepler before RTO - 25,830 Investment (311,219) Equipment (17,731) - Net cash (used in) provided by investing activities (2,339,635) 103,703 FINANCING ACTIVITIES Proceeds from loan payable - 20,000 Repayment of lease liabilities (23,953) - Repayment of loans and credit facilities (509,086) (20,000) Shares issued for cash 12,698,593 2,294,475 Share issue cost (963,628) (41,580) Share subscriptions received 1,050 - Net cash provided by financing activities 11,202,976 2,252,895 Foreign exchange effect on cash (98,047) 6,779 Change in cash for the year 4,275,061 395,967 Cash, beginning of year 550,011 154,044 Cash, end of year $ 4,825,072 $ 550,011 Cash paid for interest during the year $ - $ 1,600 Cash paid for income taxes during the year $ - $ -
