About Elys Game Technology

Elys BMG Group, Inc. (Elys), through its subsidiary, Multigioco Srl (Multigioco), provides business-to-consumer (B2C) gaming services in Italy. The company's operations are carried out via both land-based or online retail gaming licenses regulated by the Agenzia delle Dogane e dei Monopoli (ADM) that permits it to distribute leisure betting products, such as sports betting, and virtual sports betting products through both physical, land-based retail locations, as well as online through its licensed website www.newgioco.it or commercial webskins linked to its licensed website and through mobile devices. The company also provides bookmaking services in the U.S. market via its recently acquired subsidiary Bookmakers Company US, LLC (US Bookmaking) and Elys Gameboard Technologies, LLC (Gameboard) in certain regulated states where it offers business-to-business (B2B) bookmaking and platform services to its customers. The company began operations in Washington, D.C. through a Class B Managed Service Provider and Class B Operator license to operate a sportsbook within the Grand Central Restaurant and Sportsbook located in the Adams Morgan area of Washington, D.C. In October 2021, the company entered into an agreement with Ocean Casino Resort in Atlantic City and commenced operations in the state of New Jersey in March 2022. Additionally, the company provides B2B gaming technology through its Odissea Betriebsinformatik Beratung GmbH (Odissea) subsidiary, which owns and operates a betting software designed with a unique 'distributed model' architecture colloquially named Elys Game Board (the Platform). The Platform is a fully integrated 'omni-channel' framework that combines centralized technology for updating, servicing, and operations with multi-channel functionality to accept all forms of customer payment through the two distribution channels described above. The omni-channel software design is fully integrated with a built in player gaming account management system, built-in sports book and a virtual sports platform through its Virtual Generation subsidiary. The Platform also provides seamless application programming interface integration of third-party supplied products, such as online casino, poker, lottery, and horse racing and has the capability to incorporate e-sports and daily fantasy sports providers. Management implemented a growth strategy to expand B2B gaming technology operations in the U.S. and is considering further expansion in Canada and Latin American countries in the near future. The company's corporate group is based in North America, which includes an executive suite situated in Las Vegas, Nevada and a Canadian office in Toronto, Ontario through which it carries-out corporate activities, handle day-to-day reporting and the U.S. development planning, and through which various employees, independent contractors and vendors are engaged. The company's Platform is considered one of the newest betting software platforms in the world and its plan is to expand its Platform offering to new jurisdictions around the world on B2B basis, including expansion through Europe, South America, South Africa, and the developing market in the United States. The company also generates service revenue from royalties through authorized agents by providing its virtual sports products through its Virtual Generation subsidiary and generated service revenues through the provision of bookmaking and platform services through its recently acquired subsidiary, US Bookmaking. The company intends to leverage its partnerships in these countries to cross-sell its Platform services to expand the global distribution of its betting solutions. The Platform is certified by the ADM, the Malta Gaming Authority (MGA) in Malta and Gaming Laboratories International (GLI) and is owned by its Odissea subsidiary. The software architecture was developed and built on the latest Microsoft.Net Core framework, supporting both online customer gaming accounts, as well as land-based bet processing capability with multi-channel functionality accepting all forms of payment methods (i.e., cash, e-wallet, bank card and wire transfer, etc.) backed by a real-time customer relationship management (CRM) and business intelligence (BI) program for streamlined cross-platform marketing, as well as a synchronized financial accounting processes. Data is communicated directly to on-the-ground sales and marketing agents that manage and maintain both the company's online and land-based retail distribution. The Platform allows the company's independent B2B customers to rapidly and effectively model their gaming businesses and manage gaming accounts, monitor and analyze performance on an ongoing basis, share dashboards, and generate management reports all within a fully integrated solution. In addition, the company's clients can use the built-in business intelligence modules to evaluate actual performance and leverage insights from analytics to make informed, timely decisions to drive future business. The unique 'shop-client' architecture of the Platform is to the company's knowledge a one-of-a-kind solution in the leisure betting industry. Elys was built around the specific needs of leisure betting operators and proven through the company's existing Multigioco distribution throughout Italy. The company's intention is to focus its attention on developing and expanding the U.S. market. The company provides gaming services in the U.S. market on a B2B basis via its acquired subsidiary, US Bookmaking and its Gameboard subsidiary, in certain licensed states where it offers bookmaking and platform services to its customers and in 2021 expanded its operations is Washington, D.C. through a Class B Managed Service Provider and Class B Operator license to operate a sportsbook within the Grand Central Bar and Grill located in the Adams Morgan area of Washington, D.C., and has entered into an agreement to provide services with another location in Washington, D.C. In addition, in March 2022, the company commenced operations with Ocean Resort Casino in Atlantic City, New Jersey. The company's penetration into the U.S. market is significant as it has demonstrated that it can provide its bookmaking and platform services to both smaller retail locations and large casino operators using the same technology and platform base for all potential customers with minimal modification required to its operating systems and bookmaking services. The company provides its gaming services in Italy through its subsidiary, Multigioco, which operations are carried out via both land-based or online retail gaming licenses regulated by the ADM that permits it to distribute leisure betting products, such as sports betting, and virtual sports betting products through both physical, land-based retail locations, as well as online through its licensed website www.newgioco.it or commercial webskins linked to its licensed website and through mobile devices. The company's Austria Bookmaker license that was regulated by the Austrian Federal Finance Ministry (BMF) permitted it to operate online sports betting in certain European jurisdictions through its subsidiary, Ulisse GmbH (Ulisse), under the free-trade principles incorporated within bilateral Intra-EU trade agreements that refers to all trade, including e-commerce transactions in most goods, services, and products between member states of the European Union (EU). In Italy, the company's gaming products and services are offered to customers throughout the following three distribution channels: Online gaming websites or mobile solutions where players, through an online account and an e-wallet, using the internet, can play online poker, online casinos games, sports betting wagers, play i-lottery games etc. Punti Virtuali di Ricarica (PVR) (translated as Virtual Reload Centers) or Web-shop (web cafe or internet cafe): A PVR or web-shop is a physical location that is operated by third-party independent businesses that promote the company's online gaming websites, acquires online customers, and via manned or self-service automated terminals permit online-players to make cash deposits that are electronically credited to their personal online gaming accounts. While at the PVR online-players could also play games and wager through their personal online account by using the public internet accessing communal PC's available at the venue. Corner or Punto Sportivo (translated as Sporting Point-of-sale): A corner is distinguished from an agency insofar as the principal business situated at the location that is operated by third-party independent businesses and is an activity that is primarily different from gaming (such as a coffee shop or convenience store) with a terminal connected to the ADM network. The primary purpose of such facility is not gaming, but rather, there is only a small 'corner' for extra cash flow in exchange for a fee and/or commission. Specifically, a maximum of 30% of floor space of a corner location can be dedicated to gaming where gaming transactions are collected and processed by a counter clerk. The company services approximately 82,000 online user accounts and an indeterminate number of walk-in customers at a combination of the three types of venues: approximately web-shops, corners, and land based shop. For the period ended December 31, 2022, transaction revenue generated through the company's subsidiary Multigioco consisted of wagering and gaming transaction income broken down to spread on sports bet wagers, and fixed rate commissions on casino, poker, lotto and horse racing wagers from online based betting web-shops and websites, as well as land-based retail betting shops located throughout Italy; while the company's service revenue generated by its Platform is primarily derived from bet and wager processing in Italy through Multigioco, and in the U.S., through Gameboard and US Bookmaking. During the second quarter of 2021, management simplified the company's Italian footprint by focusing investments towards its Multigioco operations and discontinued Ulisse since the majority of CTD locations were not expected to re-open after the COVID-19 related lockdowns in Italy subsided. For the year ended December 31, 2021, transaction revenue generated through the company's subsidiaries Multigioco and Ulisse comprising wagering and gaming transactions income broken down to spread on sports bet wagers, and fixed rate commissions on casino, poker, lotto, and horse racing wagers from online based betting web-shops and websites, as well as land-based retail betting shops located throughout Italy; while the company's service revenue generated by its Platform is primarily derived from bet and wager processing through Multigioco and Odissea. In the U.S., the company operates as a B2B, the same as the 'Corner or Punto Sportivo'. The company is licensed to operate in Washington, D.C. (District of Columbia) and New Jersey. The locations oversee the wagers and paying out winnings and use its technology and support for the bookmaking services and its operating platform. On September 1, 2020, the company's Odissea subsidiary obtained ISO-27001:2013 certification for safety management. Products and Services and Distribution Methods Betting Platform The Platform, engineered and launched by the company's software development team at Odissea, is a highly efficient, cutting edge betting Platform technology that supports the processing of online client gaming account protocols, as well as land-based betting protocols with seamless multi-channel functionality accepting all forms of payment methods (i.e., cash, e-wallet, bank card and wire transfer, etc.) and integrated with a real-time CRM and Business Intelligence program for streamlined cross-platform marketing, as well as a synchronized financial accounting process. Payment channels for both deposit and withdrawals online are as set forth below: Player indirect - meaning that the player makes a deposit indirectly to their gaming account through a licensed agent (such as a cash deposit to their gaming account at a web-shop counter (e-credit to player account)). Player direct - meaning that the player makes a deposit directly to their own gaming account through one or more of the following methods, such as credit card; ATM/debit card; bank wire, postal money order; and E-wallet or e-credit transfer. Payment channels for both play of wagers and settlement of winnings at the land-based or retail agency or corner counter is as follows: Player direct - meaning that the customer pays for the wager in cash and accepted debit or credit cards. The company employs a customizable client-focused 'hands-on' method, rather than a 'general approach' to the company's Platform design with the goal of empowering its player-facing customers, agents, and employees to enhance the players' experience by allowing personalized dashboard design and customer care for all customer call-ins to its service agents. Gaming Product Offerings The company's online sales channel (websites and web-shops) in Italy offers a full suite of gaming products that can be played in both real-money or free-play modes, which include: Sports Betting: Considered the largest and most well-known industry segment offering both pre-match and live in-game betting events on a wide variety of sports. Online Casino: Includes the following: Traditional Online Slot Games: Automated (using random number generated (RNG)) casino games and slot machines; Traditional Online Table Games: Table games, such as roulette, blackjack, and baccarat; Poker: Texas Hold'em and Omaha in both cash and tournament formats; Bingo and Skilled and Interactive Games: Games that are programmed with a random number generator to ensure constant fairness for all parties. These games include card games, such as tresette (3 Sevens), scopa (Sweep), and briscola (Trump); Virtual Sports Betting: Various computer generated sport and racing events that are programmed with an RNG; and Horse Racing: Live track horse racing events. The company's land-based customer locations generally offer only sports betting, and may also carry virtual sports betting and horse racing in Italy. Markets, Other Services, and Facilities In addition to complementing gaming offerings originally provided by the company's acquired operators with its Newgioco branding, it intends to add new products and services with the assistance of gaming specialists, software providers, and market research professionals. The company can generate additional revenues by establishing more marketing centers and web-shops in Italy and expand its services in restaurants, bars, and other similar small businesses across the U.S. In Italy, the company services approximately 82,000 online user accounts and estimates that its online user base will continue to further increase based on projections of both organic growth and acquisitions of existing operators. In addition, the company services an indeterminate number of walk-in customers at its physical locations throughout the U.S. and Italy. Subject to licensing requirements in each state, the company also expects to increase its penetration in the U.S. and other North American markets in 2023. The company's client's range in age from ages 18 through 79 and are a mix of 70% male and 30% female. In addition, the company separates its revenue source by sports betting, casino and card game betting, and poker. The company's in-house analysis indicates that sports betting and casino games are more popular than poker and other card games among its customer base. Furthermore, sports betting is the company's most profitable revenue stream yielding the highest percentage of its gross gaming revenue at 49.6% of revenues, which is representative of industry metrics when measured by completed sports seasons on a year over year basis. The company's second largest source of revenue is casino followed by poker. The company anticipates a shift in revenue in the future and that its largest source of its future revenue growth will be from B2B2C, which is expected to have the highest gross margin followed by sportsbook, casino, and poker. The company's internal analysis further indicates different gaming patterns among its male and female online users. Male players prefer sports-bets, while approximately 10% of them also explore casino and poker. Conversely, female players prefer casino and bingo while approximately 1% try the company's other games, such as poker, sports-betting, or lotteries. Most of the company's users are located throughout Italy, with the highest concentrations in larger centers, such as Rome and Naples. Revenue Streams The company's revenue streams primarily consist of transactional income and service revenue. In the U.S., the company generates service revenue from providing its platform and bookmaking services on a B2B basis to retail locations and casino operators in the U.S. market, through its subsidiaries, Gameboard and US Bookmaking. The company also intends to expand its presence in the U.S. market and are considering expanding its operations to provide a digital solution to customers in the U.S. on a business-to-consumer (B2C) basis. In Italy, the company generates transactional revenue through the collection of bets from sports wagering and gaming from online betting and land-based betting shops located throughout Italy through its subsidiary Multigioco. The company also generates service revenue from providing its Platform services to third party operators on a B2B basis through its Odissea subsidiary. Gaming Revenues Revenues from sports-betting, casino, cash and skill games, slots, bingo, and horse race wagers represent the gross pay-ins (also referred to as turnover) from customers less gaming taxes and payouts to customers. Revenues are recorded when the game is closed which is representative of the point in time at which the company has satisfied its performance obligation. In addition, the company receives commissions from the sale of scratch tickets and other lottery games. Commissions are recorded when the ticket for scratch off tickets and lottery tickets are sold. Betting Platform Revenues from the Betting Platform include license fees, training, installation, and product support services. Revenue is recognized when transfer of control to the customer has been made and the company's performance obligation has been fulfilled. License fees are calculated as a percentage of each licensee's level of activity and are contingent upon the licensee's usage. The license fees are recognized on an accrual basis as earned. Mobile Browser Application Based upon customer demand for improved performance, speed, and ease-of-use for sports betting on mobile devices, the company engaged a dedicated internal team of engineers to this distribution channel and has already launched and intend to continue to launch several new and innovative features. The company's next-generation mobile browser and application based betting solution on its Platform is constantly evolving and being customized for deployment in each specific country market. The mobile solution is dedicated to improving the user experience with respect to sports betting with a unique modular design that allows quick go-to-market with plug-and-play features, the company has the ability to tailor the mobile app to each market, including specific look and feel features, while end users quickly get to the desired bet ticket with just a few clicks. The modular architecture design of the company's mobile platform includes features inherent in the leading-edge Material Design framework developed by Google in 2014. Material Design is a visual language that synthesizes the classic principles of good design with the innovation of technology and science allowing the flexibility to quickly create new layouts for a variety of both enterprise brands and chain store locations, private brands and applications to add other features such as loyalty rewards for restaurants and cruise lines, push marketing for customer acquisition and retention and importantly, the ability to offer both online and land-based betting distribution under a variety of gaming regulations. Websites In Italy, the company owns its branded URL (uniform resource locator) newgioco.it that it operates in accordance with the ADM Games at a Distance (GAD) licensing requirements either directly or through white label websites with online customers, or alternatively, contract the websites to third party agents or promoters operating webskin URLs under the newgioco.it licensed website. The company's licensed gaming website, newgioco.it, processes live and virtual sports bets and mobile sports betting transactions through its Platform, while online casino and poker are provided under a third-party service provider agreement with Microgame SpA, and lotto products are provided by Lottomatica SpA. The company's gaming websites are tailored for the Italian market and Odissea provides and operates all aspects of its online gaming websites including servers, routers, software development, sportsbook trading, telephone betting, licensing, website hosting, payment solutions, security, and gaming related customer support needs. The branded website newgioco.it serves both players directly and web-shops (i.e., internet cafe's) through the online channel of the company's Platform. There are some variations in website style because it offers different services through distinctive marketing campaigns. The company's website, newgioco.it, is mainly devoted to marketing for retail shops, including marketing with respect to campaigns, branding, and proposals/marketing for prospective operators to become a 'Newgioco shop' and is the landing page for all white-label websites. A landing page refers to a webpage that is generally owned by a promoter (which can also be referred to as a betting shop) which redirects their marketing (social network, friends or other forms of marketing) to this main webpage. Apart from a few advertisements, the landing page links patrons to sign-up or register directly on the newgioco.it main page except that a promotional code is tied to the link, such that the web promoter can funnel its marketing through a subnet. In the case of Italy, the entire subnet (a subnet is a logical grouping of connected network devices; nodes on a subnet tend to be located in close physical proximity to each other such as on a LAN) must be connected to the ADM network (and all games offered through the network) must be certified and approved by SOGEI (an entity authorized to conduct such certification and approval by the Italian Ministry of Finance). The company's newgioco.it website offers wagering in many categories of sports events. It intends to capture a larger share of the Italian sports betting market by focusing on the Serie A, Serie B, and Serie C soccer matches, as well as virtual sports betting, online poker, online casino and slots, skill games, and Italian horse racing through agent-based sales campaigns. The company's direct sales campaigns aimed at end users and agent-based sales campaigns are offered through white-label pages or webskins that direct gaming transactions through its licensed website newgioco.it. The company operates eleven such webskins, such as originalbet.it; lovingbet.it; tecknogame.it; clubgames.it; gamesmart.it; 782xbet.it; timetobet.it; quibet.it; fullmatchnew.it; newbetlive5k.it; and guadagnomatematicobet.it. Webskins or white-label pages are dedicated to the end-user, or player, and focus on regional campaigns and gaming offerings directed at local players, such as welcome bonuses, poker rake rebate for poker players, etc. A white-label page is a complete gaming website (similar to the main website of the licenser (in the company's case Multigioco)) but with the interface and logo of the promoter. The promoter earns fees based on a percentage of the handle (turnover) generated through their website. In relation to the third-party websites, the promoter (partner, shop, agent, or promoter) is responsible for marketing strategies, administration, and costs. The promoter may utilize special promotions, draws and incentives to drive players to their website to increase gaming handle (turnover) or visits. Generally, these regional promoters operate in areas that are remote or distant from the company's central operations based in Rome. Therefore, some promotions may be tied to local events in the jurisdictions surrounding the 'home base' of the promoter rather than originating from the company's main operations. The relationship with local shops and players from the promoter region remains with the promoter since there may be regional nuances that attract their clientele to the company's gaming offerings. Notwithstanding the foregoing, the gaming business is owned by the underlying licensor (i.e., Multigioco) and is included in the company's overall financial results as gaming handle (turnover). Although the company has a diverse portfolio of product and service offerings through its websites, it intends to focus on creating in-house cost savings and synergies by undertaking strategic acquisitions of competing webskin operators and to operate them under its Newgioco branding. The company intends to replicate its successful operational model developed in the regulated Italian market through the U.S. and into other international markets. Strategy The company expects the U.S. market and other new markets, such as Canada and elsewhere, to be a large source of its future growth, in particular, the U.S. market is one where it intends to offer the use of its Platform to existing commercial and tribal casinos, retail betting operators, and franchise enterprises. Intellectual Property As a result of its acquisitions of Multigioco, Rifa, and the gaming assets of Newgioco Srl, the company obtained the rights to the domestic distribution brand known throughout Italy as New Gioco, and in July 2015, it obtained a trademark on the brand and logo for New Gioco. The company's prior subsidiary Rifa was amalgamated into Multigioco with effect on January 20, 2020. As a result of the acquisition of Odissea, the company obtained the intellectual property and technical know-how behind its betting Platform. The company also has proprietary rights to a number of trademarks, service marks, and trade names, which are important to its business, including NewGioco, OriginalBet, LovingBet, US Bookmaking, and Elys. Research and Development The company incurred research and development expenses in the amount of approximately $1.1 million for the year ended December 31, 2022. Strategic Agreements Entered Into With Lottomatica (known as G.B.O, S.p.A) During the second quarter of the 2022, the company entered into a Master Technology Development and License Agreement and a Technical Services Agreement with Lottomatica to develop and provide a dedicated Sports Betting Platform (SBP) for use in both land-based and on-line applications by Lottomatica in the U.S. and Canadian markets, as well as potentially worldwide. The contract is for a period of ten years, after which the source code will be assigned to Lottomatica. An option was also granted to Lottomatica that after a period of four years from the commencement of the provision of the SBP. The Technical Services Agreement was entered into with the company's subsidiary Odissea to provide engineering services, develop, and deliver the software and provide operational and product management support to Lottomatica on the SBP. The initial term of the agreement is for a period of ten years and is based on cost plus a percentage of the services provided. In a separate Virtual Service Agreement entered into between the company's subsidiary Virtual Generation and Goldbet S.p.A., a subsidiary of Lottomatica, whereby Virtual Generation will license virtual event content to be implemented on the Lottomatica's Platform throughout the Lottomatica vast network of retail outlets and on the online services in Italy. The agreement provides for an exclusivity period of two years from the date of certification of the virtual platform by the Italian regulator (ADM), which will only allow Lottomatica and the company to make use of the platform. Virtual Generation will generate commission revenue based on a percentage of Net Gaming Revenues. In a separate Assignment Agreement entered into between the company's subsidiary, Multigioco, Lottomatica assigned ownership of 100 Sports Rights to Multigioco, which will allow Multigioco to expand its land-based distribution network to 110 point-of-sale locations. Multigioco activated 53 location rights during the second half of 2022 and expects to activate the remaining 47 locations over the first half of 2023. Competition The company faces direct competition in Italy from established online gaming sites, including Lottomatica S.p.A.; Snaitech; Sisal (wholly owned by CVC Capital Partners); GVC Holdings/BWIN; Ladbrokes/Gala Coral Group/Eurobet; Bet365 (Hillside Media); PaddyPower/Betfair (Flutter Entertainment); The Stars Group (PokerStars); 888 Holdings; and William Hill. Government Regulations The company is a licensed operator in New Jersey and Washington D.C and has obtained conditional approval to operate in Ohio, and in tribal jurisdictions in Colorado, New Mexico, North Dakota and Michigan. The company has obtained GLI-33 certification to operate its Sportsbook in New Jersey, Washington D.C., and Ohio. The company holds, through its Multigioco subsidiary, three gaming licenses upon which its business is dependent a Bersani license, a Monti license, and a Games at a Distance (GAD) license. The company's Italian Bersani, Monti and GAD licenses are issued by the Agenzia delle Dogane e dei Monopoli (ADM). History The company was founded in 1998. It was incorporated in the state of Delaware in 1998. The company was formerly known as Tradestream Global Corp. and changed its name to Empire Global Corp. in 2005. Further, the company changed its name to Newgioco Group, Inc. in 2016 and to Elys Game Technology, Corp. in 2020 and then to Elys BMG Group, Inc. in January 2024.