GAN LTD MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-K)

You ought to learn the next dialogue and evaluation of our monetary situation
and outcomes of operations along with the Company's consolidated monetary
statements and the associated notes thereto. Some of the knowledge contained in
this dialogue and evaluation or set forth elsewhere, together with info with
respect to our plans and technique for our enterprise, consists of forward-looking
statements that contain dangers and uncertainties. You ought to evaluate the
"Cautionary Note Regarding Forward-Looking Statements" and "Risk Factors"
sections for a dialogue of necessary components that would trigger precise outcomes
to vary materially from the outcomes described in or implied by the
forward-looking statements contained within the following dialogue and evaluation.



Overview



GAN Limited is a Bermuda exempted holding firm and thru its subsidiaries,
operates in two traces of enterprise. We are a business-to-business ("B2B")
provider of enterprise Software-as-a-Service ("SaaS") options for on-line
on line casino gaming, generally known as iGaming, and on-line sports activities betting
purposes. Beginning with our January 2021 acquisition of Vincent Group
p.l.c., a Malta public restricted firm ("Coolbet"), we're additionally a
business-to-consumer ("B2C") developer and operator of an internet sports activities betting
and on line casino platform, which presents shoppers in choose markets in Northern
Europe, Latin America and Canada a digital portal for partaking in sports activities
betting, on-line on line casino video games and poker. These two traces of enterprise are additionally the
Company's reportable segments.



The B2B phase develops, markets and sells cases of and GameSTACK
know-how and iSight Back Office that includes complete participant
registration, account funding and back-office accounting and administration instruments
that allow on line casino operators to effectively, confidently and successfully prolong
their on-line presence. In 2021, we received three prestigious {industry} awards from
EGR North America - Best Freeplay Gaming Supplier, Best Full-Service Platform
Provider and Best White Label Partner of the Year - in recognition of our
experience and dedication for delivering industry-leading gaming options to
land-based casinos.



Beginning January 1, 2021, the B2C phase consists of the operations of Coolbet.
Coolbet develops and operates an internet sports activities betting and on line casino platform that
is accessible by its web site in markets throughout Northern Europe, Latin
America and Canada. In 2021, Coolbet received two prestigious awards on the
International Gaming Awards in London - Mobile Sports Product of the Year and
Innovator of the Year - in recognition of our important impression within the cell
sports activities betting {industry}.



To meet this demand and serve our rising variety of U.S. on line casino operator
purchasers, we proceed to put money into our software program engineering capabilities and
increase our operational assist. The most major factor of our working
prices usually relate to our worker wage prices and advantages. We have
elevated our world headcount from 440 workers at January 1, 2021, to 682
workers at December 31, 2021. Also, working prices embrace know-how and
company infrastructure related-costs, in addition to advertising and marketing expenditures with a
deal with rising and retaining B2C end-users.



Our web loss was $30.6 million and $20.2 million for the years ended December
31, 2021 and 2020, respectively. Our outcomes of operations for the yr ended
December 31, 2021 consists of the monetary outcomes of Coolbet for all the
interval, and accordingly, usually are not instantly corresponding to our consolidated outcomes
of operations for the yr ended December 31, 2020.



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We consider that our present know-how is very scalable and might assist the
launch of our product choices for brand spanking new prospects and in new jurisdictions. We
count on to enhance our profitability by elevated revenues from:

? natural development of our present on line casino operators,

? enlargement into newly regulated jurisdictions with present and new prospects,

? margin enlargement pushed by the mixing of Coolbet’s sports activities betting

know-how in our B2B product choices,

? income enlargement from the roll-out of our Super RGS content material providing to B2C

    operators who usually are not already purchasers, and
  ? natural development of our B2C enterprise in present and new jurisdictions.




We maintain a strategic U.S. patent, which governs the linkage of on-property reward
playing cards to their counterpart web playing accounts along with bilateral
transmission of reward factors between the web gaming know-how system and
the land-based on line casino administration system current in all U.S. on line casino properties.
In February 2021, we reached an settlement to license our U.S. patent to a second
main U.S. on line casino operator group and we might license our patent to different main
U.S. web gaming operators sooner or later.



Recent Developments

May 2020 Completion of U.S. IPO and Reorganization with GAN plc

On May 5, 2020, GAN Limited accomplished a share change and reorganization
pursuant to a Scheme of Arrangement whereby the shareholders of the earlier
mother or father, GAN plc, agreed to change their shares, on a foundation of 4 abnormal
shares to at least one abnormal share, for shares in GAN Limited, plus a professional rata portion
of an combination £2.0 million or 2.32 pence per share in money. After the
reorganization, GAN plc was renamed GAN (UK) Limited and have become a wholly-owned
subsidiary of GAN Limited.



On May 7, 2020, GAN Limited accomplished its U.S. preliminary public providing underneath
which it offered an combination of seven,337,000 abnormal shares at a value per share to
the general public of $8.50 and raised gross proceeds of $62.4 million (web proceeds of
$55.3 million).

December 2020 Follow-on Offering of Ordinary Shares

On December 21, 2020, GAN Limited accomplished a follow-on public providing underneath
which it offered 6,790,956 of abnormal shares at a value per share of $15.50 and
raised gross proceeds of $98.5 million (web proceeds of $98.5 million). The web
proceeds from the providing have been used to fund the money portion of the acquisition
value for the acquisition of Coolbet that was paid to the previous shareholders
pursuant to the Share Exchange Agreement, dated November 15, 2020 ("Share
Exchange Agreement").

January 2021 Acquisition of Coolbet

On January 1, 2021, GAN Limited accomplished its acquisition of Coolbet, in
accordance with the phrases of the Share Exchange Agreement.

GAN Limited acquired the entire excellent fairness in Coolbet in change for a
buy value of $218.1 million, which included a money cost of $111.1
million, the issuance of 5,260,516 abnormal shares (valued at $106.7 million)
and the issuance of alternative fairness awards (valued at $0.3 million).



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Critical Accounting Policies and Estimates

Our accounting insurance policies are extra totally described in Note 3 - Summary of
Significant Accounting Policies of our Notes to Consolidated Financial
Statements included on this report. As disclosed in Note 3, the preparation of
monetary statements in accordance with accounting rules usually accepted
in the United States requires the usage of judgments and estimates. We base our
estimates on historic expertise and on numerous different assumptions that we
consider to be cheap underneath present circumstances, the outcomes of which kind
the premise for making judgments in regards to the carrying values of property and
liabilities that aren't available from different sources. Actual outcomes
might differ from these estimates. We think about the next to be our most
essential accounting estimates that contain important judgment:



Revenue Recognition



Our income recognition insurance policies described in Note 3 - Summary of Significant
Accounting Policies, require us to make important judgments and estimates.
Accounting Standards Codification ("ASC") 606 requires that we apply judgments
or estimates to find out the efficiency obligations, the stand-alone promoting
costs of our efficiency obligations to prospects, allocation of the
transaction value, and the timing of switch of management of the respective
efficiency obligations. The analysis of every of those standards contemplating
contract particular info and circumstances is of course judgmental, however sure
judgments may considerably have an effect on the quantity or timing of income acknowledged
if we have been to succeed in a distinct conclusion. The essential judgments we're
required to make in our evaluation of contracts with prospects that would
considerably have an effect on the timing or quantity of income acknowledged are:



Stand-Alone Selling Price and Allocation of Transaction Price. ASC 606 requires
that we decide the stand-alone promoting value for our items and companies as a
foundation for allocating the transaction value to the recognized distinct
efficiency obligations in our contracts with prospects. Because we regularly bundle
the promoting value for {hardware} or companies or we might license methods for which
the options we offer are extremely personalized and due to this fact the costs differ,
the willpower of a stand-alone promoting value requires important judgment.



For efficiency obligations that contain a number of services or products, we
allocate the transaction value to be utilized to every efficiency obligation
based mostly on an estimation of the stand-alone promoting value. We usually decide
the stand-alone promoting value based mostly on the quantities that we cost when offered
individually in related circumstances to related prospects. In cases the place the
stand-alone promoting value can't be decided utilizing an adjusted market
evaluation method, now we have used different allocation strategies in accordance with
ASC 606, together with a residual method to allocate a stand-alone promoting value.



Business Combinations



We account for enterprise mixtures in accordance with ASC 805, Business
Combinations. This commonplace requires the buying entity in a enterprise
mixture to acknowledge all (and solely) the property acquired and liabilities
assumed within the transaction and establishes the acquisition-date truthful worth as
the measurement goal for all property acquired and liabilities assumed in a
enterprise mixture.



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Determining the truthful worth of property acquired and liabilities assumed requires
administration judgment and sometimes includes the usage of important estimates and
assumptions with respect to the timing and quantities of future money inflows and
outflows, low cost charges, market costs and asset lives, amongst different gadgets.
These estimates are based mostly on info obtained from administration of the
acquired firm and historic expertise and are usually made with the
help of an impartial valuation agency. These estimates can embrace, however
usually are not restricted to, the money flows that an asset is predicted to generate within the
future, and the associated fee financial savings anticipated to be derived from buying an asset. Any
adjustments within the underlying assumptions can impression the estimates of truthful worth by
materials quantities, which may in flip materially impression our outcomes of operations.
These estimates are inherently unsure and unpredictable, and, if totally different
estimates have been used, the acquisition value for the acquisition may very well be allotted
to the acquired property and liabilities in a different way from the allocation that we
have made. In addition, unanticipated occasions and circumstances might happen which
have an effect on the accuracy or validity of such estimates, and, if such occasions happen, we
could also be required to report a cost towards the worth ascribed to an acquired
asset or a rise within the quantities recorded for assumed liabilities.

If the next precise outcomes and up to date projections of the underlying
enterprise exercise change in contrast with the assumptions and projections used to
develop these truthful values, we might must report impairment expenses within the
future. In addition, now we have estimated the helpful lives of sure acquired
property, and these lives are used to compute depreciation and amortization
expense. If our estimates of the helpful lives change, depreciation and
amortization expense could also be required to be accelerated or decelerated.

Goodwill



Goodwill is reviewed for impairment yearly as of October 1st, or extra
regularly if indicators of impairment exist. A major quantity of judgment
is concerned in figuring out if an indicator of goodwill impairment has occurred.
Such indicators might embrace, amongst others: a major decline in anticipated
future money flows; a major antagonistic change in authorized components or within the
enterprise local weather; unanticipated competitors; and the testing for recoverability
of a major asset group inside a reporting unit. Our goodwill impairment
evaluation additionally features a comparability of the combination estimated truthful worth of all
reporting models to our whole market capitalization. Therefore, our shares might
commerce under our e-book worth and a major and sustained decline in our share
value and market capitalization may lead to goodwill impairment expenses. Any
antagonistic change in these components may have a major impression on the
recoverability of those property and will have a cloth impression on our
consolidated monetary statements.



Goodwill impairment testing includes a comparability of the estimated truthful worth of
a reporting unit to its respective carrying quantity, which can be carried out
using both a qualitative or quantitative evaluation. A reporting unit is
outlined as an working phase or one degree under an working phase. The
qualitative evaluation evaluates numerous occasions and circumstances, resembling
macro-economic situations, {industry} and market situations, value components,
related occasions and monetary developments that will impression a reporting unit's truthful
worth. If it's decided that the estimated truthful worth of the reporting unit
is more-likely-than-not lower than the carrying quantity, together with goodwill, a
quantitative evaluation is required. Otherwise, no additional evaluation is
crucial.



In a quantitative evaluation, the truthful worth of a reporting unit is decided
after which in comparison with its carrying worth. A reporting unit's truthful worth is
decided based mostly upon consideration of assorted valuation methodologies,
together with the earnings method, which makes use of projected future money flows
discounted at charges commensurate with the dangers concerned, and multiples of
present and future earnings. If the truthful worth of a reporting unit is lower than
its carrying worth, a goodwill impairment cost is acknowledged for the quantity by
which the carrying quantity exceeds the reporting unit's truthful worth; nevertheless, the
loss acknowledged can not exceed the full quantity of goodwill allotted to that
reporting unit.



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The earnings method used to check our reporting models consists of the projection of
estimated working outcomes and money flows, discounted utilizing a weighted-average
value of capital ("WACC") that displays present market situations applicable to
every reporting unit. Those projections contain administration's finest estimates of
financial and market situations over the projected interval, together with development charges
in revenues and prices and finest estimates of future anticipated adjustments in working
margins and money expenditures. Other important assumptions and estimates used
within the earnings method embrace terminal worth development charges, future estimates of
capital expenditures and adjustments in future working capital necessities. In
addition, the WACC utilized to low cost estimated future money flows is delicate
to adjustments in rates of interest and different market charges in place on the time the
evaluation is carried out. Future adjustments in our estimates or assumptions or in
rates of interest may have a major impression on the estimated truthful worth of
reporting models and lead to a goodwill impairment cost that may very well be
materials to our consolidated monetary statements.



Share-Based Compensation



Management measures equity-classified share-based awards at truthful worth on the
date of grant and bills the associated fee on a straight-line foundation over the requisite
service interval of all the award, usually outlined because the vesting interval,
together with a corresponding improve in fairness. Forfeitures are recorded within the
interval wherein they happen with the impression, if any, acknowledged within the
consolidated statements of operation with a corresponding adjustment to fairness.



The truthful worth of share choices is decided utilizing a Black-Scholes mannequin,
considering administration's finest estimate of the anticipated lifetime of the
possibility and the estimated variety of shares that can ultimately vest. Application
of the option-pricing mannequin includes the usage of estimates, judgment and
assumptions which might be extremely complicated and subjective and are outlined under as
they pertain to grants subsequent to our preliminary public providing.



Expected Term - represents the time frame that awards granted are anticipated
to be excellent. In figuring out the anticipated time period of the award, future
train and forfeiture patterns are estimated from historic worker train
habits. These patterns are additionally affected by the vesting situations of the
award. Changes sooner or later train habits of workers or within the vesting
interval of the award may lead to a change within the anticipated time period. An improve
within the anticipated time period would lead to a rise to our expense.



Volatility - a measure of the quantity by which the value of our abnormal shares
is predicted to fluctuate every year throughout the anticipated time period of the award. Our
anticipated volatility is decided by reference to volatility of sure
recognized peer teams, share buying and selling info and share costs on the
Nasdaq. The implied volatilities from traded choices are impacted by adjustments in
market situations. An improve within the volatility would lead to a rise in
our expense.

Expected Dividend Yield - is predicated on our historic dividend yield, which is
zero - as now we have not traditionally paid dividends. If we have been to start paying
dividends, the dividend yield would improve and lead to a lower in our
expense.

Risk-Free Interest Rate – is predicated on the U.S. Treasury yield curve in impact at
time of grant. As the risk-free rate of interest will increase, the anticipated time period
will increase, leading to a rise in our expense.

Where the Company has determined to cowl the social taxes and earnings taxes associated
to equity-classified share-based awards for the choice holders, we acknowledge a
tax expense for the longer term money cost as a liability-classified share-based
compensation expense. At every reporting interval, administration measures tax
liabilities related to our share-based compensation based mostly on the intrinsic
worth of the choices utilizing our share value at every date of measurement. The
impression of the revision of the unique estimates, if any, is acknowledged in
revenue or loss with a corresponding improve or discount to the corresponding
legal responsibility. Where the Company doesn't cowl worker social taxes and earnings
taxes, we acknowledge employer tax bills within the interval when the respective
holder workout routines their choices.



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Capitalization and Impairment of Internally Generated Intangible Assets

Management evaluations expenditures, together with wages and advantages for workers,
incurred on growth actions and, based mostly on their judgment of the prices
incurred, assesses whether or not the expenditure meets the capitalization standards set
out in ASC 350 and the intangible property accounting coverage inside the notes to
our consolidated monetary statements. Management particularly considers if
further expenditure on initiatives pertains to upkeep or new growth
initiatives. In addition, the helpful lifetime of capitalized growth prices is
decided by administration on the time the software program is introduced into use and is
commonly reviewed for appropriateness. For distinctive software program merchandise we management
and develop, the life is predicated on historic expertise with related merchandise as
effectively as anticipation of future occasions, which can impression their helpful financial
life, resembling adjustments in know-how.



Management evaluations intangible property at every reporting interval to find out
potential impairment each time occasions or adjustments in circumstances point out that
the carrying quantity of an intangible asset is probably not totally recoverable.
Recoverability is measured by evaluating the carrying quantity of the intangible
asset with the longer term undiscounted money flows the asset is predicted to generate.
Management should make estimates associated to future money flows and low cost charges
that displays present market assessments of the time worth of cash and the
dangers particular to the asset for which the estimates of future money flows have
not been adjusted. If such property are thought of impaired, an impairment loss
can be measured by evaluating the quantity by which the carrying worth exceeds
the truthful worth of the intangible asset.



Income Taxes

We function in numerous jurisdictions and our efficient tax price is predicated on
our earnings, statutory tax charges, tax planning alternatives and switch pricing
insurance policies within the numerous jurisdictions wherein we function. Judgment is required
in respect of the interpretation of state, federal and worldwide tax regulation and
observe as e-commerce and tax continues to evolve. Our earnings tax price is
considerably affected by the tax charges that apply to our international earnings.



Deferred tax property symbolize quantities out there to scale back earnings taxes payable
in future years. Such property come up from non permanent variations between the
monetary reporting and tax foundation of property and liabilities, in addition to from web
working losses and tax credit score carryforwards. Deferred tax property are
acknowledged to the extent that it's possible future taxable earnings will probably be
out there towards which the non permanent variations may be utilized. This
evaluation of future taxable earnings depends closely on estimates which might be based mostly
on numerous components, together with historic outcomes and future enterprise
forecasts. To the extent deferred tax property usually are not anticipated to be realized, we
report a valuation allowance.

Research and growth tax reduction is acknowledged as an asset as soon as there's
adequate proof that any quantity we might declare will probably be acquired. A key
judgement arises with respect to the probability of a declare being profitable when
a declare has been quantified however has not been acquired. In making this judgement,
we think about the character of the declare and particularly the observe report of
success of earlier claims.



We are topic to earnings taxes in quite a few jurisdictions and there are
transactions for which the final word tax willpower can't be assessed with
certainty within the abnormal course of enterprise. We acknowledge a provision for
conditions which may come up within the foreseeable future based mostly on an evaluation of
the chances as as to if further taxes will probably be due. An unsure tax
place is acknowledged as a profit solely whether it is "extra doubtless than not" that
the tax place can be sustained in a tax examination, with a tax examination
being presumed to happen. The quantity acknowledged is the biggest quantity of tax
profit that's higher than 50% doubtless of being realized on examination. For
tax positions not assembly the "extra doubtless than not" take a look at, no tax profit is
recorded. Penalties and curiosity incurred associated to underpayment of earnings tax
are labeled as earnings tax expense within the interval incurred.



42

Consolidated Results of Operations

On January 1, 2021, we accomplished our acquisition of Coolbet which was accounted
for as a enterprise mixture underneath ASC 805, Business Combinations. The
following dialogue of our outcomes of operations for the yr ended December
31, 2021 consists of the monetary outcomes of Coolbet for all the interval. Our
B2B phase outcomes for the yr ended December 31, 2020 are comprised of our
legacy enterprise operations previous to the acquisition of Coolbet.

Year Ended December 31, 2021 Compared to Year Ended December 31, 2020

The following desk units forth our consolidated outcomes of operations for the
intervals indicated:



                                           Year Ended
                                          December 31,                   Change
                                       2021          2020         Amount       Percent
({dollars} in hundreds)
Revenue                              $ 124,163     $  35,159     $  89,004         n.m.
Operating prices and bills
Cost of income(1)                      41,373        10,471        30,902         n.m.
Sales and advertising and marketing                     22,266         5,046        17,220         n.m.
Product and know-how                  22,548        11,032        11,516         n.m.

General and administrative(1)           48,881        24,825        24,056         96.9 %
Impairment                               3,500             -         3,500 

n.m.

Depreciation and amortization           16,808         3,257        13,551 

n.m.

Total working prices and bills 155,376 54,631 100,745

       n.m.
Operating loss                         (31,213 )     (19,472 )     (11,741 )      (60.3 )%
Other (earnings) loss, web                  (408 )         392          (800 )       n.m.
Loss earlier than earnings taxes               (30,805 )     (19,864 )     (10,941 )      (55.1 )%

Income tax expense (profit)              (211 )         353          (564

)       n.m.
Net loss                             $ (30,594 )   $ (20,217 )   $ (10,377 )      (51.3 )%

(1) Excludes depreciation and amortization expense

n.m. = not significant



Geographic Information



The following desk units forth our consolidated income by geographic area,
for the intervals indicated:



                                         Year Ended
                                        December 31,            Percentage of Revenue                Change
                                     2021          2020          2021             2020        Amount       Percent
({dollars} in hundreds)
United States                      $  37,791     $ 29,351            30.4 %         83.5 %   $  8,440          28.8 %
Europe                                47,309        5,759            38.1 %         16.4 %     41,550          n.m.
Latin America                         32,434            -            26.1 %            - %     32,434          n.m.
Rest of the world                      6,629           49             5.4 %          0.1 %      6,580          n.m.
Total income                      $ 124,163     $ 35,159           100.0 %        100.0 %   $ 89,004          n.m.




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Revenue



Revenue was $124.2 million for the yr ended December 31, 2021, a rise of
$89.0 million from the comparable interval in 2020. The improve was primarily
attributable to income from our B2C operations of $78.6 million in 2021. The
remaining improve in income was primarily pushed by real-money gaming development,
of which $9.3 million associated to will increase in platform and content material license charges
within the U.S. and $2.2 million associated to related will increase in Italy, mixed
with a rise in simulated gaming income of $2.3 million because of new buyer
launches. These will increase have been partially offset by a lower in sportsbook
income of $2.5 million primarily from FanDuel's migration to its personal participant
pockets throughout the third quarter of 2020.



Revenue elevated throughout our worldwide markets primarily on account of the
Coolbet acquisition, which accounted for $40.1 million of the elevated revenues
in Europe, the total $32.4 million in Latin America, and considerably all of our
revenues in all different non-U.S. markets. The improve in income in the United
States as in comparison with the prior interval was the results of elevated RMiG revenues
inside the B2B phase primarily pushed by the enlargement into newly regulated
U.S. states and the annualized impression of purchasers launched in 2020.



Cost of Revenue

Cost of income was $41.4 million for the yr ended December 31, 2021, an
improve of $30.9 million from the comparable interval in 2020. The improve was
attributable to our B2C operations' value of gaming of $29.8 million. Cost of
income for our B2B phase elevated $1.1 million because of a rise in content material
license charges of $1.9 million pushed by larger RMiG revenues in Italy, elevated
simulated gaming revenues and a $0.5 million improve in processing charges because of
a rise within the variety of cases of our platform and finish customers. These
will increase have been partially offset by a $1.4 million lower in value of
growth companies and different revenues, primarily on account of decreased
{hardware} gross sales and a $0.6 million lower in regulatory charges and gaming duties
as in comparison with the prior yr. The extent to which we have interaction in {hardware} gross sales
is pushed by particular person operator circumstances and usually are not essentially
constant from interval to interval.



Sales and Marketing



Sales and advertising and marketing expense was $22.3 million for the yr ended December 31,
2021, a rise $17.2 million from the comparable interval in 2020. Of the
improve, $14.9 million was attributable to our B2C operations' gross sales and
advertising and marketing. We count on gross sales and advertising and marketing expense to proceed to extend in our
B2C phase as we search to draw further end-users. Sales and advertising and marketing
bills associated to our B2B enterprise elevated $2.3 million primarily because of an
improve in personnel prices of $1.4 million, excluding will increase in associated
share-based compensation bills of $0.3 million, pushed by elevated headcount
inside our gross sales and advertising and marketing capabilities.



Product and Technology



Product and know-how expense was $22.5 million for the yr ended December 31,
2021, a rise of $11.5 million from the comparable interval in 2020, because of
larger web salaries and associated worker prices of $11.7 million (excluding a
lower in associated share-based compensation of $2.4 million) as we ramped up
our workforce and invested in our platform to serve our new and present prospects
for the B2B phase and $1.9 million from the inclusion of Coolbet in our
working outcomes.



General and Administrative



General and administrative expense elevated $24.1 million of which $16.6
million was attributable to Coolbet. Exclusive of Coolbet, the remaining
improve was pushed by a rise of $2.8 million in skilled charges associated
to authorized charges, recruiting prices, skilled consulting prices, and public
firm compliance prices, a $2.1 million improve in personnel and associated prices
(excluding a lower in associated share-based compensation expense of $1.1
million) in capabilities resembling administration, authorized, human assets and finance to
improve our back-office infrastructure, a $1.2 million improve regarding
unfavorable forex fluctuations, a $1.3 million improve regarding insurance coverage
prices reflecting the 2021 full yr impression of administrators and officers and
enterprise insurance coverage, and a $1.0 million improve in software-related prices to
assist the Company's development. These will increase have been partially offset by different
immaterial adjustments totaling $0.2 million.



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Within our working bills, share-based compensation and associated bills
throughout gross sales and advertising and marketing, product and know-how, and common and
administrative bills decreased by $2.0 million to $8.1 million for the yr
ended December 31, 2021. The lower was primarily because of bills of
$7.3 million acknowledged throughout the yr ended December 31, 2020 in relation to
(i) the acceleration of vesting of excellent grants on the time of our preliminary
public submitting in May 2020 of $3.9 million and (ii) the popularity of
cash-settled share-based compensation expense in relation to taxes related
with U.Ok. choices throughout the identical interval of $3.4 million (as in comparison with a
advantage of $0.5 million within the present yr interval). The lower was primarily
offset by bills of $4.2 million associated to new awards issued in 2021, an
expense $0.9 million associated to a change within the incentive compensation construction
made efficient in 2021 which allowed for sure executives to obtain their
incentive compensation within the type of share-based compensation. In addition, we
incurred share-based compensation bills of $0.6 million associated alternative
share possibility awards to persevering with workers of Coolbet and restricted shares
issued within the acquisition of Silverback.



Impairment



We recorded an impairment cost of $3.5 million throughout the yr ended
December 31, 2021 associated to the termination discover we served to a content material
supplier in January 2022 as sure situations precedent related to the
certification of their distant gaming server had not been glad pursuant to
the phrases of the settlement within the interval ended December 31, 2021. In accordance
with the settlement, termination for trigger leads to a return of the preliminary
cost of $3.5 million, nevertheless in response to our termination discover, the
content material supplier responded with a discover to the Company of its materials breach
of the settlement, disputing the validity of the termination.

Depreciation and Amortization

Depreciation and amortization expense was $16.8 million for the yr ended
December 31, 2021, a rise of $13.6 million from the comparable interval in
2020. The improve was because of the amortization expense on intangible property
recorded within the acquisition of Coolbet on January 1, 2021.

Income Tax Expense

We recorded earnings tax advantage of $0.2 million for the yr ended December 31,
2021, reflecting an efficient tax price of 0.7%, in comparison with earnings tax expense
of $0.4 million for the yr ended December 31, 2020, reflecting an efficient
tax price of (1.8)%. Our nation of domicile is Bermuda, which successfully has a
0% statutory tax price because it doesn't impose taxes on earnings, earnings, dividends,
or capital positive aspects. The distinction between this 0% tax price and the efficient
earnings tax price for the years ended December 31, 2021 and 2020 was due primarily
to a mixture of earnings in international jurisdictions which might be topic to present tax,
making an allowance for international loss carryforwards in sure jurisdictions which might be
not anticipated to be acknowledged.



Segment Operating Results



We report our working outcomes by phase in accordance with the "administration
method." The administration method designates the interior reporting utilized by our
Chief Operating Decision Maker ("CODM"), who's our Chief Executive Officer, for
making selections and assessing efficiency of our reportable segments.

Year Ended December 31, 2021 Compared to Year Ended December 31, 2020

The following desk units forth our phase outcomes for the intervals indicated:



                                        Year Ended              Percentage of Segment
                                       December 31,                    Revenue                       Change
                                     2021         2020         2021              2020         Amount       Percent
({dollars} in hundreds)
B2B
Revenue                            $ 45,569     $ 35,159         100.0 %           100.0 %   $ 10,410          29.6 %
Cost of income(1)                   11,600       10,471          25.5 %            29.8 %      1,129          10.8 %
B2B phase gross revenue           $ 33,969     $ 24,688          74.5 %            70.2 %   $  9,281          37.6 %
B2C
Revenue                            $ 78,594     $      -         100.0 %               - %   $ 78,594          n.m.
Cost of income(1)                   29,773            -          37.9 %               - %     29,773          n.m.
B2C phase gross revenue           $ 48,821     $      -          62.1 %               - %   $ 48,821          n.m.

(1) Excludes depreciation and amortization expense

n.m. = not significant



45






B2B Segment



B2B income elevated $10.4 million primarily because of a rise in platform and
content material charge income of $10.7 million. Of this improve, RMiG jurisdictions in
the United States contributed a rise of $9.3 million throughout the yr ended
December 31, 2021, together with new U.S. states which launched in 2021 resembling in
Michigan following the launch of RMiG in January 2021, along with
contributions starting in May 2021 in West Virginia and October 2021 in
Connecticut. Further contributing to the rise was a rise of $2.2
million in RMiG revenues in Italy and a rise of $2.0 million in simulated
gaming income as in comparison with the prior yr interval. The will increase have been
partially offset by a $2.5 million lower in sportsbook income primarily as a
results of FanDuel's migration to its personal participant pockets throughout the third quarter
of 2020.



Additionally, B2B growth companies and different income decreased $0.3 million,
of which $2.2 million associated to a lower in growth income, primarily
associated to prior yr revenues related to FanDuel's migration to its personal
participant pockets platform in 2020 and a $1.0 million lower primarily associated to
decrease {hardware} gross sales. The lower was partially offset by $3.0 million in
revenues attributable to patent licensing charge income acknowledged throughout the

yr
ended December 31, 2021

B2B value of income elevated $1.1 million primarily because of a $1.9 million
improve in content material license charges because of larger gross sales in Italy and simulated
gaming income and a $0.5 million improve in processing charges because of a rise
within the quantity cases of our platform and finish customers. This improve was
partially offset by lower in prices of growth companies and different revenues
of $1.4 million, primarily on account of decrease {hardware} gross sales in comparison with

the
prior yr interval.



Segment gross revenue margin for B2B, which excludes depreciation and
amortization expense, elevated by 37.6% primarily pushed by a rise in
platform and content material charge income and a rise within the gross margin for
growth companies and different income from 70.0% in 2020 to 85.3% in 2021. The
improve in gross margin for growth companies and different income was because of
patent income of $3.0 million which didn't happen within the prior yr interval and
decrease value of {hardware} relative to its gross sales within the present interval in comparison
to the prior yr interval.



B2C Segment

Segment gross revenue for B2C, which excludes depreciation and amortization
expense, was $48.8 million, or 62.1% as a share of phase income, for the
yr ended December 31, 2021. Prior yr income and prices of income usually are not
included in our monetary outcomes because of the timing of the Coolbet acquisition,
which closed January 1, 2021.



Non-GAAP Financial Measures



Adjusted EBITDA



Management makes use of the non-GAAP measure of Adjusted EBITDA to measure its monetary
efficiency. Specifically, it makes use of Adjusted EBITDA (i) as a measure to match
our working efficiency from interval to interval, because it removes the impact of
gadgets circuitously ensuing from our core operations, and (ii) as a way of
assessing our core enterprise efficiency towards others within the {industry}, as a result of
it eliminates a number of the results which might be generated by variations in capital
construction, depreciation, tax results and weird and rare occasions.



We outline Adjusted EBITDA as web earnings (loss) earlier than different (earnings) loss, web,
earnings tax expense (profit), depreciation and amortization, impairments,
share-based compensation expense and associated expense, preliminary public providing
associated prices and different gadgets which our Board of Directors considers to be
rare or uncommon in nature. The presentation of Adjusted EBITDA shouldn't be
meant for use in isolation or as an alternative choice to any measure ready in
accordance with U.S. GAAP and Adjusted EBITDA might exclude monetary info
that some buyers might think about necessary in evaluating our efficiency.
Because Adjusted EBITDA shouldn't be a U.S. GAAP measure, the way in which we outline Adjusted
EBITDA is probably not corresponding to equally titled measures utilized by different
firms within the {industry}.



46






Below is a reconciliation of Adjusted EBITDA to web loss, essentially the most comparable
U.S. GAAP measure, as offered within the consolidated statements of operations for
the years specified:



                                                        Year Ended
                                                       December 31,
                                                    2021          2020
(in hundreds)
Net loss                                          $ (30,594 )   $ (20,217 )
Income tax expense (profit)                           (211 )         353
Other (earnings) loss, web                               (408 )         392
Depreciation and amortization                        16,808         3,257

Share-based compensation and associated expense(1) 8,136 10,181
Impairment

                                            3,500             -
Initial public providing transaction associated               -         2,831
Tax associated provisions                                    -           939
Adjusted EBITDA                                   $  (2,769 )   $  (2,264 )

(1) Includes $7.9 million and $6.8 million in equity-classified expense for the
years ended December 31, 2021 and 2020, respectively, and $0.4 million and $3.4
million in liability-classified (profit) expense, for the years ended December
31, 2021 and 2020, respectively. Such quantities excluded capitalized quantities.
Refer to Note 11 - Share-based Compensation for additional particulars.



Key Performance Indicators



Our administration makes use of the next key efficiency indicators ("KPIs") as
indicators of developments and outcomes of the enterprise. These KPIs give our administration
a sign of the extent of engagement between the participant and the Company's
platforms. No estimation is critical in quantifying these KPIs, nor do they
symbolize U.S. GAAP based mostly measurements. These KPIs are topic to numerous dangers
resembling buyer focus, competitors, licensing and regulation, and
macroeconomic situations. Refer to "Item 1A. Risk Factors" for additional dangers
related to our enterprise which might have an effect on these KPIs.



                                               Year Ended
                                              December 31,                Change
                                            2021        2020       Amount       Percent

B2B Gross Operator Revenue (in thousands and thousands) $ 921.1 $ 545.2 $ 375.9

         68.9 %
B2B Take Rate                                  4.9 %       6.4 %       N/A          (1.5 )%
B2C Active Customers (in hundreds)(1)         394         158         236 

        n.m.
B2C Marketing Spend Ratio(1)                    15 %        19 %       N/A            (4 )%
B2C Sports Margin(1)                           6.8 %       6.7 %       N/A           0.1 %

(1) B2C working outcomes of Coolbet have been included within the consolidated
monetary statements starting on January 1, 2021.

B2B Gross Operator Revenue



We outline B2B Gross Operator Revenue because the sum of our B2B company prospects'
gross income from SIM, gross gaming income from RMiG, and gross sports activities win
from sportsbook choices. B2B Gross Operator Revenue, which isn't comparable
to monetary info offered in conformity with U.S. GAAP, provides
administration and customers of our monetary statements a sign of the extent of
transactions processed by our B2B company prospects' platforms and permits
administration to know the extent of exercise that our platform is processing.



The improve in Gross Operator Revenue for the yr ended December 31, 2021, as
in comparison with the yr ended December 31, 2020, was pushed primarily by expanded
legalization of RMiG and sports activities betting in further U.S. states and our launch
of RMiG options for brand spanking new and present prospects in these jurisdictions, the
most important of which was Michigan in January 2021. Additional will increase in
Europe of RMiG and SIM have been pushed by natural development from new and present

prospects.



47






B2B Take Rate



We outline B2B Take Rate as a quotient of B2B web income retained by the Company
over the full gross income generated by our B2B company prospects. B2B web
income is calculated by deducting from gross income, the statutory taxes,
promotional bonuses, and our B2B buyer's share outlined by industrial
agreements. B2B Take Rate provides administration and customers of our monetary statements
a sign of the impression of the statutory phrases and the effectivity of the
industrial phrases on the enterprise.



The lower in B2B Take Rate for the yr ended December 31, 2021, as in contrast
to the yr ended December 31, 2020, was pushed by a shift in income from SIM
to RMiG that inherently has a decrease take price; a rise in RMiG and sports activities
betting income from U.S. states with larger taxes, particularly Pennsylvania
and Michigan; and elevated promotional bonuses by sure B2B prospects in new
jurisdictions, resembling Wynn in Michigan and FanDuel in Michigan, West Virginia,
and Connecticut.



B2C Active Customers



We outline B2C Active Customers as a person that locations a wager throughout the interval.
This metric permits administration to observe the shopper segmentation, development
drivers, and in the end creates alternatives to determine and add worth to the
person expertise. This metric permits administration and customers of the monetary
statements to measure the platform visitors and observe associated developments.



B2C Marketing Spend Ratio



We outline B2C Marketing Spend Ratio as the full B2C direct advertising and marketing expense
for the interval divided by the full B2C revenues. This metric permits administration
to measure the success of selling prices throughout a given interval. Additionally,
this metric permits administration to match throughout jurisdictions and different subsets,
as an extra indication of return on advertising and marketing funding.



B2C Sports Margin

We outline B2C Sports Margin because the ratio of wagers minus winnings to whole
quantity wagered, adjusted for open wagers at interval finish. Sports betting includes
a person putting a guess on the end result of a sporting occasion with the prospect to win a
pre-determined quantity, sometimes called mounted odds. Our B2C sportsbook
income is generated by setting odds which might be meant to supply a built-in
theoretical margin in every sports activities guess supplied to our customers. This metric permits
administration to measure sportsbook efficiency towards its anticipated consequence.

Liquidity and Capital Resources

Material Cash Commitments

Our major makes use of of money embrace funding our ongoing working capital wants,
content material licensing mentioned under, creating and sustaining our proprietary
software program platforms.

During the yr ended December 31, 2021, we entered into Content Licensing
Agreements (the "Agreement") with a third-party playing content material supplier
specializing in creating and licensing interactive video games. The Agreement grants
us unique proper to make use of and distribute the web gaming content material in North
America. The content material supplier is dedicated to creating a minimal variety of
video games for our unique use over the five-year time period, topic to extensions. In
change, we're required to pay mounted charges, totaling $30.0 million, of which
$5.0 million was due upon execution of the Agreement, and the remaining mounted
charges are paid systematically over the preliminary five-year time period. Additional
funds may very well be required if our whole income generated from the licensed
content material exceed sure stipulated thresholds. In the occasion that the Agreement is
terminated, precise money outlays may very well be lower than at present contemplated.

48

We count on our capital expenditures to proceed to extend within the rapid
future, as we search to increase our enterprise by natural development and potential
enterprise acquisitions. Specifically, the important thing parts of our development technique
embrace, however usually are not restricted to, the enlargement of our gaming content material on our
platform, primarily by the Agreements, our anticipated launch of the
built-in B2B sportsbook know-how answer in North America within the fourth
quarter of 2022, the continued integration of Coolbet's sports activities betting
know-how and worldwide B2C operations, the launch of regulated gaming in
new U.S. states and potential enterprise acquisitions.



The execution of our development technique would require continued important capital
expenditures. We count on to proceed investing in our merchandise and applied sciences
as we search to scale our enterprise.



We incurred capital expenditures of $14.0 million and $5.9 million for the years
ended December 31, 2021 and 2020, respectively. Of these expenditures, purchases
associated to internally developed capitalized software program represented $11.6 million
and $4.4 million, respectively, property and tools (together with licenses for
inner use software program) represented $1.9 million and $1.2 million, respectively,
and intangible property (together with licenses to function in associated jurisdictions)
represented $0.4 million and $0.2 million, respectively, for the years ended
December 31, 2021 and 2020.



Sources of Liquidity



We have primarily funded our operations by money generated from operations
and money available. In May 2020, we accomplished our U.S. preliminary public providing
underneath which we offered an combination of seven,337,000 abnormal shares for web proceeds
of $57.4 million and in December 2020, we carried out a follow-on providing underneath
which we offered 6,790,956 abnormal shares for web proceeds of $98.5 million. In
January 2021, we accomplished the acquisition of Coolbet for a purchase order value of
$218.1 million, together with the issuance of 5,260,516 abnormal shares, alternative
equity-based awards valued at $0.3 million and money of $111.1 million, which was
funded from the follow-on providing proceeds and out there money available.

Our major supply of liquidity for our working capital is money flows generated
from operations and our money available of $39.5 million at December 31, 2021.

We consider money generated from operations and money available will probably be adequate to
meet our working capital and capital expenditure necessities for a minimum of the
subsequent twelve months. We can also search to reinforce our aggressive place by
further complementary acquisitions in each present and new markets.
Therefore, every now and then, we might entry the fairness or debt markets to boost
further funds to finance potential acquisitions.



In the long term, to the extent that our present assets, together with our
means to generate working money flows, are inadequate to fulfill our money
necessities, we might search further fairness or debt financing. Our means to do
so will depend on prevailing financial situations and different components, lots of which
are past our management.

We don't at present have any credit score amenities or related debt preparations in
place and can't present any assurance as to the provision or phrases of any
future financing that we might require to assist our operations. If the wanted
financing shouldn't be out there, or if the phrases of financing are much less fascinating than
we count on, we could also be compelled to lower our degree of funding in new merchandise
and applied sciences, discontinue additional enlargement of our enterprise, or cut back
our present operations, any of which may have an antagonistic impression on our
enterprise and monetary prospects.



49






Cash Flow Analysis



A abstract of our working, investing and financing actions is proven within the
following desk:



                                          Year Ended
                                         December 31,                     Change
({dollars} in hundreds)                2021           2020          Amount        Percent
Net money utilized in working
actions                         $   (5,003 )   $   (6,348 )        1,345          (21.2 )%
Net money utilized in investing
actions                           (106,674 )       (5,919 )     (100,755 )         n.m.
Net money offered by financing
actions                                169        154,708       (154,539 )        (99.9 )%
Effect of international change charges
on money                                (1,669 )          (66 )       (1,603

) n.m.
Net (lower) improve in money $ (113,177 ) $ 142,375 $ (255,552 ) (179.5 )%

n.m. = not significant



Operating Activities



Net money utilized in working actions decreased $1.3 million primarily ensuing
from a lower in web loss after changes to reconcile web loss to money
flows from operations of $8.1 million. The lower in money utilized in working
actions was offset by an unfavorable change in working property and
liabilities, primarily because of funds totaling $8.5 million to third-party
playing content material suppliers for the rights to make use of and distribute their on-line
gaming content material in North America.



Investing Activities

Net money utilized in investing actions elevated $100.8 million primarily as a
results of $92.7 million money paid for the acquisition of Coolbet, web of money
acquired and a $7.2 million improve in spend for capitalized software program
growth prices primarily associated to $4.3 million invested in relation to new
B2B buyer launches, product enhancements, and new options, $1.6 million for
the B2B sportsbook know-how answer in North America, and $1.3 million
invested in relation to new B2C product enhancements and options.



Financing Activities



Net money offered by financing actions decreased by $154.5 million primarily
because of $57.4 million in proceeds from our U.S. preliminary public providing in May
2020 and $99.4 million in proceeds from the issuance of abnormal shares in a
follow-on public providing in December 2020 that didn't recur throughout the yr
ended December 31, 2021, and a lower in money proceeds on the train of
worker share choices of $1.6 million. The lower was partially offset by
decreased funds of providing prices of $1.4 million and money consideration paid
to the earlier shareholders of GAN plc pursuant to the May 2020 Scheme of
Arrangement of $2.5 million.

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