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Esports Entertainment Group Inc. (EEG), a global iGaming and B2B esports solutions and content provider, has sent the shareholders the letter below from its CEO, Alex Igelman. The letter includes an update on the ongoing restructuring plan aimed to drive accelerated growth and improved operational efficiency.
My fellow shareholders
I joined the Company about three months ago and immediately began a review from top to bottom of the organization, based on my opinion as to where the esports industry and esports betting are headed. I then incorporated this into a coherent vision for the Company. Esports Entertainment has several assets it acquired in the past and these assets will serve as the basis for the new direction of the Company. I am confident that by concentrating our efforts on streamlining our business we will be able to achieve a dominant position in this fast-growing industry and drive profitability over the long term.
Strategic Focus
We plan to focus more on esports betting as a B2C iGaming provider in international markets operating under the MGA license. This will be done through new betting offerings and content. The Company is also implementing strategies for expanding its B2C esports betting services via its Idefix Platform, and we’re in the final stages to integrate the Oddin.gg iFrame on our platform. We plan to eventually offer a “esports first” Idefix B2B platform to be sold and distributed to third parties. We anticipate a unique chance to bridge the iGaming world and esports through the Idefix iGaming Platform and MGA-based B2C suites, as well as growth opportunities in B2B platforms.
We expect to focus our efforts in the US on aggregating B2B solutions and content for esports, esports gaming and related industries. The Company will also focus on bespoke esimulator competitions and esimulator-related content. EEG’s ggCircuit, which is a division of EEG that has a strong presence in both the US and worldwide, offers esports venues management solutions. We believe that the education sector is one of the most promising markets to target in the near future. There has been a lot of growth on both the domestic and international campuses, as well as the K-12 schools. We plan to improve the existing ggCircuit with features that allow integration of esports betting content, where legal, and to incorporate several add-ons. This will increase revenue for the Company and its clients.
Operational Efficiency
To streamline our business, we divest or close non-core lines of business. In January, we sold our eSports Spanish Gaming licence for about $1.2 million. In February, following this sale, we sold the Bethard company for $1.7 million at closing. We also eliminated $7.5 million of debt and liabilities owed to Bethard. In March we began the liquidation process of Argyll entertainment, a UK-based online gambling company with recurring losses.
In addition, we have reduced our headcount, from 158 employees full-time at the end of December 2022 to 99 employees full-time, including planned reductions. As a result of the actions taken so far, it is expected that annualized salaries will decline by 36%. We incurred some upfront costs for the restructuring but, in time, we expect these initiatives to reduce our annual operating expenses by more than $4,000 million. We have also identified additional cost-saving opportunities.
Balance Sheet Improvement
Our balance sheet has been dramatically improved. We have reduced our debt and other liabilities to approximately $27.1 Million since December 31, 2022. Our Senior Convertible Note principal was reduced from $32.2 Million at December 31 2022 to $15.9 Million as of March 31 2023, a reduction of $16.3M. The Senior Convertible Note holder’s other payables were reduced by $2.5 Million. We eliminated $7.5 million in debt and liabilities through the sale of Bethard earlier this year. We also terminated a leasing agreement, which resulted in a reduction of $0.8 million in the lease liability. We are grateful for the support from our senior lender, and we’re working to convert more debt into preferred equity. This shows their confidence in long-term prospects of the business.
Management Restructuring
Michael Villani was recently promoted to interim CFO in addition to my appointment as CEO at the beginning of this year. Michael has a wealth of experience in capital markets, corporate finance, and restructuring the business. He was instrumental in reducing costs and restructuring the company. Michael was a Director at KPMG’s Deal Advisory Practice before joining Esports Entertainment. He supported clients with technical accounting and buy-side and sold-side transactions. Michael also held senior accounting positions at several public companies and served as Chief Financial Officer for a Geneva-based Hedge Fund. We also eliminated senior positions in non-core areas that did not align with the Company’s future.
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Esports betting is not uniform and often a byproduct of sports betting. It’s also something that US bookmakers are struggling to understand and integrate into their platforms. Esports Entertainment is a company with a number of assets that we consider to be very valuable and differentiating. We believe these assets will be crucial for the future success of this industry. Our vision is being executed with a focus on esports gambling solutions and esports simulation content. We target both B2B as well as B2C.
I am convinced that the achievements we have made in just three months are really noteworthy. This is only the beginning of our journey. Our team is now made up of seasoned gambling executives and former regulators as well as video game industry professionals who are all committed to realizing our vision. Diversifying our revenue sources will help us create a business model that is more resilient and sustainable. I am confident that with the right leadership, financial discipline and direction, we can establish Esports Entertainment in this rapidly growing market while unlocking value to shareholders.
We are grateful for the support from our shareholders, and we look forward to bringing you more updates in the coming weeks.
Alex Igelman
Chief Executive Officer
