ESE Entertainment Announces 2021 Audited Financial Results

Rhea-AI Summary

ESE Entertainment Inc. (OTCQB: ENTEF) reported record revenues of $11.38 million for Fiscal 2021, marking an impressive 2818% increase year-over-year. Q4 2021 stood out with revenues of $6.24 million, up 3018% from Q4 2020. Despite these gains, the company faced an adjusted EBITDA loss of $3.50 million, worsening from a loss of $2.04 million the previous year. Total assets rose to $15.94 million, a 1793% increase, and cash reserves increased to $4.83 million. Future growth is anticipated with recent acquisitions of Frenzy and GameAddik.

Positive

• Record annual revenue of $11.38 million for Fiscal 2021, up 2818% YoY.
• Q4 2021 revenue reached $6.24 million, a 3018% increase YoY.
• Total assets grew to $15.94 million, a 1793% increase YoY.
• Cash balance increased to $4.83 million from $0.55 million YoY.
• Recent acquisitions of Frenzy and GameAddik expected to drive future growth.

Negative

• Adjusted EBITDA loss widened to $3.50 million from $2.04 million in the prior year.
• Net loss for the year was $18.66 million, significantly higher than $3.80 million in Fiscal 2020.

• Fiscal 2021 record revenue of $11.38 million, year-over-year increase of 2818%
• Q4 2021 record revenue of $6.24 million (unaudited), representing year-over-year increase of 3018%
• Financial results do not include recently completed acquisitions of Frenzy and GameAddik (subsequent events)
  

VANCOUVER, British Columbia, Feb. 23, 2022 (GLOBE NEWSWIRE) -- ESE Entertainment Inc. (“ESE” or the “Company”) (TSXV: ESE) (OTCQB: ENTEF), a gaming and esports company that provides a range of services to leading video game developers and publishers, is pleased to announce that is has filed its audited annual consolidated financial statements (the “Financial Statements”) and related Management Discussion and Analysis (the “MD&A”) for the 12 months ended October 31, 2021 (“Fiscal 2021”) the highlights of which are presented in this news release. The Financial Statements and MD&A are available on www.sedar.com and on the Company’s website.

Financial Highlights:

• Revenue of $6.24 million for the three months ended October 31, 2021 (unaudited), representing a 3018% increase from revenue for the three months ended October 31, 2020 of $0.20 million (unaudited).
• Annual consolidated revenue in Fiscal 2021 of $11.38 million, representing a 2818% increase from annual consolidated revenue for the 12 months ended October 31, 2020 (“Fiscal 2020”) of $0.39 million.
• Annual gross profit in Fiscal 2021 of $1.15 million, representing a 195% increase from annual gross profit in Fiscal 2020 of $0.39 million.
• Adjusted EBITDA¹ loss of $3.50 million in Fiscal 2021, compared to adjusted EBITDA loss of $2.04 million in Fiscal 2020.
• Total assets as at October 31, 2021 of $15.94 million, representing a 1793% increase from total assets as at October 31, 2020 of $0.84 million.
      ^{¹ Adjusted EBITDA is a non-IFRS measure. Refer to “Non-IFRS Measures” at the end of this press release.}
  
• Cash balance as at October 31, 2021 of $4.83 million compared to $0.55 million as at October 31, 2020.

“We are proud to publish a record year, with quadruple-digit revenue growth and financial performance that highlights the growth our company is experiencing. We are entering 2022 with momentum,” said Konrad Wasiela, CEO of ESE. “ESE generated record quarterly revenues in the fourth quarter of 2021, led by record organic growth in existing assets, our ability to acquire and integrate assets, our ability to attract and retain clients for expanded contracts, and ultimately our ability to deliver 360 esports and gaming technology and services for gaming publishers and developers. With the subsequent events of acquiring Frenzy and GameAddik, we anticipate strong continued quarterly growth.”

“Q4 2021 revenue growth was strong at 3018% year-over-year, but it is important to note these figures do not include the recently completed acquisitions of Frenzy and GameAddik. We anticipate continued growth from organic business plus these new key assets. As we move into 2022, we have an increased focus on revenue and gross profit margin expansion,” said Rob Kang, ESE’s Chief Financial Officer. “Increased revenues and higher gross margins are key to reaching our goals, and we believe our investments in operations will drive performance in the quarters ahead.”

Q4 2021 Operational Highlights:

• Completion of the acquisition of Auto Simulation Ltd. DBA Digital Motorsports, an Ireland-based provider of advanced simulation racing infrastructure, technology and support.
• Entry into a binding share purchase agreement to acquire Frenzy sp. z.o.o., a European esports media and technology company (“Frenzy”).
• Launch of a set of non-fungible tokens (NFTs) in collaboration with its esports team, K1CK esports, and Bitcoin Vault.
  

Subsequent Events:

• On November 12, 2021, the Company completed the acquisition of 100% of the issued and outstanding shares of Frenzy, a European esports media and technology company.
• On February 14, 2022, the Company completed the acquisition of 100% of the issued and outstanding shares of 9327-7358 Quebec Inc. DBA GameAddik (“GameAddik”), a Canadian technology company focused on gaming and esports.

The following table presents a reconciliation of Net income (loss) to Adjusted EBITDA for Fiscal 2021 and Fiscal 2020:

	Year ended October 31, 2021	Year ended October 31, 2020
(In Canadian dollars)	$	$
Net loss for the year	(18,663,912)	(3,802,333)
Provision for income taxes	614	-
Depreciation	38,974	-
Commissions	54,861	-
Finder's fees and stamp duty for acquisitions	1,669,923	-
Share-based payments	9,630,008	150,651
Interest	11,459	-
Impairment of K1CK assets	207,500	-
Impairment of WPG assets	3,548,313	-
Listing Cost	-	1,600,287
Foreign exchange (gain) loss	2,142	14,150
Adjusted EBITDA¹	(3,500,118)	(2,037,245)

^{¹ Adjusted EBITDA is a non-IFRS measure. Refer to “Non-IFRS Measures” at the end of this press release.}

The financial and operating results included in this news release are based on the audited results which were released on February 23, 2022. It is only in the context of the fulsome information and disclosures contained in the Financial Statements and MD&A that an investor can properly analyze this information. The Financial Statements and MD&A will be published under the Company’s profile on SEDAR at www.sedar.com.

All amounts are in Canadian dollars.

ESE Entertainment Inc.

Konrad Wasiela
Chief Executive Officer and Director

About ESE Entertainment Inc.
ESE is a Europe based entertainment and technology company focused on gaming and esports. The Company provides a range of services to leading video game developers, publishers, and brands by providing technology, infrastructure, and fan engagement services internationally. ESE also operates its own ecommerce channels, esports teams, and gaming leagues. In addition to the Company’s organic growth opportunities, the Company is considering selective acquisitions that align with its objective of becoming a dominant global player in esports technology and infrastructure. | www.esegaming.com

CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATION

This news release contains certain statements that may constitute forward-looking information under applicable securities laws. All statements, other than those of historical fact, which address activities, events, outcomes, results, developments, performance or achievements that ESE anticipates or expects may or will occur in the future (in whole or in part) should be considered forward-looking information. Such information may involve, but is not limited to, statements with respect to anticipated revenue growth, financial results, and margin expansion and the drivers thereof. Often, but not always, forward-looking information can be identified by the use of words such as "plans", "expects", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates", or "believes" or variations (including negative variations) of such words and phrases, or statements formed in the future tense or indicating that certain actions, events or results "may", "could", "would", "might" or "will" (or other variations of the forgoing) be taken, occur, be achieved, or come to pass. Forward-looking information is based on currently available competitive, financial and economic data and operating plans, strategies or beliefs as of the date of this news release, but involve known and unknown risks, uncertainties, assumptions and other factors that may cause the actual results, performance or achievements of ESE to be materially different from any future results, performance or achievements expressed or implied by the forward-looking information. Such factors may be based on information currently available to ESE, including information obtained from third-party industry analysts and other third-party sources, and are based on management's current expectations or beliefs regarding future growth, results of operations, future capital (including the amount, nature and sources of funding thereof) and expenditures. Any and all forward-looking information contained in this press release is expressly qualified by this cautionary statement. Trading in the securities of ESE should be considered highly speculative.

This press release contains future-oriented financial information and financial outlook information (collectively, "FOFI") about ESE’s prospective results of operations, revenues and margins and components thereof, all of which are subject to the same assumptions, risk factors, limitations, and qualifications as set forth in the above paragraph. FOFI contained in this document was approved by management as of the date of this document and was provided for the purpose of providing further information about ESE’s future business operations. ESE disclaims any intention or obligation to update or revise any FOFI contained in this document, whether as a result of new information, future events or otherwise, unless required pursuant to applicable law. Readers are cautioned that the FOFI contained in this document should not be used for purposes other than for which it is disclosed herein.

NON-IFRS MEASURES

This press release includes references to adjusted EBITDA. Adjusted EBITDA is a non-IFRS financial measure and is defined by the Company as net income or loss before income taxes, depreciation, commissions, finder's fees and stamp duty for acquisitions, share-based payments, interest, impairment of assets, listing costs, and foreign exchange gain or loss. We believe that adjusted EBITDA is a useful measure of financial performance because it provides an indication of the Company’s ability to capitalize on growth opportunities in a cost-effective manner, finance its ongoing operations and service its financial obligations.

This non-IFRS financial measure is not an earnings or cash flow measure recognized by IFRS and does not have a standardized meaning prescribed by IFRS. Our method of calculating such a financial measure may differ from the methods used by other issuers and, accordingly, our definition of this non-IFRS financial measure may not be comparable to similar measures presented by other issuers. Investors are cautioned that non-IFRS financial measures should not be construed as an alternative to net income determined in accordance with IFRS as indicators of our performance or to cash flows from operating activities as measures of liquidity and cash flows.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

For further information about ESE, please contact:
Daniel Mogil, Investor Relations
investors@esegaming.com
647-492-1535

ESE ENTERTAINMENT INC.
Consolidated Statements of Financial Position
As at October 31, 2021 and 2020
(Expressed in Canadian Dollars )

		2021		2020
ASSETS
Current assets
Cash	$	4,825,072	$	550,011
Receivables (Note 7)		844,148		262,596
Prepaid expense and deposits		448,616		29,486
Inventory		406,549		-
		6,524,385		842,093
Property and equipment (Note 8)		346,995		-
Deposit (Note 9)		311,219		-
Unallocated purchase price (Note 6)		8,761,762		-
Total assets	$	15,944,361	$	842,093
LIABILITIES
Current liabilities
Accounts payable and accrued liabilities (Notes 10 and 16)	$	1,000,785	$	263,425
Current portion of lease liabilities (Note 11)		71,574		-
Deferred revenue (Note 17)		234,390		115,040
		1,306,749		378,465
Lease liabilities (Note 11)		126,551		-
		1,433,300		378,465
EQUITY
Share capital (Note 13)		28,707,147		4,088,263
Share subscriptions received		1,050		-
Commitment to issue shares (Note 6, 13 and 16)		4,755,754		50,000
Contributed surplus		2,388,107		305,416
Accumulated other comprehensive (loss) income		(107,129)		5,983
Deficit		(21,202,268)		(3,986,034)
Equity attributable to shareholders		14,542,661		463,628
Non-controlling interest		(31,600)		-
Total equity		14,511,061		463,628
Total liabilities and equity	$	15,944,361	$	842,093

ESE ENTERTAINMENT INC.
Consolidated Statements of Loss and Comprehensive Loss
For the years ended October 31, 2021 and 2020
(Expressed in Canadian Dollars)

			2021			2020
Revenue		$	11,384,731		$	390,171
Cost of sales			10,234,688			-
Gross Profit			1,150,043			390,171
Expenses
Advertising and event planning			1,101,358			282,192
Depreciation (Note 8)			38,974			-
Bank charges			26,327			-
Consulting fees (Note 16)			2,011,212			1,394,191
Commissions			54,861			-
Finder’s fees and stamp duty for acquisitions (Note 5, 6 and 13)			1,669,923			-
Office and miscellaneous			177,107			115,589
Professional fees (Note 16)			737,218			286,660
Rent			30,500			18,192
Share-based payments (Notes 13 and 16)			9,630,008			150,651
Transfer agent and filing fees			193,835			42,644
Travel and conferences			67,002			48,230
Wages and benefits			326,487			245,315
Website hosting and development			8,677			13,048
			16,073,489			2,596,712
Loss before other items			(14,923,446)			(2,206,541)
Other items:
Other income			29,562			18,645
Interest			(11,459)			-
Impairment of K1CK assets (Note 18)			(207,500)			-
Impairment of WPG assets (Note 5)			(3,548,313)			-
Listing cost (Note 4)			-			(1,600,287)
Foreign exchange loss			(2,142)			(14,150)
			(3,739,852)			(1,595,792)
Net loss for the year before taxes			(18,663,298)			(3,802,333)
Provision for income taxes (Note 20)			(614)			-
Net loss for the year			(18,663,912)			(3,802,333)
Other comprehensive income
Gain (loss) on translation of foreign operations			(113,112)			6,779
Total comprehensive loss for the year		$	(18,777,024)		$	(3,795,554)
Net income (loss) attributable to:
Shareholders of the company		$	(17,216,234)		$	(3,802,333)
Non-controlling interest			(1,447,678)			-
Net loss for the year		$	(18,663,912)		$	(3,802,333)
Total comprehensive income (loss) attributable to:
Shareholders of the company		$	(17,329,346)		$	(3,795,554)
Non-controlling interest			(1,447,678)			-
Total comprehensive loss for the year		$	(18,777,024)		$	(3,795,554)
Basic and diluted loss per common share		$	(0.38)		$	(0.14)
Weighted average number of common shares outstanding			45,500,947			26,785,387

ESE ENTERTAINMENT INC.
Consolidated Statements of Cash Flows
For the years ended October 31, 2021 and 2020
(Expressed in Canadian Dollars)

		2021				2020
CASH FLOWS PROVIDED BY (USED IN)
OPERATING ACTIVITIES
Loss for the year	$	(18,663,912)			$	(3,802,333)
Items not affecting cash:
Accretion on lease liabilities		3,785				-
Consulting fees paid by shares		-				50,000
Depreciation		38,974				-
Finder’s fees for acquisitions paid by shares		1,475,956				-
Impairment of assets		3,755,813				-
Listing cost		-				1,600,287
Provision for income taxes		614				-
Share-based payments		9,630,008				150,651
Change in non-cash working capital items:
Receivables		(1,503)				(242,944)
Inventory		(187,660)				-
Prepaid expenses and deposits		(59,222)				(29,246)
Deferred revenue		(33,530)				115,040
Accounts payable and accrued liabilities, income tax payable and shareholder loans		(449,556)				191,135
Net cash used in operating activities		(4,490,233)				(1,967,410)
INVESTING ACTIVITIES
Cash paid to acquire WPG		(128,019)				-
Cash paid to acquire Digital Motorsports		(1,681,250)				-
Cash acquired on acquisition of subsidiaries		208,584				77,873
Funds to WPG prior to acquisition		(290,000)				-
Cash paid to acquire K1CK assets		(120,000)				-
Loan proceeds from Kepler before RTO		-				25,830
Investment		(311,219)
Equipment		(17,731)				-
Net cash (used in) provided by investing activities		(2,339,635)				103,703
FINANCING ACTIVITIES
Proceeds from loan payable		-				20,000
Repayment of lease liabilities		(23,953)				-
Repayment of loans and credit facilities		(509,086)				(20,000)
Shares issued for cash		12,698,593				2,294,475
Share issue cost		(963,628)				(41,580)
Share subscriptions received		1,050				-
Net cash provided by financing activities		11,202,976				2,252,895
Foreign exchange effect on cash		(98,047)				6,779
Change in cash for the year		4,275,061				395,967
Cash, beginning of year		550,011				154,044
Cash, end of year	$	4,825,072			$	550,011
Cash paid for interest during the year	$	-			$	1,600
Cash paid for income taxes during the year	$	-			$	-

FAQ

What are the revenue figures for ESE Entertainment for Fiscal 2021?

ESE Entertainment reported record revenue of $11.38 million for Fiscal 2021, a 2818% increase from the previous year.

What was ESE Entertainment's adjusted EBITDA for Fiscal 2021?

ESE recorded an adjusted EBITDA loss of $3.50 million for Fiscal 2021.

How much revenue did ESE Entertainment generate in Q4 2021?

In Q4 2021, ESE generated revenue of $6.24 million, reflecting a 3018% year-over-year increase.

What is the future outlook for ESE Entertainment following recent acquisitions?

Following the acquisitions of Frenzy and GameAddik, ESE anticipates strong continued growth and expansion.