GAN(GAN) - 2024 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) This section presents GAN Limited's unaudited condensed consolidated financial statements for Q1 2024, covering key financial statements and accounting notes Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheets | Metric | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | Change (in thousands) | | :-------------------------------- | :------------------------------ | :------------------------------- | :-------------------- | | Total Assets | $81,403 | $87,504 | -$6,101 | | Total Liabilities | $90,325 | $92,108 | -$1,783 | | Total Shareholders' Deficit | $(8,922) | $(4,604) | -$4,318 | | Cash | $36,592 | $38,578 | -$1,986 | Condensed Consolidated Statements of Operations Condensed Consolidated Statements of Operations | Metric | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | Change (in thousands) | | :-------------------------------- | :--------------------------------------- | :--------------------------------------- | :-------------------- | | Revenue | $30,651 | $35,129 | -$4,478 | | Operating Loss | $(3,303) | $(6,001) | $2,698 | | Net (Loss) Income | $(4,160) | $1,501 | -$5,661 | | (Loss) Earnings Per Share, basic and diluted | $(0.09) | $0.03 | -$0.12 | Condensed Consolidated Statements of Comprehensive Loss Condensed Consolidated Statements of Comprehensive Loss | Metric | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | Change (in thousands) | | :-------------------------------- | :--------------------------------------- | :--------------------------------------- | :-------------------- | | Net Loss | $(4,160) | $1,501 | -$5,661 | | Foreign currency translation adjustments | $(767) | $966 | -$1,733 | | Comprehensive (Loss) Income | $(4,927) | $2,467 | -$7,394 | Condensed Consolidated Statements of Changes in Shareholders' Equity Condensed Consolidated Statements of Changes in Shareholders' Equity | Metric | Balance at Jan 1, 2024 (in thousands) | Balance at March 31, 2024 (in thousands) | Balance at Jan 1, 2023 (in thousands) | Balance at March 31, 2023 (in thousands) | | :-------------------------------- | :------------------------------------- | :--------------------------------------- | :------------------------------------- | :--------------------------------------- | | Total Shareholders' (Deficit) Equity | $(4,604) | $(8,922) | $20,768 | $24,607 | | Net (Loss) Income | $(4,160) | $(4,160) | $1,501 | $1,501 | | Share-based compensation | $840 | $840 | $1,382 | $1,382 | Condensed Consolidated Statements of Cash Flows Condensed Consolidated Statements of Cash Flows | Metric | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | Change (in thousands) | | :-------------------------------- | :--------------------------------------- | :--------------------------------------- | :-------------------- | | Net cash used in operating activities | $(280) | $(4,175) | $3,895 | | Net cash used in investing activities | $(727) | $(1,762) | $1,035 | | Net cash provided by (used in) financing activities | $3 | $(47) | $50 | | Net decrease in cash | $(1,986) | $(5,165) | $3,179 | | Cash, end of period | $36,592 | $40,755 | -$4,163 | Notes to Condensed Consolidated Financial Statements - GAN Limited operates in two segments: B2B (GameSTACK™, GAN Sports for U.S. casinos) and B2C (Coolbet online sports betting and casino in Northern Europe, Latin America, Canada)[24] - The Company entered into a Merger Agreement with SEGA SAMMY CREATION INC. on November 7, 2023, under which GAN will become a wholly-owned subsidiary, with shareholders approving the merger on February 13, 2024[25][27] - The merger consideration is $1.97 per ordinary share in cash, with all outstanding restricted shares, restricted share units, and options vesting and converting to cash at the effective time[29] - Financial statements are prepared under U.S. GAAP, consolidating all wholly-owned subsidiaries, with intercompany transactions eliminated[30] - As of March 31, 2024, the Company had an accumulated deficit of $313.5 million and a net loss of $4.2 million for the quarter[31] - The Amended Credit Facility requires minimum liquidity of $10.0 million, and the Company was in compliance as of March 31, 2024, but future covenant violations are possible[33] - Foreign currency translation adjustments resulted in a net loss of $767 thousand for Q1 2024, compared to a gain of $966 thousand for Q1 2023[17] - Approximately $28.5 million of cash deposits are held in foreign countries (Northern Europe and Latin America), subject to local banking laws[38] - Macroeconomic conditions (inflation, higher interest rates, recession, strong U.S. dollar) can adversely impact the Company's results, affecting consumer spending and wagering[40] - B2B revenue is primarily from GameSTACK™ SaaS platform, content licensing, development, and hardware resale, with fees often usage-based or fixed[42][43] - Remaining unsatisfied performance obligations related to fixed minimum guaranteed revenue totaled $47.1 million as of March 31, 2024, with $34.0 million expected to be satisfied within five years[43] - B2C operations include sportsbook, poker, casino, live casino, and virtual sports via www.coolbet.com, with revenue recognized at the conclusion of each contest or wager[53][57] - Cost of revenue includes content license fees, payment processing fees, platform technology costs, gaming duties, and sportsbook feed services, excluding depreciation and amortization[60] - Sales and marketing expenses, including B2C user acquisition, are expensed as incurred[61] - General and administrative expenses include professional services, compensation, and foreign currency transaction gains/losses[63] - Share-based compensation expense is recognized for share options and restricted shares/units, valued at grant date fair value and amortized over the vesting period[65][67] - Cash includes balances held at banks and third-party service providers, with $10.2 million held to satisfy liabilities to users as of March 31, 2024[69] - Capitalized software development costs are amortized on a straight-line basis over 3-5 years, with development in progress for GAN Sports and GameSTACK technology[70][71][91] Property and Equipment, Net | Metric | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | | :-------------------------------- | :------------------------------ | :------------------------------- | | Total Property and Equipment, net | $3,737 | $4,159 | | Accumulated Depreciation | $(3,40