gan-20210331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_________________________

FORM 10-Q

_________________________

(Mark One)


x			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021


o			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 001-39274

_________________________

GAN Limited

(Exact name of registrant as specified in its charter)

_________________________

Bermuda

Not Applicable

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

400 Spectrum Center Drive,

Suite 1900,

Irvine,

California

92618

(Address of principal executive offices)

(Zip Code)

(702) 964-5777

(Registrant’s telephone number, including area code)

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

_________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Ordinary shares (Par Value $0.01)

GAN

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

At May 3, 2021, there were 42,007,600 ordinary shares outstanding.

Table of Contents

GAN LIMITED

FORM 10-Q

INDEX


		Page
	PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020	5
	Condensed Consolidated Statements of Operations for the three months ended March 31, 2021 and 2020	5
	Condensed Consolidated Statements of Comprehensiv e Loss for the three months ended March 31, 2021 and 2020	6
	Condensed Consolidated Statements of Changes in Stockholders' Equity for the three months en ded March 31, 2021 and 2020	7
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020	8
	Notes to Condensed Consolidated Financial Statements	9
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	37
Item 4.	Controls and Procedures	37
	PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	37
Item 1A.	Risk Factors	37
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37
Item 6.	Exhibits	37
	SIGNATURES	39

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

GAN LIMITED

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)

(Unaudited)


	March 31, 2021		December 31, 2020
ASSETS
Current assets
Cash	$	52,185	$	152,654
Accounts receivable, net	11,945		6,818
Prepaid expenses	2,800		1,912
Other current assets	3,423		2,112
Total current assets	70,353		163,496

Capitalized software development costs, net	8,134		6,648
Goodwill	152,734		—
Intangible assets, net	43,855		468
Other assets	3,926		2,634
Total assets	$	279,002	$	173,246

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	4,329	$	4,926
Accrued compensation and benefits	6,127		4,956
Accrued expenses	4,414		3,363
Liabilities to users	6,916		—
Other current liabilities	3,944		4,067
Total current liabilities	25,730		17,312

Deferred income taxes	2,167		—
Other noncurrent liabilities	559		370
Total liabilities	28,456		17,682

Stockholders’ equity
Ordinary shares, $0.01 par value, 100,000,000 shares authorized, 42,004,100 and 36,635,362 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively	419		365
Additional paid-in capital	312,715		203,842
Accumulated deficit	(50,230)		(45,766)
Accumulated other comprehensive loss	(12,358)		(2,877)
Total stockholders’ equity	250,546		155,564
Total liabilities and stockholders’ equity	$	279,002	$	173,246

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

GAN LIMITED

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share amounts)

(Unaudited)


	Three Months Ended March 31,
	2021		2020
Revenues	$	27,842	$	7,670

Operating costs and expenses
Cost of revenues (1)	8,719		1,692
Sales and marketing	4,101		863
Product and technology	4,850		1,024
General and administrative (1)	10,011		2,391
Depreciation and amortization	3,963		853
Total operating costs and expenses	31,644		6,823
Operating income (loss)	(3,802)		847
Interest expense, net	1		8
Income (loss) before income taxes	(3,803)		839
Income tax provision	661		145
Net income (loss)	$	(4,464)	$	694

Income (loss) per share
Basic	$	(0.11)	$	0.03
Diluted	$	(0.11)	$	0.03

Weighted average ordinary shares outstanding
Basic	41,986,083		21,512,225
Diluted	41,986,083		23,040,345

(1) Excludes depreciation and amortization

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

GAN LIMITED

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands)

(Unaudited)


	Three Months Ended March 31,
	2021		2020

Net income (loss)	$	(4,464)	$	694
Other comprehensive loss, net of tax
Foreign currency translation adjustments	(9,481)		(1,320)
Comprehensive loss	$	(13,945)	$	(626)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

GAN LIMITED

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(In thousands, except share amounts)

(Unaudited)


	Ordinary Shares			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity
	Shares	Amount
Balance at December 31, 2020	36,635,362	$	365	$	203,842	$	(45,766)	$	(2,877)	$	155,564
Net loss	—	—		—		(4,464)		—		(4,464)
Share-based compensation expense	—	—		1,632		—		—		1,632
Issuance of ordinary shares upon exercise of stock options	108,222	1		314		—		—		315
Issuance of ordinary shares as partial consideration in Coolbet acquisition (Note 4)	5,260,516	53		106,630		—		—		106,683
Fair value of replacement equity awards issued as consideration in Coolbet acquisition (Note 4)	—	—		297		—		—		297
Foreign currency translation adjustments	—	—		—		—		(9,481)		(9,481)
Balance at March 31, 2021	42,004,100	$	419	$	312,715	$	(50,230)	$	(12,358)	$	250,546


	Ordinary Shares			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity
	Shares	Amount
Balance at December 31, 2019	21,486,059	$	215	$	40,862	$	(23,024)	$	(2,908)	$	15,145
Net income	—	—		—		694		—		694
Share-based compensation expense	—	—		295		—		—		295
Issuance of ordinary shares upon exercise of stock options	64,908	1		86		—		—		87
Foreign currency translation adjustments	—	—		—		—		(1,320)		(1,320)
Balance at March 31, 2020	21,550,967	$	216	$	41,243	$	(22,330)	$	(4,228)	$	14,901

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

GAN LIMITED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Three Months Ended March 31,
	2021		2020
Cash Flows From Operating Activities
Net income (loss)	$	(4,464)	$	694
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Amortization of software and intangible assets	3,724		792
Depreciation on property and equipment and finance lease right-of-use assets	239		61
Share-based compensation expense	1,632		295
Other	99		31
Changes in operating assets and liabilities, net of acquisition:
Accounts receivable	(5,109)		(3,047)
Prepaid expenses and other current assets	(919)		(386)
Other assets	97		1,055
Accounts payable	(2,093)		(567)
Accrued compensation and benefits	(43)		598
Accrued expenses	1,528		(64)
Liabilities to users	1,808		—
Other liabilities	(644)		(901)
Net cash used in operating activities	(4,145)		(1,439)

Cash Flows From Investing Activities
Cash paid for acquisition, net of cash acquired	(92,404)		—
Expenditures for capitalized software development costs	(2,153)		(534)
Purchases of gaming licenses	(

SEC Form 10-Q filed by GAN Limited