You should read the following discussion and analysis of our financial condition
and results of operations together with the Company's consolidated financial
statements and the related notes thereto. Some of the information contained in
this discussion and analysis or set forth elsewhere, including information with
respect to our plans and strategy for our business, includes forward-looking
statements that involve risks and uncertainties. You should review the
"Cautionary Note Regarding Forward-Looking Statements" and "Risk Factors"
sections for a discussion of important factors that could cause actual results
to differ materially from the results described in or implied by the
forward-looking statements contained in the following discussion and analysis.



Overview



GAN Limited is a Bermuda exempted holding company and through its subsidiaries,
operates in two lines of business. We are a business-to-business ("B2B")
supplier of enterprise Software-as-a-Service ("SaaS") solutions for online
casino gaming, commonly referred to as iGaming, and online sports betting
applications. Beginning with our January 2021 acquisition of Vincent Group
p.l.c., a Malta public limited company ("Coolbet"), we are also a
business-to-consumer ("B2C") developer and operator of an online sports betting
and casino platform, which offers consumers in select markets in Northern
Europe, Latin America and Canada a digital portal for engaging in sports
betting, online casino games and poker. These two lines of business are also the
Company's reportable segments.



The B2B segment develops, markets and sells instances of and GameSTACK
technology, GAN Sports, and iSight Back Office that incorporates comprehensive
player registration, account funding and back-office accounting and management
tools that enable casino operators to efficiently, confidently and effectively
extend their online presence. In 2022, we won a prestigious industry award from
EGR North America - Best Customer Onboarding Partner - in recognition of our
expertise and commitment for delivering industry-leading gaming solutions to
land-based casinos and GAN was named a "Rising Star in Sports Betting" for the
SBC North America Awards 2022. GAN Sports, our newest product offering following
the acquisition of Coolbet, launched in September 2022 and aims to provide a
best-in-class B2B sports betting product in the U.S. and Canada.



The B2C segment includes the operations of Coolbet. Coolbet develops and
operates an online sports betting and casino platform that is accessible through
its website in markets across Northern Europe, Latin America, and Canada. In
April of 2022, Coolbet won a prestigious award at the International Gaming
Awards in London - Mobile Operator of the Year - in recognition of our
user-friendly mobile site and available innovative product features, and in
September 2022, Coolbet won the Northern European Operator of the Year award at
the SBC Awards 2022 in Barcelona.



To meet demand and serve our growing number of U.S. casino operator clients, we
continue to invest in our software engineering capabilities and expand our
operational support. The most significant component of our operating costs
generally relate to our employee salary costs and benefits. Also, operating
costs include technology and corporate infrastructure related-costs, as well as
marketing expenditures with a focus on increasing and retaining B2C end-users.



Our net loss was $197.5 million and $30.6 million for the years ended December 31, 2022 and 2021, respectively.





We believe that our current technology is highly scalable and can support the
launch of our product offerings for new customers and in new jurisdictions. We
expect to improve our profitability through increased revenues from:



? organic growth of our existing casino operators,

? expansion into newly regulated jurisdictions with existing and new customers,

? margin expansion driven by the integration of Coolbet's sports betting

technology in our B2B product offerings,

? strategically reducing our existing worldwide global workforce to simplify and

streamline our organization and strengthen the overall competitiveness of our

B2B segment,

? revenue expansion from the roll-out of our Super RGS content offering to B2C


    operators who are not already clients, and
  ? organic growth of our B2C business in existing and new jurisdictions.




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We hold a strategic U.S. patent, which governs the linkage of on-property reward
cards to their counterpart internet gambling accounts together with bilateral
transmission of reward points between the internet gaming technology system and
the land-based casino management system present in all U.S. casino properties.
In February 2021, we reached an agreement to license our U.S. patent to a second
major U.S. casino operator group and we may license our patent to other major
U.S. internet gaming operators in the future.



Critical Accounting Policies and Estimates





Our accounting policies are more fully described in Note 2 - Summary of
Significant Accounting Policies of our Notes to Consolidated Financial
Statements included in this report. As disclosed in Note 2, the preparation of
financial statements in accordance with accounting principles generally accepted
in the United States requires the use of judgments and estimates. We base our
estimates on historical experience and on various other assumptions that we
believe to be reasonable under current circumstances, the results of which form
the basis for making judgments about the carrying values of assets and
liabilities that are not readily available from other sources. Actual results
may differ from these estimates. We consider the following to be our most
critical accounting estimates that involve significant judgment:



Revenue Recognition



Our revenue recognition policies described in Note 2 - Summary of Significant
Accounting Policies, require us to make significant judgments and estimates.
Accounting Standards Codification ("ASC") 606 requires that we apply judgments
or estimates to determine the performance obligations, the stand-alone selling
prices of our performance obligations to customers, allocation of the
transaction price, and the timing of transfer of control of the respective
performance obligations. The evaluation of each of these criteria requires
consideration of contract specific facts and circumstances is naturally
judgmental, but certain judgments could significantly affect the amount or
timing of revenue recognized if we were to reach a different conclusion. The
critical judgments we are required to make in our assessment of contracts with
customers that could significantly affect the timing or amount of revenue
recognized are:



Stand-Alone Selling Price and Allocation of Transaction Price. ASC 606 requires
that we determine the stand-alone selling price for our goods and services as a
basis for allocating the transaction price to the identified distinct
performance obligations in our contracts with customers. Because we often bundle
the selling price for hardware or services or we may license systems for which
the solutions we provide are highly customized and therefore the prices vary,
the determination of a stand-alone selling price requires significant judgment.



For performance obligations that involve multiple products or services, we
allocate the transaction price to be applied to each performance obligation
based on an estimation of the stand-alone selling price. We typically determine
the stand-alone selling price based on the amounts that we charge when sold
separately in similar circumstances to similar customers. In instances where the
stand-alone selling price cannot be determined using an adjusted market
assessment approach, we have used other allocation methods in accordance with
ASC 606, including a residual approach to allocate a stand-alone selling price.



Business Combinations



We account for business combinations in accordance with ASC 805, Business
Combinations. This standard requires the acquiring entity in a business
combination to recognize all (and only) the assets acquired and liabilities
assumed in the transaction and establishes the acquisition-date fair value as
the measurement objective for all assets acquired and liabilities assumed in a
business combination.



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Determining the fair value of assets acquired and liabilities assumed requires
management judgment and often involves the use of significant estimates and
assumptions with respect to the timing and amounts of future cash inflows and
outflows, discount rates, market prices and asset lives, among other items.
These estimates are based on information obtained from management of the
acquired company and historical experience and are generally made with the
assistance of an independent valuation firm. These estimates can include, but
are not limited to, the cash flows that an asset is expected to generate in the
future, and the cost savings expected to be derived from acquiring an asset. Any
changes in the underlying assumptions can impact the estimates of fair value by
material amounts, which can in turn materially impact our results of operations.
These estimates are inherently uncertain and unpredictable, and, if different
estimates were used, the purchase price for the acquisition could be allocated
to the acquired assets and liabilities differently from the allocation that we
have made. In addition, unanticipated events and circumstances may occur which
affect the accuracy or validity of such estimates, and, if such events occur, we
may be required to record a charge against the value ascribed to an acquired
asset or an increase in the amounts recorded for assumed liabilities.



If the subsequent actual results and updated projections of the underlying business activity change compared with the assumptions and projections used to develop these fair values, we may have to record impairment charges in the future. In addition, we have estimated the useful lives of certain acquired assets, and these lives are used to compute depreciation and amortization expense. If our estimates of the useful lives change, depreciation and amortization expense may be required to be accelerated or decelerated.

Goodwill



Goodwill is reviewed for impairment annually as of October 1st, or more
frequently if indicators of impairment exist. A significant amount of judgment
is involved in determining if an indicator of goodwill impairment has occurred.
Such indicators may include, among others: a significant decline in expected
future cash flows; a significant adverse change in legal factors or in the
business climate; unanticipated competition; and the testing for recoverability
of a significant asset group within a reporting unit. Our goodwill impairment
analysis also includes a comparison of the aggregate estimated fair value of all
reporting units to our total market capitalization. Therefore, our shares may
trade below our book value and a significant and sustained decline in our share
price and market capitalization could result in goodwill impairment charges. Any
adverse change in these factors could have a significant impact on the
recoverability of these assets and could have a material impact on our
consolidated financial statements.



Goodwill impairment testing involves a comparison of the estimated fair value of
a reporting unit to its respective carrying amount, which may be performed
utilizing either a qualitative or quantitative assessment. A reporting unit is
defined as an operating segment or one level below an operating segment. The
qualitative assessment evaluates various events and circumstances, such as
macro-economic conditions, industry and market conditions, cost factors,
relevant events and financial trends that may impact a reporting unit's fair
value. If it is determined that the estimated fair value of the reporting unit
is more-likely-than-not less than the carrying amount, including goodwill, a
quantitative assessment is required. Otherwise, no further analysis is
necessary.



In a quantitative assessment, the fair value of a reporting unit is determined
and then compared to its carrying value. A reporting unit's fair value is
determined based upon consideration of various valuation methodologies,
including the income approach, which utilizes projected future cash flows
discounted at rates commensurate with the risks involved, and multiples of
current and future earnings. If the fair value of a reporting unit is less than
its carrying value, a goodwill impairment charge is recognized for the amount by
which the carrying amount exceeds the reporting unit's fair value; however, the
loss recognized cannot exceed the total amount of goodwill allocated to that
reporting unit.



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We estimated the fair value of all reporting units utilizing both a market approach and an income approach (discounted cash flow) and the significant assumptions used to measure fair value include discount rate, terminal value factors, revenue and EBITDA multiples, and control premiums.





The income approach used to test our reporting units includes the projection of
estimated operating results and cash flows, discounted using a weighted-average
cost of capital ("WACC") that reflects current market conditions appropriate to
each reporting unit. Those projections involve management's best estimates of
economic and market conditions over the projected period, including growth rates
in revenues and costs and best estimates of future expected changes in operating
margins and cash expenditures. Other significant assumptions and estimates used
in the income approach include terminal value growth rates, future estimates of
capital expenditures and changes in future working capital requirements. In
addition, the WACC utilized to discount estimated future cash flows is sensitive
to changes in interest rates and other market rates in place at the time the
assessment is performed.


The market approach used to test our reporting units included the review of revenue and EBITDA multiples from other publicly traded companies in the industry used to derive their enterprise values and the application of those multiples to the relevant earnings streams within each of our reportable segments.

We confirmed the reasonableness of the estimated reporting unit fair values under the income and market approaches by reconciling those fair values to our enterprise value and market capitalization. Data points from other market participants were additionally used which suggested that the lower end of valuation ranges related to our B2C segment may be applicable while adverse regulatory changes in certain markets in which we operate were pending.





Share-Based Compensation



Management measures equity-classified share-based awards at fair value at the
date of grant and expenses the cost on a straight-line basis over the requisite
service period of the entire award, generally defined as the vesting period,
along with a corresponding increase in equity. Forfeitures are recorded in the
period in which they occur with the impact, if any, recognized in the
consolidated statements of operation with a corresponding adjustment to equity.



The fair value of share options is determined using a Black-Scholes model,
taking into consideration management's best estimate of the expected life of the
option and the estimated number of shares that will eventually vest. Application
of the option-pricing model involves the use of estimates, judgment and
assumptions that are highly complex and subjective and are outlined below as
they pertain to grants subsequent to our initial public offering.



Expected Term - represents the period of time that awards granted are expected
to be outstanding. In determining the expected term of the award, future
exercise and forfeiture patterns are estimated from historical employee exercise
behavior. These patterns are also affected by the vesting conditions of the
award. Changes in the future exercise behavior of employees or in the vesting
period of the award could result in a change in the expected term. An increase
in the expected term would result in an increase to our expense.



Volatility - a measure of the amount by which the price of our ordinary shares
is expected to fluctuate each year during the expected term of the award. Our
expected volatility is determined by reference to volatility of certain
identified peer groups, share trading information and share prices on the
Nasdaq. The implied volatilities from traded options are impacted by changes in
market conditions. An increase in the volatility would result in an increase in
our expense.



Expected Dividend Yield - is based on our historical dividend yield, which is
zero - as we have not historically paid dividends. If we were to begin paying
dividends, the dividend yield would increase and result in a decrease in our
expense.


Risk-Free Interest Rate - is based on the U.S. Treasury yield curve in effect at time of grant. As the risk-free interest rate increases, the expected term increases, resulting in an increase in our expense.





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Capitalization and Impairment of Internally Generated Intangible Assets





Management reviews expenditures, including wages and benefits for employees,
incurred on development activities and, based on their judgment of the costs
incurred, assesses whether the expenditure meets the capitalization criteria set
out in ASC 350 and the intangible assets accounting policy within the notes to
our consolidated financial statements. Management specifically considers if
additional expenditure on projects relates to maintenance or new development
projects. In addition, the useful life of capitalized development costs is
determined by management at the time the software is brought into use and is
regularly reviewed for appropriateness. For unique software products we control
and develop, the life is based on historical experience with similar products as
well as anticipation of future events, which may impact their useful economic
life, such as changes in technology.



Management reviews intangible assets at each reporting period to determine
potential impairment whenever events or changes in circumstances indicate that
the carrying amount of an intangible asset may not be fully recoverable.
Recoverability is measured by comparing the carrying amount of the intangible
asset with the future undiscounted cash flows the asset is expected to generate.
Management must make estimates related to future cash flows and discount rates
that reflects current market assessments of the time value of money and the
risks specific to the asset for which the estimates of future cash flows have
not been adjusted. If such assets are considered impaired, an impairment loss
would be measured by comparing the amount by which the carrying value exceeds
the fair value of the intangible asset.



Income Taxes



We operate in a number of jurisdictions and our effective tax rate is based on
our income, statutory tax rates, tax planning opportunities and transfer pricing
policies in the various jurisdictions in which we operate. Judgment is required
in respect of the interpretation of state, federal and international tax law and
practice as e-commerce and tax continues to evolve. Our income tax rate is
significantly affected by the tax rates that apply to our foreign earnings.



Deferred tax assets represent amounts available to reduce income taxes payable
in future years. Such assets arise from temporary differences between the
financial reporting and tax basis of assets and liabilities, as well as from net
operating losses and tax credit carryforwards. Deferred tax assets are
recognized to the extent that it is probable future taxable profits will be
available against which the temporary differences can be utilized. This
assessment of future taxable profits relies heavily on estimates that are based
on a number of factors, including historical results and future business
forecasts. To the extent deferred tax assets are not expected to be realized, we
record a valuation allowance.



Research and development tax relief is recognized as an asset once there is
sufficient evidence that any amount we may claim will be received. A key
judgement arises with respect to the likelihood of a claim being successful when
a claim has been quantified but has not been received. In making this judgement,
we consider the nature of the claim and in particular the track record of
success of previous claims.



We are subject to income taxes in numerous jurisdictions and there are
transactions for which the ultimate tax determination cannot be assessed with
certainty in the ordinary course of business. We recognize a provision for
situations that might arise in the foreseeable future based on an assessment of
the probabilities as to whether additional taxes will be due. An uncertain tax
position is recognized as a benefit only if it is "more likely than not" that
the tax position would be sustained in a tax examination, with a tax examination
being presumed to occur. The amount recognized is the largest amount of tax
benefit that is greater than 50% likely of being realized on examination. For
tax positions not meeting the "more likely than not" test, no tax benefit is
recorded. Penalties and interest incurred related to underpayment of income tax
are classified as income tax expense in the period incurred.



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Consolidated Results of Operations

Year Ended December 31, 2022 Compared to Year Ended December 31, 2021





The following table sets forth our consolidated results of operations for the
periods indicated:



                                            Year Ended
                                           December 31,                    Change
                                        2022          2021          Amount        Percent
(dollars in thousands)
Revenue                              $  141,528     $ 124,163     $   17,365          14.0 %
Operating costs and expenses
Cost of revenue (1)                      41,634        41,373            261           0.6 %
Sales and marketing                      28,095        22,266          5,829          26.2 %
Product and technology                   26,345        22,548          3,797          16.8 %
General and administrative (1)           46,906        48,881         (1,975 )        (4.0 )%
Impairment                              166,010         3,500        162,510          n.m.
Restructuring                             1,771             -          1,771          n.m.
Depreciation and amortization            23,276        16,808          6,468          38.5 %
Total operating costs and expenses      334,037       155,376        178,661          n.m.
Operating loss                         (192,509 )     (31,213 )     (161,296 )        n.m.
Other loss (income), net                  1,047          (408 )        1,455          n.m.
Loss before income taxes               (193,556 )     (30,805 )     (162,751 )        n.m.
Income tax expense (benefit)              3,942          (211 )        4,153          n.m.
Net loss                             $ (197,498 )   $ (30,594 )   $ (166,904 )        n.m.



(1) Excludes depreciation and amortization expense



n.m. = not meaningful



Geographic Information



The following table sets forth our consolidated revenue by geographic region,
for the periods indicated:



                               Year Ended
                              December 31,              Percentage of Revenue                Change
                           2022          2021           2022             2021         Amount       Percent
(dollars in thousands)
United States            $  45,615     $  37,791            32.2 %          30.4 %   $  7,824          20.7 %
Europe                      45,092        47,309            31.9 %          38.1 %     (2,217 )        (4.7 )%
Latin America               44,078        32,434            31.1 %          26.1 %     11,644          35.9 %
Rest of the world            6,743         6,629             4.8 %           5.4 %        114           1.7 %
Total revenue            $ 141,528     $ 124,163           100.0 %         100.0 %   $ 17,365          14.0 %




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Revenue



Revenue was $141.5 million for the year ended December 31, 2022, an increase of
$17.4 million from the comparable period in 2021. The increase was attributable
to an increase of $8.5 million in our B2B revenues, which was driven by an
increase in platform and content license fees revenue resulting from growth in
existing customers, and an increase of $8.9 million in our B2C revenues, which
was attributable to active customer growth in Latin America.



In Europe, our B2C revenues decreased $0.3 million as a result of our B2C
revenues in Euros weakening relative to the U.S. Dollar. The revenues presented
in U.S Dollars decreased despite an increase in the underlying revenues
denominated in Euros of 11.5%. The increase in underlying Euro revenues was a
result of increased customer activity. On a constant currency basis, B2C
revenues increased by $4.6 million but was offset by the unfavorable currency
effect of $4 .9 million. The B2B segment further experienced declines in its
RMiG business in Europe that resulted in an additional $2.0 million decrease in
revenue.


The increase in revenue in the United States as compared to the prior period was the result of increased RMiG revenues within the B2B segment.





Cost of Revenue



Cost of revenue was $41.6 million for the year ended December 31, 2022, an
increase of $0.3 million from the comparable period in 2021. The increase was
attributable to an increase of $0.6 million in our B2C operations' cost of
gaming revenues, which was primarily driven by increased customer growth in
Latin America. This increase was partially offset by a decrease of $0.3 million
in our B2B segment, which was primarily due to a decrease in cost of development
services and other revenue as a result of lower volume of hardware sales and
related cost of revenue in the current period than in the prior year comparable
period.



Sales and Marketing



Sales and marketing expense was $28.1 million for the year ended December 31,
2022, an increase $5.8 million from the comparable period in 2021. The increase
was primarily driven by an increase of $7.1 million in sales and marketing
activities within our B2C operations in order to attract additional end-users in
Latin America. The increase was partially offset by a decrease of $1.1 million
in personnel costs, largely resulting from cost saving initiatives during the
current period.



Product and Technology



Product and technology expense was $26.4 million for the year ended December 31,
2022, an increase of $3.8 million from the comparable period in 2021. The
increase was primarily attributable to a reduction in capitalized development
costs as a result of product deployment and launches which occurred during the
current period that did not occur during the prior year comparable period.




General and Administrative



General and administrative expense was $46.9 million for the year ended December
31, 2022, a decrease of $2.0 million from the comparable period in 2021. This
decrease was primarily driven by cost saving initiatives during the current
period, largely resulting in a reduction in professional fees.



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Impairment


We recorded an impairment charge of $166.0 million during the year ended December 31, 2022, an increase of $162.5 million from the comparable period in 2021.





The market price of our publicly traded shares and resulting market
capitalization of our business has experienced a significant and sustained
decline since our acquisition of Coolbet. As a result of an interim goodwill
impairment assessment we performed as of June 30, 2022 we recognized an
impairment of $28.9 million to goodwill. Additionally, in December 2022, we
revised our 2023 budget and long-range plan as a result of material reductions
in our expected future cash flows from our B2B segment, a strategic decision not
to pursue and invest further in our original content strategy, and a
re-assessment of our growth strategy related to our B2C segment. As a result, we
identified negative market indicators and trends related to the value of our
reporting units. These events and circumstances indicated impairment may be
probable and an additional quantitative goodwill impairment assessment as of
December 31, 2022 was performed which resulted in impairment of goodwill of
$108.0 million. We recognized total impairment to goodwill of $136.9 million
during the year ended December 31, 2022.



These changes to our 2023 budget and long-range plan resulted in impairment charges recognized to our intangible assets associated with our content licensing arrangement and our capitalized software development costs of $19.1 million and $10.0 million, respectively, for the year ended December 31, 2022.





The impairment charge of $3.5 million in the year ended December 31, 2021
related to the termination notice we served to a third-party content provider in
January 2022, as certain conditions associated with the completion of
contractual obligations had not been satisfied by the agreed upon period in
2021. In accordance with the agreement, termination for cause results in a
return of the initial payment of $3.5 million, however we have yet to receive
the initial payment back.


Depreciation and Amortization


Depreciation and amortization expense was $23.3 million for the year ended
December 31, 2022, an increase of $6.5 million from the comparable period in
2021. Of the increase, $4.1 million was attributable to the amortization expense
on intangible assets related to our content licensing arrangement. The remaining
increase was attributable to higher depreciation and amortization of new assets
placed-in service as a result of product launches that occurred during the

prior
year comparable period.



Income Tax Expense



We recorded income tax expense of $3.9 million for the year ended December 31,
2022, reflecting an effective tax rate of (2.0)%, compared to income tax benefit
of $0.2 million for the year ended December 31, 2021, reflecting an effective
tax rate of 0.7%. Our country of domicile is Bermuda, which effectively has a 0%
statutory tax rate as it does not impose taxes on profits, income, dividends, or
capital gains. The difference between this 0% tax rate and the effective income
tax rate for the years ended December 31, 2022 and 2021 was due primarily to a
mix of earnings in foreign jurisdictions that are subject to current tax and
loss carryforwards in certain jurisdictions that are not expected to be
recognized.



Segment Operating Results



We report our operating results by segment in accordance with the "management
approach." The management approach designates the internal reporting used by our
Chief Operating Decision Maker ("CODM"), who is our Chief Executive Officer, for
making decisions and assessing performance of our reportable segments.



Year Ended December 31, 2022 Compared to Year Ended December 31, 2021





The following table sets forth our segment results for the periods indicated:



                                Year Ended              Percentage of
                               December 31,            Segment Revenue               Change
                             2022         2021         2022        2021       Amount       Percent
(dollars in thousands)
B2B
Revenue                    $ 54,045     $ 45,569        100.0 %     100.0 %   $ 8,476          18.6 %
Cost of revenue (1)          11,248       11,600         20.8 %      25.5 %      (352 )        (3.0 )%
B2B segment contribution   $ 42,797     $ 33,969         79.2 %      74.5 %   $ 8,828          26.0 %
B2C
Revenue                    $ 87,483     $ 78,594        100.0 %     100.0 %   $ 8,889          11.3 %
Cost of revenue (1)          30,386       29,773         34.7 %      37.9 %       613           2.1 %

B2C segment contribution $ 57,097 $ 48,821 65.3 % 62.1 %

$ 8,276          17.0 %



(1) Excludes depreciation and amortization expense



n.m. = not meaningful



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B2B Segment



B2B revenue increased $8.5 million primarily due to an increase in platform and
content license fees revenue of $6.6 million, resulting from organic growth in
existing U.S. customers. Additionally, B2B development services and other
revenue increased $1.9 million, driven by expansion into new markets, including
Ontario, Canada.


B2B cost of revenue decreased $0.3 million primarily as a result of lower volume of hardware sales compared to the prior year period.


Segment contribution for B2B, which excludes depreciation and amortization
expense, increased 26.0%, which was primarily driven by an increase in platform
and content license fees revenue and decreased revenues and related cost of
revenue related to a higher volume of hardware sales that occurred during the
prior period than in the current period.



B2C Segment


B2C revenue increased $8.9 million primarily due to growth in the number of active customers in our Latin American markets during the current period.





B2C cost of revenue increased $0.6 million, which was primarily attributable to
increases in content license fees and gaming duties of $0.6 million and $0.6
million, respectively, which were driven by increased revenues. The increases
were partially offset by a decrease of $0.9 million in processing fees due to
improved terms on payment processing deals.



Segment contribution for B2C, which excludes depreciation and amortization
expense increased 17.0%. This increase was primarily driven by an increase in
gaming revenues and an increase in segment contribution margin as a result of
improved terms on payment processing deals for the year ended December 31,

2022.



Non-GAAP Financial Measures



Adjusted EBITDA



Management uses the non-GAAP measure of Adjusted EBITDA to measure its financial
performance. Specifically, it uses Adjusted EBITDA (i) as a measure to compare
our operating performance from period to period, as it removes the effect of
items not directly resulting from our core operations, and (ii) as a means of
assessing our core business performance against others in the industry, because
it eliminates some of the effects that are generated by differences in capital
structure, depreciation, tax effects and unusual and infrequent events.



We define Adjusted EBITDA as net loss before interest expense (income), net,
income tax expense (benefit), depreciation and amortization, impairments,
share-based compensation expense and related expense, restructuring costs, and
other items which our Board of Directors considers to be infrequent or unusual
in nature. The presentation of Adjusted EBITDA is not intended to be used in
isolation or as a substitute for any measure prepared in accordance with U.S.
GAAP and Adjusted EBITDA may exclude financial information that some investors
may consider important in evaluating our performance. Because Adjusted EBITDA is
not a U.S. GAAP measure, the way we define Adjusted EBITDA may not be comparable
to similarly titled measures used by other companies in the industry.



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Below is a reconciliation of Adjusted EBITDA to net loss, the most comparable
U.S. GAAP measure, as presented in the consolidated statements of operations for
the years specified:



                                                          Year Ended
                                                         December 31,
                                                      2022          2021
(in thousands)
Net loss                                           $ (197,498 )   $ (30,594 )
Income tax expense (benefit)                            3,942          (211 )

Interest expense (income), net                          4,279           (30 )
Other income, net (1)                                  (3,000 )        (378 )
Depreciation and amortization                          23,276        16,808
Share-based compensation and related expense (2)        7,262         8,136
Impairment (3)                                        166,010         3,500
Restructuring                                           1,771             -
Adjusted EBITDA                                    $    6,042     $  (2,769 )




(1 ) Other income for the year ended December 31, 2022 includes a $3.0 million
release of the contingent liability that was initially recognized upon execution
of the amendment to an agreement with a content provider. See Note 3 -
Acquisition in the accompanying consolidated financial statements for further
details. Other income, net for the year ended December 31, 2021 primarily
consists of a research and development tax credit of $0.4 million.



(2) Includes $7.6 million and $7.9 million in equity-classified expense for the
years ended December 31, 2022 and 2021, respectively, $0.1 million and $0.4
million in liability-classified expense, for the years ended December 31, 2022
and 2021, respectively. Such amounts excluded capitalized amounts. Refer to Note
9 - Share-based Compensation in the accompanying consolidated financial
statements for further details.



(3) Includes impairment to (i) goodwill of $136.9 million, (ii) intangible
assets of $19.1 million, and (iii) capitalized software development costs of
$10.0 million for the year ended December 31, 2022. Refer to Note 5 -
Capitalized Software Development Costs, net and Note 6 - Goodwill and Intangible
Assets in the accompanying consolidated financial statements for further
details. Includes $3.5 million related to an initial content license payment for
the year ended December 31, 2021. Refer to Note 16. Commitments and
Contingencies in the accompanying consolidated financial statements for further
details.



Key Performance Indicators



Our management uses the following key performance indicators ("KPIs") as
indicators of trends and results of the business. These KPIs give our management
an indication of the level of engagement between the player and the Company's
platforms. No estimation is necessary in quantifying these KPIs, nor do they
represent U.S. GAAP based measurements. These KPIs are subject to various risks
such as customer concentration, competition, licensing and regulation, and
macroeconomic conditions. Refer to "Item 1A. Risk Factors" for further risks
associated with our business which would affect these KPIs.



                                                Year Ended
                                               December 31,                  Change
                                             2022         2021       Amount        Percent

B2B Gross Operator Revenue (in millions) $ 1,224.4 $ 921.1 $ 303.3

           32.9 %
B2B Take Rate                                    4.4 %       4.9 %      (0.5 )%         N/A
B2C Active Customers (in thousands)              559         394         165           41.9 %
B2C Marketing Spend Ratio                         21 %        15 %       6.0 %          N/A
B2C Sports Margin                                6.9 %       6.8 %       0.1 %          N/A




B2B Gross Operator Revenue



We define B2B Gross Operator Revenue as the sum of our B2B corporate customers'
gross revenue from SIM, gross gaming revenue from RMiG, and gross sports wins
from sportsbook offerings. B2B Gross Operator Revenue, which is not comparable
to financial information presented in conformity with U.S. GAAP, gives
management and users of our financial statements an indication of the extent of
transactions processed through our B2B corporate customers' platforms and allows
management to understand the extent of activity that our platform is processing.



The increase in Gross Operator Revenue for the year ended December 31, 2022, as
compared to the year ended December 31, 2021, was driven primarily by new client
launches in the United States as a result of organic growth and expansion into
Ontario, Canada.



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B2B Take Rate



We define B2B Take Rate as a quotient of B2B segment revenue retained by the
Company over the total Gross Operator Revenue generated by our B2B corporate
customers. B2B Take Rate gives management and users of our financial statements
an indication of the impact of the statutory terms and the efficiency of the
commercial terms on the business.



The decrease in B2B Take Rate for the year ended December 31, 2022, as compared to the year ended December 31, 2021, was driven by a shift in the relative amounts of revenue from SIM and RMiG in Italy to RMiG from U.S. states that inherently have a lower take rates due to higher taxes, specifically Pennsylvania and Michigan, and promotional bonus spend.





B2C Active Customers



We define B2C Active Customers as a user that places a wager during the period.
This metric allows management to monitor the customer segmentation, growth
drivers, and ultimately creates opportunities to identify and add value to the
user experience. This metric allows management and users of the financial
statements to measure the platform traffic and track related trends.



The increase in B2C Active Customers for the year ended December 31, 2022, as
compared to the year ended December 31, 2021, was primarily attributable to an
uptick in business activity throughout the current period. This can be
attributed to a combination of increased marketing expenditures throughout the
year, as well as organic growth across all regions, with a particular emphasis
on Latin America. During the fourth quarter of 2022, the Company experienced a
significant surge in business activity across all markets, largely due to the
World Cup 2022. This increased activity resulted in an all-time high in active
customer count. Specifically, during the fourth quarter as the World Cup took
place, the Company observed a monthly average of active customer count that was
over 40% higher than the average for the rest of the year.



B2C Marketing Spend Ratio



We define B2C Marketing Spend Ratio as the total B2C direct marketing expense
for the period divided by the total B2C revenues. This metric allows management
to measure the success of marketing costs during a given period. Additionally,
this metric allows management to compare across jurisdictions and other subsets,
as an additional indication of return on marketing investment.



The increase in B2C Marketing Spend Ratio for the year ended December 31, 2022,
as compared to the year ended December 31, 2021, was primarily driven by
increased marketing spend in Latin America, and Ontario, Canada. In Latin
America, we invested in developing greater brand awareness through several
marketing initiatives and sponsorships and the Ontario, Canada, market required
higher acquisition spend due to increased competition in a newly regulated

jurisdiction.



B2C Sports Margin



We define B2C Sports Margin as the ratio of wagers minus winnings to total
amount wagered, adjusted for open wagers at period end. Sports betting involves
a user placing a bet on the outcome of a sporting event with the chance to win a
pre-determined amount, often referred to as fixed odds. Our B2C sportsbook
revenue is generated by setting odds that are intended to provide a built-in
theoretical margin in each sports bet offered to our users. This metric allows
management to measure sportsbook performance against its expected outcome.



The increase in B2C Sports Margin for the year ended December 31, 2022, as
compared to the year ended December 31, 2021, was primarily driven by an overall
increase in business volumes, with a particular emphasis on Latin America. The
region's share of turnover increased, and due to its higher margin, this led to
a slight increase in the weighted average of B2C sports margin.



Liquidity and Capital Resources





Sources of Liquidity



As of December 31, 2022, we had an accumulated deficit of $274.9 million. During
the year ended December 31, 2022, we incurred a net loss of $197.5 million,
which primarily related to impairment of (i) goodwill ($136.9 million), (ii)
intangible assets ($19.1 million), and (iii) capitalized software development
costs ($10.0 million). We used $1.2 million of cash in operations during the
year ended December 31, 2022. Cash on hand totaled $45.9 million as of December
31, 2022 and liabilities to users totaled $10.7 million as of December 31, 2022.



Since our inception, we have primarily funded our operations through cash
generated from operations, cash generated from financing activities including
our U.S. initial public offering and term credit facility, and cash on hand. In
May 2020, we completed our U.S. initial public offering under which we sold an
aggregate of 7,337,000 ordinary shares for net proceeds of $57.4 million and in
December 2020, we conducted a follow-on offering under which we sold 6,790,956
ordinary shares for net proceeds of $98.5 million. In January 2021, we completed
the acquisition of Coolbet for a purchase price of $218.1 million, including the
issuance of 5,260,516 ordinary shares, replacement equity-based awards valued at
$0.3 million and cash of $111.1 million, which was funded from the follow-on
offering proceeds and available cash on hand. During the year ended December 31,
2022, we repurchased $1.0 million of our own shares as we believed our share
price was undervalued and did not reflect the long-term opportunities ahead

of
us.



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In April 2022, we entered into a $30.0 million term credit facility with net
proceeds of $27.6 million (the "Credit Facility"). The Credit Facility contains
affirmative and negative covenants, including certain financial covenants
associated with our financial results. The financial covenants test periods
begin on March 31, 2023. We were in compliance with all financial covenants as
of December 31, 2022, however given our cash flow and net losses for the year
ended December 31, 2022, historical performance, and reasonably estimable
near-term future cash flows, it is possible that we could violate financial
covenants in the future which could trigger an acceleration of all amounts due
and the termination of commitments under the Credit Facility.



On April 13, 2023, we executed agreements to amend the Credit Facility to waive
all events of default, amend certain financial covenants, assign the rights to
the Credit Facility from our existing lender to a third party, and increase the
principal balance from $30.0 million to $42.0 million with accrued paid in-kind
("PIK") interest of 8.0% per year (together, forming the "Amended Credit
Facility"). The Amended Credit Facility becomes effective upon cash settlement
of payments initiated on April 13, 2023, which is probable to occur within one
week of initiation and would represent a cure of any events of default under the
Credit Facility and thereby prevent any amounts from becoming due and payable
under the Credit Facility's subjective acceleration clause. The Amended Credit
Facility contains a financial covenant, among other covenants, requiring minimum
liquidity of $10.0 million. Refer to Note 17 - Subsequent Events in the
accompanying consolidated financial statements for further detail with respect
to the Amended Credit Facility.



In the fourth quarter of 2022, we initiated plans to address our liquidity needs
and improve our operations and cash position primarily by (i) reducing and
deferring personnel and operational costs for non-strategic initiatives, (ii)
amending the Credit Facility to reduce cash interest obligations and amend
financial covenants, (iii) identifying sources of additional capital, (iv)
continuing investment in the growth areas of our consolidated operations, (v)
continuing our cost saving initiatives first implemented during the year ended
December 31, 2022, and (vi) initiating a strategic review process to assess a
range of strategic alternatives.



In accordance with Accounting Standards Codification ("ASC") 205-40, Going
Concern, we have evaluated whether there are conditions and events, considered
in the aggregate, that raise substantial doubt about our ability to continue as
a going concern within one year after the date after the accompanying
consolidated financial statement to this Report are issued. The Company's
current financial condition, liquidity resources, and planned near-term cash
flows from operations are sensitive to changes in macro-economic conditions and
the substantial variability inherent in the Company's wager-based revenues
streams. These factors along with the potential covenant breaches are indicators
that raise uncertainty related to the ability of the Company to meet its current
obligations as they come due, however we believe that the Amended Credit
Facility and intent and ability to complete the remaining cost mitigation plans
mitigate this concern and alleviate this uncertainty. The accompanying
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty. Accordingly, the consolidated
financial statements have been prepared on a basis that assumes the Company will
continue as a going concern and which contemplates the realization of assets and
satisfaction of liabilities and commitments in the ordinary course of business.



To the extent that our current resources, including our ability to generate
operating cash flows, are insufficient to satisfy our cash requirements, we may
seek additional equity or debt financing. Our ability to do so depends on
prevailing economic conditions and other factors, many of which are beyond our
control. We do not currently have any such credit facilities or similar debt
arrangements in place, outside of the Amended Credit Facility as described
above, and cannot provide any assurance as to the availability or terms of any
future financing that we may require to support our operations. If the needed
financing is not available, or if the terms of financing are less desirable than
we expect, we may be forced to decrease our level of investment in new products
and technologies, discontinue further expansion of our business, scale back our
existing operations, or divest of assets, any of which could have an adverse
impact on our business and financial prospects.



Material Cash Commitments


Our primary uses of cash include funding our ongoing working capital needs, content licensing discussed below, and developing and maintaining our proprietary software platforms. Such capital allocations are contemplated while considering other opportunities we may have to deploy our capital.





During the year ended December 31, 2021, we entered into a Content Licensing
Agreement and in April 2022 we amended the Content Licensing Agreement (together
the "Agreement") with a third-party gambling content provider specializing in
developing and licensing interactive games. The Agreement grants us exclusive
right to use and distribute the online gaming content in North America. The
content provider is committed to developing a minimum number of games for our
exclusive use over the five-year term, subject to extensions. In exchange, we
are required to pay fixed fees, totaling $30.0 million, of which $5.0 million
was due upon execution of the Agreement, and the remaining fixed fees are paid
systematically over the initial five-year term. Additional payments could be
required if our total revenue generated from the licensed content exceeds
certain stipulated annual and cumulative thresholds during the contract term. In
March 2023 the Company amended and restated its Content Licensing Agreement with
the Content Provider which resulted in a reduced contract term and a reduction
in the fixed fees payable under the arrangement by $15 million. Refer to Note 17
- Subsequent Events in the accompanying consolidated financial statements for
further detail.



The execution of our growth strategy will require continued significant capital
expenditures, and we expect to continue investing in our products and
technologies as we seek to scale our business. Specifically, the key elements of
our growth strategy include, but are not limited to, our continued rollout of
GAN Sports with existing and new customers in regulated U.S. states, expansion
of our international B2C operations, and the launch of regulated gaming in

new
U.S. states.



We utilized cash in investing activities of $19.1 million and $106.7 million for
the year ended December 31, 2022 and 2021, respectively. Of these activities,
$92.7 million related to the cash paid for the acquisition of Coolbet for the
year ended December 31, 2021. We made payments during the year ended December
31, 2022 related to content licensing fees of $6.0 million. Expenditures related
to purchases of gaming licenses represented $1.1 million and $0.4 million,
respectively, internally developed capitalized software represented $10.1
million and $11.6 million, respectively, and property and equipment (including
licenses for internal use software) represented $1.9 million and $1.9 million,
respectively.



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Cash Flow Analysis



A summary of our operating, investing and financing activities is shown in the
following table:



                                          Year Ended
                                         December 31,                      Change
(dollars in thousands)                2022           2021          Amount         Percent
Net cash used in operating
activities                         $   (1,249 )   $   (5,003 )        3,754           (75.0 )%
Net cash used in investing
activities                            (19,103 )     (106,674 )       87,571           (82.1 )%
Net cash provided by financing
activities                             27,448            169         27,279            n.m.
Effect of foreign exchange rates
on cash                                  (653 )       (1,669 )        1,016           (60.9 )%
Net increase (decrease) in cash    $    6,443     $ (113,177 )   $  119,620

           n.m.




n.m. = not meaningful



Operating Activities



Net cash used in operating activities decreased $3.8 million primarily resulting
from a decrease in net loss after adjustments to reconcile net loss to cash
flows from operations of $4.8 million and a favorable fluctuation in working
capital of $1.9 million. Additionally, we made interest payments of $2.4 million
during the year ended December 31, 2022 related to our Credit Facility.



Investing Activities



Net cash used in investing activities decreased $87.6 million primarily as a
result of $92.7 million cash paid for the acquisition of Coolbet during the year
ended December 31, 2021. This decrease was primarily offset by increases of $6.0
million in cash payments to third-party gambling content providers for the
rights to use and distribute their online gaming content in North America, and
an increase of $0.7 million in cash payments for gaming licenses in anticipation
of new jurisdictional launches, and $1.5 million in spend for capitalized
software development costs primarily related to product enhancements, and new
features for both the B2B and B2C platforms.



Financing Activities



Net cash provided by financing activities increased by $27.3 million primarily
due to $27.6 million net cash proceeds associated with the Credit Facility, net
of issuance costs, as well as $0.6 million in offering cost payments made in the
prior period related to our acquisition of Coolbet which did not occur in the
current period. These amounts were partially offset by our use of $1.0 million
related to our share repurchase program during the current period.

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