Sports Entertainment Gaming Global Corp

Current report

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Current report

Impact of Legacy Matters on Current Operations

Current report

Legacy Matters have had, and continue to have, a material impact on the Company’s current operations, financial condition, and strategic execution. While the Company has transitioned from stabilization toward execution of its strategic growth phase, the effects of prior operational disruption, control deficiencies, and capital constraints remain relevant to an understanding of current performance.

Current report

Operational Restart and Execution Focus

Current report

Following the cessation of certain legacy operations in 2022, the Company has been engaged in a phased operational restart. Current operations reflect a transition from a legacy model primarily dependent on lottery-based revenue toward a more diversified platform across sports, entertainment, and gaming.

Current report

As a result, period-over-period comparisons may not be indicative of underlying performance trends, as prior periods reflect a fundamentally different operating structure. Current operating results are more closely aligned with early-stage platform development, integration of newly acquired or partnered assets, and the reestablishment of commercial activities.

Current report

Revenue Profile and Business Mix

Current report

The Company’s historical concentration in lottery-related revenue has been replaced by a broader, but still developing, revenue base. While this transition is expected to improve long-term scalability and diversification, it has resulted in near-term variability in revenue and limited comparability to historical results.

Current report

Revenue generation in the current period is increasingly tied to digital media, content platforms, and strategic acquisitions, including the Company’s investment in Veloce, which expands the Company’s reach into global digital motorsports and gaming audiences. These platforms introduce different revenue recognition patterns, margin profiles, and monetization timelines compared to the Company’s legacy operations.

Current report

Cost Structure and Investment Requirements

Current report

The Company’s cost structure has been significantly impacted by its transition. Current operating expenses reflect:

Current report

These costs are expected to remain elevated in the near term as the Company continues to execute its transformation strategy as part of the strategic growth phase.

Current report

Liquidity and Capital Allocation

Current report

Legacy Matters have materially affected the Company’s liquidity profile, necessitating a continued reliance on external financing to fund operations and strategic initiatives.

Current report

On March 16, 2026, the Company entered into a Securities Purchase Agreement pursuant to which it agreed to issue unsecured convertible promissory notes in an aggregate principal amount of up to approximately $11.8 million, to be funded in multiple tranches. The initial tranche was funded upon execution, with subsequent tranches subject to customary conditions.

Current report

This financing, along with other recent capital raises, have been critical in supporting the Company’s operational restart, funding strategic initiatives, and addressing obligations arising from Legacy Matters. However, such financings have resulted in, and may continue to result in, dilution to existing stockholders.

Current report

Management has implemented a disciplined capital allocation framework focused on deploying capital into revenue-generating opportunities and initiatives that are expected to support near- to medium-term financial performance. The Company’s ability to execute its strategy remains dependent on its ability to access additional capital on acceptable terms.

Current report

Internal Controls and Reporting Processes

Current report

Management continues to invest in personnel, systems, and processes to strengthen the control environment and support scalable operations.

Current report

Strategic Execution and Integration Risk

Current report

The Company’s current strategy includes the acquisition and integration of complementary businesses and platforms. While these initiatives are expected to contribute to revenue growth and strategic positioning, they introduce execution risks, including integration complexity, alignment of operating models, and realization of anticipated synergies.

Current report

Legacy Matters have necessitated a more measured and disciplined approach to execution, with an emphasis on transactions that are expected to deliver tangible revenue contributions and align with the Company’s capital constraints.

Current report

Inflection Point and Transition to Execution

Current report

Management believes the Company has reached an inflection point in its transformation. Having addressed critical Legacy Matters, stabilized operations, and secured incremental capital, the Company is transitioning from a period defined by remediation and restructuring to one focused on execution and revenue generation as part of the strategic growth phase.

Current report

This inflection point is characterized by:

Current report

While risks remain, including liquidity constraints and execution risk associated with integrating new platforms, management believes the Company is better positioned to pursue scalable growth opportunities and improve operating performance.

Current report

Ongoing Impact and Path Forward

Current report

Notwithstanding the progress achieved, Legacy Matters continue to influence the Company’s current operations, including through elevated operating costs, a transitional revenue profile, and ongoing capital requirements.

Current report

Management remains focused on scaling revenue-generating operations, improving operating efficiency, strengthening the balance sheet, and continuing to enhance internal controls and compliance processes. The Company’s future performance will depend on its ability to successfully execute this strategy and convert its repositioned platform into sustainable revenue growth and long-term stockholder value.

Current report

Our Current Revenue

Current report

The Company currently derives its revenue from three areas of focus:

Current report

*Data Services.*Commercial acquirers of our Data Service pay a subscription for access to the Data Service and, for acquisition of certain large data sets, an additional per record fee. The Company additionally enters into multi-year contracts pursuant to which it sells proprietary, anonymized transaction data under multi-year agreements and in accordance with our Terms of Service in consideration of a fee.

Current report

Digital Media and AdvertisingRevenue generated from our digital media platforms is primarily driven by audience scale, engagement, and monetization through advertising, sponsorships, and content partnerships.

Current report

Gaming Platforms Our gaming and interactive revenue in 2025 was driven by our Mexican operations and includes iLottery products.

Current report

Company Operating Costs and Expenses

Current report

*Personnel Costs.*Personnel costs include salaries, payroll taxes, health insurance, worker’s compensation and other benefits for management and office personnel.

Current report

*Professional Fees.*Professional fees include fees paid for legal and financial advisors, accountants and other professionals related to the Business Combination and other transactions.

Current report

*General and Administrative.*General and administrative expenses include marketing and advertising expenses, office and facilities lease payments, travel expenses, bank fees, software dues and subscriptions, expensed research and development (“R&D”) costs and other fees and expenses.

Current report

*Depreciation and Amortization.*Depreciation and amortization expenses include depreciation and amortization expenses on real property and other assets.

Current report

Key Trends and Factors Affecting Our Results

Previous report

Management’s Report on Internal Control Over Financial Reporting

Previous report

Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost benefit relationship of possible controls and procedures. In connection with this Report, our management, with the participation of our Chief Executive Officer, reevaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2022. Based on such reevaluation, our Chief Executive Officer concluded that, as of the end of the period covered by this Report, our disclosure controls and procedures were still not effective due to the material weaknesses in our internal control over financial reporting with respect to our financial statement close and reporting process, as described further below. As a result of this conclusion, we retained third-party accounting consultants who performed additional analysis as deemed necessary to ensure that our financial statements were prepared in accordance with GAAP. Accordingly, management believes that the financial statements included in this Report present fairly in all material respects our financial position, results of operations and cash flows for the periods presented. The issues which were identified during the initial and subsequent review continued until the new management team for the company began addressing them in the fall of 2022. Efforts to strengthen and improve internal controls over accounting and financial reporting are ongoing.

Previous report

In connection with the audit of our condensed consolidated financial statements included in this Report, our management has identified material weaknesses in our internal control over financial reporting as of December 31, 2024 and 2023 relating to deficiencies in the design and operation of the procedures relating to the closing of our financial statements. These include: (i) our lack of a sufficient number of personnel with an appropriate level of knowledge and experience in accounting for complex or non-routine transactions, (ii) the fact that our policies and procedures with respect to the review, supervision and monitoring of our accounting and reporting functions were either not designed and in place or not operating effectively; (iii) our inability to complete the timely closing of financial books at the quarter and fiscal year end, and (iv) incomplete segregation of duties in certain types of transactions and processes.

Previous report

Specifically, prior management did not design and maintain sufficient procedures and controls related to revenue recognition including those related to ensuring accuracy of revenue recognized from non-routine transactions such as the sales of LotteryLink Credits. As a result, we determined that there was an overstatement of revenue in the consolidated statement of operations of approximately $52.1 million during the year ended December 31, 2021, which required a restatement of the previously issued financial statements for the year ended December 31, 2021 contained in the Amended 2021 Annual Report.

Previous report

We have begun implementing remediation steps to improve our internal control over financial reporting and to remediate the identified material weaknesses, including (i) adding personnel with sufficient accounting knowledge; (ii) adopting a more rigorous period-end review process for financial reporting; (iii) adopting improved period close processes and accounting processes, and (iv) clearly defining and documenting the segregation of duties for certain transactions and processes. Management has expanded and will continue to enhance our system of identifying transactions and evaluating and implementing the accounting standards that apply to our financial statements, including through enhanced analyses by our personnel and third-party professionals with whom we consult regarding complex accounting applications. We intend to continue take steps to remediate the material weaknesses described above and further continue re-assessing the design of controls, the testing of controls and modifying processes designed to improve our internal control over financial reporting. The Company plans to continue to assess its internal controls and procedures and intends to take further action as necessary or appropriate to address any other matters it identifies or are brought to its attention. We will not be able to fully remediate these material weaknesses until these steps have been completed and have been operating effectively for a sufficient period of time. The implementation of our remediation will be ongoing and will require validation and testing of the design and operating effectiveness of internal controls over a sustained period of financial reporting cycles. We may also conclude that additional measures may be required to remediate the material weaknesses in our internal control over financial reporting.

Previous report

We cannot assure you that the measures we take will be sufficient to remediate the material weaknesses we identified or avoid the identification of additional material weaknesses in the future. If the steps we take do not remediate the material weaknesses in a timely manner, there could continue to be a reasonable possibility that this control deficiency or others could result in another material misstatement of our annual or interim financial statements that would not be prevented or detected on a timely basis.

Previous report

For more information, see “Item 1A. Risk Factors - Public Company Operating Risks - If we fail to implement and maintain an effective system of internal controls, we may be unable to accurately report our results of operations, meet our reporting obligations or prevent fraud, and investor confidence and the trading price of our common stock and warrants may be materially and adversely affected.”

Previous report

Except as otherwise described herein, there was no change in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter ended December 31, 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Previous report — wording carried elsewhere

Changes in Internal Control Over Financial Reporting