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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM CB

TENDER OFFER/RIGHTS OFFERING NOTIFICATION FORM

Please place an X in the box(es) to designate the appropriate rule provision(s) relied upon to file this Form:

 

 

PART I – INFORMATION SENT TO SECURITY HOLDERS

 

Item 1. Home Jurisdiction Documents

(a) The following documents are attached as exhibits to this Form CB:

(b) Not applicable.

Item 2. Informational Legends

A legend complying with Rule 802(b) under the U.S. Securities Act of 1933, as amended, is included in each of the documents referred to in Item 1.

PART II – INFORMATION NOT REQUIRED TO BE SENT TO SECURITY HOLDERS

 

Ehibit Number
99.3	NeoGames’ stand-alone financial statements for the financial year 2021
99.4	NeoGames’ stand-alone financial statements for the financial year 2020
99.5	NeoGames’ stand-alone financial statements for the financial year 2019

 

PART III – CONSENT TO SERVICE OF PROCESS

 

 

SIGNATURES

After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.

 

 

Date: April 27, 2022

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Public offering of up to 7,604,886 new ordinary shares in NeoGames S.A represented by a corresponding number of Swedish Depositary Receipts

in the context of a public takeover offer in Sweden regarding all shares in Aspire Global Plc.

 

This prospectus (the “Prospectus”) has been prepared in connection with a public offering of SDRs (as defined below) in Sweden in the context of the public takeover offer in Sweden submitted by NeoGames S.A., a public limited liability company (société anonyme) incorporated and existing under the laws of the Grand Duchy of Luxembourg, with its registered office at 63-65, rue de Merl, L - 2146 Luxembourg, Grand Duchy of Luxembourg, and registered with the Luxembourg Register of commerce and companies (“RCS”) under number B186309 (“NeoGames” or the “Company”), regarding all shares in Aspire Global Plc, a Maltese public limited company with Maltese registration number C 80711 (“Aspire”) which shares are admitted to trading on Nasdaq First North Premier Growth Market in Stockholm, and the issue of up to 7,604,886 new ordinary shares (the “Shares”) represented by a corresponding number of Swedish Depositary Receipts (“SDRs”) as share consideration in the offer, following the capital increase of the Company (the “Offer”).

 

The Offer, as well as any agreements entered into between the Company and the shareholders in Aspire for the purpose of the Offer, shall be governed and construed in accordance with substantive Swedish law. Any dispute regarding the Offer or such agreements, or which arises in connection therewith, shall be settled exclusively by Swedish courts, and the District Court of Stockholm (Sw. Stockholms tingsrätt) shall be the court of first instance. The Swedish Corporate Governance Board’s Takeover rules for certain trading platforms (the “Takeover Rules”) and the Swedish Securities Council’s (Sw. Aktiemarknadsnämnden) statements and rulings regarding interpretation and application of the Takeover Rules, including, where applicable, the Swedish Securities Council’s interpretation and application of the formerly applicable Rules on Public Offers for the Acquisition of Shares issued by the Swedish Industry and Commerce Stock Exchange Committee (Sw. Näringslivets Börskommitté), are applicable to the Offer. The SDRs are being offered, as specified in this Prospectus, subject to cancellation, suspension or modification of the Offer and subject to certain other conditions (see “Terms and Conditions of the Offer”).

 

Investing in the securities described in the Prospectus is connected with a high degree of risk inherent to investments in capital market equity instruments and risks connected with the Company’s operations and its business environment. Prospective investors should read the entire Prospectus and, in particular the discussion herein of certain risk factors that should be considered in connection with an investment in the SDRs, see “Risk Factors” in this Prospectus. The market price of the SDRs may decline and investors could lose all or part of their investment. An investment in the SDRs does not guarantee the achievement of the expected profitability level. An investment in the securities covered by this Prospectus is not covered by any invested capital protection schemes. An investment in the SDRs is compatible only with investors who do not need guaranteed income or capital protection, who (either alone or in conjunction with an appropriate financial or other advisor) are capable of evaluating the merits and risks of such an investment and who have sufficient resources to be able to bear any losses that may result therefrom.

 

The Offer is made for the securities of a non-U.S. company. The Offer is subject to disclosure requirements of a foreign country that are different from those of the United States. Financial statements included in the Prospectus, if any, may have been prepared in accordance with foreign accounting standards that may not be comparable to the financial statements of U.S. companies. It may be difficult for U.S. investors to enforce their rights and any claim they may have arising under the federal securities laws, since the Issuer is located in a foreign country, and some or all of its officers and directors may be residents of a foreign country. U.S. investors may not be able to sue a foreign company or its officers or directors in a foreign court for violations of the U.S. securities laws. It may be difficult to compel a foreign company and its affiliates to subject themselves to a U.S. court's judgment. U.S. investors should be aware that the Issuer may purchase securities otherwise than under the Company’s public offer to Aspire’s shareholders, such as in open market or privately negotiated purchases.

 

This Prospectus constitutes a prospectus in the form of a single document within the meaning of Article 6 of Regulation (EU) 2017/1129 of 14 June 2017, on the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market, as amended (the “Prospectus Regulation”) and has been prepared in accordance with the provisions of the Prospectus Regulation and the Swedish Act (2019:414) Supplementing the EU’s Prospectus Regulation (Sw. Lag (2019:414) med kompletterande bestämmelser till EU:s prospektförordning) (the “Swedish Prospectus Act”) and the rules promulgated thereunder. This Prospectus has been approved on 26 April 2022 by the Swedish Financial Supervisory Authority (Sw. Finansinspektionen) (the “SFSA”) as a competent authority in accordance with the Prospectus Regulation. The SFSA only approves this Prospectus as meeting the standards of completeness, comprehensibility and consistency imposed by the Prospectus Regulation; such approval should not be considered as an endorsement of the Company that is, or the quality of the securities that are, the subject of this Prospectus. Investors should make their own assessment as to the suitability of investing in the securities that are the subject of this Prospectus. The Prospectus shall be valid until 26 April 2023 being twelve months after its approval by the SFSA.

 

Based on Article 2(m) of the Prospectus Regulation, the Kingdom of Sweden (“Sweden”) is the home Member State of the Company and the SFSA is solely authorised to approve this Prospectus. This approval cannot be considered as a judgment by the SFSA on, or any comment by the SFSA on, the merits of the transaction, nor on the situation of the Company, and by approving this Prospectus the SFSA gives no undertaking as to the economic and financial soundness of the transaction and the quality or solvency of the Company.

 

The Company will be authorised to offer the SDRs as share consideration under the Offer in Sweden once the Prospectus has been approved by the SFSA and published on the Company’s website (https://ir.neogames.com/offer-page) and, additionally, for information purposes only, on the website of https://mangold.se/. In addition, in accordance with the requirements of the Prospectus Regulation, a copy of this Prospectus on a durable medium will be delivered to investors upon their request free of charge. Furthermore, a paper copy of this Prospectus will be delivered to the investors upon their request free of charge. However, pursuant to the Prospectus Regulation, such delivery will be limited to the jurisdiction in which the offer of the SDRs is made or where the admission to trading on a regulated market is taking place under the Prospectus Regulation.

 

The information contained herein is current as of the date of this Prospectus. Neither the delivery of this Prospectus, nor the offer, sale or delivery of the SDRs shall, under any circumstances, create any implication that no adverse changes have occurred nor events have happened, which may or could result in an adverse effect on the Company’s business, financial condition or results of operations and/or the market price of the Shares. Nothing contained in this Prospectus constitutes, or shall be relied upon as, a promise or representation by the Company or its advisors as to the future.

 

Prior to the Offer, the shares of the Company have been admitted to, and listed by the nominee Cede & Co on, the Nasdaq Global Market (ISIN LU2263803020). Application will be made to admit all the Shares to listing and trading on the Nasdaq Global Market. The Company expects that the date on which the trading in Shares on the Nasdaq Global Market will commence will be on or around 14 June 2022 (the “Listing Date”). The SDRs will not be subject to an application for the admission and introduction to trading on any trading venue. All the shares of the Company are ordinary registered shares. The ISIN of the Shares is LU2263803020. The SDRs represent ordinary shares in the Company. Each SDR corresponds to one share in the Company and the newly issued shares will be represented by SDRs. The ISIN of the SDRs is SE0017832504 as provided by Euroclear Sweden AB.

 

If the Offer is cancelled on the terms provided in this Prospectus, all shareholders in Aspire tendering in the Offer in exchange for share consideration, in part or in full, in the form of SDRs will be disregarded and any tendered Aspire shares will be returned without interest or other compensation. All dealings in the Shares prior to the Listing Date are at the sole risk of the parties concerned. Mangold Fondkommission AB (“Mangold”) or the Company do not accept any responsibility or liability with respect to any person as a result of a withdrawal/cancellation, modification or suspension of the Offer.

 

Except as indicated above, this Prospectus has not been registered, approved or submitted to any other regulatory body in any other jurisdiction and the SDRs have not been registered or approved, nor are they the subject of a notification submitted to any regulatory body in any jurisdiction. The date of this Prospectus is 26 April 2022.

 

 

TABLE OF CONTENTS

 

SUMMARY	3
RISK FACTORS	10
IMPORTANT INFORMATION	34
RESPONSIBILITY STATEMENT	35
NOTICE TO PROSPECTIVE TENDERERS	36
NOTICE TO PROSPECTIVE INVESTORS IN THE UNITED STATES	37
NOTICE TO EEA INVESTORS	38
MIFID II PRODUCT GOVERNANCE REQUIREMENTS	39
PRESENTATION OF FINANCIAL AND OTHER INFORMATION	40
MARKET AND INDUSTRY DATA	42
TRADEMARKS, SERVICE MARKS AND TRADE NAMES	43
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS	44
REASONS FOR THE OFFER	45
DIVIDEND AND DIVIDEND POLICY	47
CAPITALISATION AND INDEBTEDNESS	48
INVESTMENTS	49
SELECTED HISTORICAL FINANCIAL INFORMATION	50
COMBINED COMPANY AND PRO FORMA FINANCIAL INFORMATION	55
OPERATING AND FINANCIAL REVIEW	68
BUSINESS OF THE COMPANY	80
MARKET AND REGULATORY OVERVIEW	88
GENERAL CORPORATE INFORMATION	94
MANAGEMENT AND CORPORATE GOVERNANCE	95
MAJOR SHAREHOLDERS	100
RELATED-PARTY TRANSACTIONS	101
DESCRIPTION OF THE SHARES AND GENERAL MEETINGS	105
TERMS AND CONDITIONS OF THE SDRs	119
TERMS AND CONDITIONS OF THE OFFER	123
SELLING RESTRICTIONS	130
TRANSFER RESTRICTIONS	131
TAXATION	132
MATERIAL CONTRACTS	136
ADDITIONAL INFORMATION	137
ABBREVIATIONS AND DEFINITIONS	139
GLOSSARY OF INDUSTRY TERMS	140
DOCUMENTS INCORPORATED BY REFERENCE INTO THIS PROSPECTUS	141

 

SUMMARY

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What is the key financial information regarding the Company?

What are the key risks that are specific to the SDRs?

SDR holders do not have the same rights as NeoGames shareholders; There will be no trading in the SDRs; Investors with a reference currency other than SEK will be subject to certain currency risks if they tender for SDRs in the Offer.

Where will the securities be traded?

All of the Shares will be subject to an application for the admission and introduction to trading on the Nasdaq Global Market. The SDRs will not be subject to an application for the admission and introduction to trading on any trading venue.

Section D - Key information on the offer of securities to the public

Under which conditions and timetable can I invest in this security?

General terms and conditions of the Offer On 17 January 2022, NeoGames announced a recommended public offer to the shareholders of Aspire to tender all their shares in Aspire to NeoGames for a consideration consisting of a combination of cash and newly issued shares in the NeoGames in the form of SDRs (the “Offer”). Shareholders in Aspire may elect to tender in the Offer pursuant to either of two consideration alternatives, the Base Case Alternative and the Conditional Alternative. The Base Case Alternative Subject to the potential adjustment of each individual Aspire shareholder’s consideration due to elections made under the Mix & Match Facility described below, NeoGames is offering each shareholder in Aspire the following: (i) in respect of 50 percent of the number of shares in Aspire tendered by such shareholder: SEK 111.00 in cash per share in Aspire; and (ii) in respect of the remaining 50 percent of the number of shares in Aspire tendered by such shareholder: 0.320 shares in NeoGames per share in Aspire in the form of SDRs. The Mix & Match Facility for Aspire’s shareholders As part of the Base Case Alternative, NeoGames offers Aspire’s shareholders a Mix & Match Facility, through which each shareholder in Aspire is, subject to restrictions set out below, given the possibility, should the shareholder prefer a deviation from the Base Case Alternative, to elect either: (i) to receive as much consideration in cash as possible for tendered Aspire shares (in addition to the default cash entitlement of SEK 111.00 per Aspire share in respect of 50 percent of the number of Aspire shares tendered), and thus as little consideration in shares in the form of SDRs as possible; or (ii) to receive as much consideration in shares in the form of SDRs as possible for tendered Aspire shares (in addition to the default share entitlement of 0.320 shares in NeoGames in the form of SDRs per Aspire share in respect of 50 percent of the number of Aspire shares tendered), and thus as little in cash consideration as possible. The Conditional Alternative As an alternative to the Base Case Alternative, NeoGames is offering each shareholder in Aspire the following in respect of 100 percent of the number of Aspire shares tendered by such shareholder, and for each such Aspire share: (i) at settlement of the Offer: 0.320 shares in NeoGames or such lower prorated number of shares in NeoGames, in the form of SDRs, that may follow as a result of other shareholders’ elections under the Mix & Match Facility and the maximum number of shares in NeoGames that will be issued as consideration in the Offer, and (ii) provided that if less than 0.320 shares in NeoGames in the form of SDRs for each Aspire share has been received pursuant to clause (i) above and conditional upon the payment of future dividends from Aspire to NeoGames in a corresponding aggregate amount (net of any dividend tax) after Aspire has become a wholly owned subsidiary of NeoGames: an additional cash purchase price for each Aspire share amounting to the difference between the value of the share consideration delivered pursuant to clause (i) above (where 0.320 shares in NeoGames in the form of SDRs shall be deemed to have a value of SEK 111.00) and SEK 111.00, payable in cash in connection with such potential future dividends being paid. The offered consideration models will be adjusted should Aspire or NeoGames distribute dividends or in any other way distribute or transfer value to their respective shareholders before settlement has taken place in relation to the Offer. The consideration will accordingly be reduced by a corresponding amount per share for each such dividend or value transfer distributed by Aspire, or increased by a corresponding amount per share for each such dividend or value transfer distributed by NeoGames. Furthermore, should the acceleration of all current outstanding incentive programs in Aspire, as well as any other warrants/options issued by Aspire, result in the creation of more than 828,094 new Aspire shares, the consideration in the Offer will be reduced such that the total consideration for all shares in Aspire in the Offer does not change, unless the Offer is instead withdrawn on the basis of the condition for completion number 3 below. No commission will be charged in respect of the settlement of the Aspire shares tendered to Neo-Games under the Offer. Conditions for completion of the Offer Completion of the Offer is conditional upon: (1) the Offer being accepted to such extent that NeoGames becomes the owner of shares representing not less than 90 percent of the total number of outstanding shares in Aspire (on a non-diluted and on a fully diluted basis); (2) Aspire’s articles of association, prior to the end of the acceptance period in the Offer, being amended as to allow for NeoGames, having become the owner of not less than 90 percent of the total number of outstanding shares in Aspire carrying voting rights (on both a non-diluted and on a fully diluted basis), to acquire the shares in Aspire that have not been tendered in the Offer, for a consideration no higher than and, at the sole discretion of NeoGames, in the same form as the consideration paid per Aspire share in the Offer or in a form having the corresponding value consisting of cash alone or a combination of cash and non-cash consideration;

Why is this prospectus being produced?

Reasons for the Offer Having thoroughly researched and landscaped the global gaming market for a best-in-class iGaming provider, NeoGames has identified Aspire as an ideal combination that would allow NeoGames to pursue sports and gaming initiatives globally for lottery customers and permit entry into the adjacent TAMs of online sports betting and online gaming. NeoGames believes combining with Aspire and adding its proprietary technology, including a scalable PAM solution providing end-to-end solutions for a customer’s online business from regulation and compliance to payment processing, risk management, CRM, support and player value optimization combined with its games content and sports betting platform, provides strong strategic and operational rationale for a combination. Further, Aspire operates a pure B2B model, given its recent divestiture of its B2C operations. Aspire’s B2B operations, as reported by Aspire, have a history of revenue growth and operating profitability provides strong financial rationale for a combination. Neo-Games believes that the combination of award-winning products and service offerings across iLottery, online sports betting and iGaming, will uniquely position NeoGames, as a global multi-product leader, to further capitalize on industry growth, increase reve-nues from existing customers and offer a value proposition that would appeal to a wider array of customers globally. Conflicts of interest Barak Matalon and Aharon Aran are board members in both NeoGames and Aspire and own shares in NeoGames as well as Aspire. Oded Gottfried is Chief Technical Officer of NeoGames and owns shares in NeoGames as well as in Aspire. Barak Matalon, Aharon Aran and Oded Gottfried have irrevocably and unconditionally undertaken towards NeoGames to accept the Offer. Considering the aforementioned relationships and contractual arrangements, and in accordance with the Swedish Corporate Governance Board’s Takeover rules for certain trading platforms, Barak Matalon and Aharon Aran have not participated, and will not participate, in NeoGames’ nor Aspire’s handling and evaluation of the Offer. Correspondingly, NeoGames’ board of directors has established an independent director committee to handle and evaluate the Offer without the involvement of Barak Matalon and Aharon Aran.

RISK FACTORS

 

Before tendering for SDRs in the Offer, prospective tenderers should carefully consider the risks and uncertainties described below, together with the other information contained in this Prospectus. The occurrence of any of the events or circumstances described in these risk factors, individually or together with other circumstances, may have a significant negative impact on the Company’s business, financial condition, results of operations and prospects. The price of the SDRs could decline, and an investor might lose part or all of its investment upon the occurrence of any such event.

 

All of these risk factors are contingencies that may or may not occur. The Company may face a number of these risks described below simultaneously and some risks described below may be interdependent where indicated with a cross-reference. Although the most material risk factors have been presented first within each category, the order in which the remaining risks are presented is not necessarily an indication of the likelihood of the risks actually materialising, of the potential significance of the risks or of the scope of any potential negative impact to the Group’s business, financial condition, results of operations and prospects. While the risk factors below have been divided into categories, some risk factors could belong in more than one category and prospective investors should carefully consider all of the risk factors set out in this section.

 

Although the Company believes that the risks and uncertainties described below are the material risks and uncertainties concerning the Company’s business and industry and the SDRs, they are not the only risks and uncertainties relating to the Company and the SDRs. Other risks, events, facts or circumstances not presently known to the Company, or that the Company currently deems to be immaterial could, individually or cumulatively, prove to be important and may have a significant negative impact on the Company’s business, financial condition, results of operations and prospects.

 

Prospective investors should carefully read and review the entire Prospectus and should form their own views before making an investment decision with respect to the SDRs. Furthermore, before making a decision to tender in the Offer in exchange for a share consideration in the form of SDRs, prospective investors should consult their own professional adviser and carefully review the risks associated with an investment in the SDRs and consider such an investment decision in light of their personal circumstances.

 

Risks relating to the Company’s business, operations and the industry in which it operates

 

We have a concentrated customer base, and our failure to retain our existing contracts with our customers could have a significant adverse effect on our business.

 

Our financial condition is heavily dependent on our ability to maintain our existing turnkey contracts and our large games contracts. We cannot guarantee that our existing contracts will be renewed or that we will be able to win a procurement process for a new contract. Even if we are successful in renewing agreements with customers, there is no assurance that such renewals will be on the same terms, and it is possible that renewals of existing agreements will be on less preferable terms. This has occurred in the past when certain customers required certain concessions upon the renewal of existing agreements. As is typical with many government contracts, most of our customers can terminate our contracts for convenience. Loss of any of our customer contracts would result in a substantial decline in our revenues, which also could hinder our ability to pursue growth initiatives, both in the form of new or enhanced products and services and in expansion into new markets. The loss of any of our customers could damage our reputation, which could materially damage our financial condition.

 

We are dependent on Pollard with respect to our joint operation of the Michigan iLottery for the Michigan State Lottery.

 

We act as a subcontractor to Pollard with respect to its agreement (the “MSL Agreement”) to provide development, implementation, operational support and maintenance (including technology platforms, games and added value services) to the Michigan State Lottery (the “MSL”). The Michigan iLottery accounted for 45.3% of our revenues in the year ended 31 December 2021 and 54.5% of our revenues in the year ended 31 December 2020.

 

If Pollard breaches or does not perform its obligations under the MSL Agreement to the satisfaction of the MSL or if there is otherwise a dispute between Pollard and the MSL, the MSL could seek to terminate the MSL Agreement prior to its expiration or seek to amend the terms of the MSL Agreement in a manner that would negatively impact the financial and other benefits we derive indirectly from the MSL Agreement. In addition, such an amendment to the MSL Agreement could cause Pollard to seek to amend the terms of our agreement with Pollard with respect to the MSL (the “Michigan JV Agreement”) in a way that is less favorable to us. If the MSL terminates the MSL Agreement or if any disputes arise between Pollard and the MSL, our business, financial conditions and results of operations could be adversely affected as a result of our association with Pollard and the MSL.

 

Our inability to successfully complete and integrate pending or future acquisitions could limit our future growth or otherwise be disruptive to our ongoing business.

 

Since our inception, we have not consummated any acquisitions in support of our strategic goals, and we therefore have no experience in integration of new acquisitions. From time to time, we pursue acquisitions in support of our strategic goals. Our tender offer to acquire Aspire is an example for such strategic acquisition. There can be no assurance that acquisition opportunities will be available on acceptable terms or at all or that we will be able to obtain necessary financing or regulatory approvals to complete potential acquisitions. Our ability to succeed in implementing our strategy will depend to some degree upon the ability of our management to identify, complete and successfully integrate commercially viable acquisitions. Acquisition transactions may disrupt our ongoing business and distract management from other responsibilities. In connection with any such acquisitions, we could face significant challenges in managing and integrating our expanded or combined operations, including acquired assets, operations, and personnel. For example, the integration of Aspire, if completed, could prove to be complicated and time consuming for our management. We may not be able to successfully integrate Aspire and may not be able to realize and benefit from any future synergies, which could adversely affect our business and financial condition. For information regarding the public tender offer to Aspire shareholders, see “Terms and conditions of the Offer”.

 

We do not have a formal joint venture agreement or any other operating or shareholders’ agreement with Pollard with respect to NPI, through which we conduct a substantial amount of our business.

 

In 2014, following the procurement process for the predecessor to the MSL Agreement, we and Pollard established NPI to pursue other iLottery opportunities in the North American market. While the current MSL Agreement remains between Pollard and the MSL, NPI has since been awarded iLottery contracts with the Virginia Lottery (the “VAL”) in August 2015, the New Hampshire Lottery Commission (the “NHL”) in September 2018 (as a subcontractor to Intralot, Inc. (“Intralot”)), the North Carolina Education Lottery (the “NCEL”) in October 2019 and the Alberta Gaming, Liquor and Cannabis Commission (the “AGLC”) in March 2020.

 

Although we and Pollard have certain rights and obligations prescribed by law as equity holders of NPI, there is no joint venture agreement, shareholders’ agreement or any other type of operating agreement between us and Pollard with respect to NPI, and we and Pollard operate NPI based on a term sheet that was executed in 2014 and expired in 2015. While to date the parties have been successfully operating NPI on the basis of non-contractual understandings, the absence of a written agreement with clearly defined rights, roles and responsibilities of each party may increase the likelihood of disputes between us and Pollard and could make the outcome of any potential dispute more uncertain. Furthermore, conducting a business through a jointly-owned entity such as NPI entails risks that are commonly associated with joint ventures, including the failure to maintain a good working relationship, differing economic and business interests and goals, and liability or reputational harm resulting from each other’s actions. Differences in views between us and Pollard, or a change in the ownership of Pollard, may also result in delayed decision-making or disputes at the shareholder and board level that could negatively impact the operations of NPI and its relationship with customers.

 

Upon the termination of the Michigan JV Agreement, neither we nor Pollard will be obligated to cooperate with each other in pursuing iLottery opportunities in North America, and both we and Pollard may choose to pursue future iLottery opportunities without each other. The termination of our business relationship with Pollard would pose several potential risks for us. In the event that our relationship with Pollard is terminated, there can be no assurance that any of NPI’s employees will remain with NPI. In addition, Pollard manages the procurement process, and our ability to pursue new contracts in North America may be hindered as a result of a need to build certain legal, administrative and customer relations capabilities and functions in our North American operations, which Pollard currently contributes to NPI and which we do not currently offer in North America. As such, if we pursue future opportunities alone, we cannot assure you that we will be able to secure additional contracts in North America. Further, if we decide to collaborate with new partners with whom we have no prior relationship or track record of successful cooperation, we may fail to achieve the same degree of success that we have achieved with Pollard. We may also be delayed in pursuing future opportunities if we are required to negotiate new agreements and business arrangements with these new partners, and the terms we negotiate with these new partners may be less favorable than those we currently have with Pollard.

 

A reduction in discretionary consumer spending could have an adverse impact on our business.

 

Lottery and gaming represent discretionary expenditures, which are subject to volatility during times of economic, social and political change. Changes in discretionary spending or player preferences are driven by changes outside of our control, such as, but not limited to, the following economic or socio-political factors:

 

•          recessions or other economic slowdowns;

 

•          perceptions by potential players of weak or weakening economic conditions;

 

•          tax increases, including on lottery winnings;

 

•          significant declines in stock markets;

 

•          decreased liquidity in certain financial markets;

 

•          general tightening of credit;

 

•          civil unrest, terrorist activities or other forms of socio-political turbulence; and

 

•          pandemics, epidemics and the spread of contagious diseases.

 

We generate the majority of our revenues from customer contracts based on a revenue sharing model, with our portion calculated as a percentage of GGR or NGR. Widespread reductions in disposable income could lead to a reduction in the number of lottery players and the amounts such players are willing and able to wager. Given the nature of our revenue sharing arrangements, fewer players and lower spending per player could have a significant adverse effect on our business.

 

Because our customers’ offerings are typically available only to players within their geographic borders, our revenue is highly concentrated in a limited number of locations. A significant portion of our revenue is generated from the Michigan iLottery, and any adverse impact resulting from any of the foregoing economic factors would be magnified to the extent that it disproportionately impacts players in Michigan or other jurisdictions from which we derive revenues.

 

As our revenue sharing arrangements result in an intertwined relationship between our and our customers’ financial condition, we also face significant risks during times of uncertain and unfavorable economic and socio-political conditions affecting our customers. Unfavorable economic and socio-political factors and conditions could result in budgetary and liquidity concerns for our customers, which may reduce the likelihood that we will be able to renew our existing contracts on substantially similar commercial terms or win new contracts with terms as favorable to us as the terms of our existing contracts.

 

The growth of our business largely depends on our continued ability to procure new contracts.

 

While much of our revenue growth over the past few years has come from increasing NGR generated by the Michigan iLottery, and we expect the Michigan iLottery to continue to account for a large portion of our revenues, the addition of new iLottery contracts has begun to contribute substantially to the growth of our business. In particular, NPI began recognizing revenues from new turnkey contracts supporting the VAL in 2015 and, later, NHL and the NCEL in 2018 and 2019, respectively, and the latter two contracts accounted collectively for 40.3% of the Company’s share in NPI’s revenues for the year ended 31 December 2021 and 16.1% of the Company’s share in NPI’s revenues for the year ended 31 December 2020.

 

 

We may not continue to procure new customer contracts at the same rate as in the past, or at all. There can be no assurance that additional U.S. states will seek to implement iLottery offerings or that U.S. states seeking to implement iLottery offerings will do so through a process in which NPI can compete to be the turnkey solution provider. In particular, certain of our competitors currently serve as central lottery system providers for certain U.S. states, and if these states decide to implement iLottery offerings, they may choose to do so by expanding their existing relationships with our competitors without launching a public procurement process or by including iLottery in a broader lottery system procurement process in which we may not be able to successfully compete.

 

Even if additional U.S. states seek to implement iLottery offerings through a public procurement process, there can be no assurance that NPI will procure any new contracts. Our failure to win new contracts could materially limit the growth of our business.

 

We incur significant costs related to the procurement of new contracts, which we may be unable to recover in a timely manner, or at all.

 

The tender process to obtain a new contract is highly competitive and typically requires a significant upfront capital investment. The efforts and resources required to participate and win a request for proposal, commence operations of an iLottery program and procure revenues from that program are relatively long and may take several months or years to complete. This investment, which includes our management’s time, may never be recovered in the event that we fail in our bid. A typical request for proposals or a tender requires us to spend substantial time and effort assisting potential customers in evaluating our products and services, including providing demonstrations and benchmarking against other available offerings by our competitors. This process can be costly and time consuming, and we often do not know if any given sales efforts will be successful until the later stages of those efforts. After being awarded a contract, it can take years to set up the iLottery system and for the contract to become profitable. The long procurement cycle creates a significant time gap between the time we participate in a tender and dedicate the necessary resources, and the time we can recognize revenue or income from that program, if at all. This time gap creates pressure on our cash flow, as it requires significant funding up front, and in the interim period, and may not result in any income, or result in income that will only be achieved quarters after the resources have been dedicated. If we are unable to forecast market demand and conditions, we may not be able to expand our sales efforts at appropriate times and our revenues and related results of operations could be materially adversely affected.

 

Intense competition exists in the iLottery industry, and we expect competition to continue to intensify.

 

We face significant competition in the evolving iLottery industry. We compete in the iLottery market with respect to our offering of technology solutions, games and related operational services on the basis of the content, features, quality, functionality, accuracy, reliability, innovation and price of such offerings. If we do not consistently deliver innovative, high-quality and reliable products and services, our ability to remain viable within the iLottery industry may suffer, especially as the level of competition increases.

 

Some of our competitors and potential competitors have substantially greater financial and other resources (including human resources) or experience than we do. Some of our competitors also have existing relationships and insight as the legacy retail lottery provider of certain U.S. states and may realize synergies that we cannot. Competitors may devote more resources towards developing and testing products and services, undertake more extensive marketing campaigns, offer more favorable pricing terms, pursue aggressive growth initiatives or otherwise develop more commercially successful products or services. In addition, certain of our competitors may enter into contracts with less favorable terms to prevent us from procuring new contracts or renewing our existing contracts. Such potential competitive disadvantages may make it difficult for us to retain existing contracts or secure new contracts without being willing to accept less favorable terms.

 

In addition to risks directly tied to our relative lack of resources, experience and longevity, we face risks that:

 

 

 

 

 

Moreover, current and future competitors may establish cooperative relationships among themselves or with others, including our current or future strategic partners. By doing so, these competitors may increase their ability to meet the needs of our existing and prospective customers and their players. These developments could make it more difficult for us to renew our existing contracts or win new contracts. If we are unable to compete effectively, successfully and at reasonable cost against our existing and future competitors, our results of operations, cash flows and financial condition could be adversely impacted.

 

Our information technology and infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfeasance or other disruptions.

 

The secure maintenance and transmission of player information is a critical element of our operations. Our information technology and other systems that maintain and transmit player information, or those of service providers, business partners or employee information may be compromised by a malicious third-party penetration of our network security, or that of a third-party service provider or business partner, or impacted by intentional or unintentional actions or inactions by our employees, or those of a third-party service provider or business partner. As a result, our players’ information may be lost, disclosed, accessed or taken without their consent. We have experienced in the past, and expect to continue to experience in the future, attempts to breach our systems and other similar incidents. To date these attempts have not had a material impact on our operations or financial results, but we cannot provide assurance that they will not have a material impact in the future.

 

We rely on encryption and authentication technology licensed from third parties in an effort to securely transmit confidential and sensitive information, including credit card numbers. Advances in computer capabilities, new technological discoveries or other developments may result in the whole or partial failure of this technology to protect transaction data or other confidential and sensitive information from being breached or compromised. In addition, websites are often attacked through compromised credentials, including those obtained through phishing and credential stuffing. Our security measures, and those of our third-party service providers, may not detect or prevent all attempts to breach our systems, denial-of-service attacks, viruses, malicious software, break-ins, phishing attacks, social engineering, security breaches or other attacks and similar disruptions that may jeopardize the security of information stored in or transmitted by our websites, networks and systems or that we or such third parties otherwise maintain, including payment card systems, which may subject us to fines or higher transaction fees or limit or terminate our access to certain payment methods. Threats to information security are constantly evolving, including in diversity and sophistication. We and such third parties may not anticipate or prevent all types of attacks until after they have already been launched. Further, techniques used to obtain unauthorized access to or sabotage systems change frequently and may not be known until launched against us or our third-party service providers.

 

In addition, security breaches can also occur as a result of non-technical issues, including intentional or inadvertent breaches by our employees or by third parties. These risks may increase over time as the number of our employees and the complexity and number of technical systems and applications we use also increase. Breaches of our security measures or those of our third- party service providers or cybersecurity incidents could result in unauthorized access to our sites, networks and systems; unauthorized access to and misappropriation of player information, including players’ personally identifiable information, or other confidential or proprietary information of ourselves or third parties; viruses, worms, spyware or other malware being served from our sites, networks or systems; deletion or modification of content or the display of unauthorized content on our sites; interruption, disruption or malfunction of operations; costs relating to breach remediation, deployment of additional personnel and protection technologies, response to governmental investigations and media inquiries and coverage; engagement of third-party experts and consultants; litigation, regulatory action and other potential liabilities. In the past, we have experienced social engineering, phishing, malware and similar attacks and threats of denial-of-service attacks, none of which to date has been material to our business; however, such attacks could in the future have a material adverse effect on our operations. Pursuant to a software license agreement with Pollard in respect of the offering to the MSL (the “Pollard Software License Agreement”), our iLottery software is installed on Pollard’s servers, through which it is made available to the MSL. Pollard is responsible for the security measures on its servers, and the Pollard Software License Agreement contains no representations or undertakings with regard to such security measures. A breach of Pollard’s server security could expose our software to the risks noted above. Moreover, our iLottery software is made available by NPI to the VAL, the NHL, the NCEL and the AGLC . If any of these breaches of security should occur, our reputation and brand could be damaged, customers may terminate their contracts with us, our business may suffer, we could be required to expend significant capital and other resources to alleviate problems caused by such breaches, and we could be exposed to a risk of loss, litigation or regulatory action and possible liability. We cannot guarantee that recovery protocols and backup systems will be sufficient to prevent data loss. Actual or anticipated attacks may cause us to incur increasing costs, including costs to deploy additional personnel and protection technologies, train employees and engage third-party experts and consultants.

 

In addition, any party who is able to illicitly obtain a player’s password may be able access such player’s transaction data or personal data (including payment information), resulting in the perception that our systems are insecure. Any compromise or breach of our security measures, or those of our third-party service providers, could violate applicable privacy, data protection, data security, network and information systems security and other laws, potentially trigger private rights of action under certain laws and cause significant legal and financial exposure, negative publicity and a loss of confidence in our security measures, which could have a material adverse effect on our business, reputation, financial condition, results of operations and prospects. We continue to devote significant resources to protect against security breaches and we may in the future need to address problems caused by breaches, including notifying affected players and responding to any resulting litigation, which in turn, would divert resources from the growth and expansion of our business.

 

We maintain liability insurance policies covering certain security and privacy damages. However, we cannot be certain that our coverage will be adequate for liabilities actually incurred or that insurance will continue to be available to us on economically reasonable terms, or at all.

 

In addition to competition with other iLottery providers, we and our customers also compete with providers of other online offerings.

 

In addition to competition from iLottery providers, we also face competition from providers of other online offerings, including iGaming, sports betting, mobile games and eSports. While we believe that our customers’ iLottery offerings target different players and provide a differentiated experience than these other online offerings, the introduction of such offerings may allow new competitors to establish a foothold in regions where we currently provide the iLottery offering. For example, on 22 January 2021, iGaming and online sports betting was launched in Michigan. The Michigan iLottery accounted for approximately 45.3% of our revenues in the year ended 31 December 2021 and 54.5% of our revenues in the year ended 31 December 2020, and the introduction of other online gaming offerings, which is typically accompanied by significant marketing efforts to attract players, has adversely affected the revenues generated by the Michigan iLottery program.

 

We operate in an industry that is affected by technological improvements and evolving player preferences.

 

The iLottery industry continues to experience rapid development of technological advances and player preferences. In some instances, advancements in technology trigger a change in player preferences. For example, as digital graphics improve, players may demand games with higher definition and a superior user interface. Our success depends on our ability to accurately anticipate and quickly respond to evolving industry standards and player preferences. We cannot assure you that we will be able to respond to such changes with innovative, high-quality, reliable and popular products and services or make the required adjustments to our existing products and services on a timely basis. In addition, the introduction of new products or updated versions of existing products has inherent risks, including, but not limited to:

 

 

 

 

 

 

 

 

In light of the costs required to create and introduce new or enhanced products and services, if our new or enhanced products fail to achieve commercial success, we will struggle to remain commercially viable, especially in the face of heightened competition.

 

 

We have incurred operating losses in the past, may incur operating losses in the future and may not be able to maintain sustainable profit margins.

 

We generated a net profit of $6.5 million in the year ended December 31, 2020, which was the first reporting period in which we generated a net profit since incorporation. We continued to generate net profit, and in the year ended December 31, 2021 we generated a net profit of $4.7 million. We expect to continue the development and expansion of our business, and we anticipate additional costs in connection with legal, accounting and other administrative expenses related to operating as a public company. While our revenue has grown in recent years, if our revenue declines or fails to grow at a rate sufficient to offset increases in our operating expenses, we may generate losses. We cannot ensure that we will sustain profitability in the future.

 

Certain of our directors and shareholders may experience a conflict of interest between their duties to us and to Aspire.

 

We were established as an independent company in 2014, following a spin-off from Aspire Global Plc (formerly known as NeoPoint Technologies Limited) (“Aspire” and, together with its subsidiaries, the “Aspire Group”). Prior to our spin-off from Aspire, our management team was responsible for the iLottery business of Aspire. Barak Matalon and Aharon Aran, members of our board of directors, are also members of Aspire’s board of directors. Further, Barak Matalon, Elyahu Azur, Pinhas Zahavi and Aharon Aran (collectively, the “Founding Shareholders”), who collectively own a majority of the shares of Aspire, may have substantial influence over the outcome of matters submitted to our shareholders for approval. Such directors and shareholders could experience a conflict of interest between their duties to us and Aspire, which may have an adverse effect on our business and prospects.

 

For example, the Aspire Software License Agreement (as defined below in “Related Party Transactions - Relationship with Aspire - Aspire Software License Agreement”) does not prevent NeoGames from using the Mixed-Use Software (as defined below in “Related Party Transactions - Relationship with Aspire - Aspire Software License Agreement”) to design, develop and implement games content, so long as it is not sold through certain platform providers or white label companies which are competitors of Aspire, and provided that we do not design, develop and implement casino and slot content to games aggregators. See “Related Party Transactions - Relationship with Aspire - Aspire Software License Agreement.” Accordingly, both we and Aspire could compete in future engagements for provision of games content or for a contract with a white label provider. Furthermore, the Aspire Software License Agreement does not prevent either NeoGames or Aspire from using the Mixed-Use Software for (i) B2B customers in the iGaming and sports betting business in the United States, (ii) B2G customers in the iLottery business anywhere outside the United States, and (iii) offering games content to customers worldwide except for B2G customers in the United States and for customers who are providers of iLottery content which are NeoGames competitors. Accordingly, both we and Aspire could compete for the same B2B iGaming and sports betting customers in the United States or B2G iLottery customers outside the United States. In the event that such circumstances arise, the shared directors or shareholders may decide to prevent NeoGames from pursuing such opportunities in favor of Aspire.

 

Additionally, on 17 January 2022 we announced the Aspire Tender Offer (as defined below). The Aspire Tender Offer is an ongoing process as of the date hereof. While both we and Aspire have established special independent committees to evaluate and approve the Aspire Tender Offer, the Aspire Tender Offer, if completed, will constitute a transaction between related parties. For more information, see “Related Party Transactions - Relationship with Aspire.”

 

Our Founding Shareholders have significant influence over the nominations and elections of members of our board of directors and other matters submitted for shareholder approval.

 

Our Founding Shareholders have the exclusive right under our amended and restated articles of association (“articles of association”) to nominate up to 50% of our directors so long as they own in the aggregate at least 40.0% of our issued and outstanding share capital. As of March 31, 2022, the Founding Shareholders held approximately 49.9% of our issued and outstanding share capital. As a result, the Founding Shareholders have significant influence also over the outcomes of other matters submitted to shareholders for approval. The Founding Shareholders are entitled to vote their shares according to their own interests, and such interests may be different than the interests of our other shareholders and may delay, deter or prevent a change in control or other business combination that might otherwise be beneficial to our shareholders.

 

We have engaged in transactions with related parties, and such transactions present possible conflicts of interest that could have an adverse effect on our business and results of operations.

 

We provide a sub-license to the NeoSphere platform to William Hill, which at the time was one of our largest shareholders. In April 2021, William Hill was acquired by, and became a subsidiary of Caesars Entertainment, Inc. (“Caesars”). On 18 March 2022, Caesars reported the consummation of a block sale, in which it divested its holdings in the Company. We also provide certain software services to Aspire. The revenues received from William Hill and Aspire amounted to approximately 19% of our revenues in the year 31 December 2021 and 18.6% of our revenues in the year ended 31 December 2020. We may have achieved more favorable terms if such transactions had not been entered into with related parties.

 

We have also entered into certain intellectual property licenses and cost-sharing arrangements with Aspire. Transactions with our significant shareholders or entities in which our significant shareholders hold ownership interests present potential for conflicts of interest, as the interests of these parties and their stockholders may not align with the interests of our shareholders.

 

Our existing and future contractual arrangements could restrict our ability to compete effectively, which may affect our ability to grow our business and enter into new markets.

 

From time to time, we enter into contractual agreements that contain restrictive covenants (such as non-compete, exclusivity and license agreements) that restrict us from entering into new markets to which we may desire to expand our businesses. Our contractual arrangements with Pollard, Aspire and William Hill contain certain provisions that may restrict our ability to grow our business, enter into new markets and compete effectively.

 

Pursuant to the Michigan JV Agreement, until its expiration, we are restricted from exploring any opportunities for further marketing, distribution and exploitation of our internet lottery, scratch cards, instant win games and slots and other online games to other national and state lotteries in the United States and Canada without Pollard. Both the Company and Pollard have the exclusive and pre-emptive right to exploit any and all such additional opportunities that may be conceived, and the participation of NPI in any such additional opportunity is subject to mutual approval of the Company and Pollard. Accordingly, as long as the Michigan JV Agreement remains in effect, the Company is unable to independently pursue any such opportunities, enter into agreements with additional lotteries in the United States and Canada or enter into new partnerships in the United States and Canada. This may negatively impact the future growth of our business or cause our business, financial conditions and results of operations to be harmed.

 

Additionally, pursuant to the Aspire Software License Agreement, Aspire granted NeoGames a license to use Mixed-Use Software for certain purposes. However, the Aspire Software License Agreement restricts NeoGames from using the Mixed-Use Software to (i) design, develop or implement casino and slot games for games aggregators and (ii) design, develop and implement games content for customers who are platform providers or white-label companies which are competitors of Aspire. See “Related Party Transactions - Relationship with Aspire - Aspire Software License Agreement.” While we have only focused on the iLottery business to date, these restrictions may limit our ability to enter into the market of casino, slot games and sports betting in the future and may affect our ability to expand our customer base.

 

Further, pursuant to a binding term sheet entered into in 2018 (the “WH Term Sheet”) with WHG (International) Ltd. (“WHG”), an affiliate of William Hill, we are prohibited from using the NeoSphere platform to compete with WHG in the B2C sports betting industry in the United States. While this has not impeded our ability to grow our business to date, it may limit our ability to expand into the B2C sports betting market in the future.

 

To the extent that such restrictive contractual provisions prevent us from taking advantage of business opportunities, our business, financial position and cash flows may be adversely affected.

 

While we have not experienced a material impact to date, the ongoing COVID-19 and similar health epidemics and contagious disease outbreaks could significantly disrupt our operations and adversely affect our business, results of operations, cash flows or financial condition.

 

In December 2019, a novel strain of coronavirus (“COVID-19”) was identified, and on 11 March 2020, the World Health Organization declared COVID-19 as a global pandemic. Numerous state and local jurisdictions have imposed, and others in the future may impose, “shelter-in-place” orders, quarantines, executive orders and similar government orders and restrictions for their residents to control the spread of COVID-19. In particular, the governments in jurisdictions where our employees are located have imposed limitations on gatherings, social distancing measures and restrictions on movement, only allowing essential businesses to remain open. Such restrictions have resulted in temporary store closures, work stoppages, slowdowns and delays, travel restrictions and cancellation of events, among other restrictions, any of which may negatively impact workforces, customers, consumer sentiment and economies in many markets and, along with decreased consumer spending, have led to an economic downturn throughout much of the world.

 

Our business is largely tied to the disposable income of lottery players. While we have not experienced a material impact to date, the global economic and financial uncertainty may result in significant declines to the number of players using our customers’ offerings and the amount of money that players are able and willing to wager. See “– A reduction in discretionary consumer spending could have an adverse impact on our business.”

 

In response to the COVID-19 pandemic, we transitioned many of our employees to remote working arrangements and temporarily closed our offices in Israel, Ukraine and Michigan. More recently, we have gradually permitted employees to return to our offices in Israel, Kyiv and Michigan in phases while maintaining hybrid office and remote workplace arrangements. While we have not experienced a material impact to date, it is possible that this could have a negative impact on the execution of our business plans and operations. If a natural disaster, power outage, connectivity issue, or other event occurred that impacted our employees’ ability to work remotely, it may be difficult or, in certain cases, impossible, for us to continue our business for a substantial period of time. The increase in remote working may also result in player privacy, IT security and fraud concerns as well as increase our exposure to potential wage and hour issues.

 

Given the continued spread of COVID-19, including the emergence of COVID-19 variants, such as the recent Delta and Omicron variants, and the resultant personal, economic and governmental reactions, we may have to take additional actions in the future that could adversely affect our business, financial condition, and results of operations. In addition, our management team has spent, and will likely continue to spend, significant time, attention, and resources monitoring the COVID-19 pandemic and associated global economic uncertainty and seeking to manage its effects on our business and workforce.

 

The extent to which the COVID-19 pandemic affects our financial results and operations will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to, vaccine and booster rollout, severity and transmission rates of the virus and its current and future variants, the duration and spread of the outbreak, the governmental actions and regulations imposed to contain the virus or treat its impact, how quickly and to what extent pre-pandemic economic and operating conditions can resume and overall changes in players’ behavior.

 

Our limited operating history makes it difficult to evaluate our current business and future prospects.

 

The market for our offerings is relatively new and evolving, and we have a limited operating history under the majority of our customer agreements. As a result, our business and future prospects are difficult to evaluate and our ability to accurately forecast our future results of operations is limited and subject to a number of uncertainties.

 

We entered into our first customer agreement in 2014, and a majority of our customer agreements are in their initial terms. In 2018 and 2019, we began providing turnkey solutions to the NHL and NCEL, respectively. Furthermore, during 2020 we transitioned the VAL solution into a full iLottery program and launched a new turnkey solution with the province of Alberta in Canada. In 2021, we launched Instant games with the Austrian Lotteries (Österreichische Lotterien) as well as Lottomatica in Italy and Sisal Sans in Turkey. Our limited operating history in certain markets makes it difficult to accurately assess our future prospects and increase the risk associated with your investment. Any future changes to our revenue model could materially and adversely affect our business.

 

Our historical revenue growth should not be considered indicative of our future performance. In future periods, our revenue growth could slow and our revenues could decline for a number of reasons, including declining player demand, increasing competition, decreasing growth of the iLottery market or our failure to continue entering into new arrangements. We will continue to encounter risks and uncertainties frequently experienced by growing companies in rapidly changing industries. If our assumptions regarding these risks, uncertainties or future revenue growth are incorrect, or if we do not address these risks successfully, our operating and financial results could differ materially from our expectations and our business could suffer.

 

We are subject to substantial penalties for failure to perform.

 

Our lottery contracts in the United States and in other jurisdictions and other service contracts often require performance bonds or letters of credit to secure our performance under such contracts and require us to pay substantial monetary liquidated damages in the event of non-performance by us.

 

As of 31 December 2021, we had outstanding performance bonds and letters of credit in an aggregate amount of approximately $3.8 million. These instruments present a potential expense for us and divert financial resources from other uses. Claims on performance bonds, drawings on letters of credit, and payment of liquidated damages could individually or in the aggregate have a material adverse effect on our results of operations, business, financial condition or prospects.

 

We rely on information technology and other systems and platforms, and any failures, errors, defects or disruptions in our systems or platforms could diminish our brand and reputation, subject us to liability, disrupt our business, affect our ability to scale our technical infrastructure and adversely affect our business.

 

Our technology infrastructure is critical to the performance of our platform and offerings and to customer and player satisfaction. We devote significant resources to network and data security to protect our systems and data. However, our systems and the systems of any third-party service providers on which we rely may not be adequately designed with the necessary reliability and redundancy to avoid performance delays or outages that could be harmful to our business. We cannot assure you that the measures we take to prevent or hinder cyber-attacks and protect our systems, data and player information and to prevent outages, data or information loss, fraud and to prevent or detect security breaches, including a disaster recovery strategy for server and equipment failure and back-office systems and the use of third parties for certain cybersecurity services, will provide absolute security. We have experienced, and we may in the future experience, website disruptions, outages and other performance problems due to a variety of factors, including infrastructure changes, human or software errors and capacity constraints. Such disruptions have not had a material impact on us; however, future disruptions from unauthorized access to, fraudulent manipulation of, or tampering with our computer systems and technological infrastructure, or those of third parties, could result in a wide range of negative outcomes, each of which could materially adversely affect our business, financial condition, results of operations and prospects.

 

Additionally, our software may contain errors, bugs, flaws or corrupted data. If a particular product offering is unavailable when players attempt to access it or navigation through our platforms is slower than they expect, players may be less likely to return to our customers’ platforms as often, if at all. Furthermore, programming errors, defects and data corruption could disrupt our operations, adversely affect the experience of players, harm our reputation and cause players to stop utilizing our customers’ offerings.

 

Our current systems may be unable to support a significant increase in online traffic or increased player numbers, especially during peak times or events (such as for significant jackpot runs). If there is a system disruption, customers may be able to make a contractual claim for damages against us.

 

We may at any time be required to expend significant capital or other resources, including staff and management time, to reduce the risk of network or IT failure or disruption, including replacing or upgrading existing business continuity systems, procedures and security measures. If such protective measures are implemented unsuccessfully or inefficiently, the quality of our products and services may be materially and adversely affected.

 

We rely on third-party service providers for key functions in our operations.

 

We rely upon various third-party service providers to maintain continuous operation of our platform, servers, hosting services, payment processing and various other key functions of our business. Know-your-customer and geolocation programs and technologies supplied by third parties are an important aspect of certain of our products and services. These services are costly and their failure or inadequacy could materially affect our operations.

 

Additionally, we rely on third-party service providers for payment processing services, including the processing of credit and debit cards. Our business could be materially disrupted if these third-party service providers become unwilling or unable to provide these services to us.

 

Certain of these services discussed above are only provided by a limited number of third-party providers and in the event that any of these providers cease to provide us with their services (due to the termination of their agreement, a dispute between us and any such providers or for any other reason), we may struggle to locate a suitable replacement on commercially reasonable terms, if at all, which could lead to harmful disruptions to our operations.

 

If we fail to protect or enforce our intellectual property rights, our business could be materially affected.

 

We rely on a combination of trademark, copyright, trade secret, and domain-name-protection laws as well as contractual restrictions to protect our technology and intellectual property rights. While it is our policy to protect and defend our rights to our intellectual property, we cannot predict whether steps taken by us to protect our intellectual property will be adequate to prevent infringement, misappropriation, dilution or other violation of our intellectual property rights. Effective intellectual property protection may not be available in every country in which we operate or intend to operate our business. Third parties may infringe our proprietary rights (knowingly or unknowingly) and challenge proprietary rights held by us, and any potential future trademark and patent applications may not be approved. We have been required and in the future may be required to expend significant time and expense to prevent infringement or to enforce our rights. We also cannot guarantee that others will not independently develop technology with the same or similar functions to any proprietary technology we rely on to conduct our business and differentiate ourselves from our competitors. Unauthorized parties may also attempt to copy or obtain and use our technology to develop offerings with the same functionality as our solutions, and policing unauthorized use of our technology and intellectual property rights is difficult and may not be effective. Any unauthorized use of our brand, technology or intellectual property could result in revenue loss as well as have an adverse impact on our reputation. We may be required to incur significant expenses in registering, monitoring and protecting our intellectual property rights. Any litigation could result in significant expense to us, including the diversion of management time and may not ultimately be resolved in our favor. Changes in the law or adverse court rulings may also negatively affect our ability to prevent others from using our technology.

 

•

the judgment of the U.S. court is final and enforceable (exécutoire) in the United States;

•

the U.S. court had jurisdiction over the subject matter leading to the judgment (that is, its jurisdiction was in compliance both with Luxembourg private international law rules and with the applicable domestic U.S. federal or state jurisdictional rules);

•

the U.S. court has applied to the dispute the substantive law that would have been applied by Luxembourg courts. Based on recent case law and legal doctrine, it is not certain that this condition would still be required for an exequatur to be granted by a Luxembourg court;

•

the judgment was granted following proceedings where the counterparty had the opportunity to appear and, if it appeared, to present a defense, and the decision of the foreign court must not have been obtained by fraud, but in compliance with the rights of the defendant;

•

the U.S. court has acted in accordance with its own procedural laws; and

•

the decisions and the considerations of the U.S. court must not be contrary to Luxembourg international public policy rules, must not have been given in proceedings of a tax or criminal nature and must not have been rendered subsequent to an evasion of Luxembourg law (fraude à la loi).

•	to any legal entity which is a qualified investor as defined under Article 2 of the Prospectus Regulation;

•	to fewer than 150 natural or legal persons (other than qualified investors as defined under Article 2 of the Prospectus Regulation); or

•	in any other circumstances falling within Article 1(4) of the Prospectus Regulation,

•

Under Luxembourg law, at least 5% of our net profits per year must be allocated to the creation of a legal reserve until such reserve has reached an amount equal to 10% of our issued share capital. The allocation to the legal reserve becomes compulsory again when the legal reserve no longer represents 10% of our issued share capital. As of 31 December 2021 we had a legal reserve in the amount of $230 thousand.

•

Under Luxembourg law, the amount of distributions paid to shareholders (including in the form of dividends, share premium reimbursements or capital surplus reimbursements) may not exceed the amount of profits at the end of the last financial year plus any profits carried forward and any amounts drawn from reserves that are available for that purpose, less any losses carried forward and sums to be placed in reserve in accordance with Luxembourg law or our articles of association. Furthermore, no distributions (including in the form of dividends, share premium reimbursements or capital surplus reimbursements) may be made if net assets were, at the end of the last financial year (or would become, following such a distribution), less than the amount of the subscribed share capital plus the non-distributable reserves. Distributions in the form of dividends may only be made out of net profits and profits carried forward, whereas distributions in the form of share premium reimbursements may only be made out of available share premium and distributions in the form of capital surplus reimbursements may only be made out of available capital surplus.

A Cash			40,768
B Cash equivalents			-
C Other current financial assets			-
D Liquidity (A + B + C)			40,768
E Current financial debt (including debt instruments, but excluding current portion of non-current financial debt)			-
F Current portion of non-current financial debt			-
G Current financial indebtedness (E + F)			-
H Net current financial indebtedness (G - D)			(40,768	)
I Non-current financial debt (excluding current portion and debt instruments).			13,287
J Debt instruments			-
K Non-current trade and other payables			1,158
L Non-current financial indebtedness (I + J + K)			14,445
M Total financial indebtedness (H + L)			(26,323	)

	%
Computers and computers equipment	25-33
Office furniture and equipment	7
Leasehold improvements	Over the shorter of the term of the lease or useful lives

•

Whether an entity should consider uncertain tax treatments separately;

•

The assumptions an entity should make about the examination of tax treatments by taxation authorities;

•

How an entity determines taxable profit or loss, tax bases, unused tax losses, unused tax credits and tax rates; and

•

How an entity considers changes in facts and circumstances.

Owner		Number of shares				% of the share capital				% of the votes
Barak Matalon			8,042,765				24.23				24.23
Pinhas Zahavi			5,031,596				15.16				15.16
Elyahu Azur			5,019,425				15.12				15.12
Aharon Aran			2,007,769				6.05				6.05
Oded Gottfried			608,677				1.83				1.83
Others			12,488,088				37.62				37.62
TOTAL			33,198,320				100.00				100.00

		Before the Offer				After the Offer				Dilution
Number of outstanding shares and votes in NeoGames			25,593,434				33,198,320				22.91	%
Registered share capital in NeoGames			45,263.77				58,713.54				22.91	%

•

The audited NeoGames consolidated statement of financial position as of December 31, 2021;

•

The unaudited Aspire consolidated statement of financial position as of December 31, 2021, published by Aspire on February 17, 2022, converted from EURO into USD using a EURO to USD conversion rate as further set out in item 2 below and conformed with NeoGames’ financial presentation;

•

Pro forma adjustments to reflect the proposed acquisition of Aspire as if such acquisition had been completed on December 31, 2021; and

•

Pro forma adjustments to reflect the debt financing undertaken by NeoGames for the purpose of financing the proposed acquisition of Aspire as if such debt financing had been undertaken effective as of December 31, 2021.

•

The audited NeoGames consolidated statement of comprehensive income (loss) for the year ended December 31, 2021;

•

The unaudited NeoGames reconciliation statement for non-IFRS measures (EBIT, EBITDA and Adjusted EBITDA) for the year ended December 31, 2021;

•

The unaudited Aspire consolidated statement of comprehensive income (loss) for the year ended December 31, 2021, published by Aspire on February 17, 2022, converted from EURO into USD using a EURO to USD conversion rate as further set out in item 2 below and conformed to NeoGames’ financial presentation;

•

Pro forma adjustments to reflect the proposed acquisition of Aspire as if such acquisition had been completed on December 31, 2021;

•

Pro forma adjustments to reflect the debt financing undertaken by NeoGames for the purpose of financing the proposed acquisition of Aspire as if such debt financing had been undertaken effective as of December 31, 2021; and

•

Pro forma adjustments to reflect the divestment of Aspire’s B2C Business as if it had occurred on January 1, 2021.