Amended Current Report Filing (8-k/a)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

___________________

AMENDMENT NO. 1

FORM 8-K

__________________

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (date of earliest event reported): February 4, 2019

Newgioco Group, Inc.

(Exact name of Registrant as specified in its charter)

Delaware	000-50045	33-0823179
(State or other jurisdiction of Incorporation or organization)	(Commission File Number)	(I.R.S. Employer Identification No.)

130 Adelaide Street West, Suite 701

Toronto, Ontario M5H 2K4, Canada

(Address of Principal Executive Offices)

+39 391 306 4134

(Registrant’s Telephone Number, Including Area Code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

☐ Emerging growth company

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

Explanatory Note

As previously reported in the Current Report on Form 8-K, filed by Newgioco Group, Inc. (the “Company” or “Newgioco”) with the Securities and Exchange Commission (“SEC”) on January 22, 2019 (the “Initial Form 8-K”), Newgioco entered into a Share Purchase Agreement (the “Purchase Agreement”) with the selling shareholders set forth therein (the “Sellers”) to acquire all of the issued and outstanding ordinary shares of Virtual Generation Limited, a company organized under the laws of Republic of Malta in 2014 (“VG”), together with all the ordinary shares of Naos Holding Limited, a company organized under the laws of Republic of Malta in 2018 (“Naos”), the holding company which owned 3,999 of the 4,000 issued and outstanding ordinary shares of VG. The Sellers included our related parties Luca Pasquini, our VP Technology and Gabriele Peroni, our VP Business Development each of which held 20% of the shares of Naos. As reported in the Current Report on Form 8-K, filed by the Company with the SEC on February 4, 2019 (the “February 2019 Form 8-K”), the closing of the transactions contemplated by the Purchase Agreement occurred on January 30, 2019, pursuant to which the Company acquired 100% of the outstanding stock of VG and Naos (the “Acquisition”).

This Amendment No. 1 on Form 8-K (“Amendment 1”) amends the February 2019 Form 8-K to include financial information required under Item 9.01, which was not previously filed with the February 2019 Form 8-K and which is permitted to be filed by amendment no later than 71 calendar days after the date on which the February 2019 Form 8-K was required to be filed. Except as stated in this Explanatory Note, no other information contained in the February 2019 Form 8-K is changed. This Amendment 1 should be read in connection with the Initial Form 8-K and the February 2019 Form 8-K, which provide a more complete description of the Acquisition.

Item 9.01 Financial Statements and Exhibits.

(a) Financial Statements of Business Acquired.

The audited financial statements of VG for the years ended December 31, 2018 and 2017 required by Item 9.01(a) of Form 8-K are filed as Exhibit 99.1 to this Amendment No. 1. to the February 2019 Form 8-K and incorporated herein by reference.

The audited financial statements of Naos for the year ended December 31, 2018 required by Item 9.01(a) of Form 8-K is filed as Exhibit 99.2 to this Amendment No. 1. to the February 2019 Form 8-K and incorporated herein by reference.

(b) Pro Forma Financial Information.

The unaudited pro forma condensed combined financial information of VG and Naos and Newgioco required by Item 9.01(b) of Form 8-K is included as Exhibit 99.3 to this Amendment No. 1 to the February 2019 Form 8-K and incorporated herein by reference.

Exhibit No.		Description

99.1		Audited financial statements of VG as of and for the years ended December 31, 2018 and 2017.
99.2		Audited financial statements of Naos as of and for the year ended December 31, 2018.
99.3		Unaudited pro forma condensed combined financial information of VG and Naos and Newgioco for the year ended December 31, 2018.
99.4		Report of the Independent Auditor for financial statements of VG as of and for the years ended December 31, 2018 and 2017.
99.5		Report of the Independent Auditor for financial statements of Naos as of and for the year ended December 31, 2018.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: April 16, 2019	Newgioco Group, Inc.

	By: /s/ Michele Ciavarella
	Name: Michele Ciavarella
	Title: Chief Executive Officer

Registration number C 66059

Virtual Generation Limited

Director's Report

and

Financial Statements

2018

VIRTUAL GENERATION LIMITED

DIRECTOR'S REPORT AND FINANCIAL STATEMENTS

2018

Contents

	Page

Report of the Director	2
Statement of Director's Responsibilities	3
Report of the Independent Auditor	4 - 6
Statement of Comprehensive Income	7
Statement of Financial Position	8
Statement of Changes in Equity	9
Statement of Cash Flows	10
Notes to the Financial Statements	11 – 18

-1 -

VIRTUAL GENERATION LIMITED

REPORT OF THE DIRECTOR

FOR THE YEAR ENDED 31 DECEMBER 2018

Director	Stefano Volo

Registered Office	Level 2, Farrugia Building, 9
	St. Michael Street
	San Gwann SGN2301
	Malta

The director presents the annual report together with the audited financial statements of the Company for the year ended 31 December 2018. The Company qualifies as a small company for the purposes of the reporting requirements of the Companies Act, Cap. 386 of the Laws of Malta.

1 Principal Activities

The Company is engaged in developing and managing virtual gaming software and ancillary services.

2 Review of Business Development and State of Affairs

During the year under review, the Company was engaged in maintaining and strengthening its customer base. The profit for the year amounted to €37,897.

3 Likely Future Business Developments

The Company expects to maintain its business line at profitable levels over the forthcoming financial year.

4 Dividends and Reserves

During the year under review, interim dividends amounting to €100,000 (2017: €165,000) were distributed to shareholders. After adding up the profit and the dividend for the current year to retained profits brought forward, total retained profits amounting to €107 ,665 are being carried forward to the next financial year.

Approved by the Director on 31 January 2019:

/s/ Stefano Volo

Stefano Volo

Director

-2 -

VIRTUAL GENERATION LIMITED

STATEMENT OF DIRECTOR'S RESPONSIBILITIES

This statement is made to enable shareholders to distinguish bet1veen the duties of the director, as listed below, and the duties of the auditor as indicated in the report of the independent auditor to the members on page 4.

The Companies Act, Cap. 386 of the Laws of Malta requires the director to prepare financial statements for each financial period, which give a true and fair view of the Company's state of affairs as at the end of, and its profit or loss for, that period.

In preparing these financial statements, the director is required to:

•

adopt the going concern basis unless it is inappropriate to presume that the Company will continue in business;

•

select suitable accounting policies and apply them consistently;

•

make judgements and estimates that are reasonable and prudent;

•

account for income and charges relating to the accounting period on the accruals basis;

•

value separately the components of asset and liability items; and

•

report comparative figures corresponding to those of the preceding accounting period.

The director is responsible for keeping proper accounting records. Such records should disclose with reasonable accuracy at any time, the financial position of the Company such as to enable him to ensure that the financial statements have been properly prepared in accordance with the Companies Act. He is also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

-3 -

REPORT OF THE INDEPENDENT AUDITOR

TO THE MEMBERS OF VIRTUAL GENERATION LIMITED

Report on the Financial Statements

I have audited the financial statements of Virtual Generation Limited as set out on pages 7 to 18, which comprise the Statements of Comprehensive Income, Changes in Equity and Cash Flows for the year ended 31 December 2018, the Statement of Financial Position as at that date and the Notes to the Financial Statements.

Audit Opinion

In my opinion, the financial statements give a true and fair view of the financial position of the Company as at 31 December 2018 and of its financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union ("IFRS"), and have been properly prepared in accordance with the Companies Act, Cap. 386 of the Laws of Malta.

Basis for Opinion

Profession (Code of Ethics for Warrant Holders) Directive issued in terms of the Accountancy Profession Ad, Cap. 281 of the La1vs of Malta, and I have fulfilled my other ethical responsibilities in accordance with these requirements and the IESBA Code. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a

basis for my opinion.

Other Information

The director is responsible for the Other Information. The Other Information comprises the Director's Report as set out on page 2. My opinion on the financial statements does not cover this information. In connection with my audit of the financial statements, my responsibility is to read the Other Information and, in doing so, consider whether the Other Information is materially inconsistent with the financial statements or my knowledge obtained in the audit, or otherwise appears to be materially misstated. With respect to the Director's Report, I also considered whether the Director's Report includes the disclosures required by Article 177 of the Companies Act, Cap. 386 of the Laws of Malta.

Based on the work I have performed, in my opinion:

•

the information given in the Director's Report is consistent with the financial statements; and

•

the Director's Report has been prepared in accordance with the Companies Act;

In addition, in light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, I am required to report if I have identified material misstatements in the Director's Report and Other Information. I have nothing to report in this regard.

-4 -

REPORT OF THE INDEPENDENT AUDITOR

TO THE MEMBERS OF VIRTUAL GENERATION LIMITED (cont.)

Director's Responsibility for the Financial Statements

As described on page 3, these financial statements are the responsibility of the Company's director. The director is responsible for the preparation and fair presentation of these financial statements in accordance with IFRS and in accordance with the Companies Act, Cap. 386 of the Laws of Malta, and for such internal control as he determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the director is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the director either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Auditor's Responsibility

My ob1ectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes my opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in their aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with ISAs, I exercise professional 1udgment and maintain professional scepticism throughout the audit. I also:

•

Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for my opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

•

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control.

•

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the director.

•

Conclude on the appropriateness of the director's use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If I conclude that a material uncertainty exists, I am required to draw attention in my auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify my opinion. My conclusions are based on the audit evidence obtained up to the date of my auditor's report. However, future events or conditions may cause the company to cease to continue as a going concern.

•

Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

-5 -

REPORT OF THE INDEPENDENT AUDITOR

TO THE MEMBERS OF VIRTUAL GENERATION LIMITED (cont.)

I communicate with the director regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that I identify during my audit.

Report on Other Legal and Regulatory Requirements

The Companies Act, Cap. 386 of the Laws of Malta establishes that if the Company's directors default in:

•

disclosing their remuneration; or

•

their duties related to retention of accounting records, preparation of financial statements and in

•

safeguarding the auditor's rights;

•

the auditor shall report the default in the audit report.

There is no information to report in this regard.

/s/ Christopher Attard

Christopher Attard CPA

Certified Public Accountant

10, Santa Rita, Venewwa Street, Fgura FGR1860, Malta

31 January 2019

-6 -

VIRTUAL GENERATION LIMITED

STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31DECEMBER 2018

			2018			2017
	Note

Turnover		4	€	618,010		€	712,089

Direct Costs				(428,658	)		(319,782	)

Gross Profit				189,352			392,307

Administrative Expenses				(131,049	)		(148,911	)

Profit before Taxation		5		58,303			243,396

Taxation		6		(20,406	)		(85,188	)

Profit for the Year				37,897			158,208

Other Comprehensive Income for the Year				—			—

Total Comprehensive Income for the Year				37,897			158,208

-7 -

VIRTUAL GENERATION LIMITED

STATEMENT OF FINANCIAL POSITION

AT 31 DECEMBER 2018

		2018						2017
Non-Current Assets	Note	€			€			€
Property, Plant and Equipment	7					38,098			64,326

Current Assets
Debtors	8		128,592						74,483
Bank Balances			83,190						253,538

			211,782						328,021

Current Liabilities
Creditors	9		(28,647	)					(39,344	)

Current Taxation			(20,406	)					(179,235	)
			(49,053	)					(218,579	)

Net Current Assets						162,729			109,442

Total Assets less Current Liabilities						200,827			173,768

Non-Current Liabilities
Creditors	9					(89,162	)		—

						111,665			173,768

Capital and Reserves

Called Up Issued Share Capital	10					4,000			4,000

Profit and Loss Account						107,665			169,768

Shareholders' Funds						111,665			173,768

The Director approved the financial statements on pages 7 to 18 on 31 January 2019:

/s/ Stefano Volo

Stefano Volo

Director

- 8 -

VIRTUAL GENERATION LIMITED

STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31DECEMBER 2018

	Ordinary Share Capital		Profit and Loss Account			TOTAL
	€		€			€
At 1 January 2017		4,000		176,560			180,560

Total Comprehensive Income for the Year				158,208			158,208

Dividend Distributed				(165,000	)		(165,000	)

At 31 December 2017		4,000		169,768			173,768

Total Comprehensive Income for the Year				37,897			37,897

Dividend Distributed				(100,000	)		(100,000	)

At 31 December 2018		4,000		107,665			111,665

- 9 -

VIRTUAL GENERATION LIMITED

STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2018

		2018						2017
	Note	€			€			€

Cash Flows from Operating Activities:
Cash received from customers			577,792						647,258
Cash paid to suppliers			(556,179	)					(441,784	)

Cash Generated from Operating Activities	11		21,613						205,474
Taxation			(179,235	)					(49,485	)

Net Cash (Outflow)/Inflow from Operating Activities						(157,622	)		155,989

Cash Flows from Investing Activities
Payments to acquire property, plant and equipment			(4,078	)					(51,550	)
Net Cash Outflow from Investing Activities						(4,078	)		(51,550	)

Cash Flows from Financing Activities
Repayments of advances from shareholders			(8,648	)					(2,190	)
Dividends distributed			—						(165,000	)

Net Cash (Outflow)/Inflow from Financing Activities						(8,648	)		(167,190	)

Net Decrease in Cash and Cash Equivalents						(170,348	)		(62,751	)

Bank balances at beginning of year						253,538			316,289

Bank Balances at End of Year						83,190			253,538

- 10 -

VIRTUAL GENERATION LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2018

1 Corporate Information

Virtual Generation Limited is a limited liability company incorporated and domiciled in Malta. Its registered address and principal activities are described in the Report of the Director. These financial statements were authorised for issue in accordance with a resolution of the director dated 31 January 2019.

2 Accounting Convention and Basis of Preparation

These financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union ("IFRS"), and have been properly prepared in accordance with the Companies Act, Cap. 386 of the Laws of Malta. These financial statements have been prepared under the historic cost convention as modified by the fair valuation convention where required by IFRS. The presentation and functional currency is the Euro ('€'), being the currency that reflects the economic substance of the underlying events and circumstances relevant to the Company.

The Company adopted all International Financial Reporting Standards and interpretations that are mandatory for the accounting period commencing on 1 January 2018. The adoption of any new standards, amendments and interpretations to existing standards since the previous accounting period did not result in substantial changes to the Company's existing policies. The Company has not early adopted any new International Financial Reporting Standards' requirements that are issued but not as yet mandatory for this accounting period. It is envisaged that there are no such requirements that will have a possible material impact on the Company's financial statements in the period of initial application.

These financial statements have been prepared on a going concern basis.

3 Significant Accounting Policies

The significant accounting policies adopted in the preparation of these financial statements are set out below. These accounting policies have been consistently applied by the Company throughout the period under review and are consistent with policies applied in previous years.

a) Property. Plant and Equipment

Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. Depreciation is calculated to write down the value of property, plant and equipment, less any anticipated residual value, by equal annual instalments over their estimated useful lives. A charge equivalent to a full period's depreciation is provided for during the period in which the asset is first brought into use, while no depreciation is charged during the period the asset is disposed of or scrapped.

- 11 -

3 Significant Accounting Policies (cont.)

a) Property, Plant and Equipment (cont.)

At reporting date, assets are assessed about whether there is any indication of impairment. Any impairment loss is recognised as an expense to profit or loss.

The rates of depreciation used are based on the following estimated useful lives:

	Years
Electronic Equipment	4

b) Revenue Recognition

Revenue is recognised when:

•

the contract with a customer is identified;

•

the performance obligations in the contract is identified;

•

the transaction price is determined;

•

the transaction price may be allocated to the performance obligations in the contract; and

•

the Company fully satisfies the performance obligation.

In relation to the rendering of services, revenue is recognised by reference to the date when the service is actually rendered.

c) Taxation

Income tax on the profit or loss for the period comprises current and deferred tax. Income tax is recognised to profit or loss except to the extent that it relates to items recognised directly to equity, in which case it is recognised in equity.

Current tax is the expected tax payable on the taxable income for the period, using tax rates enacted or substantially enacted at the reporting date.

Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantially enacted at the reporting date.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

d) Cash and Cash Equivalents

Cash and cash equivalents comprise bank balances.

e) Trade and Other Receivables

Trade and other short-term receivables are stated at their cost less specific impairment losses.

- 12 -

3 Significant Accounting Policies (cont.)

f) Trade and Other Payables

Trade and other payables are stated at cost.

g) Use of Estimates

The preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent liabilities at the balance sheet date, as well as the income and expenses for the period under review. These estimates are reviewed periodically, and if adjustments become necessary, they are reported in the periods in which they become known.

The accounting estimates, assumptions and judgements made in preparing these financial statements are not of such difficulty, sub1ectivity and complexity as to require their disclosure as critical in accordance with applicable GAAP.

h) Impairment

The carrying amount of the Company's assets is reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the assets' recoverable amount is estimated. An impairment loss is recognised whenever the present carrying amount of an asset exceeds its recoverable amount. Impairment losses are recognised to profit or loss.

When a decline in the fair value of an asset has been previously recognised in equity and there is ob1ective evidence that the asset is impaired, the cumulative loss that has been recognised in equity is transferred to profit or loss.

An impairment loss is reversed if there is objective evidence that the recoverable amount has recovered the value previously assessed as impaired. The impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation, if no impairment loss had been originally recognised.

4 Turnover

Turnover is stated after deduction of sales rebates and taxes directly linked to turnover. Turnover was generated entirely within Europe and peripheral territories.

5 Profit before Taxation

a) The profit before taxation is stated after charging the following expenses:

	2018		2017
		€		€

Audit fees		2,000		1,500
Depreciation of property, plant and equipment		30,306		29,340

- 13 -

5 Profit before Taxation (cont.)

b) The company employed a weekly average of 3 operating employees and 1 management, during the year under review (2017: 3).

c) The staff costs incurred during the year, including directors' remuneration, amounted to:

	2018		2017
	€		€

Staff wages and salaries		96,688		57,035
Social security costs		8,382		4,508

		105,070		61,543

6 Taxation

a) The taxation charged for the year comprised:

	2018		2017
	€		€

Current taxation		20,406		85,188
Deferred taxation		—		—

		20,406		85,188

b) There were no temporary differences at the reporting date from which a deferred tax balance could arise (2017: nil).

c) The tax expense for the year is reconciled to the results as per financial statements as follows:

			2018		2017
	%		€		€

Profit as per financial statements				58,303		243,396

Tax charge as the applicable effective tax rate		35		20,406		85,188

Tax expense for the year				20,406		85,188

- 14 -

7 Property, Plant and Equipment

	Electronic Equipment		Furniture & Fixtures		Total

	€		€		€
Cost
At 1 January 2017		66,995				66,995
Additions		49,571		1,979		51,550
At 31 December 2017		116,566		1,979		118,545
Additions		3,725		353		4,078
At 31 December 2018		120,291		2,332		122,623
Depreciation
At 1 January 2017		24,879				24,879
Charge for the year		29,142		198		29,340
At 31 December 2017		54,021		198		54,219
Charge for the year		30,073		233		30,306
At 31 December 2018		84,094		431		84,525
Net Book Amount
At 1January 2017		42,116				42,116
At 31 December 2017		62,545		1,781		64,326
At 31 December 2018		36,197		1,901		38,098

8 Debtors

Debtors comprise:	2018		2017
	€		€
Trade receivables		113,451		73,233
Prepayments		9,598		1,250
Other debtors		5,543		—
		128,592		74,483

- 15 -

9 Creditors

a) Creditors comprise:	2018		2017
Failing due within One Year	€		€
Trade payables		10,231		35,372
Accrued expenses		14,516		619
Related party payables		3,900		1,710
Other creditors		—		1,643
		28,647		39,344
Falling due within More than One Year
Loan from parent company		89,162		—
		117,809		39,344

b) The amounts owed to the related parties and shareholders are unsecured and free of interest.

10 Called Up Issued Share Capital

	2018		2017
	€		€

Authorised Share Capital
4,000 Ordinary Shares of €1 each		4,000		4,000

Issued and Fully Paid Up
4,000 Ordinary Shares of €1 each		4,000		4,000

In accordance with the Company's memorandum and articles of association, each ordinary share gives the right to one voting right, participates equally in profits distributed by the Company and carries equal rights upon the distribution of assets by the Company in the event of a winding up.

During the year, the Company distributed interim dividends amounting to €25.00 per ordinary share in issue and ranking for dividend (2017: €41.25). The dividends were still unsettled as at the reporting date.

- 16 -

11 Net Cash Inflow from Operating Activities

The net cash inflow from operating activities is reconciled to the net profit before taxation as follows:

	2018			2017
	€			€
Profit before taxation		58,303			243,396
Add back / (Deduct):
Non-cash expenditure		30,306			29,340
Taxation paid		(179,235	)		(49,485	)
Movement in debtors		(54,109	)		(66,081	)
Movement in creditors		(12,887	)		(1,181	)
Net cash (outflow)/inflow from operating activities		(157,622	)		155,989

12 Related Parties

Related parties in these financial statements

The following table summarises the related parties referred to in these financial statements:

Name	Nature of relationship
NAOS Holding Limited	Shareholder

Transactions and balances with related parties

All transactions with related parties were carried out on an arm's length basis, except for a loan by the shareholders that was provided on an interest-free basis.

The director receives no remuneration for holding the office of director of the Company.

Outstanding balances with related parties at year-end and conditions thereon are stated in note 9 to these financial statements.

Controlling party

The Company is a subsidiary of NAOS Holding Limited, a company registered in Malta with registration number C83262 and registered address at Cornerstone Business Centre, Suite 1, Level 2, 16th September Square, Mosta MSTl 180, Malta. No individual directly or indirectly controls the ma1ority of the equity of the Company.

13 Financial Instruments

Financial assets of the Company comprise bank balance and trade receivables. Financial liabilities of the Company comprise trade and loan payables. The accounting policies for these assets and liabilities are set out in note 3 to these financial statements, and these policies are directed towards the establishment of fair values for these assets and liabilities.

- 17 -

13 Financial Instruments (cont.)

a) Interest Rate Risk

The Company is not exposed to any interest-accruing assets or liabilities.

b) Fair Value

The fair values of financial instruments of the Company are not materially different from their carrying amounts. The Company assesses the fair value of its financial instruments by reference to non-complex valuation methods based on cost and income factors and using observable inputs (IFRS 13 level 2 hierarchy). Given that the financial instruments held by the Company have a short maturity date, are not of a complex nature and are similar to many other financial instruments in prevalent economic use, the risk that fair valuation methods used by the Company may affect its reported financial performance is low.

c) Credit Risk

The Company does not hold any significant financial assets sub1ect to high credit risk.

d) Foreign Exchange Risk

The Company does not hold any significant financial assets in any currency other than the functional currency.

e) Liquidity Risk

The Company is funded partly by equity and partly by debt funding. The Company's debt funding is provided by the direct parent company which have the willingness and ability to continue funding the Company's operations over the foreseeable future. The contractual maturity of such funding is between 1year and 5 years. The contracted undiscounted future cash flows of funding is not materially different from the carrying amount in the statement of financial position in view of prevalent zero-interest market rates.

The Company is not subject to any supplementary externally imposed capital management requirements.

f) Market Risk

The Company is inherently exposed to all the macro-economic, legal and social factors that affect the industry in which it carries out its business. The sensitivity to such factors is assessed as average by management, as compared to competitors in the same industry. The Company does not possess any financial assets or liabilities which are specifically exposed to a high level of market risk profile.

- 18 -

VIRTUAL GENERATION LIMITED

SCHEDULE TO THE STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2018

Schedule

Direct Costs & Administrative Expenses I

This schedule does not form part of the audited financial statements set out on pages 7 to 18

- 19 -

Schedule I

VIRTUAL GENERATION LIMITED

DIRECT COSTS AND ADMINISTRATIVE EXPENSES

FOR THE YEAR ENDED 31 DECEMBER 2018

	2018		2017
	€		€

Certification costs		47,190		—
Depreciation of property, plant and equipment		30,306		29,340
Hosting fees		25,212		22,510
Platform maintenance and usage fees		59,617		64,197
Royalty fees		7,650		—
Software costs		116,632		91,310
Wages and salaries		105,070		61,543
Website development costs		36,480		49,870
Webspace usage fees		501		1,012
Direct costs		428,658		319,782
Advertising costs		6,711		1,245
Bank charges		1,361		918
Conferences, fairs and seminars		11,495		15,628
General expenses		—		66
Hire of equipment		—		6,635
Legal fees		162		359
Office maintenance		2,522		5,615
Postage and stationery		1,437		836
Premises rental		—		30,992
Professional fees		71,993		69,680
Registration fees		250		140
Sales commissions		10,454		—
Telecommunications		576		1,051
Travelling costs		22,591		15,065
Water and electricity		1,497		681
Administrative expenses		131,049		148,911

- 20 -

Registration number C 66059

Virtual Generation Limited

Director’s Report and

Financial Statements 2017

VIRTUAL GENERATION LIMITED

DIRECTOR’S REPORT AND FINANCIAL STATEMENTS 2017

Contents

	Page
Report of the Director	2
Statement of Director’s Responsibilities	3
Report of the Independent Auditor	4 - 6
Statement of Comprehensive Income	7
Statement of Financial Position	8
Statement of Changes in Equity	9
Statement of Cash Flows	10
Notes to the Financial Statements	11 – 18

REPORT OF THE DIRECTOR

FOR THE YEAR ENDED 31 DECEMBER 2017

Director : Stefano Volo

Registered Office : Level 2, Farrugia Building, 9

St. Michael Street

San Gwann SGN2301 Malta

The director presents the annual report together with the audited financial statements of the Company for the year ended 31 December 2017. The Company qualifies as a small company for the purposes of the reporting requirements of the Companies Act, Cap. 386 of the Laws of Malta.

Principal Activities

The Company is engaged in developing and managing virtual gaming software and ancillary services.

Review of Business Development and State of Affairs

During the year under review, the Company was engaged in expanding its business setup and customer base. The profit for the year amounted to €158,208.

Likely Future Business Developments

The Company expects to maintain its business line at profitable levels over the forthcoming financial year.

Dividends and Reserves

During the year under review, interim dividends amounting to €165,000 (2016: €90,000) were distributed to shareholders. After adding up the profit and the dividend for the current year to retained profits brought forward, total retained profits amounting to €169,768 are being carried forward to the next financial year.

Approved by the Director on 25 July 2018:

Stefano Volo

Director

- 2 -

STATEMENT OF DIRECTOR’S RESPONSIBILITIES

This statement is made to enable shareholders to distinguish between the duties of the director, as listed below, and the duties of the auditor as indicated in the report of the independent auditor to the members on page 4.

In preparing these financial statements, the director is required to:

◼

adopt the going concern basis unless it is inappropriate to presume that the Company will continue in business;

◼

select suitable accounting policies and apply them consistently;

◼

make judgements and estimates that are reasonable and prudent;

◼

account for income and charges relating to the accounting period on the accruals basis;

◼

value separately the components of asset and liability items; and

◼

report comparative figures corresponding to those of the preceding accounting period.

- 3 -

REPORT OF THE INDEPENDENT AUDITOR

TO THE MEMBERS OF VIRTUAL GENERATION LIMITED

Report on the Financial Statements

I have audited the financial statements of Virtual Generation Limited as set out on pages 7 to 18, which comprise the Statements of Comprehensive Income, Changes in Equity and Cash Flows for the year ended 31 December 2017, the Statement of Financial Position as at that date and the Notes to the Financial Statements.

Audit Opinion

In my opinion, the financial statements give a true and fair view of the financial position of the Company as at 31 December 2017 and of its financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union (“IFRS”), and have been properly prepared in accordance with the Companies Act, Cap. 386 of the Laws of Malta.

Basis for Opinion

I conducted my audit in accordance with International Standards on Auditing (“ISAs”). My responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of my report. I am independent of the Company in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (“IESBA Code”) together with the ethical requirements that are relevant to my audit of the financial statements in accordance with the Accountancy Profession (Code of Ethics for Warrant Holders) Directive issued in terms of the Accountancy Profession Act, Cap. 281 of the Laws of Malta, and I have fulfilled my other ethical responsibilities in accordance with these requirements and the IESBA Code. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinion.

Other Information

The director is responsible for the Other Information. The Other Information comprises the Director’s Report as set out on page 2. My opinion on the financial statements does not cover this information. In connection with my audit of the financial statements, my responsibility is to read the Other Information and, in doing so, consider whether the Other Information is materially inconsistent with the financial statements or my knowledge obtained in the audit, or otherwise appears to be materially misstated. With respect to the Director’s Report, I also considered whether the Director’s Report includes the disclosures required by Article 177 of the Companies Act, Cap. 386 of the Laws of Malta.

Based on the work I have performed, in my opinion:

the information given in the Director’s Report is consistent with the financial statements; and

the Director’s Report has been prepared in accordance with the Companies Act;

In addition, in light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, I am required to report if I have identified material misstatements in the Director’s Report and Other Information. I have nothing to report in this regard.

- 4 -

REPORT OF THE INDEPENDENT AUDITOR

TO THE MEMBERS OF VIRTUAL GENERATION LIMITED (cont.)

Director’s Responsibility for the Financial Statements

As described on page 3, these financial statements are the responsibility of the Company’s director. The director is responsible for the preparation and fair presentation of these financial statements in accordance with IFRS and in accordance with the Companies Act, Cap. 386 of the Laws of Malta, and for such internal control as he determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the director is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the director either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Auditor’s Responsibility

My objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes my opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in their aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with ISAs, I exercise professional judgment and maintain professional scepticism throughout the audit. I also:

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the director.

Conclude on the appropriateness of the director’s use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If I conclude that a material uncertainty exists, I am required to draw attention in my auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify my opinion. My conclusions are based on the audit evidence obtained up to the date of my auditor’s report. However, future events or conditions may cause the company to cease to continue as a going concern.

- 5 -

Report on Other Legal and Regulatory Requirements

The Companies Act, Cap. 386 of the Laws of Malta establishes that if the Company’s directors default in:

disclosing their remuneration; or

their duties related to retention of accounting records, preparation of financial statements and in

safeguarding the auditor’s rights;

the auditor shall report the default in the audit report. There is no information to report in this regard.

Christopher Attard

Certified Public Accountant

10, Santa Rita, Venewwa Street, Fgura FGR1860, Malta 25 July 2018

- 6 -

FOR THE YEAR ENDED 31 DECEMBER 2017

2017

2016

Note

€

Turnover

712,089

557,390

Direct Costs

Gross Profit

(319,782)

--------- 392,307

(224,847)

---------- 332,543

Administrative Expenses

Profit before Taxation

(148,911)

--------- 243,396

(63,834)

---------- 268,709

Taxation

Profit for the Year

(85,188)

--------- 158,208

=====

(94,048)

---------- 174,661

=====

Other Comprehensive Income for the Year

Total Comprehensive Income for the Year

158,208

=====

174,661

=====

AT 31 DECEMBER 2017

2017

2016

Non-Current Assets

Note

€ €

€

Property, Plant and Equipment

64,326

42,116

--------

Current Assets

Debtors

74,483

8,402

Bank Balances

Current Liabilies

253,538

---------- 328,021

----------

316,289

---------- 324,691

----------

Creditors

(39,344)

(38,815)

Current Taxation

(179,235)

---------- (218,579)

----------

(143,532)

---------- (182,347)

----------

Net Current Assets

Total Assets less Current Liabilities

109,442

---------- 173,768

142,344

---------- 184,460

Non-Current Liabilites

Creditors

(3,900)

----------

173,768

=====

180,560

=====

Capital and Reserves

Called Up Issued Share Capital

4,000

Profit and Loss Account

Shareholders’ Funds

169,768

--------- 173,768

=====

176,560

---------- 180,560

=====

The Director approved the financial statements on pages 7 to 18 on 25 July 2018:

Stefano Volo

Director

- 8 -

	Ordinary Share Capital	Profit and Loss Account	TOTAL
	€	€	€
At 1 January 2016	4,000	91,899	95,899
Total Comprehensive Income for the Year	-	174,661	174,661
Dividends Distributed At 31 December 2016	- ------- 4,000	(90,000) --------- 176,560	(90,000) --------- 180,560
Total Comprehensive Income for the Year	-	158,208	158,208
Dividends Distributed At 31 December 2017	- ------- 4,000 ===	(165,000) ---------- 169,768 =====	(165,000) ---------- 173,768 =====

Cash Flows from Operating Activities:

Cash received from customers

Note

2017

€ €

647,258

2016

€

575,370

Cash paid to suppliers

Cash Generated from Operating Activities

(441,784)

---------

205,474

(241,932)

----------

333,438

Taxation

Net Cash Inflow from Operating Activities

(49,485)

---------

155,989

---------- 333,438

Cash Flows from Investing Activities

Payments to acquire property, plant and equipment

(51,550)

(34,475)

Net Cash Outflow from Investing Activities

--------

(51,550)

--------

(34,475)

--------

Cash Flows from Financing Activities

Repayments of advances from shareholders

(2,190)

Dividends distributed

Net Cash (Outflow)/Inflow from Financing Activities

(165,000)

---------

(167,190)

---------

(90,000)

-------- (90,000)

--------

Net (Decrease)/Increase in Cash and Cash Equivalents

(62,751)

208,963

Bank balances at beginning of year

Bank Balances at End of Year

316,289

---------- 253,538

=====

107,326

---------- 316,289

=====

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017

Corporate Information

Accounting Convention and Basis of Preparation

These financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (“IFRS”), and have been properly prepared in accordance with the Companies Act, Cap. 386 of the Laws of Malta. These financial statements have been prepared under the historic cost convention as modified by the fair valuation convention where required by IFRS. The presentation and functional currency is the Euro (‘€’), being the currency that reflects the economic substance of the underlying events and circumstances relevant to the Company.

The Company adopted all International Financial Reporting Standards and interpretations that are mandatory for the accounting period commencing on 1 January 2017. The adoption of any new standards, amendments and interpretations to existing standards since the previous accounting period did not result in substantial changes to the Company’s existing policies. The Company has not early adopted any new International Financial Reporting Standards’ requirements that are issued but not as yet mandatory for this accounting period. It is envisaged that there are no such requirements that will have a possible material impact on the Company’s financial statements in the period of initial application.

These financial statements have been prepared on a going concern basis.

Significant Accounting Policies

Property, Plant and Equipment

Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. Depreciation is calculated to write down the value of property, plant and equipment, less any anticipated residual value, by equal annual instalments over their estimated useful lives. A charge equivalent to a full period’s depreciation is provided for during the period in which the asset is first brought into use, while no depreciation is charged during the period the asset is disposed of or scrapped.

- 11 -

Property, Plant and Equipment (cont.)

At reporting date, assets are assessed about whether there is any indication of impairment. Any impairment loss is recognised as an expense to profit or loss.

The rates of depreciation used are based on the following estimated useful lives:

	Years
Electronic Equipment	4

Revenue Recognition

Revenue is recognised when:

the amount of revenue can be measured reliably;

it is probable that the economic benefits associated with the transaction will flow to the company; and

the costs incurred or to be incurred in respect of the transaction can be measured reliably.

In relation to the rendering of services, revenue is recognised by reference to the date when the service is actually rendered.

Taxation

Current tax is the expected tax payable on the taxable income for the period, using tax rates enacted or substantially enacted at the reporting date.

Cash and Cash Equivalents

Cash and cash equivalents comprise bank balances.

Trade and Other Receivables

Trade and other short-term receivables are stated at their cost less specific impairment losses.

Trade and Other Payables

Trade and other payables are stated at cost.

- 12 -

Use of Estimates

The accounting estimates, assumptions and judgements made in preparing these financial statements are not of such difficulty, subjectivity and complexity as to require their disclosure as critical in accordance with applicable GAAP.

Impairment

The carrying amount of the Company’s assets is reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the assets’ recoverable amount is estimated. An impairment loss is recognised whenever the present carrying amount of an asset exceeds its recoverable amount. Impairment losses are recognised to profit or loss.

When a decline in the fair value of an asset has been previously recognised in equity and there is objective evidence that the asset is impaired, the cumulative loss that has been recognised in equity is transferred to profit or loss.

An impairment loss is reversed if there is objective evidence that the recoverable amount has recovered the value previously assessed as impaired. The impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation, if no impairment loss had been originally recognised.

Turnover

Turnover is stated after deduction of sales rebates and taxes directly linked to turnover. Turnover was generated entirely within Europe and peripheral territories.

Profit before Taxation

The profit before taxation is stated after charging the following expenses:

2017 2016

€ €

Audit fees 1,500 1,200

Depreciation of property, plant and equipment 29,340 16,749

==== ====

The company employed a weekly average of 2 operating employees during the year under review (2016: nil).

5 Profit before Taxation (cont.)

The staff costs incurred during the year, including directors’ remuneration, amounted to:

	2017 €	2016 €
Staff wages and salaries	57,035	-
Social security costs	4,508 -------- 61,543 ====	- ----- - ===
6 Taxation
a) The taxation charged for the year comprised:
	2017	2016
	€	€
Current taxation	85,188	94,048
Deferred taxation	- -------- 85,188 ====	- -------- 94,048 ====

There were no temporary differences at the reporting date from which a deferred tax balance could arise (2016: nil).

The tax expense for the year is reconciled to the results as per financial statements as follows:

2017

€

2016

€

Profit as per financial statements

243,396

=====

268,709

====

Tax charge as the applicable effective tax rate

Tax expense for the year

85,188

--------- 85,188

====

94,048

-------- 94,048

====

7 Property, Plant and Equipment

	Electronic Equipment	Furniture & Fixtures	Total
	€	€	€
Cost
At 1 January 2016	32,520	-	32,520
Additions	34,475 --------	- ----	34,475 ---------
At 31 December 2016	66,995	-	66,995
Additions	49,571	1,979	51,550
	---------	------	----------
At 31 December 2017	116,566	1,979	118,545
	----------	-------	----------
Depreciation
At 1 January 2016	8,130	-	8,130
Charge for the year	16,749	-	16,749
	--------	----	--------
At 31 December 2016	24,879	-	24,879
Charge for the year	29,142	198	29,340
	--------	-----	--------
At 31 December 2017	54,021	198	54,219
	--------	-----	---------
Net Book Amount
At 1 January 2016	24,390	-	24,390
	====	==	====
At 31 December 2016	42,116	-	42,116
	====	==	====
At 31 December 2017	62,545	1,781	64,326
	====	===	====

8 Debtors Debtors comprise:
	2017	2016
	€	€
Trade receivables	73,233	8,402
Prepayments	1,250 --------- 74,483 ====	- ------ 8,402 ===

a) Creditors comprise:	2017	2016
Falling due within One Year	€	€
Trade payables	35,372	19,676
Accrued expenses	619	-
Loan from shareholders	1,710	-
Other creditors	1,643 -------- 39,344	19,139 -------- 38,815
Falling due within More than One Year Loan from shareholders	-	3,900
	--------	--------
	39,344 ====	42,715 ====
b) The amounts owed to the shareholders are unsecured and free of interest.
10 Called Up Issued Share Capital	2017	2016
Authorised Share Capital	€	€
4,000 Ordinary Shares of €1 each Issued and Fully Paid-up	4,000 ===	4,000 ===
4,000 Ordinary Shares of €1 each	4,000 ===	4,000 ===

In accordance with the Company’s memorandum and articles of association, each ordinary share gives the right to one voting right, participates equally in profits distributed by the Company and carries equal rights upon the distribution of assets by the Company in the event of a winding up.

During the year, the Company distributed interim dividends amounting to €41.25 per ordinary share in issue and ranking for dividend (2016: €22.50). The dividends were fully paid out at the reporting date.

- 16 -

The net cash inflow from operating activities is reconciled to the net profit before taxation as follows:

	2017 €	2016 €
Profit before taxation	243,396	268,709
Add back/(Deduct):
Non-cash expenditure	29,340	16,749
Taxation paid	(49,485)	-
Movement in debtors	(66,081)	18,295
Movement in creditors	(1,181)	29,685
	----------	----------
Net cash inflow from operating activities	155,989	333,438
	=====	=====

Related Parties

Related parties in these financial statements

The following table summarises the related parties referred to in these financial statements:

Name Nature of relationship

NAOS Holding Limited Shareholder

Transactions and balances with related parties

All transactions with related parties were carried out on an arm’s length basis, except for a loan by the shareholders that was provided on an interest-free basis.

The director receives no remuneration for holding the office of director of the Company.

Outstanding balances with related parties at year-end and conditions thereon are stated in note 9 to these financial statements.

Controlling party

The Company is a subsidiary of NAOS Holding Limited, a company registered in Malta with registration number C83262 and registered address at Cornerstone Business Centre, Suite 1, Level 2, 16th September Square, Mosta MST1180, Malta. No individual directly or indirectly controls the majority of the equity of the Company.

- 17 -

Financial Instruments

Interest Rate Risk

The Company is not exposed to any interest-accruing assets or liabilities.

Fair Value

Credit Risk

The Company does not hold any significant financial assets subject to high credit risk.

Foreign Exchange Risk

The Company does not hold any significant financial assets in any currency other than the functional currency.

Liquidity Risk

The Company is funded partly by equity and partly by debt funding. The Company’s debt funding is provided by the direct parent company which have the willingness and ability to continue funding the Company’s operations over the foreseeable future. The contractual maturity of such funding is less than 1 year. The contracted undiscounted future cash flows of funding is not materially different from the carrying amount in the statement of financial position.

The Company is not subject to any supplementary externally imposed capital management requirements.

Market Risk

- 18 -

VIRTUAL GENERATION LIMITED

SCHEDULE TO THE STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2017

Schedule

Direct Costs & Administrative Expenses I

This schedule does not form part of the audited financial statements set out on pages 7 to 18.

Schedule I

VIRTUAL GENERATION LIMITED DIRECT COSTS AND ADMINISTRATIVE EXPENSES FOR THE YEAR ENDED 31 DECEMBER 2017
	2017	2016
	€	€
Depreciation of property, plant and equipment	29,340	16,749
Hosting fees	22,510	7,716
Platform maintenance and usage fees	64,197	50,970
Software costs	91,310	59,912
Wages and salaries	61,543	-
Website development costs	49,870	85,900
Webspace usage fees Direct costs	1,012 ---------- 319,782 =====	3,600 ---------- 224,847 =====
Advertising costs	1,245	-
Bank charges	918	530
Conferences, fairs and seminars	15,628	-
General expenses	66	200
Hire of equipment	6,635	-
Legal fees	359	-
Office maintenance	5,615
Postage and stationery	836	69
Premises rental	30,992	-
Professional fees	69,680	61,173
Registration fees	140	140
Telecommunications	1,051	-
Travelling costs	15,065	1,722
Water and electricity Administrative expenses	681 --------- 148,911 =====	- -------- 63,834 ====

Registration number C 83262

NAOS Holding Limited

Director's Report

and

Financial Statements

2018

NAOS HOLDING LIMITED

DIRECTOR'S REPORT AND FINANCIAL STATEMENTS

2018

Contents

	Page

Report of the Director	2
Statement of Director's Responsibilities	3
Report of the Independent Auditor	4 - 6
Statement of Comprehensive Income	7
Statement of Financial Position	8
Statement of Changes in Equity	9
Statement of Cash Flows	10
Notes to the Financial Statements	11 – 17

- 1 -

NAOS HOLDING LIMITED

REPORT OF THE DIRECTOR

FOR THE PERIOD FROM 31 OCTOBER 2017 TO 31 DECEMBER 2018

Director FBS Trust Limited (appointed on 31 October 2017; resigned on 29 January 2019)

Michele Ciavarella (appointed on 29 January 2019)

Registered Office Cornerstone Business Centre, Suite 1, Level 2

16th September Square Mosta MST1180

Malta

The director presents the annual report together with the audited financial statements of the Company for the period from 31 October 2017, being the date of incorporation of the Company, to 31 December 2018. The Company qualifies as a small company for the purposes of the reporting requirements of the Companies Act, Cap. 386 of the Laws of Malta.

1 Principal Activities

The Company acts as a holding company investing in remote gaming operators and related service providers.

2 Review of Business Development and State of Affairs

During the year under review, the Company was engaged in setting up its corporate structure and acquiring equity interests in one company. It acquired controlling interests in:

Virtual Generation Limited, a company registered in Malta.

3 Likely Future Business Developments

The Company is expected to retain its current portfolio of equity holdings during the forthcoming financial year. A consistent dividend stream from this equity interest should enable the Company to retain profitability in the near future.

4 Dividends and Reserves

No dividends are being distributed to the shareholder. The profit for the period amounted to €132,957. Dividends amounting to €100,000 were distributed to the shareholders, while €32,957 are being carried forward to the next financial year.

Approved by the Director on 28 February 2019:

/s/ Michele Ciavarella

Michele Ciavarella

Director

- 2 -

NAOS HOLDING LIMITED

STATEMENT OF DIRECTOR' RESPONSIBILITIES

This statement is made to enable shareholders to distinguish between the duties of the director, as listed below, and the duties of the auditor as indicated in the report of the independent auditor to the members on page 4.

In preparing these financial statements, the director is required to:

adopt the going concern basis unless it is inappropriate to presume that the Company will continue in business;

select suitable accounting policies and apply them consistently;

make judgements and estimates that are reasonable and prudent;

account for income and charges relating to the accounting period on the accruals basis;

value separately the components of asset and liability items; and

report comparative figures corresponding to those of the preceding accounting period.

- 3 -

REPORT OF THE INDEPENDENT AUDITOR

TO THE MEMBERS OF NAOS HOLDING LIMITED

Report on the Financial Statements

I have audited the financial statements of NAOS Holding Limited as set out on pages 7 to 17, which comprise the Statements of Comprehensive Income, Changes in Equity and Cash Flows for the period from 31 October 2017 to 31 December 2018, the Statement of Financial Position as at that date and the Notes to the Financial Statements.

Audit Opinion

In my opinion, the financial statements give a true and fair view of the financial position of the Company as at 31 December 2018 and of its financial performance and cash flows for the period then ended in accordance with International Financial Reporting Standards as adopted by the European Union ("IFRS"), and have been properly prepared in accordance with the Companies Act, Cap. 386 of the Laws of Malta.

Basis for Opinion

I conducted my audit in accordance with International Standards on Auditing ("ISAs"). My responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of my report. I am independent of the Company in accordance with the International Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants ("IESBA Code") together with the ethical requirements that are relevant to my audit of the financial statements in accordance with the Accountancy Profession (Code of Ethics for Warrant Holders) Directive issued in terms of the Accountancy Profession Act, Cap. 281 of the La1vs of Malta, and I have fulfilled my other ethical responsibilities in accordance with these requirements and the IESBA Code. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinion.

Other Information

Based on the work I have performed, in my opinion:

the information given in the Director's Report is consistent with the financial statements; and

the Director's Report has been prepared in accordance with the Companies Act;

- 4 -

REPORT OF THE INDEPENDENT AUDITOR

TO THE MEMBERS OF NAOS HOLDING LIMITED (cont.)

Director's Responsibility for the Financial Statements

In preparing the financial statements, the director is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the director either intend to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Auditor's Responsibility

My objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes my opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with ISAs, I exercise professional judgment and maintain professional scepticism throughout the audit. I also:

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the director.

- 5 -

REPORT OF THE INDEPENDENT AUDITOR

TO THE MEMBERS OF NAOS HOLDING LIMITED (cont.)

Report on Other Legal and Regulatory Requirements

The Companies Act, Cap. 386 of the Laws of Malta establishes that if the Company's director default in:

disclosing their remuneration; or

their duties related to retention of accounting records, preparation of financial statements and in safeguarding the auditor's rights;

the auditor shall report the default in the audit report.

There is no information to report in this regard.

/s/ Christopher Attard

Christopher Attard

Certified Public Accountant

10, Santa Rita, Venewwa Street, Fgura FGR1860, Malta

28 February 2019

- 6 -

NAOS HOLDING LIMITED

STATEMENT OF COMPREHENSIVE INCOME

FOR THE PERIOD FROM 31OCTOBER 2017 TO 31DECEMBER 2018

	Note	2018 €
Turnover		153,842

Administrative Expenses		(13,195)

Other Operating Income		46,155

Profit before Taxation	4	186,802

Taxation	5	(53,845)

Profit for the Period		132,957

Other Comprehensive Income for the Period

Total Comprehensive Income for the Period		132,957

- 7 -

NAOS HOLDING LIMITED

STATEMENT OF FINANCIAL POSITION

AT 31 DECEMBER 2018

		2018
Non-Current Assets	Note	€
Financial Assets	6	3,999
Current Assets

Debtors	7	89,162

Current Liabilities
Creditors	8	(56,204)

Net Current Assets		32,958

Total Assets less Current Liabilities		36,957

Capital and Reserves

Called Up Issued Share Capital	9	4,000

Profit and Loss Account		32,957

Shareholder's Funds		36,957

The Director approved the financial statements on pages 7 to 17 on 28 February 2019:

/s/ Michele Ciavarella

Michele Ciavarella

Director

- 8 -

NAOS HOLDING LIMITED

STATEMENT OF CHANGES IN EQUITY

FOR THE PERIOD FROM 31 OCTOBER 2017 TO 31 DECEMBER 2018

	Ordinary Share Capital	Profit and Loss Account	TOTAL
	€	€	€
At 31 October 2017	-	-	-

Issue of Ordinary Share Capital	4,000	-	4,000

Total Comprehensive Income for the Period		132,957	132,957

Dividend Distributed		(100,000)	(100,000)

At 31 December 2018	4,000	32,957	36,957

- 9 -

NAOS HOLDING LIMITED

STATEMENT OF CASH FLOWS

FOR THE PERIOD FROM 31 OCTOBER 2017 TO 31 DECEMBER 2018

2018

Note €

Cash Flows from Operating Activities:

Cash receipts from financial assets -

Cash paid to suppliers -

Net Cash Inflow from Operating Activities 10

Cash Flows from Investing Activities

Payments to acquire equity investments (4,000)

Net Cash Outflow from Investing Activities (4,000)

Cash Flows from Financing Activities

Proceeds from issue of share capital 4,000

Net Cash Inflow from Financing Activities 4,000

Net Increase in Cash and Cash Equivalents -

Bank balances at beginning of period -

Bank Balances at End of Period -

- 10 -

NAOS HOLDING LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE PERIOD FROM 31 OCTOBER 2017 TO 31 DECEMBER 2018

1 Corporate Information

NAOS Holding Limited is a limited liability company incorporated and domiciled in Malta. Its registered address and principal activities are described in the Report of the Director. These financial statements were authorised for issue in accordance with a resolution of the director dated 28 February 2019.

2 Accounting Convention and Basis of Preparation

The Company adopted all International Financial Reporting Standards and interpretations that are mandatory for the accounting period commencing on 31 October 2017. The adoption of any new standards, amendments and interpretations to existing standards since the previous accounting period did not result in substantial changes to the Company's existing policies. The Company has not early adopted any new International Financial Reporting Standards' requirements that are issued but not as yet mandatory for this accounting period. It is envisaged that there are no such requirements that will have a possible material impact on the Company's financial statements in the period of initial application.

These financial statements have been prepared on a going concern basis.

3 Significant Accounting Policies

- 11 -

3 Significant Accounting Policies (cont.)

a) Revenue Recognition

Revenue is recognised when:

the contract with a customer is identified;

the performance obligations in the contract is identified;

the transaction price is determined;

the transaction price may be allocated to the performance obligations in the contract; and

the Company fully satisfies the performance obligation.

In relation to dividend income, revenue is recognised when the Company's right to receive payment has been established, provided that it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably.

b) Taxation

Current tax is the expected tax payable on the taxable income for the period, using tax rates enacted or substantially enacted at the reporting date.

c) Cash and Cash Equivalents

Cash and cash equivalents comprise cash and bank balances with a contractual maturity of three months or less.

d) Trade and Other Receivables

Trade and other short-term receivables are stated at their cost less specific impairment losses.

e) Trade and Other Payables

Trade and other payables are stated at cost.

- 12 -

3 Significant Accounting Policies (cont.)

f) Use of Estimates

The preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent liabilities at the balance sheet date, as well as the income and expenses for the period under review. These estimates are reviewed periodically, and if ad1ustments become necessary, they are reported in the periods in which they become known.

g) Investments in Subsidiaries

In the individual financial statements of the Company, investments in subsidiaries are carried at cost less specific impairment losses.

h) Impairment

4 Profit before Taxation

a) The profit before taxation is stated after charging auditor's remuneration amounting to €1,000.

b) The Company employed no employees during the period under review.

- 13 -

5 Taxation

a) The taxation charge for the period comprised:

2018

€

Current taxation 53,845

Deferred taxation 53,845

b) There were no temporary differences at the reporting date from which a deferred tax balance could arise.

c) The tax expense for the period is reconciled to the results as per financial statements as follows:

	%	2018 €
Profit as per financial statements		186,802
Tax charge as the applicable effective tax rate	35	65,381
Tax effect of non-deductible expenses		4,618
Tax effect of non-chargeable income		(16,154)
Tax expense for the period		53,845

6 Financial Assets

a) At the reporting date, the Company held the following equity interests in unlisted undertakings:

Country of Interest Cost

Incorporation

2018

% €

Virtual Generation Limited

C66059 Malta 99.9 3,999

b) The Group of which the Company is the parent qualifies for the exemption granted by Articles 173 and 185(5) of the Companies Act, Cap. 386 of the Laws of Malta, from the requirement to prepare consolidated financial statements in view that at the reporting date, the undertakings together do not exceed:

net consolidated assets total of €4,000,000;

net consolidated turnover of €8,000,000; and

an average number of employees during the year of 50.

- 14 -

7 Debtors

a) Debtors comprise:

2018

€

Related party balances 89,162

b) The balances with related parties are unsecured and free on interest.

8 Creditors

a) Creditors comprise:

2018

€

Accrued expenses 2,360

Advances by shareholder 53,844

56,204

b) The advances by the shareholder are unsecured and free of interest.

9 Called Up Issued Share Capital

2018

€

Authorised Share Capital

4,000 Ordinary Shares of €1 each 4,000

Issued and Fully Paid-up

4,000 Ordinary Shares of €1 each 4,000

During the year, the Company distributed dividends amounting to €25.00 per ordinary share in issue and ranking for dividend.

- 15 -

10 Net Cash Inflow from Operating Activities

The net cash inflow from operating activities is reconciled to the profit before taxation as follows:

2018

€

Profit before taxation 186,802

Add back/ (Deduct): Non-cash income (199,997)

Change in creditors 13,195

Net cash inflow from operating activities -

11 Related Parties

Related parties in these financial statements

The following table summarises the related parties referred to in these financial statements:

Name Nature of relationship

Newgioco Group Inc Shareholder

Virtual Generation Limited Investee companies

Transactions and balances with related parties

During the year under review, there were no related party transactions other than the subscription to share capital and the receipt and distribution of dividends. The shareholder moreover transferred his existing equity and debt investment in these companies to the company on a credit basis. Outstanding balances with related parties at year-end are as stated in notes 7 and 8 to these financial statements.

The director receives no remuneration for holding the office of director of the Company.

Controlling party

The Company is a wholly-owned subsidiary of Newgioco Group Inc, a company registered in the State of Delaware, USA with registration number 2938006. The parent company prepares consolidated financial statements.

No individual directly or indirectly controls the majority of the equity of the Company.

12 Financial Instruments

Financial assets of the Company comprise equity investments and other receivable balances. Financial liabilities of the Company comprise other payables. The accounting policies for these assets and liabilities are set out in note 3 to these financial statements, and these policies are directed towards the establishment of fair values for these assets and liabilities.

a) Interest Rate Risk

The Company is not exposed to any interest-accruing assets or liabilities.

12 Financial Instruments (cont.)

b) Fair Value

c) Credit Risk

The Company does not hold any significant financial assets sub1ect to high credit risk.

d) Foreign Exchange Risk

The Company does not hold any significant financial assets in any currency other than the functional currency.

e) Liquidity Risk

The Company is funded entirely by equity funding. The Company is not subject to any supplementary externally imposed capital management requirements.

f) Market Risk

- 16 -

NAOS HOLDING LIMITED

SCHEDULE TO THE STATEMENT OF COMPREHENSIVE INCOME

FOR THE PERIOD FROM 31 OCTOBER 2017 TO 31 DECEMBER 2018

Schedule

Administrative Expenses & Other Operating Income I

This schedule does not form part of the audited financial statements set out on pages 7 to 17.

- 17 -

Schedule I

NAOS HOLDING LIMITED ADMINISTRATIVE EXPENSES & OTHER OPERATING INCOME FOR THE PERIOD FROM 31OCTOBER 2017 TO 31DECEMBER 2018
	2018
	€

Professional fees	12,735

Registration fees	460

Administrative expenses	13,195

Dividend-related income	46,155

Other operating income	46,155

Exhibit 99.3

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

On January 30, 2019 (the “Effective Date”), Newgioco Group, Inc. (“Newgioco”) completed its acquisition of Virtual Generation Ltd. (“VG”), a developer of virtual gaming software, together with Naos Holding Limited, a private holding company (“Naos”) (the “Acquisition”). As a result of the completion of the Acquisition, VG and Naos have become an indirect and direct wholly-owned subsidiary of Newgioco, respectively, and the results of VG and Naos have been included in the consolidated results of Newgioco since January 30, 2019.

Newgioco acquired 100% of the outstanding stock of Naos and VG for €4 million (approximately US$4.5 million) in a combination of cash and stock to be paid in immediately available funds of €108,000 and €89,000 in shares of common stock on the Closing Date plus a promissory note to pay 23 equal consecutive monthly instalments in cash of €104,000 each and 17 equal consecutive monthly instalments of €83,000 converted to U.S. dollars in shares of common stock as determined by the average of the closing price of such shares on the last ten (10) trading days immediately preceding the payment date commencing March 1, 2019, with an additional earn-out payment of €500,000 (approximately US$560,000) to be paid in shares of common stock of Newgioco contingent on a 5% increase in the number of bets made through the VG platform in 2019 compared to 2018.

The business combination was accounted for using the acquisition method of accounting, which requires an acquiror to recognize assets acquired and liabilities assumed at the acquisition date fair value. The estimated fair value of assets acquired and liabilities assumed is preliminary and differences between the preliminary and final estimated fair value could be material. Newgioco preliminarily allocated the purchase price to the acquired assets and liabilities based on their estimated fair values at the acquisition date as summarized in the accompanying notes to the unaudited pro forma condensed combined financial information.

VG and Naos report under International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standard Board (“IASB”). Management has determined that there are no quantitative differences between IFRS and generally accepted accounting principles in the United States of America (“US GAAP”) that are applicable to VG for the period presented.

The unaudited pro forma condensed combined balance sheet is based on the historical condensed consolidated balance sheet of Newgioco and the historical condensed accounting records of Naos and VG as of December 31, 2018 and has been prepared to reflect the Acquisition as if it had been consummated on January 1, 2018. The balance sheet information for Naos and VG has been derived, without material modification, from both Naos and VG’s historical accounting records and converted from Euros into US dollars ("USD" or "$") at the rate of 1.1444 to the Euro.

The unaudited pro forma condensed combined statement of operations is based on the historical condensed consolidated results of Newgioco and the historical condensed accounting records of Naos and VG for the twelve months ended December 31, 2018 and has been prepared as if the Acquisition had been completed on January 1, 2018. The historical results of Naos and VG have been derived, without material modification, from both Naos and VG’s statement of operations for the year ended December 31, 2018 and has been converted from Euros into US dollars using the average exchange rate for the twelve months ended December 31, 2018 at the rate of 1.1809 to the Euro.

The unaudited pro forma condensed combined financial information is based on estimates and assumptions which are preliminary and has been made solely for purposes of developing such pro forma information. In connection with the plan to integrate the operations of Newgioco, Naos and VG, Newgioco anticipates that non-recurring charges will be incurred. Newgioco is not able to determine the timing, nature and amount of these charges as of the date of this current report. However, these charges could affect the combined results of operations of Newgioco, Naos and VG in the period in which they are recorded. The unaudited pro forma condensed combined financial information does not include the effects of the costs associated with any integration activities resulting from the transaction, as they are non-recurring in nature and not factually supportable at the time that the unaudited pro forma condensed combined financial information was prepared. In addition, the pro forma condensed combined financial statements do not include any potential operating efficiencies or cost savings from expected synergies of combining the companies.

The unaudited pro forma condensed combined financial information is presented for illustrative purposes only and is not necessarily indicative of what the combined Newgioco’s financial condition or results of operations would have been had the Acquisition occurred on the date indicated or that may be achieved in the future. They also may not be useful in predicting the future financial condition and results of operations of Newgioco on a combined basis. The actual financial position and results of operations may differ significantly from the pro forma amounts reflected herein due to a variety of factors.

The assumptions and estimates underlying the unaudited adjustments to the pro forma condensed combined financial statements are described in the accompanying notes, which should be read in conjunction with:

the accompanying notes to this unaudited pro forma condensed combined financial information;

the historical consolidated financial statements of Newgioco included in Newgioco’s annual report on Form 10-K for the year ended December 31, 2018, filed with the SEC;

the historical financial statements of VG for the year ended December 31, 2018, included herein; and

the historical financial statements of Naos for the year ended December 31, 2018, included herein.

All intercompany balances and profits or losses from transactions between Newgioco and VG and Naos have been eliminated in this pro forma condensed combined financial information.

PRO FORMA CONDENSED COMBINED BALANCE SHEETS

AS OF DECEMBER 31, 2018

UNAUDITED

	Newgioco Group, Inc.	Virtual Generation Limited	Naos Holding Limited	Pro Forma Adjustments	Notes	Pro Forma Combined
Current Assets
Cash and cash equivalents	$ 6,289,903	95,201				$ 6,385,104
Accounts receivable	10,082	129,832		(69,423) (5,581)	(a) (b)	64,910
Gaming accounts receivable	1,021,052					1,021,052
Prepaid expenses	124,712	10,984				135,696
Related party receivable	49,914	102,036				151,950
Other current assets	55,700	6,343				62,043
Total Current Assets	$ 7,551,363	$ 242,360	$ 102,036	($ 75,004)		$ 7,820,755

Noncurrent Assets
Restricted cash	1,560,539					1,560,539
Property, plant and equipment	354,799	43,599				398,398
Intangible assets	12,583,457			4,300,000	(c)	16,883,457
Goodwill	262,552			10,617	(d)	273,169
Investment in non-consolidated entities	275,000		4,576	(4,576)	(e)	275,000
Total Noncurrent Assets	$15,036,347	$ 43,599	$ 4,576	$ 4,306,041		$19,390,563

Total Assets	$22,587,710	$ 285,959	$ 106,612	$ 4,231,037		$27,211,317

Current Liabilities
Line of credit – bank	$ 750,000					$ 750,000
Accounts payable and accrued liabilities	4,603,608	28,320	2,701	(69,423) (5,581)	(a) (b)	4,559,625
Gaming accounts balances	1,049,423					1,049,423
Taxes payable	1,056,430	23,352				1,079,782
Advances from stockholders	39,237	4,463	61,618			105,318
Debentures, net of discount	3,942,523					3,942,523
Promissory notes payable – related party	318,078					318,078
Bank loan payable – current portion	120,920					120,920
Total Current Liabilities	$11,880,219	$ 56,135	$ 64,319	($ 75,004)		$11,925,670

Bank loan payable	225,131					225,131
Other long-term liabilities	608,728	102,036				710,764

Total Liabilities	$12,714,078	$ 158,171	$ 64,319	($ 75,004)		$12,861,564

Stockholders' Equity
Preferred stock, $0.0001 par value; 20,000,000 shares authorized, none issued	-					-
Common Stock, $0.0001 par value, 160,000,000 shares authorized; 75,540,298 and 74,143,590 shares issued and outstanding as of December 31, 2018 and 2017	7,555	4,578	4,578	(9,154)	(f)	7,556
Additional paid-in capital	23,956,309	123,210	37,715	4,315,195	(g)	28,432,429
Accumulated other comprehensive income	(1,081,338)					(1,081,338)
Accumulated deficit	(13,008,894)					(13,008,894)
Total Stockholders' Equity	$ 9,873,632	$ 127,788	$ 42,293	$ 4,306,041		$14,349,753

Total Liabilities and Stockholders’ Equity	$22,587,710	$ 285,959	$ 106,612	$ 4,231,037		$27,211,317

The accompanying notes are an integral part of these unaudited pro forma condensed combined financial statements.

PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS

(in USD, except per share data)

YEAR ENDED DECEMBER 31, 2018

UNAUDITED

	Newgioco Group, Inc.			Virtual Generation Limited		Naos Holding Limited		Pro Forma Adjustments			Notes	Pro Forma Combined

Revenue	$	34,575,097		$	729,782	$	236,168	($	589,522	)	(h)	$	34,951,524

Costs and Expenses
Selling expenses		24,142,110			506,184				(411,635	)	(i)		24,236,659
General and administrative expenses		10,005,713			154,750		15,581						10,176,045
Total Costs and Expenses		34,147,823			660,934		15,581		(411,635	)			34,412,704
Income (Loss) from Operations		427,274			68,848		220,586		(177,888	)			538,820

Other Expenses (Income)

Interest expense, net of interest income		2,614,837											2,614,837
Imputed interest on related party advances		761											761
Gain on litigation settlement		(516,120	)										(516,120	)
Loss on issuance of debt		196,403											196,403
Other Expense		75,000											75,000
Total Other Expenses (Income)	$	2,370,881										$	2,370,881

Income (Loss) Before Income Taxes		(1,943,607	)		68,848		220,586		(177,888	)			(1,832,061	)
Income tax provision		1,102,701			24,097		63,583						1,190,381
Net Income (Loss)	$	(3,046,308	)	$	44,751	$	157,003	($	177,888	)		$	(3,022,441	)

Other Comprehensive Income (Loss)
Foreign currency translation adjustment		(831,011	)										(831,011	)
Comprehensive Income (Loss)	$	(3,877,319	)	$	44,751	$	157,003	($	177,888	)		$	(3,853,452	)

Income (loss) per common share – basic		(0.04	)										(0.04	)
Income (loss) per common share – diluted		(0.04	)										(0.04	)

Weighted average number of common shares outstanding – basic		75,887,946											75,887,946

Weighted average number of common shares outstanding – diluted		75,887,946											75,887,946

The accompanying notes are an integral part of these unaudited pro forma condensed combined financial statements.

Notes to Unaudited Pro Forma Condensed Combined Financial Statements

1. Description of Acquisition and Basis of Presentation

Newgioco acquired 100% of the outstanding stock of Naos and VG for €4 million (approximately US$4.5 million) in a combination of cash and stock to be paid in immediately available funds of €108,000 and €89,000 in shares of common stock on the Closing Date plus a promissory note to pay 23 equal consecutive monthly instalments in cash of €104,000 each and 17 equal consecutive monthly instalments of €83,000 converted to U.S. dollars in shares of common stock as determined by the average of the closing price of such shares on the last ten (10) trading days immediately preceding the payment date commencing March 1, 2019, with an additional earn-out payment of €500,000 (approximately US$560,000) to be paid in shares of common stock of the Company contingent on a 5% increase in the number of bets made through the VG platform in 2019 compared to 2018.

Naos and VG report under International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standard Board (“IASB”) and are presented in Euros. Accordingly, amounts for Virtual Generation and Naos are translated to U.S. dollars. Management has determined that there are no quantitative differences between IFRS and generally accepted accounting principles in the United States of America (“US GAAP”) that are applicable to VG for the period presented.

The unaudited pro forma condensed combined financial information is based on estimates and assumptions which are preliminary and has been made solely for purposes of developing such pro forma information. The unaudited pro forma condensed combined financial information is not necessarily an indication of the results that would have been achieved had the acquisition been consummated as of the dates indicated or that may be achieved in the future.

2. Pro Forma Adjustments

The unaudited pro forma condensed combined financial statements for the fiscal year ended December 31, 2018 are presented as if the Acquisition had occurred on January 1, 2018, the first day of that fiscal year. The pro forma adjustments give effect to the events that are directly attributable to the transaction and are expected to have a continuing impact on the financial results of the combined company. The pro forma adjustments are based on available information and certain assumptions that Newgioco believes are reasonable.

The pro forma adjustments included in the unaudited pro forma combined statements of income are as follows:

(a)

To eliminate trade accounts receivable and payable between VG and Ulisse GmbH;

(b)

To eliminate trade accounts receivable and payable between Odissea GmbH and VG;

(c)

To record the fair value of VG's internally developed technologies;

(d)

To record VG's goodwill acquired;

(e)

To eliminate intercompany investment between Naos and VG;

(f)

To eliminate VG's and Naos’ historical stockholders' equity;

(g)

Reflects the allocation of the purchase price of approximately US$ 4,500,000 to the fair value of the assets acquired. The allocation of the purchase price is preliminary and therefore subject to change. The allocation of the purchase price to the fair value of the assets acquired is as follows:

Total	Purchase Price	$	4,500,000
Less:	Net assets acquired		(189,383	)
Less:	Intangible assets		(4,300,000	)
	Goodwill	$	10,617

(h)

To eliminate revenue on sales between VG and Newgioco; and

(i)

To eliminate cost of sales between VG and Newgioco

Exhibit 99.4

Report of the Independent Auditor for financial statements of VG as of and for the years ended December 31, 2018 and 2017.

Please refer to the accompanying document in pdf format.

REPORT OF THE INDEPENDENT AUDITOR TO THE MEMBERS OF

NAOS HOLDING LIMITED

To the Director and Shareholders of

NAOS Holding LTD

Malta

Report on the Financial Statements

We have audited the accompanying financial statements of NAOS Holding LTD, which comprise the statements of financial position as at 31 December 2018, the statements of comprehensive income, changes in equity and cash flows for the period from 31 October 2017 to 31 December 2018, and a summary of significant accounting policies and other explanatory notes.

Audit Opinion

In our opinion, the financial statements give a true and fair view of the financial position of the Company as at 31 December 2018 and of its financial performance and cash flows for the period then ended in accordance with the International Financial Reporting Standards as adopted by the European Union (IFRS) and have been properly prepared in accordance with the Companies Act, Cap. 386 of the Laws of Malta.

Basis for Opinion

We conducted our audit in accordance with International Standards on Auditing (“ISAs”). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report.

We are independent of the Company in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (“IESBA Code”) together with the ethical requirements of the Accountancy Profession (Code of Ethics for Warrant Holders) Directive issued in terms of the Accountancy Profession Act, Cap. 281, that are relevant to our audit of the financial statements in Malta. We have fulfilled our other ethical responsibilities in accordance with the IESBA Code.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Other Information

The director is responsible for the other information. The other information comprises only the Director’s Report. Our opinion on the financial statements does not cover this information.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

With respect to the Director’s Report, we also considered whether the Director’s Report includes the disclosures required by Article 177 of the Companies Act, Cap. 386 of the Laws of Malta.

Based on the work we have performed, in our opinion:

§ the information given in the Director’s Report for the financial year for which the financial statements are prepared is consistent with the financial statements; and

§ the Director’s Report has been prepared in accordance with the Maltese Companies Act, Cap.386.

In addition, in light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we are required to report if we have identified material misstatements in the Director’s Report and other information that we obtained prior to the date of this auditor’s report. We have nothing to report in this regard.

Director’s Responsibility for the Financial Statements

The director is responsible for the preparation of financial statements that give a true and fair view in accordance with IFRS as adopted by the European Union and the requirements of the Maltese Companies Act, Cap. 386, and for such internal control as he determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in their aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the director.

Conclude on the appropriateness of the director’s use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the company to cease to continue as a going concern.

We communicate with the director regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

Report on Other Legal and Regulatory Requirements

The Companies Act, Cap. 386 of the Laws of Malta establishes that if the Company’s director default in:

disclosing their remuneration; or

their duties related to retention of accounting records, preparation of financial statements and in safeguarding the auditor’s rights;

the auditor shall report the default in the audit report.

We have nothing to report to you in this regard.

Pitagora Revisione S.r.l.

Turin, Italy

April 15, 2019

Roberto Seymandi

Partner

This regulatory filing also includes additional resources:
exhibit_99-4.pdf

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