UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
For
the quarterly period ended
Commission
File Number:
|
|
| (Exact name of registrant as specified in its charter) |
|
|
|
|
|
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
|
|
|
|
| (Address of principal executive offices) | (Zip Code) |
Registrant’s
telephone number:
(Former name or former address, if changed since last report): N/A
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
(Title of each class)
Indicate
by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.:
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |
|
|
☒ | Smaller reporting company |
|
|
| Emerging growth company |
|
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
☐ No
The number of shares of the issuer’s common stock outstanding as of November 14, 2025, was shares, par value $ per share.
VIP Play, Inc.
Form 10-Q
Table of Contents
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Our financial statements included in this Form 10-Q are as follows:
| 1 |
VIP PLAY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands except number of shares and par value)
| September 30, 2025 | June 30, 2025 | |||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ |
|
$ |
|
||||
| Cash reserved for users |
|
|
||||||
| Prepaid expenses and other current assets |
|
|
||||||
| Total current assets |
|
|
||||||
| Other assets: | ||||||||
| Intangible assets, net |
|
|
||||||
| Deposits and other assets |
|
|
||||||
| Total other assets |
|
|
||||||
| Total assets | $ |
|
$ |
|
||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued expenses | $ |
|
$ |
|
||||
| Accrued expenses - related party |
|
|
||||||
| Players liabilities |
|
|
||||||
| Notes payable |
|
|
||||||
| Notes payable - related party, net of discount |
|
|
||||||
| Convertible notes, net |
|
|
||||||
| Line of credit - related party |
|
|
||||||
| Derivative liability |
|
|
||||||
| Total current liabilities |
|
|
||||||
| Total liabilities |
|
|
||||||
| Commitments and contingencies | ||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| F- 1 |
VIP PLAY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS - Continued
| September 30, 2025 | June 30, 2025 | |||||||
| (unaudited) | ||||||||
| Stockholders’ deficit: | ||||||||
| Preferred stock, shares authorized | ||||||||
| Series A preferred stock, $ par value, shares designated, and shares issued and outstanding as of September 30, 2025, and June 30, 2025, respectively | ||||||||
| Series B preferred stock, $ par value, shares designated, and shares issued and outstanding as of September 30, 2025, and June 30, 2025, respectively |
|
|
||||||
| Series C preferred stock, $ par value, shares designated, and shares issued and outstanding as of September 30, 2025, and June 30, 2025, respectively | ||||||||
| Common stock, $ par value, shares authorized, and shares issued and outstanding as of September 30, 2025, and June 30, 2025, respectively |
|
|
||||||
| Additional paid-in capital |
|
|
||||||
| Accumulated deficit |
(
|
) |
(
|
) | ||||
| Total stockholders’ deficit |
(
|
) |
(
|
) | ||||
| Total liabilities and stockholders’ deficit | $ |
|
$ |
|
||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| F- 2 |
VIP PLAY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands except number of shares and per share data)
|
For the three months ended September 30, |
||||||||
| 2025 | 2024 | |||||||
| Gaming revenues | $ |
|
$ |
(
|
) | |||
| Costs of gaming revenue |
|
|
||||||
| Net gaming loss |
(
|
) |
(
|
) | ||||
| Operating expenses: | ||||||||
| Salaries and wages |
|
|
||||||
| Depreciation and amortization |
|
|
||||||
| Sales and marketing |
|
|
||||||
| General and administrative |
|
|
||||||
| Total operating expenses |
|
|
||||||
| Loss from Operations |
(
|
) |
(
|
) | ||||
| Other income (expenses): | ||||||||
| Gain (loss) on change in fair value of derivative |
|
(
|
) | |||||
| Interest expense |
(
|
) |
(
|
) | ||||
| Interest expense - related party |
(
|
) |
(
|
) | ||||
| Total other expenses, net |
(
|
) |
(
|
) | ||||
| Net loss | $ |
(
|
) | $ |
(
|
) | ||
|
Net loss per common share basic and diluted |
$ | ) | $ | ) | ||||
|
Weighted average number of common shares outstanding basic and diluted |
||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| F- 3 |
VIP PLAY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
(unaudited)
(in thousands except share data)
|
Preferred Shares Series A $0.001 Par Value |
Preferred Shares Series B $1.00 Par Value |
Preferred Shares Series C $0.001 Par Value |
Common Shares $0.001 Par Value | Additional Paid-In | Accumulated |
Total Stockholders’ Equity |
||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | (Deficit) | (Deficit) | ||||||||||||||||||||||||||||||||||
| Balance, June 30, 2025 | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
(
|
) | $ |
(
|
) | ||||||||||||||||||||||||||||
| Fair value of vested incentive stock options - | - |
|
|
|||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - |
(
|
) |
(
|
) | ||||||||||||||||||||||||||||||||||||
| Balance, September 30, 2025 | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
(
|
) | $ |
(
|
) | ||||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| F- 4 |
VIP PLAY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT - continued
(unaudited)
|
Preferred Shares Series A $0.001 Par Value |
Preferred Shares Series B $1.00 Par Value |
Preferred Shares Series C $0.001 Par Value |
Common Shares $0.001 Par Value |
Additional Paid-In | Stock Subscriptions | Accumulated |
Total Stockholders’ Equity |
|||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Receivable | Deficit | (Deficit) | |||||||||||||||||||||||||||||||||||||
| Balance, June 30, 2024 | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ | $ |
(
|
) | $ | (13,191 | ) | |||||||||||||||||||||||||||||||
| Fair value of vested incentive stock options | - | - | - | - |
|
48 | ||||||||||||||||||||||||||||||||||||||||||
| Change in par value of common stock | - | - | - | - |
|
(
|
) | - | ||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - |
(
|
) | (5,269 | ) | ||||||||||||||||||||||||||||||||||||||||
| Balance, September 30, 2024 | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ | $ |
(
|
) | $ | (18,412 | ) | |||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| F- 5 |
VIP PLAY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
|
For the Three Months Ended September 30, |
||||||||
| 2025 | 2024 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net loss | $ |
(
|
) | $ |
(
|
) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Amortization of debt issuance costs – related party |
|
|||||||
| Depreciation and amortization |
|
|
||||||
| Incentive stock option expense |
|
|
||||||
| (Gain) loss on change in fair value of derivative |
(
|
) |
|
|||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses and other current assets |
|
|
||||||
| Accounts payable and accrued expenses |
|
(
|
) | |||||
| Accrued expenses - related party |
|
|
||||||
| Players liabilities |
(
|
) |
(
|
) | ||||
| Net cash used in operating activities |
(
|
) |
(
|
) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Cash paid for licenses and capitalized software |
(
|
) |
(
|
) | ||||
| Net cash used in investing activities |
(
|
) |
(
|
) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from line of credit - related party |
|
|
||||||
| Proceeds from convertible notes |
|
|||||||
| Repayments of notes payable |
(
|
) |
(
|
) | ||||
| Net cash provided by financing activities |
|
|
||||||
| NET CHANGE IN CASH AND CASH RESERVED FOR USERS |
|
|
||||||
| CASH AND CASH RESERVED FOR USERS AT BEGINNING OF PERIOD |
|
|
||||||
| CASH AND CASH RESERVED FOR USERS AT END OF PERIOD | $ |
|
$ |
|
||||
| DISCLOSURE OF CASH AND CASH RESERVED FOR USERS: | ||||||||
| CASH |
|
|
||||||
| CASH RESERVED FOR USERS |
|
|
||||||
| CASH AND CASH RESERVED FOR USERS AT END OF PERIOD | $ |
|
$ |
|
||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||
| Interest paid | $ |
|
$ |
|
||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| F- 6 |
VIP PLAY, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – OVERVIEW AND ORGANIZATION & SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Overview and Organization
VIP Play, Inc. (the “Company,” “we”, “us” and “our”), formerly known as KeyStar Corp. prior to September 20, 2024, was incorporated on April 16, 2020, under the laws of the State of Nevada. On December 21, 2021, the Company formed UG Acquisition Sub, Inc. as a wholly-owned subsidiary under the state of Nevada. On December 9, 2022, the Company formed VIP Play TN, LLC (formerly known as KeyStar TN, LLC) as a wholly-owned subsidiary under the state of Nevada. On March 4, 2025, the Company formed VIP Play WV, LLC as a wholly owned subsidiary under the state of Nevada. On August 5, 2024, the Board of Directors approved the winding down and dissolution of UG Acquisition Sub, Inc.
In May 2023, the Company received approval on its Tennessee Sports Gaming Operator license. The Company officially launched its Sports Betting operation in Tennessee in June 2023. On December 10, 2024, the Company entered into a Casino and Sportsbook Online Operations Agreement with a license holder in West Virginia. This agreement grants the Company the right to seek and obtain licenses from the appropriate governing authority to offer and operate interactive online gaming services in West Virginia via the Internet, mobile or other remote or electronic device or data network. On March 31, 2025, the Company received interim approval on its West Virginia i-Gaming and Sports Wagering Management Service Provider License. As of September 30, 2025, the Company had not yet commenced operations in West Virginia.
Basis of Presentation
The foregoing unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions for Form 10-Q and Regulation S-X as promulgated by the United States Securities and Exchange Commission (“SEC”). Accordingly, these unaudited condensed consolidated financial statements do not include all of the disclosures required by U.S. GAAP for complete annual audited consolidated financial statements. These unaudited condensed consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included on Form 10-K for the year ended June 30, 2025. In the opinion of management, the unaudited condensed consolidated financial statements furnished herein include all adjustments, all of which are of a normal recurring nature, necessary for a fair statement of the results for the interim period presented.
Operating results for the three month period ended September 30, 2025, are not necessarily indicative of the results that may be expected for the year ending June 30, 2026. The condensed consolidated balance sheet at June 30, 2025, has been derived from the annual audited consolidated financial statements included in our Annual Report on Form 10-K at that date but does not include all of the information and footnotes required U.S. GAAP for complete annual audited consolidated financial statements.
| F- 7 |
Principles of Consolidation
The unaudited condensed consolidated financial statements represent the results of VIP Play, Inc. and its wholly owned subsidiaries (collectively, the “Company”). All intercompany transactions and balances have been eliminated upon consolidation of these entities.
Segment Reporting
Our chief operating decision maker (“CODM”), Les Ottolenghi, Chief Executive Officer, reviews operating results on a consolidated basis and has determined that we have one reportable segment.
The following table presents selected financial information with respect to the Company’s single operating segment for the three months ended September 30, 2025 and 2024:
|
For the three months ended September 30, |
||||||||
| 2025 | 2024 | |||||||
| Gaming revenues | $ |
|
$ |
(
|
) | |||
| Costs of gaming revenue |
|
|
||||||
| Net gaming loss |
(
|
) |
(
|
) | ||||
| Operating expenses: | ||||||||
| Salaries and wages |
|
|
||||||
| Depreciation and amortization |
|
|
||||||
| Sales and marketing |
|
|
||||||
| General and administrative |
|
|
||||||
| Total operating expenses |
|
|
||||||
| Loss from Operations |
(
|
) |
(
|
) | ||||
| Other income (expenses): | ||||||||
| (Loss) gain on change in fair value of derivative |
|
(
|
) | |||||
| Interest expense |
(
|
) |
(
|
) | ||||
| Interest expense - related party |
(
|
) |
(
|
) | ||||
| Total other expenses, net |
(
|
) |
(
|
) | ||||
| Net loss | $ |
(
|
) | $ |
(
|
) | ||
During the current fiscal period, the Company began investing in initiatives outside of its core sports wagering operations, including non-gaming digital entertainment opportunities. These initiatives are in the early stages of development, have not generated revenues to date, and are not material to the Company’s financial position or results of operations. Accordingly, the Company continues to report as one operating segment.
Use of Estimates
The preparation of the unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates. Significant estimates and assumptions reflected in the unaudited condensed consolidated financial statements relate to and include, but are not limited to, the valuation of debt and equity instruments, the valuation and expensing of equity awards, accounting for contingencies and uncertainties, purchase price allocations, including fair value estimates of intangible assets, the estimated useful lives of fixed assets and intangible assets, internally developed software costs and accrued expenses.
| F- 8 |
Going Concern
The
Company’s unaudited condensed consolidated financial statements are prepared using the accrual method of accounting in accordance
with U.S. GAAP and have been prepared on a going concern basis, which contemplates the realization of assets and the settlement
of liabilities in the normal course of business. The Company has an accumulated deficit of $
The Company is dependent upon, among other things, achieving a level of profitable operations and receiving additional cash infusions including securing additional lines of credit and raising additional capital through placement of preferred and/or common stock in order to implement its business plan. There can be no assurance that the Company will be successful in order to continue as a going concern. The Company is funding its initial operations by securing a related party line of credit, a related party note payable, a note payable, issuing preferred stock, and issuing common stock through private placements.
We cannot be certain that capital will be provided when it is required or in amounts sufficient to meet our operating requirements. Management believes the existing shareholders, the prospective new investors, and future sales will provide the additional cash needed to meet the Company’s obligations as they become due and will allow the development of its core business operations. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, it may contain restrictions on our operations, in the case of debt financing, or cause substantial dilution for our stockholders, in the case of equity financing.
Cash and Equivalents
The
Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Cash includes
amounts deposited in financial institutions in excess of insurable Federal Deposit Insurance Company (FDIC) limits. At times throughout
the year, the Company may maintain cash balances in certain bank accounts in excess of FDIC limits. As of September 30, 2025, the Company’s
cash balance exceeded the FDIC limits by approximately $
Cash Reserved for Users
The
Company maintains separate bank accounts to segregate users’ funds from operational funds. User funds are held by VIP Play TN,
LLC, which was organized for the purpose of protecting users’ funds in the event of creditor claims. As of September 30, 2025
and June 30, 2025, approximately $
Equipment
Equipment is stated at cost, less accumulated depreciation and amortization. Depreciation is calculated using the straight-line method over the asset’s estimated useful life. Expenditures for maintenance and repairs are expensed as incurred. When retired or otherwise disposed of, the related carrying value and accumulated depreciation are removed from the respective accounts, and the net difference less any amount realized from the disposition is reflected in earnings. Estimated useful lives are as follows:
| Equipment |
|
| F- 9 |
Intangible assets include internally developed software and website development costs, software licenses and gaming licenses
Internally
developed software and website development and software licenses are stated at cost, less accumulated amortization on the condensed
consolidated balance sheets. Amortization is calculated using the straight-line method over the asset’s estimated useful life.
The capitalization policy for the company is to capitalize intangible assets greater than $
Estimated useful lives are as follows:
| Internally developed software and website development |
|
|||
| Software licenses |
|
|||
| Gaming licenses | Indefinite |
Internally Developed Software and website development
Internally developed software and website development primarily relates to the design and development of sports betting software for online sportsbook and for our customer engagement platform. Software that is developed for internal use is accounted for pursuant to the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Sub-topic 350-40, Intangibles, Goodwill and Other—Internal-Use Software. Qualifying costs incurred to develop internal-use software are capitalized when (i) the preliminary project stage is completed, (ii) management has authorized further funding for the completion of the project and (iii) it is probable that the project will be completed and perform as intended. These capitalized costs include compensation for employees who develop internal-use software and external costs related to development of internal use software. Capitalization of these costs ceases once the project is substantially complete and the software is ready for its intended purpose. Internally developed software is amortized using the straight-line method over the estimated useful life of the software. Significant upgrades or enhancements are amortized over the remaining useful life of the software upon implementation unless the significant upgrade or enhancement separately results in a distinctly new functionality that would extend the life of the asset. All other expenditures, including those incurred in order to maintain an intangible asset’s current level of performance, are expensed as incurred. When intangible assets are retired or disposed of, the cost and accumulated amortization thereon are removed, and any resulting gain or losses are included in the condensed consolidated statements of operations.
Gaming licenses
Certain costs, generally legal and professional fees, are required to attain jurisdictional gaming licenses in order to legally operate our core sports betting business. Gaming licenses, with indefinite useful lives, are tested at least on an annual basis as to the assets that have been impaired. Intangible assets determined to have an indefinite useful life are not amortized. Gaming licenses are assets that are determined to have an indefinite useful life are not amortized and are included in intangible assets on the condensed consolidated balance sheets. Annual gaming license fees and legal and professional fees required to maintain the licenses are recorded as period costs in the condensed consolidated statement of operations.
Software license
The Company holds a perpetual license to utilize a third-party customer engagement digital application. The Company capitalizes the cost of acquiring perpetual software licenses as intangible assets. These assets are amortized on a straight-line basis over their estimated useful lives, three years. The Company evaluates these assets for impairment whenever events or circumstances indicate that their carrying value may not be recoverable.
| F- 10 |
Impairment of Long-Lived Assets
Intangible assets are amortized utilizing the straight-line method over their remaining economic useful lives. The Company reviews long-lived assets and intangible assets for potential impairment annually and when events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. In the event the expected undiscounted future cash flows resulting from the use of the asset is less than the carrying amount of the asset, an impairment loss is recorded equal to the excess of the asset’s carrying value over its fair value. If an asset is determined to be impaired, the loss is measured based on quoted market prices in active markets, if available. If quoted market prices are not available, the estimate of fair value is based on various valuation techniques, including a discounted value of estimated future cash flows. In the event that management decides to no longer allocate resources to an asset, an impairment loss equal to the remaining carrying value of the asset is recorded. The Company did not record any impairment charges related to intangibles assets during the three months ended September 30, 2025 and 2024.
Lease Commitments
ASC Topic 842 provides for certain practical expedients when adopting the guidance. The Company elected to apply the short-term lease exception; therefore, the Company will not record a right of use (“ROU”) asset or corresponding lease liability for leases with an initial term of twelve months or less that are not reasonably certain of being renewed and instead will recognize a single lease cost allocated over the lease term, generally on a straight-line basis.
On
February 4, 2024, the Company entered into a lease for office space in Sarasota, Florida. The lease expired on
On June 18, 2025, the Company entered into a month-to-month lease for office space in Las Vegas, Nevada.
Total
rental expense for the three months ended September 30, 2025 and 2024 was $
Fair Value of Financial Instruments
The Company recognized the fair value of financial instruments in accordance with FASB ASC Topic 820, Fair Value Measurements and Disclosures, “Fair Value Measurements”, which provides a framework for measuring fair value under U.S. GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The standard also expands disclosures about instruments measured at fair value and establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:
Level 1 - Quoted prices for identical assets and liabilities in active markets;
Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, such as quoted market prices for similar assets and liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability.
Level 3 - Unobservable inputs that are supported by little to no market activity.
The Company’s derivative liabilities are carried at fair value and are classified as Level 3 liabilities.
The Company’s financial instruments consist principally of cash, prepaid expenses, accounts payable, accrued expenses, related party notes payable, related party line of credit, and notes payable approximate the fair value because of their short maturities.
| F- 11 |
The Company’s Derivative liabilities are determined based on “Level” 3 inputs, which are significant and unobservable and have the lowest priority. There were no transfers into our out of “Level 3” during the three months ended September 30, 2025, or 2024.
(in thousands)
| Description |
Total
fair
value at September 30, 2025 |
Quoted
prices
in Active markets (level 1) |
Significant
other
observable inputs (level 2) |
Significant
unobservable inputs (level 3) |
||||||||||||
| Derivative liability (1) | $ |
|
$ | $ | $ |
|
||||||||||
| Description |
Total
fair
value at June 30, 2025 |
Quoted
prices
in Active markets (level 1) |
Quoted
prices
in Active markets (level 2) |
Quoted
prices
in Active markets (level 3) |
||||||||||||
| Derivative liability (1) | $ |
|
$ | $ | $ |
|
||||||||||
| (1) |
|
Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial statement. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could transfer a liability in an orderly transaction between willing and able maker participants. In general, the Company’s policy in estimating fair values is to first look at observable market prices for the identical assets and liabilities in active markets, where available. When these are not available other inputs used to model fair value such as prices of similar instruments, yield curves, volatilities., prepayment speeds, default rates credit spreads, rely first on observable data from active markets. Depending on the availability of observable inputs and prices, different valuation models could produce materially different fair value estimates. The values presented may not represent future fair value as discussed above.
Derivative Liabilities
The
Company accounts for derivative instruments in accordance with FASB ASC Topic 815, “
Derivatives and Hedging
” and
all derivative instruments are reflected as either assets or liabilities at fair value in the balance sheet. The Company uses
estimates of fair value to value its derivative instruments. Fair value is defined as the price to sell an asset or transfer a
liability in an orderly transaction between willing and able market participants. In general, the Company’s policy in
estimating fair values is to first look at observable market prices for identical assets and liabilities in active markets, where
available. When these are not available, other inputs are used to model fair value such as prices of similar instruments, yield
curves, volatilities, prepayment speeds, default rates, and credit spreads, relying first on observable data from active markets.
Depending on the availability of observable inputs and prices, different valuation models could produce materially different fair
value estimates. The values presented may not represent future fair values and may not be realizable. The Company categorizes its
fair value estimates in accordance with FASB ASC Topic 820 based on the hierarchical framework associated with the three levels of
price transparency utilized in measuring financial instruments at fair value as discussed above. As of September 30, 2025, and June
30, 2025, the Company had a derivative liability of $
Players Liabilities
Players liabilities were comprised of players betting deposits and contestant prize winnings for promotional events. During the three months ended September 30, 2025, the Company retitled the balance sheet caption to previously labeled “players balances” to “players liabilities” to better reflect the nature of the amounts presented. This change in caption did not affect the recognition, measurement, or classification of any amounts in the unaudited condensed consolidated financial statements.
As
per the Tennessee Sports Wagering Council, the Company is required to maintain a reserve in the form of cash, cash equivalents
and/or irrevocable letter of credit along with a required $
| F- 12 |
Revenue Recognition
The Company records revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC Topic 606”). ASC Topic 606 requires companies to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, the standard requires more detailed disclosures to enable readers of the unaudited condensed consolidated financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.
The Company determines revenue recognition through the following steps:
| ● | Identify the contract, or contracts, with the customer; | |
| ● | Identify the performance obligations in the contract; | |
| ● | Determine the transaction price; | |
| ● | Allocate the transaction price to performance obligations in the contract; and | |
| ● | Recognize revenue when, or as, the Company satisfies performance obligations by transferring the promised good or services. |
The Company provides online sportsbook betting services with its technical infrastructure to its direct customers. Sportsbook or sports betting involves a user wagering money on an outcome or series of outcomes occurring. When a user’s wager wins, the Company pays the user a pre-determined amount known as fixed odds. Sportsbook revenue is generated by setting odds such that there is a built-in theoretical margin in each sports wagering opportunity offered to users. Sportsbook revenue is generated from users’ wagers net of payouts made on users’ winning wagers and incentives awarded to users. Each wager placed by a user creates a single performance obligation for the Company. The performance obligation is satisfied once the event wagered on has been completed. Any unsettled wagers are recorded as a players balance liability. Any gaming or gaming related incentives are recorded as a reduction of the transaction price prior to any allocation to the performance obligations. Net gaming revenue is the aggregate of gaming wins and losses based on results of each event that customers wager bets on as well as gaming and gaming related incentives.
Cost of Revenue
Cost of revenue consists primarily of variable costs, principally recurring online platform costs directly associated with revenue-generating activities including payment processing and supporting technology costs, web hosting, regulatory compliance software, Sports Betting privilege taxes and federal excise taxes on wagers.
The Company records stock-based compensation in accordance with FASB ASC Topic 718 “Compensation-Stock Compensation”, using the fair value method. All transactions in which services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.
The Company accounts for Stock-based compensation awards issued to non-employees for services as prescribed by ASC Topic 718, at either the fair value of the services rendered or the instruments issued in exchange for such services, whichever is more readily determinable, using the measurement date guidelines enumerated in Accounting Standards Update (“ASU”) 2018-07, Nonemployee Share-Based Payments.
The Company uses the Black Scholes pricing model to calculate the fair value of stock-based awards. This model is affected by the Company’s stock price as well as assumptions regarding a number of subjective variables. These subjective variables include, but are not limited to, the Company’s expected stock price volatility over the term of the awards, and actual projected employee stock option exercise behaviors. The value of the portion of the award that is ultimately expected to vest is recognized as an expense in the condensed consolidated statement of operations over the requisite service period.
| F- 13 |
Sales and Marketing
Sales
and marketing expenses consist primarily of expenses associated with advertising and costs related to free to play contests.
Advertising costs are expensed as incurred and are included in sales and marketing expense in our unaudited condensed consolidated
statements of operations. Advertising costs include those costs associated with communicating with potential customers and generally
use some form of media, such as internet, radio, print, television, or billboards. Advertising costs also include costs associated
with strategic league and team partnerships. During the three months ended September 30, 2025 and 2024, advertising costs were
$
General and Administrative
General and administrative expenses consist of costs not related to sales and marketing, product and technology or revenue. General and administrative costs include professional services (including legal, regulatory, audit and accounting), rent and facilities maintenance, contingencies and insurance.
Income Taxes
The Company accounts for income taxes under an asset and liability approach. This process involves calculating the temporary and permanent differences between the carrying amounts of the assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The temporary differences result in deferred tax assets and liabilities, which would be recorded on the Company’s condensed consolidated balance sheet in accordance with ASC Topic 740, which established financial accounting and reporting standards for the effect of income taxes. The Company must assess the likelihood that its deferred tax assets will be recovered from future taxable income, and, to the extent the Company believes that recovery is not likely, the Company must establish a valuation allowance. Changes in the Company’s valuation allowance in a period are recorded through the income tax provision on the condensed consolidated statements of operations.
ASC Sub-topic 740-10 clarifies the accounting for uncertainty in income taxes recognized in an entity’s unaudited condensed consolidated financial statements and prescribes a recognition threshold and measurement attributes for financial statement disclosure of tax positions taken or expected to be taken on a tax return.
Under ASC Sub-topic 740-10, the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more likely than not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. Additionally, ASC Sub-topic 740-10 provides guidance on derecognition, classification, interest, and penalties, accounting in interim periods, disclosure, and transition. As a result of the implementation of ASC Sub-topic 740-10, the Company recognized no material adjustment in the liability for unrecognized income tax benefits.
Based on the uncertainty of future pre-tax income, we fully reserved our net deferred tax assets as of September 30, 2025 and June 30, 2025. In the event we were to determine that we would be able to realize our deferred tax assets in the future, an adjustment to the deferred tax asset would increase income in the period such determination was made. The provision for income taxes represents the net change in deferred tax amounts, plus income taxes paid or payable for the current period.
We
follow U.S. GAAP related accounting for uncertainty in income taxes, which provisions include a two-step approach to recognizing, de-recognizing
and measuring uncertainty in income taxes. As a result, we did not recognize a liability for unrecognized tax benefits. As of September
30, 2025 and June 30, 2025, we had
| F- 14 |
Basic net earnings (loss) per common share is computed by dividing net income (loss) by the weighted average number of vested common shares outstanding during the period. Diluted net income per common share is computed by dividing net income by the weighted average number vested of common shares, plus the net impact of common shares (computed using the treasury stock method), if dilutive, resulting from the exercise of dilutive securities. In periods when losses are reported, the weighted-average number of common shares outstanding excludes common stock equivalents because their inclusion would be anti-dilutive. As of September 30, 2025 and June 30, 2025, the Company excluded the common stock equivalents summarized below, which entitle the holders thereof to ultimately acquire shares of common stock, from its calculation of earnings per share, as their effect would have been anti-dilutive.
|
For
the three
months ended September 30, 2025 |
For
the year
ended June 30, 2025 |
|||||||
| Stock Options | ||||||||
| Series B Preferred Shares | ||||||||
| Warrants | ||||||||
| Shares issuable upon conversion of convertible notes | ||||||||
| Shares issuable upon conversion of line of credit | ||||||||
| Total potentially dilutive shares | ||||||||
Recent Accounting Pronouncements
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures , which requires entities to disclose significant segment expense categories that are regularly provided to the CODM and included in the measure of segment profit or loss. The amendments also require disclosure of the title and position of the CODM and expand the interim segment disclosure requirements. The Company adopted ASU 2023-07 on July 1, 2025, using retrospective application to all periods presented. The adoption did not have a material impact on the Company’s unaudited condensed consolidated financial statements, but resulted in expanded segment reporting disclosures, including identification of the Company’s Chief Executive Officer as its CODM and enhanced expense detail in the segment footnote.
In December 2023, the FASB issued ASU 2023-09, “Improvements to Income Tax Disclosures” (“ASU 2023-09”) to enhance the transparency and decision-usefulness of income tax disclosures, particularly in the rate reconciliation table and disclosures about income taxes paid. This ASU applies to all entities subject to income taxes. This ASU will be effective for public companies for annual periods beginning after December 15, 2024. The Company will adopt the standard for its fiscal year beginning July 1, 2025. The Company is currently evaluating the impact of this standard on its consolidated income tax disclosures; however, the Company does not expect the adoption of this standard to have a material impact on its unaudited condensed consolidated financial statements other than enhanced disclosures.
In November 2024, the FASB issued ASU 2024-03, “Income Statement: Reporting Comprehensive Income— Expense Disaggregation Disclosures,” which requires more detailed information about specified categories of expenses (purchases of inventory, employee compensation, depreciation, amortization, and depletion) included in certain expense captions presented on the face of the income statement, as well as disclosures about selling expenses. This ASU is effective for fiscal years beginning after December 15, 2026 and for interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The amendments may be applied either (1) prospectively to unaudited condensed consolidated financial statements issued for reporting periods after the effective date of this ASU or (2) retrospectively to all prior periods presented in the unaudited condensed consolidated financial statements. The Company is currently evaluating this guidance to determine the impact it may have on its unaudited condensed consolidated financial statements disclosures.
In July 2025, the FASB issued ASU 2025-05, Measurement of Credit Losses for Accounts Receivable and Contract Assets to provide a practical expedient related to the estimation of expected credit losses for current accounts receivable and current contract assets that arise from transactions accounted for under ASC Topic 606. For all entities, the amendments in this Update are effective for annual reporting periods beginning after December 15, 2025 and interim periods within those annual reporting periods. Early adoption is permitted. The Company is currently evaluating the impact of this new guidance on its unaudited condensed consolidated financial statements. The adoption of ASU 2025-05 is not expected to have a significant impact on the Company’s annual audited consolidated financial statements.
| F- 15 |
In September 2025, the FASB issued ASU 2025-06, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40) to modernize the accounting for software costs that are accounted for under Subtopic 350-40, Intangibles - Goodwill and Other - Internal-Use Software . For all entities, the amendments in this Update are effective for annual reporting periods beginning after December 15, 2027 and interim periods within those annual reporting periods. Early adoption is permitted as of the beginning of an annual reporting period. The Company is currently evaluating the impact of this new guidance on its unaudited condensed consolidated financial statements. The adoption of ASU 2025-06 is not expected to have a significant impact on the Company’s annual audited consolidated financial statements.
Management does not believe that any other recently issued, but not yet effective, accounting standard if currently adopted would have a material effect on the accompanying unaudited condensed consolidated financial statements.
NOTE 2 - INTANGIBLE ASSETS
As of September 30, 2025, intangible assets consisted of the following:
(in thousands)
|
Estimated
Useful |
Remaining
Weighted Average |
June 30, | September 30, | |||||||||||||||||
| Life | Useful Life | 2025 | Additions | Impairments | 2025 | |||||||||||||||
| Developed technology – Gaming – gross carrying value |
|
|
$ |
|
$ |
|
$ | $ |
|
|||||||||||
| Developed Technology – Non Gaming – gross carrying value |
|
|
$ | $ |
|
$ | $ |
|
||||||||||||
| Software licenses – Non Gaming |
|
|
$ |
|
$ | $ |
|
|||||||||||||
| Accumulated amortization | $ |
(
|
) | $ |
(
|
) | $ | $ |
(
|
) | ||||||||||
| Total definite lived intangible assets | $ |
|
$ |
|
$ | $ |
|
|||||||||||||
| Gaming license |
|
- | $ |
|
$ | $ | $ |
|
||||||||||||
| Total net intangibles | $ |
|
$ |
|
$ | $ |
|
|||||||||||||
| F- 16 |
Subsequent
to the filing of our fiscal year 2025 Form 10-K, in September 2025, we determined that Developed technology - Gaming - gross carrying
value and Accumulated amortization amounts in the table above were overstated (in equal and offsetting amounts) as of June 30, 2025 by
$
Amortization
expense of intangible assets for three months ended September 30, 2025, and 2024, was $
The estimated future amortization of intangibles subject to amortization at September 30, 2025 was as follows:
(in thousands)
| For the Years Ended June 30, | Amount | |||
| 2026 | $ |
|
||
| 2027 |
|
|||
| 2028 |
|
|||
| Total | $ |
|
||
NOTE 3 - PLAYERS LIABILITIES
The
players liabilities were comprised of players betting deposits and contestant prize winnings for promotional events. Players liabilities were
$
NOTE 4 - CONVERTIBLE DEBT
On
August 23, 2023, the Company entered into a Convertible Note Purchase Agreement and a Convertible Promissory Note with an unrelated
party in the principal amount of $
In August 2024, the Notes were extended for an additional year from their respective maturity dates.
In
August 2025, Note A and Note C were amended and were extended through August 31, 2026 and Note B was amended and extended through October
1, 2025. The conversion options were amended on all of the Notes whereas the outstanding principal under the Notes and accrued and
unpaid interest is convertible, at the sole discretion of the holders of the Notes, into shares of the Company’s common stock,
par value $
per share, at a conversion price equal to the lower of $
On
September 9, 2025, in connection with the Amended Convertible Note Purchase Agreements dated August 23, 2025, the Company entered
into a Convertible Promissory Note with an unrelated party in the principal amount of $
| F- 17 |
At
September 30, 2025 and 2024, total principal of $
The
fair value of the conversion feature upon issuance of the Notes was $
The following were the significant assumptions used in the Monte-Carlo model.
|
Expected volatility |
Risk-free interest rate |
Expected dividend yield |
Expected life (in years) |
|||||||||||||
| At September 1, 2023 |
|
% |
|
% |
|
% |
|
|||||||||
The Company performed a debt modification analysis as per ASC Sub-topic 470-50 at September 30, 2025, for the amendments to the Notes in September and concluded that the change in conversion terms did not result in a substantial modification, therefore the total amount of the modification noted above was not considered a debt extinguishment. As per ASC Sub-topic 470-50, the modification was recognized as a part of the change in fair value of the derivative liability. See Note 7. The new fair value of the derivative liability was recorded as a level 3 financial instrument. See Note 1. The conversion option was valued by the Company using the Monte-Carlo model in September 2025 as follows:
|
Expected volatility |
Risk-free interest rate |
Expected dividend yield |
Expected life (in years) |
|||||||||||||
| At September 30, 2025 |
|
% |
|
% |
|
% |
|
|||||||||
NOTE 5 – NOTES PAYABLE AND NOTES PAYABLE - RELATED PARTY
As
of September 30, 2025, and June 30, 2025, a principal amount of $
On
February 27, 2023, the Company entered into Stock Redemption and Purchase Agreement with John Linss, our former Chief Executive
Officer and former member of the board of directors, and his wholly owned Corespeed, LLC for the purchase of Series C Convertible
Preferred Stock owned by Linss’ Corespeed, LLC. See Note 8. The Company paid $
| F- 18 |
The
outstanding principal balance at September 30, 2025, is $
On
May 24, 2025, the Company renewed a short-term note payable with the premium finance company to fund their technology services and
cyber liability insurance. The total premiums, taxes and fees financed was $
On
November 6, 2024, the Company entered into a short-term note payable with a premium finance company to fund their excess and surplus
insurance. The total premiums, taxes and fees financed was $
NOTE 6- LINE OF CREDIT - RELATED PARTY
On
February 22, 2022, the Company entered into a discretionary non-revolving line of credit demand note with Excel Family Partners, LLLP
(“Excel”), a related party controlled by our Chief Executive Officer, initially for $
Subsequent
amendments increased the facility to $
On
December 27, 2023, $
In
August 2024, the facility was split into a $
On
March 31, 2025, the revolving note was amended to increase the borrowing capacity to $
As
of September 30, 2025, outstanding borrowings under these notes totaled $
NOTE 7 – DERIVATIVE LIABILITIES
The Amended and Restated Discretionary Non-revolving Line of Credit Demand Notes and Convertible Promissory Notes contain conversion options that qualify for embedded derivative classification. The fair value of the liability is re-measured at the end of every reporting period and the change in fair value is reported in the condensed consolidated statement of operations as a gain or loss on change in fair value of derivatives.
| F- 19 |
The table below sets forth a summary of the changes in the fair value of the Company’s Level 3 financial liabilities for the three months ended September 30, 2025:
(in thousands)
| Balance at June 30, 2025 | $ |
|
||
| Embedded conversion feature on new convertible note issued during the quarter |
|
|||
| Change in the fair value of the embedded conversion option |
(
|
|||
| Balance at September 30, 2025 | $ |
|
The Company uses Level 3 inputs for its valuation methodology for the embedded conversion option liabilities as their fair values were determined by using Monte-Carlo model based on various assumptions.
Significant changes in any of these inputs in isolation would result in a significant change in the fair value measurement. As required, these are classified based on the lowest level of input that is significant to the fair value measurement. The following table shows the assumptions used in the calculations:
|
Expected volatility |
Risk-free interest rate |
Expected dividend yield |
Expected life (in years) |
|||||||||||||
| At June 30, 2025 |
|
% |
|
% |
|
% |
|
|||||||||
| At September 30, 2025 |
|
% |
|
% |
|
% |
|
|||||||||
NOTE 8 - STOCKHOLDERS’ DEFICIT
The Company is authorized to issue shares of common stock, par value $ per share, and shares of preferred stock, of which shares (par value $ ) have been designated as Series A Convertible Preferred Stock, shares (par value $ ) have been designated as Series B Convertible Preferred Stock and shares (par value $ ) have been designated as Series C Convertible Preferred Stock.
The
Series A Convertible Preferred Stock has a liquidation preference of $
The
Series B Convertible Preferred Stock has a liquidation preference of $
The
Series C Convertible Preferred Stock has a liquidation preference of $
| F- 20 |
Series A Convertible Preferred Stock
During
the three months ended September 30, 2025 and 2024, there were
Series B Convertible Preferred Stock
During
the three months ended September 30, 2025 and 2024, there were
Series C Convertible Preferred Stock
On
February 27, 2023, the Company entered into Stock Redemption and Purchase Agreement with John Linss, our former Chief Executive
Officer and former member of the board of directors, and his wholly owned Corespeed, LLC for the purchase of the
shares of Series C Convertible Preferred Stock owned by Linss and Corespeed, LLC. The Company paid $
On June 15, 2024, the board of directors approved the issuance of common shares upon conversion of all outstanding Series C Preferred Stock. A total of shares of common stock was issued upon the conversion of shares of Series C Preferred stock.
As of September 30, 2025 and June 30, 2025, shares were outstanding.
Common Stock
During the three months ended September 30, 2025 and 2024, there were issuances of Common Stock and at September 30, 2025 and June 30, 2025, and shares were outstanding, respectively.
On
September 20, 2024, the Company changed the par value of its common stock from $
to $
. This change did not affect the number
of shares issued and outstanding. A $
On April 10, 2023, the board of directors (the “Board”) approved the 2023 stock option plan (“2023 Plan”).
The 2023 Plan provides eligible participants with benefits consisting of one or more of the following: ISOs, NSOs, and bonuses in the form of our common stock (“Stock Bonuses”). The Board or a committee of directors will administer the 2023 Plan and determine what employees or officers will receive an award under the 2023 Plan. ISOs, which are intended to be compliant with Section 422 of the Internal Revenue Code, may be awarded only to our employees. NSOs and Stock Bonuses are not subject to Section 422 of the Internal Revenue Code and can be awarded to employees and non-employees.
The aggregate number of shares of our authorized but unissued common stock that can be awarded under the 2023 Plan is , whether in the form ISOs, NSOs, or Stock Bonuses (or a combination thereof). Awards can be issued under the 2023 Plan for from the date the Board approved the 2023 Plan.
In April 2023, the Board granted Incentive Stock Options (“ISOs”) and Non statutory Stock Options (“NSOs”) under the 2023 Plan to employees and advisors of the Company to purchase a total of shares of our common stock at an exercise price of $ per share (the “Awards”).
| F- 21 |
In April 2025, the Board granted Incentive Stock Options (“ISOs”) and Non statutory Stock Options (“NSOs”) under the 2023 Plan to employees and advisors of the Company to purchase a total of shares of our common stock at an exercise price of $ per share (the “Awards”).
|
Number of Shares Underlying Outstanding Options |
Weighted Average Remaining Contractual Life |
Weighted Average Exercise Price |
Intrinsic Value |
|||||||||||||
| Options outstanding as of June 30, 2025 |
|
years | $ |
|
$ | |||||||||||
| Options exercisable as of June 30, 2025 |
|
years | $ |
|
$ | |||||||||||
| Granted | - | - | ||||||||||||||
| Exercised | - | - | ||||||||||||||
| Forfeited or expired |
(
|
) | - | $ | - | |||||||||||
| Options outstanding as of September 30, 2025 |
|
years | $ |
|
$ | |||||||||||
| Options exercisable as of September 30, 2025 |
|
years | $ |
|
$ | |||||||||||
The Company utilized the Black-Scholes valuation model for estimating fair value of the options. Each grant was evaluated based upon assumptions at the time of the grant.
As of September 30, 2025, all outstanding stock options were issued according to the Company’s 2023 Plan. There are unissued shares of common stock available for future issuance under the 2023 Plan.
NOTE 10 - COMMITMENTS AND CONTINGENCIES
Commitments and Contingencies are as follows:
Surety Bond
During
May 2023, the Company was issued $
Agreement with sport betting services provider
On November 1, 2024 (and then amended on January 8, 2025), the Company entered into an agreement with a sports betting services provider. Pursuant to the terms of the Agreement, the provider has agreed to provide certain services to the Company to use through their software platform over which gaming and betting transactions with their customers are conducted, including back-office software, player account management software, geo-location software and/or services, e-wallet software and/or services, websites and mobile applications, any underlying operating software, mobile platforms, or other means of remote communication. The Services are to be provided on a non-transferable, non-sub-licensable and non-exclusive basis for a term of five years after the first live launch in respect of the business to consumer sports betting activities that we intend to carry out in certain states, countries or territories. The terms of the agreement call for two lump sum payments, as well as ongoing business fees calculated as a percentage of net gaming revenue that will vary based upon yearly gross gaming revenues commencing with the first live launch.
| F- 22 |
Operating agreement
On December 10, 2024, the Company entered into a Casino and Sportsbook Online Operations Agreement (“Operations Agreement”) dated as of December 9, 2024 with Wheeling Island Gaming, Inc., a Delaware corporation (“Operator”), that is the duly licensed owner and operator of the casino commonly referred to as Wheeling Island Hotel Casino Racetrack located near Wheeling, West Virginia.
The Operator is the holder of a license from the West Virginia Lottery Commission which permits Operator to operate, manage, administer, and make available online gaming services in West Virginia. Operator does not directly operate online gaming services in West Virginia, such as sports wagering and interactive wagering. Pursuant to the terms and conditions of the Operations Agreement, Operator has granted the Company the right to seek and obtain licenses from the appropriate governing authority to offer and operate interactive online gaming services in West Virginia via the Internet, mobile or other remote or electronic device or data network. Interactive gaming services covered by the Operations Agreement include online poker games, online casino games and online sports wagering.
The initial term of the Operations Agreement is for ten years from the date on which the Company’s online gaming services are approved for users to play in accordance with West Virginia gaming laws. Provided that there is not a material breach then continuing by the Company under the Operations Agreement beyond any applicable notice and cure period, and the Operations Agreement has not otherwise been terminated in accordance with its terms, the Company has the right to renew the Operations Agreement.
The terms of the Operations Agreement call for a non-refundable fee to be paid in two equal installments, one within 30 business days from the Signing Date and the second within 90 business days from the Signing Date. The Operations Agreement also requires the Company to pay Operator a percentage of their annual net gaming revenue, minus a minimum annual revenue guarantee payment to be paid in equal quarterly installments.
On March 31, 2025, the Company’s online gaming services were approved for users to play in the state of West Virginia, however, as of September 30, 2025, the West Virginia Lottery Commission had not yet approved the Operations Agreement. See note 11.
Player Account Management Services Agreement
On February 7, 2025, the Company entered into a Player Account Management Services Agreement for a term of four years to enhance its online gaming platform offerings. The terms of the agreement call for a combination of upfront fees as well as monthly platform fees that will vary based upon monthly net gaming revenues.
Software defect
In
August, 2025, the Company encountered a software defect (the “Defect”) impacting its internal information technology
(“IT) infrastructure and applications. Upon detecting the Defect, the Company promptly took steps to contain and remediate the
Defect and initiated an investigation. The Defect has now been addressed and corrected. Based on the Company’s investigation
findings to date, the Defect resulted in unauthorized player withdrawals that were processed by the Company’s external payment
processor vendor in the amount of approximately $
As
of September 30, 2025, the Company has recorded players receivables in the amount of $
As
of September 30, 2025, the Company has recorded a payable to the external payment processor in the amount of approximately $
| F- 23 |
Legal matter contingencies
The Company believes, based on current knowledge and after consultation with counsel, that it is not currently party to any material pending proceedings, individually or in the aggregate, the resolution of which would have a material effect on the Company. Provisions for losses are established in accordance with ASC Topic 450, “Contingencies” when warranted. Once established, such provisions are adjusted when there is more information available about an event that occurs requiring a change.
NOTE 11 - RELATED PARTY TRANSACTIONS
Former Chief Financial Officer:
On
February 19, 2024, the Company amended its $
Excel Family Partners (Bruce Cassidy – related party):
The
Company maintains a series of discretionary non-revolving and revolving line of credit demand notes with Excel Family Partners, LLLP
(“Excel”), a related party controlled by Bruce Cassidy (former CEO and current Chairman/Secretary). These notes have been
amended and restated multiple times, increasing borrowing capacity from $
The
notes include (i) conversion options permitting Excel to convert outstanding balances into common stock at
On
December 28, 2023, $
During
the three months ended September 30, 2025 and 2024, the Company borrowed approximately $
NOTE 12 - SUBSEQUENT EVENTS
In accordance with ASC Sub-topic 855-10, the Company has analyzed its operations subsequent to September 30, 2025, to the date these unaudited condensed consolidated financial statements were issued, and as of November 14, 2025, there were no other material subsequent events to disclose in these unaudited condensed consolidated financial statements with the exception of the events below.
Subsequent
to the period end, and through November 14, 2025, the Company borrowed an additional $
Subsequent to September 30, 2025, the Company began providing support services, without charge, to a private company controlled by the Company’s Chief Executive Officer and Chairman. This related party arrangement is disclosed pursuant to ASC Topic 850 and Regulation S-K Item 404. As the services began after the reporting date, no financial statement adjustment was required under ASC Topic 855.
Subsequent to September 30, 2025, the Company received a notice of termination under its West Virginia market access Agreement and a demand for an early termination fee. The Company disputes the validity of the termination and the associated fee and intends to contest the matter. As of the date of this filing, the outcome is not determinable, and no liability has been recorded. The Company cannot reasonably estimate the likelihood or amount of any potential loss at this time.
On October 3, 2025, the Board approved two amendments to the 2023 Stock Option Plan (the “Amendments”): (1) an increase in the aggregate number of shares of the Company’s authorized but unissued common stock that can be awarded under the plan from shares to shares (the “Share Increase”); and (2) the ability to issue Participants a new type of award called Restricted Stock Units (“RSUs”) that represent the right to receive shares of the Company’s common stock upon the satisfaction of vesting or other specified conditions. The Share Increase is subject to approval of stockholders within 12 months from the date of the Board’s approval. The addition of the ability to issue RSUs under the 2023 Plan is not subject to the approval of our stockholders.
In connection with approval of the Amendments, the Board awarded Mr. Les Ottolenghi, Chief Executive Officer, Principal Executive Officer and President, RSUs and Mr. John Dermody, VP of Operations, RSUs (together, the “Officer Awards”).
| F- 24 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. We intend such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and are including this statement for purposes of complying with those safe-harbor provisions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise. Further information concerning our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC.
Overview
We are a next-generation mobile sports wagering company focused on delivering secure, innovative, and engaging digital gaming experiences. We operate a proprietary, cloud-native technology platform currently live in Tennessee, where we are licensed to offer mobile sports betting. In West Virginia, we hold an interim iGaming and mobile sports betting license, positioning us for future expansion as we prepare for launch.
Our product offering includes a modern sportsbook with differentiated wager types, sweepstakes contests, and socially integrated features designed to enhance player engagement. We are committed to responsible gaming and operate in full compliance with applicable regulatory frameworks in each jurisdiction.
We recently began exploring opportunities in the non-gaming digital entertainment space as part of our long-term growth strategy. These initiatives are in the early stages, have not generated revenue to date, and are not material to our current financial results. Accordingly, we continue to view our business as a single operating segment. We will continue to evaluate the impact of these initiatives as they develop and expand.
We began operations in June 2023.
On December 10, 2024, we entered into a Casino and Sportsbook Online Operations Agreement with a license holder in West Virginia. This agreement grants us the right to seek and obtain licenses from the appropriate governing authority to offer and operate interactive online gaming services in West Virginia via the Internet, mobile or other remote or electronic device or data network. On March 31, 2025, we received interim approval on our West Virginia i-Gaming and Sports Wagering Management Service Provider License. As of September 30, 2025, operations have not yet commenced in West Virginia and the Casino and Sportsbook Online Operations Agreement had not yet been approved by the state of Virginia.
On May 7, 2025, we received regulatory approval from the state of Tennessee to launch our new VIP Play brand application. On May 8, 2025 we began a “soft launch” of the VIP Play application and on May 12, 2025, we executed our official VIP Play app launch. The ZenSports brand and app was sunsetted on April 28, 2025.
Our current business is a mobile app and online-based technology company with no demand for a physical storefront location. The website for our business is https://www.viplayinc.com. The information on our website is not made a part of this Annual Report. Our headquarters address is: 8400 W. Sunset Rd., Suite 300 Las Vegas, NV 89113. Our phone number is: (866) 783-9435.
| 2 |
Results of Operations for the Three Months Ended September 30, 2025, and 2024
Gaming Revenues and Costs of Revenues
For the three months ended September 30, 2025 and 2024, we had gaming revenues of $5 thousand and negative gaming revenues of $4 thousand, respectively. Our gaming revenues increased by approximately $9 thousand during the three months ended September 30, 2025 as compared to the three months ended September 30, 2024. During the current quarter, we began utilizing an external payment processor which increased betting activity due to the addition of debit cards.
For the three months ended September 30, 2025 and 2024, we had costs of revenues of $191 thousand and $96 thousand, respectively. Our costs of revenues increased by approximately $95 thousand during the three months ended September 30, 2025 as compared to the three months ended September 30, 2024 primarily due to increased costs related to platform fees incurred in connection with the new Player Account Management Services Agreement entered into in February 2025.
Operating Expenses
Salaries and wages of $1.5 million were incurred during the three months ended September 30, 2025, compared to $926 thousand during the three months ended September 30, 2024. The approximate $574 thousand increase is primarily due to increased headcount, including 3 new executives in June 2025.
Depreciation and amortization for the three months ended September 30, 2025, and 2024 were $83 thousand and $472 thousand, respectively. The approximate $389 thousand decrease is principally due a higher value allocated to our former ZenSports app which was sunsetted in December 2024 as compared to the value of the new VIP Play app which was placed into service in May 2025.
Sales and Marketing for the three months ended September 30, 2025, and 2024 were $279 thousand and $116 thousand, respectively. The approximate $163 thousand increase is principally related to increased billboards and increased podcasts and social media marketing during the three months ended September 30, 2025 as compared to the three months ended September 30, 2024.
General and administrative costs for the three months ended September 30, 2025, and 2024 were $803 thousand and $989 thousand, respectively. The approximate $186 thousand decrease was primarily due to a decrease in accounting and auditing fees during the three months ended September 30, 2025 as compared to the three months ended September 30, 2024 due the timing of audit services provided. The decrease was also due to a decrease in consulting fees for advisory agreements that ended during the year ended June 30, 2025, as well as a decrease in legal fees due to higher fees in the comparative period related to the review of potential new state jurisdictions for expansion of our sports betting operations. The total decrease was partially offset by an increase in operating expense due to the recognition of an allowance for estimated losses related to the payment processing incident that occurred during the three months ended September 30, 2025.
During the quarter, we began investing in initiatives outside of our core sports wagering operations, including entry into the non-gaming digital entertainment space. These efforts are currently in an early stage of development and have not generated revenue to date. Costs associated with these initiatives were not material for the quarter, and management does not currently evaluate them as a separate operating segment. We continue to view our business as a single operating segment for financial reporting purposes.
As these non-gaming activities mature, we expect to continue assessing their impact on our overall business. If these initiatives become material, we may determine that they represent a distinct operating segment in the future, and we would provide expanded disclosures at that time.
| 3 |
Other Expenses
Total other expenses for the three months ended September 30, 2025, and 2024 were $585 thousand and $2.7 million, respectively.
The approximate $2.1 million decrease is primarily due to a gain on the change in fair value of the derivative liability of $1.8 million from September 30, 2024 to September 30, 2025. The derivative is related to a conversion feature associated with the line of credit and convertible debt which is remeasured each reporting period.
In addition, interest expense – related party for the three months ended September 30, 2025 decreased by approximately $284 thousand compared to the three months ended September 30, 2024. The decrease was due to the debt issuance costs being fully amortized into related party interest expense during the three months ended September 30, 2025. This decrease was partially offset by an increase in interest expense on the related party lines of credit due to an increase in principal balance on the lines during the three months ended September 30, 2025.
Net Loss
Our net loss for the three months ended September 30, 2025 and 2024 was $3.5 million and $5.3 million, respectively.
Liquidity and Capital Resources
Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis. Significant factors in the management of liquidity are funds generated by operations, levels of accounts payable and accrued expenditures, and capital expenditures, including the costs associated with internally developed software and attaining Sports Gaming Operator licenses.
As of September 30, 2025, we had total current assets of $2.8 million, total current liabilities of $38.2 million, and a total working capital deficit of $35.4 million. Net cash used in operating activities was $2.5 million during the three months ended September 30, 2025, compared to $2.3 million during the three months ended September 30, 2024. The increase in net cash used primarily reflects lower non-cash adjustments, including decreased depreciation and amortization expense and a smaller loss recognized on derivative liabilities, as well as higher cash outflows related to player balances during the current period. These factors more than offset the benefit of a reduced net loss and favorable changes in accrued expenses.
Net cash used in investing activities increased by approximately $94 thousand during the three months ended September 30, 2025 as compared to the three months ended September 30, 2024 primarily due to increased gaming and non-gaming capital additions.
Net cash provided by financing activities increased by approximately $238 thousand during the three months ended September 30, 2025, compared to the three months ended September 30, 2024. The increase is primarily due to proceeds from a convertible note issued during the three months ended September 30, 2025 as well as increased draws on the lines of credit, and is partially offset by repayments to the note payable during the current period.
Since our current business has a limited history of generating revenues or operating successfully, we will be dependent upon, among other things, achieving a level of profitable operations and receiving additional cash infusions including securing additional lines of credit and raising additional capital through the placement of preferred and/or common stock in order to implement our business plan. Because of our limited operating history, it is difficult to predict our capital needs on a monthly, quarterly, or annual basis. We will have limited capital available to us if we are unable to raise money through private equity offerings or find alternate forms of financing.
We expect our revenues to increase over time but we lack sufficient history to accurately forecast the amount or time required to generate sufficient revenues to cover our current or future burn rate.
We expect to incur significant increases in operating costs. The expected significant increases in costs will include, but not be limited to, costs relating to license maintenance, technology development and maintenance, sales and marketing, labor for both existing and new personnel, and other operating cost increases due to the current inflationary market place we operate in. The expected increase in operating costs is a byproduct of transitioning from a development stage business to a revenue generating operating business.
| 4 |
Off Balance Sheet Arrangements
As of September 30, 2025, we had no off-balance sheet arrangements.
Going Concern
As of September 30, 2025, we had a working capital deficit of $35.4 million. We had a net loss from operations of $3.5 million for the three months ended September 30, 2025. We do not expect significant revenues and we expect to incur significant increases in operating costs in the short term as we commence our sports betting operations. The expected significant increases in costs will include, but not be limited to, costs relating to obtaining gaming licenses, technology development, sales and marketing, and legal and professional fees.
These conditions raise substantial doubt about our ability to continue as a going concern for a period of one year from the issuance of these unaudited condensed consolidated financial statements. Because of these conditions, we will require additional working capital to develop business operations. Management’s plans are to raise additional working capital through the sale of debt and/or equity instruments as well as to generate revenues. There are no assurances that we will be able to achieve the level of revenues adequate to generate sufficient cash flow from operations to support our working capital requirements. To the extent that funds generated are insufficient, we will have to raise additional working capital. No assurance can be given that additional financing will be available, or if available, will be on terms acceptable to us. If adequate working capital is not available, we may not be able to continue our operations.
The unaudited condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset-carrying amounts or the amount and classification of liabilities that might be necessary should we be unable to continue as a going concern.
Item 3. Quantitative and Qualitative Disclosure About Market Risks
A smaller reporting company is not required to provide the information required by this Item.
Item 4. Controls and Procedures
Evaluation of Effectiveness of Disclosure Controls and Procedures
We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of September 30, 2025. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer and our Chief Accounting Officer. Based upon that evaluation, our Chief Executive Officer and Chief Accounting Officer concluded that, as of September 30, 2025, our disclosure controls and procedures were not effective due to the presence of certain deficiencies in internal control over financial reporting which constituted a material weakness. Specifically, we identified deficiencies related to:
| - | Limited segregation of duties as a result of the size of the accounting staff; | |
| - | Insufficient review controls over certain complex accounting estimates; and | |
| - | Insufficient information technology controls to prevent or detect, on a timely basis, unauthorized access to certain of its financial reporting systems. |
Remediation Efforts:
During the three months ended September 30, 2025, management initiated remediation efforts to address this material weakness. These efforts include:
| - | Hiring additional accounting personnel to increase segregation of duties; | |
| - | Enhancing formal review and approval processes for significant and complex accounting estimates; and | |
| - | Implementing improved IT access and monitoring controls within our financial reporting systems. |
Management is continuing to design, implement, and test these enhanced controls. The material weaknesses will not be considered remediated until the improved controls have been fully implemented, are operating effectively for a sufficient period of time, and have been validated through testing.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended September 30, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
As described above under “Remediation Efforts,” management has initiated certain actions to remediate the material weakness. These remediation activities are in progress and have not yet been operational for a sufficient period of time to conclude that the material weakness has been remediated.
| 5 |
PART II - OTHER INFORMATION
Item 6. Exhibits
| * | Filed herewith. |
| ** | Furnished herewith. |
| 6 |
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 thereunto duly authorized.
| VIP PLAY, INC. | ||
| (Registrant) | ||
| Date: November 14, 2025 | ||
| By: | /s/ Amy Weiss | |
| Amy Weiss | ||
| Chief Accounting Officer | ||
| (Principal Financial Officer) | ||
| 7 |