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 May 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
| March 31, 2025 | June 30, 2024 | |||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Cash reserved for users | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Other assets: | ||||||||
| Equipment, net | ||||||||
| Intangible assets, net | ||||||||
| Debt issuance costs, net | ||||||||
| Security deposit | ||||||||
| Total other assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Accrued expenses - related party | ||||||||
| Players balances | ||||||||
| Notes payable – current | ||||||||
| Notes payable - related party, net of discount | ||||||||
| Convertible notes, net | ||||||||
| Line of credit - related party | ||||||||
| Derivative liability | ||||||||
| Total current liabilities | ||||||||
| Long-term liabilities: | ||||||||
| Notes payable - long-term | ||||||||
| Total long-term 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
| March 31, 2025 | June 30, 2024 | |||||||
| (unaudited) | ||||||||
| Stockholders’ deficit: | ||||||||
| Preferred stock, $ par value, shares authorized | ||||||||
| Series A preferred stock, shares designated, and shares issued and outstanding as of March 31, 2025, and June 30, 2024, respectively | ||||||||
| Series B preferred stock, shares designated, and shares issued and outstanding as of March 31, 2025, and June 30, 2024, respectively | ||||||||
| Series C preferred stock, shares designated, and shares issued and outstanding as of March 31, 2025, and June 30, 2024, respectively | ||||||||
| Common stock, $ par value, shares authorized, and shares issued and outstanding as of March 31, 2025, and June 30, 2024, 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)
| For the three months ended March 31, | For the nine months ended March 31, | |||||||||||||||
| 2025 | 2024 (restated) | 2025 | 2024 (restated) | |||||||||||||
| Gaming revenues | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Costs of gaming revenue | ||||||||||||||||
| Net gaming loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Operating expenses: | ||||||||||||||||
| Salaries and wages | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| Sales and marketing | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Impairment of developed technology and tradename | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Other expense: | ||||||||||||||||
| Loss on change in fair value of derivative | ||||||||||||||||
| Loss on extinguishment of debt | ||||||||||||||||
| Interest expense | ||||||||||||||||
| Interest expense - related party | ||||||||||||||||
| Total other expense | ||||||||||||||||
| 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 STATEMENT OF STOCKHOLDERS’ DEFICIT
(unaudited)
Preferred Shares Series A $0.0001 Par Value | Preferred Shares Series B $1.00 Par Value | Preferred Shares Series C $0.0001 Par Value | Common Shares $0.0001 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, 2023 | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||||||||
| Fair value of vested incentive stock options | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||
| Fair value of warrant granted for as part of amended related party demand line of credit | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||
| Net loss for the period | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Balance, September 30, 2023 | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||||||||
| Fair value of vested incentive stock options | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||
| Fair value of warrant granted for as part of amended related party demand line of credit | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock upon conversion of debt | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||
| Warrant granted for consulting services | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||
| Net loss for the period | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2023 | $ | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||||||||||||
| Fair value of vested incentive stock options | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued for cash | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||
| Net loss for the period | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2024 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||||||||
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 $0.0001 Par Value |
Preferred Shares Series B $1.00 Par Value |
Preferred Shares Series C $0.0001 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 | $ | $ | $ | $ | $ | $ | $ | ( |
) | $ | ( |
) | ||||||||||||||||||||||||||||||||||||
| Fair value of vested incentive stock options | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||
| Change in par value of common stock | - | - | - | - | ( |
) | ||||||||||||||||||||||||||||||||||||||||||
| Net loss for the period | - | - | - | - | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||
| Balance, September 30, 2024 | $ | $ | $ | $ | $ | $ | $ | ( |
) | $ | ( |
) | ||||||||||||||||||||||||||||||||||||
| Fair value of vested incentive stock options | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for cash, net of offering costs | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||
| Net loss for the period | - | - | - | - | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2024 | $ | $ | $ | $ | $ | $ | $ | ( |
) | $ | ( |
) | ||||||||||||||||||||||||||||||||||||
| Fair value of vested incentive stock options | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for accrued offering costs | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||
| Net loss for the period | - | - | - | - | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2025 | $ | $ | $ | $ | $ | $ | $ | ( |
) | $ | ( |
) | ||||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| F-5 |
VIP PLAY, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
For the Nine Months Ended March 31, | ||||||||
| 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 | ||||||||
| Non-cash compensation | ||||||||
| Depreciation and amortization | ||||||||
| Incentive stock option expense | ||||||||
| Discount on related party note payable | ||||||||
| Impairment of developed technology and tradename | ||||||||
| Loss on extinguishment of debt | ||||||||
| Loss on change in fair value of derivative | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses and other current assets | ( | ) | ||||||
| Security deposit | ( | ) | ||||||
| Accounts payable and accrued expenses | ( | ) | ||||||
| Accounts payable and accrued expenses - related party | ||||||||
| Players balances | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Cash paid for capitalized software | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from issuance of common stock, net of issuance costs | ||||||||
| Proceeds from line of credit, related party | ||||||||
| Proceeds from convertible notes | ||||||||
| Repayments of note payable, current | ( | ) | ( | ) | ||||
| Net cash provided by financing activities | ||||||||
| NET CHANGE IN CASH | ( | ) | ||||||
| CASH AT BEGINNING OF PERIOD | ||||||||
| CASH AT END OF PERIOD | $ | $ | ||||||
| DISCLOSURE OF CASH AND CASH RESERVED FOR USERS: | ||||||||
| CASH | ||||||||
| CASH RESERVED FOR USERS | ||||||||
| CASH AT END OF PERIOD | $ | $ | ||||||
| SUPPLEMENTAL INFORMATION: | ||||||||
| Interest paid | $ | $ | ||||||
| NON-CASH FINANCING AND INVESTING ACTIVITIES: | ||||||||
| Common stock issued upon conversion of debt | $ | $ | ||||||
| Derivative and warrants issued upon conversion of debt | $ | $ | ||||||
| Insurance financing | $ | $ | ||||||
| Payoff of related party note payable with related party line of credit | $ | $ | ||||||
| Common stock and warrants issued for offering costs | $ | $ | ||||||
| Common stock issued for accrued offering costs | $ | $ | ||||||
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
March 31, 2025 AND 2024 (restated)
NOTE 1 – OVERVIEW AND ORGANIZATION & SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Overview and Organization
VIP Play, Inc., formerly known as KeyStar Corp. (the “Company,” “we”, “us” and “our”) was incorporated on April 16, 2020, under the laws of the State of Nevada. Up until August 5, 2024, the company had two wholly owned subsidiaries, one was formed on December 21, 2021, under the State of Nevada, as UG Acquisition Sub, Inc., the second KeyStar TN LLC was formed on December 9, 2022. On August 5, 2024, the board of directors approved the winding down and dissolution of its wholly owned subsidiary, UG Acquisition Sub, Inc. Prior to September 20, 2024, we were known as KeyStar Corp.
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 to 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. See Note 11. On March 31, 2025, the Company received interim approval on its West Virginia i-Gaming and Sports Wagering Management Service Provider License.
Basis of Presentation
The foregoing unaudited condensed interim financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions for Form 10-Q and Regulation S-X as promulgated by the Securities and Exchange Commission (“SEC”). Accordingly, these financial statements do not include all of the disclosures required by generally accepted accounting principles in the United States of America for complete financial statements. These unaudited interim financial statements should be read in conjunction with the audited financial statements and the notes thereto included on Form 10-K for the year ended June 30, 2024. In the opinion of management, the unaudited interim 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.
| F-7 |
Operating results for the three and nine month period ended March 31, 2025, are not necessarily indicative of the results that may be expected for the year ending June 30, 2025. The condensed consolidated balance sheet at June 30, 2024, has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles in the U.S. for complete financial statements.
Restatement of Previously Issued Financials
In March 2025, the Company concluded that the nondiscretionary loyalty program expenses recorded in the three and nine months ended March 31, 2024 were improperly classified on the condensed consolidated statement of operations as operating expenses as opposed to a reduction to gaming revenue.
In evaluating whether the previously issued Condensed Consolidated Financial Statements were materially misstated for the interim period ending March 31, 2024, the Company applied the guidance of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 250, Accounting Changes and Error Corrections, SEC Staff Accounting Bulletin (“SAB”) Topic 1.M, Assessing Materiality, and SAB Topic 1.N, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements and concluded that the effect of the errors on prior period interim financial statements was not material due to the lack of effect on the net loss for the three and nine months ended March 31, 2024. However, the incorrect classification of the expenses during the three and nine months ended March 31, 2024 would have a material impact on the comparison to the three and nine month periods ended March 31, 2025. Therefore, as permitted by SAB108, the Company corrected, in the current filing (March 31, 2025), the previously reported results for the three and nine months ended March 31, 2024 as follows:
| For the three months ended March 31, 2024 As Previously | For the three months ended March 31, 2024 | For the nine months ended March 31, 2024 As Previously | For the nine months ended March 31, 2024 | |||||||||||||||||||||
| Reported | Adjustments | As Restated | Reported | Adjustments | As Restated | |||||||||||||||||||
| Gaming (loss) revenues, net | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| Net gaming loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| Sales and marketing | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ||||||||||||||
| General and administrative | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Total net loss | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||||||
| Net loss per common share – basic and diluted | $ | ) | $ | $ | ) | $ | ) | $ | $ | ) | ||||||||||||||
Certain non-gaming related expenses were reclassified from sales and marketing expense to general administrative expense as part of the adjustments to the three and nine month periods above to conform to the current year presentation.
Principals of Consolidation
The consolidated financial statements represent the results of VIP Play, Inc. and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated upon consolidation of these entities.
Segment Reporting
The Company operates as one reportable segment under Accounting Standards Codification “ASC” 280, Segment Reporting. The chief operating decision maker regularly reviews the financial information of the Company at a consolidated level in deciding how to allocate resources and in assessing performance.
Use of Estimates
The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States 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 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 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 condensed consolidated financial
statements are prepared using the accrual method of accounting in accordance with accounting principles generally accepted in the United
States of America 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 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 March 31, 2025, the Company’s cash balance did
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, a Tennessee limited liability company and wholly owned
subsidiary of the Company, which was organized for the purpose of protecting users’ funds in the event of creditor claims. As of
March 31, 2025 and June 30, 2024, 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, gaming licenses, and trademarks.
Internally developed capitalized software and website
development and the VIP Play, Inc. trade name is stated at cost, less accumulated amortization on the balance sheet. 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 $
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 in the balance sheet. Annual gaming license fees and legal and professional fees required to maintain the licenses are recorded as period costs in the consolidated statements of operations.
| F-10 |
Impairment of Long-Lived Assets
Intangible assets include the cost of developed technology,
trademarks and trade names and gaming licenses and 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 recorded impairment charges of $
Lease Commitments
On February 4, 2024, the Company entered into a lease
for office space in Sarasota, Florida. The lease expired on
Total rental expense for the three months ended March
31, 2025 and 2024 was $
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 an 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.
Fair Value of Financial Instruments
The Company recognized the fair value of financial instruments in accordance with FASB ASC 820, Fair Value Measurements and Disclosures, “Fair Value Measurements”, which provides a framework for measuring fair value under 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 or out of “Level 3” during the nine months ended March 31, 2025, or 2024.
| Description | Total fair value at March 31, 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, 2024 | 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 ASC 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 ASC 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 March 31, 2025, and June 30, 2024, the Company had
a derivative liability of $
Players Balances
Players balances were comprised of players betting deposits and contestant prize winnings for promotional events.
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
$
Revenue Recognition
The Company records revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”). ASC 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 financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.
| F-12 |
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 and Sports Betting privilege taxes.
The Company records stock-based compensation in accordance with ASC 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 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 Updated (“ASU”) 2018-07.
The Company uses the Black Scholes pricing model to calculate the fair value of stock-based awards. This model is affected 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 consolidated statement of operations over the requisite service period.
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 condensed consolidated unaudited 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
March 31, 2025 and 2024, advertising costs calculated in accordance with U.S. GAAP were $
| F-13 |
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 balance sheet in accordance with ASC 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 consolidated statements of operations.
ASC 740-10 clarifies the accounting for uncertainty in income taxes recognized in an entity’s 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 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 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 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 March 31, 2025 and June 30, 2024. 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 March 31, 2025 and June 30, 2024, we had
Basic net (loss) earnings per common share is computed by dividing net (loss) income 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 March 31, 2025 and June 30, 2024, 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 nine months ended March 31, 2025 | For the year ended June 30, 2024 | |||||||
| 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 | ||||||||
| F-14 |
Recent Accounting Pronouncements
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 is currently evaluating the impact that the adoption of this standard will have on its consolidated financial statements.
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” ASU No. 2023-07 requires all annual disclosures currently required by Topic 280 to be included in interim financial statements and requires disclosure of significant segment expenses regularly provided to the chief operating decision maker (“CODM”), a description of other segment items by reportable segment, and applicable additional measures of segment profit or loss used by the CODM when allocating resources and assessing business performance. The ASU is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024 on a retrospective basis. We do not expect the adoption of ASU No. 2023-07 to have a material impact on our consolidated financial statements.
In November 2024, the FASB issued ASU 2024-03, “Disaggregation of Income Statement Expenses,” which requires additional disclosure of the nature of expenses included in the income statement in response to requests from investors for more information about an entity’s expenses. The new standard requires disaggregation of certain expense captions into specified categories in disclosures within the footnotes to the financial statements. The new guidance is effective for annual periods beginning after December 15, 2027. The Company is currently evaluating the impact of the new standard on the Company’s consolidated financial statements and related disclosures and does not believe it will have a material impact on its consolidated financial statements or its disclosures.
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 consolidated financial statements.
| F-15 |
NOTE 2 - EQUIPMENT
The Company’s equipment consisted of the following as of:
| March 31, 2025 | June 30, 2024 | |||||||
| Equipment | $ | $ | ||||||
| Total | ||||||||
| Less: accumulated depreciation | ||||||||
| Equipment, net | $ | $ | ||||||
Depreciation expense of equipment during the three
months ended March 31, 2025, and 2024 was $
NOTE 3 - LONG LIVED AND OTHER INTANGIBLE ASSETS
Long-lived and other intangible assets held, net of impairment are comprised of the following at:
| March 31, 2025 | June 30, 2024 | |||||||
| Developed technology - ZenSports | $ | $ | ||||||
| Developed technology – VIP Play | ||||||||
| Tradenames and trademarks | ||||||||
| Gaming licenses | ||||||||
| Total | ||||||||
| Less: accumulated amortization | ( | ) | ||||||
| Net carrying value | $ | $ | ||||||
Amortization expense of business intellectual property
for three months ended March 31, 2025, and 2024, was $
During the three months ended December 31, 2024 the
Company entered into an agreement with a sports betting services provider. See Note 11. As per the terms of the agreement, the Company
will integrate our new VIP Play application into the sportsbook as provided by the new provider. The Company expects to launch the new
application in May 2025. As of December 31, 2024, the Company has ceased development of the ZenSports technology. As per ASC 360-10, Impairment
or Disposal of Long-Lived Assets, these events triggered an impairment test of our finite lived asset as listed below and the carrying
amount was deemed to be unrecoverable. An impairment loss of $
As of March 31, 2025, intangible assets consisted of the following, net of impairment:
| Estimated Useful Life | Remaining Weighted Average Useful Life | Gross Carrying Amount, Net of Impairment | Accumulated Amortization | Net Carrying Amount | ||||||||||||
| Indefinite lived intangible assets: | ||||||||||||||||
| Gaming license | $ | $ | $ | |||||||||||||
| Definite lived intangible assets: | ||||||||||||||||
| Developed technology – VIP Play | $ | $ | $ | |||||||||||||
| Total intangible assets: | $ | $ | $ | |||||||||||||
| F-16 |
NOTE 4 - PLAYERS BALANCES
The players balances were comprised of players betting
deposits and contestant prize winnings for promotional events. Players balances were $
NOTE 5 - 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 $
The conversion option was valued by the Company using the Monte-Carlo model.
The following are the significant assumptions used in the Monte-Carlo model. See Note 8.
| Expected volatility | Risk-free interest rate | Expected dividend yield | Expected life (in years) | |||||||||||
| At September 1, 2023 | % | % | % | |||||||||||
In August 2024, all three of these Convertible Notes were extended for an additional year.
NOTE 6 – NOTES PAYABLE AND NOTES PAYABLE - RELATED PARTY
As of March 31, 2025, and June 30, 2024, 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. The Company
paid $
The outstanding principal balance at March 31, 2025,
is $
On May 5, 2023, the Company entered into a Promissory
Note with Excel Family Partners, LLLP, a company controlled by Bruce Cassidy (our Chief Executive Officer and the Chairman of our Board
of Directors) in the principal amount of $
| F-17 |
The note payable and the warrants were issued in a
single transaction and as such were allocated among the freestanding instruments identified. The warrants were valued by the Company using
the Black-Scholes option pricing model with the allocated fair value of $
The following are the significant assumptions used in the Black-Scholes model:
| Expected volatility | Risk-free interest rate | Expected dividend yield | Expected life (in years) | |||||||||||
| At May 5, 2023 | % | % | % | |||||||||||
On September 14, 2023, the principal balance of $
On May 24, 2023, the Company entered into a short
term note payable with a premium finance company to fund their technology services and cyber liability insurance. The total premiums,
taxes and fees financed was $
On May 24, 2024, the Company renewed the 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 $
| F-18 |
The following represents the future aggregate maturities of the notes payable and notes payable-related party as of March 31, 2025, for each of the five (5) succeeding years and thereafter as follows:
| Twelve months ending March 31, | Amount | |||
| 2026 | $ | |||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| 2030 | ||||
| Thereafter | ||||
| Total | $ | |||
NOTE 7- LINE OF CREDIT - RELATED PARTY
On February 22, 2022, the Company executed a non-revolving
line of credit demand note for $
On February 24, 2023, the Company entered into a second
amended and restated discretionary non-revolving line of credit demand note with Excel in the principal amount of not more than $
The amended note includes a conversion option that
Excel may, at its sole option, convert all or any portion of the debt into fully paid and non-assessable shares of common stock of the
Company’s common stock at a conversion price in an amount equal to the product of the lowest recent price multiplied by
The following are the significant assumptions used in the Monte-Carlo model.
| Expected volatility | Risk-free interest rate |
Expected dividend yield | Expected life (in years) |
|||||||||||||
| At February 24, 2023 | % | % | % | |||||||||||||
The note includes a common stock warrant exercisable
up to
| F-19 |
The following are the significant assumptions used in the Black-Scholes model:
| Expected volatility | Risk-free interest rate | Expected dividend yield | Expected life (in years) |
|||||||||||||
| At February 24, 2023 | % | % | % | |||||||||||||
The amended non-revolving line of credit was exchanged
and modified on substantially different terms from the non-revolving line of credit demand note it replaced and as such is treated as
a debt modification. The Company incurred debt issuance costs of $
On July 18, 2023, the Company entered into a Third
Amended and Restated Discretionary Non-Revolving Line Of Credit Demand Note with Excel Family Partners, LLLP, (“Excel”) in
the principal amount of not more than $
The following are the significant assumptions used in the Black-Scholes model for the warrants:
| Expected volatility | Risk-free interest rate | Expected dividend yield | Expected life (in years) | |||||||||||||
| At July 18, 2023 | % | % | % | |||||||||||||
At the date of the third amendment, the remaining
unamortized debt issuance costs were $
On September 14, 2023, the Company entered into a
Fourth Amended and Restated Discretionary Non-Revolving Line Of Credit Demand Note with Excel Family Partners, LLLP, a Florida limited
liability limited partnership (“Excel”) in the principal amount of not more than $
| F-20 |
The following are the significant assumptions used in the Black-Scholes model for the warrants:
| Expected volatility | Risk-free interest rate | Expected dividend yield | Expected life (in years) | |||||||||||||
| At September 13, 2023 | % | % | % | |||||||||||||
At the date of the fourth amendment, the remaining
unamortized debt issuance costs were $
As of the date of the Fourth Amended and Restated
Discretionary Non-Revolving Line of Credit Demand Note, the aggregate outstanding principal balance was $
On December 27, 2023, a total of $
The offer, sale and issuance of the Conversion Shares were deemed to be exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), in reliance on Section 4(a)(2) of the Securities Act and/or Rule 506(b) of Regulation D promulgated thereunder, as transactions by an issuer not involving a public offering. The converting debt holders acquired the Conversion Shares for investment only and not with a view to or for sale in connection with any distribution thereof and appropriate legends were affixed to the Conversion Shares upon issuance thereof.
On December 29, 2023, the Company entered into a Fifth
Amended and Restated Discretionary Non-Revolving Line Of Credit Demand Note with Excel Family Partners, LLLP, a Florida limited liability
limited partnership (“Excel”) in the principal amount of not more than $
| F-21 |
A total of $
The following are the significant assumptions used in the Black-Scholes model for the warrants:
| Expected volatility | Risk-free interest rate | Expected dividend yield | Expected life (in years) | |||||||||||||
| At December 27, 2023 | % | % | % | |||||||||||||
On August 7, 2024, $
On August 7, 2024, the Company entered into a Sixth
Amended and Restated Discretionary Non-Revolving Line of Credit Demand Note with Excel Family Partners, LLLP, a Florida limited liability
limited partnership (“Excel”) in the principal amount of not more than $
On August 7, 2024, the Company entered into a new
Discretionary Revolving Line of Credit Demand Note with Excel Family Partners, LLLP, a Florida limited liability limited partnership (“Excel”)
in the principal amount of not more than $
On March 31, 2025, the Company entered into a First
Amended and Restated Discretionary Revolving Line of Credit Demand Note with Excel Family Partners, LLLP, a Florida limited liability
limited partnership (“Excel”) in the principal amount of not more than $
During the three and nine months ended March 31, 2025,
the Company borrowed $
As of March 31, 2025, $
At March 31, 2025, the remaining unamortized debt
issuance costs were $
As of March 31, 2025 and June 30, 2024, the aggregate
outstanding principal balance of all loans under the Note was $
| F-22 |
NOTE 8 – DERIVATIVE LIABILITIES
On February 24, 2023, July 18, 2023 and September 14, 2023, the Company entered into the second, third and fourth amended and restated discretionary non-revolving line of credit demand notes (“LOC”) with a related party (See Note 7). On August 23, 2023, August 28, 2023 and September 1, 2023, the Company also entered into a Convertible Note Purchase Agreement and a Convertible Promissory Note with three unrelated parties (See Note 5). The LOC 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 statement of operations as a gain or loss on change in fair value of derivatives.
The table below sets forth a summary of the changes in the fair value of the Company’s Level 3 financial liabilities for the nine months ended March 31, 2025:
| Balance at June 30, 2024 | $ | |||
| Change in the fair value of the embedded conversion option | ||||
| Balance at March 31, 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, 2024 | - | % | - | % | % | - | ||||||||||
| At March 31, 2025 | - | % | - | % | % | - | ||||||||||
NOTE 9 - STOCKHOLDERS’ DEFICIT
The Company is authorized to issue shares of common stock, par value $ per share, and shares of preferred stock, par value $ per share; of which shares have been designated as Series A Convertible Preferred Stock, shares have been designated as Series B Convertible Preferred Stock and shares 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 $
| F-23 |
The Series C Convertible Preferred Stock has a liquidation
preference of $
Series A Convertible Preferred Stock
During the nine months ended March 31, 2025 and 2024,
there were
Series B Convertible Preferred Stock
During the nine months ended March 31, 2025 and 2024,
there were
Series C Convertible Preferred Stock
On August 16, 2022, John Linss our former Chief Executive Officer and former member of our board of directors was issued shares of our Series C Convertible Preferred Stock as part of an amendment to his employment agreement. The stock was valued at $ per share, the recent cash price paid for all previous issuances of Series C Convertible Preferred stock, and vests over a -year period unless certain milestones are met, in which case it will fully vest sooner.
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 March 31, 2025 and June 30, 2024, shares were outstanding.
Common Stock
On December 28, 2023, a total of shares
of common stock were issued upon conversion of $
On January 8, 2024 the Company sold shares of common stock to an unrelated party for cash proceeds of $.
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.
On June 28, 2024, the board of directors approved
the issuance of shares of common stock upon the cashless exercise of
| F-24 |
On November 6, 2024 the Company sold shares of common stock to two unrelated parties for cash proceeds of $ as part of a private offering. The Company also issued shares of common stock, warrants and accrued $ as compensation to a placement agent in connection with the offering. The warrants were valued using the Black Scholes model and had a fair value of $. The following are the significant assumptions used in the Black-Scholes model for the warrants:
| Expected volatility | Risk-free interest rate | Expected dividend yield | Expected life (in years) | |||||||||||||
| At November 6, 2024 | % | % | % | |||||||||||||
The common stock and warrants were fully expensed during the six months ended December 31, 2024 and netted against the value of the common stock as offering costs.
On February 5, 2025, the Company issued shares of common stock for placement agent fees related to the November 6th private offering in lieu of cash compensation, which was accrued on November 6, 2024.
NOTE 10 - STOCK OPTIONS
On April 10, 2023, the board of directors (the “Board”) approved the 2023 stock option plan (“2023 Plan”). The 2023 Plan was subject to the approval of our stockholders within 12 months of the Board’s approval. In connection with the approval of the 2023 Plan, 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-25 |
Number of Shares Underlying Outstanding Options | Weighted Average Remaining Contractual Life | Weighted Average Exercise Price | Intrinsic Value | |||||||||||||
| Options outstanding as of June 30, 2024 | years | $ | $ | |||||||||||||
| Options exercisable as of June 30, 2024 | years | $ | $ | |||||||||||||
| Granted | - | - | ||||||||||||||
| Exercised | - | - | ||||||||||||||
| Forfeited or expired | - | $ | - | |||||||||||||
| Options outstanding as of March 31, 2025 | years | $ | $ | |||||||||||||
| Options exercisable as of March 31, 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 March 31, 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 11 - COMMITMENTS AND CONTINGENCIES
Commitments and Contingencies are as follows:
During May 2023, the Company was issued $
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.
On December 10, 2024, the Company entered into a Casino and Sportsbook Online 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 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 Agreement include online poker games, online casino games and online sports wagering.
The initial term of the 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 Agreement beyond any applicable notice and cure period, and the Agreement has not otherwise been terminated in accordance with its terms, the Company has the right to renew the Agreement.
The terms of the 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 Agreement also requires the Company to pay Operator a percentage of their annual net gaming revenue from the Services, 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.
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.
| F-26 |
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 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 12 - RELATED PARTY TRANSACTIONS
Transactions with our former Chief Financial Officer:
On February 19, 2024, the Company entered into a first
amendment to the $
Transactions with our current Chief Executive Officer and current Chairman of our Board of Directors:
On August 16, 2022, the non-revolving line of credit
demand note with Excel Family Partners, LLLP (“Excel”) a company controlled by Bruce Cassidy (our Chief Executive Officer
and the Chairman of our board of directors), which can exert significant influence over the Company, was increased to $
On February 24, 2023, the Company entered into a second
amended and restated discretionary non-revolving line of credit demand note with Excel in the principal amount of not more than $
On May 5, 2023, the Company entered into a Promissory
Note with Excel Family Partners, LLLP, a company controlled by Bruce Cassidy (our former Chief Executive Officer through June 14, 2022)
the Chairman of our Board of Directors in the principal amount of $
On July 18, 2023, the Company entered into a Third
Amended and Restated Discretionary Non-Revolving Line Of Credit Demand Note with Excel Family Partners, LLLP, (“Excel”) in
the principal amount of not more than $
On September 14, 2023, the Company entered into a
Fourth Amended and Restated Discretionary Non-Revolving Line Of Credit Demand Note with Excel Family Partners, LLLP, a Florida limited
liability limited partnership (“Excel”) in the principal amount of not more than $
A total of $
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On December 29, 2023, the Company entered into a Fifth
Amended and Restated Discretionary Non-Revolving Line Of Credit Demand Note with Excel Family Partners, LLLP, a Florida limited liability
limited partnership (“Excel”) in the principal amount of not more than $
On August 7, 2024, $
On August 7, 2024, the Company entered into a Sixth
Amended and Restated Discretionary Non-Revolving Line of Credit Demand Note with Excel Family Partners, LLLP, a Florida limited liability
limited partnership (“Excel”) in the principal amount of not more than $
On August 7, 2024, the Company entered into a new
Discretionary Non-Revolving Line of Credit Demand Note with Excel Family Partners, LLLP, a Florida limited liability limited partnership
(“Excel”) in the principal amount of not more than $
On March 31, 2025, the Company entered into a First
Amended and Restated Discretionary Revolving Line of Credit Demand Note with Excel Family Partners, LLLP, a Florida limited liability
limited partnership (“Excel”) in the principal amount of not more than $
NOTE 13 - SUBSEQUENT EVENTS
In accordance with ASC 855-10, the Company has analyzed its operations subsequent to March 31, 2025, to the date these financial statements were issued, and as of May 14, 2025, there were no other material subsequent events to disclose in these financial statements with the exception of the events below.
Subsequent to the period end, and through May 14, 2025,
the Company borrowed an additional $
On April 1, 2025, the Company implemented the VIP Play 401(k) plan for its employees. This retirement plan is an employer-sponsored plan that includes both employee and employer contributions to an investment account for the benefit of employees on a tax-advantaged basis.
On April 21, 2025, stock options were forfeited as per the terms of a stock option agreement with the former SVP. As per the stock option agreement, a total of stock options were granted on April 10, 2023, with a year expiration period. The options vest over months or upon termination. If termination occurs, the stock options immediately cease vesting and the vested portion is exercisable until three months after the termination date. The SVP was terminated on January 21, 2025.
On April 22, 2025, the Company granted incentive stock options to 16 employees and contractors under the KeyStar Corp. 2023 stock option plan.
On April 28, 2025, VIP Play, Inc., a Nevada corporation, sunset its ZenSports application in preparation for the launch of its new VIP Play application in the Tennessee market. All new and prior customers were required to download the new VIP Play application upon launch, and go through the enhanced approval process. Regulatory approval was received on May 7, 2025. The company began a “soft launch” of the application on May 8, 2025 and the official launch occurred on May 12, 2025. VIP Play, Inc. does not expect that this transition will have a material negative impact on its financial condition.
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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 affect 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
As used in this Quarterly Report and unless otherwise indicated, the terms the “Company,” “we”, “us” and “our” mean VIP Play, Inc., a Nevada corporation formed on April 16, 2020.
On August 26, 2022, we entered into an Asset Purchase Agreement to purchase certain technological assets, as well as the brand ZenSports, from ZenSports, Inc. The assets were purchased to allow us to offer online sports betting, eSports, DeFi fintech and various entertainment services, on a direct-to-consumer (B2C) and business-to-business basis. We did not acquire the entity ZenSports Inc. On September 12, 2022, we entered into an Asset Purchase Agreement with Excel Members, LLC, a company controlled by Bruce Cassidy, a member of our Board of Directors (the “Board”), to acquire certain assets of a company acquired previously by Excel Members through an assignment for the benefit of creditors. Ultimate Gamer, LLC, which was formerly in the business of organizing and operating in-person and online video game competitions tournament, originally owned these assets. The purchased assets included the brand name Ultimate Gamer.
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On September 15, 2022, we entered into an agreement to assign all of the assets in connection with or relating to our prior business owned or used by us (discontinued operations), and to delegate any and all liabilities owed by us, to TopSight Corporation, a company owned by Zixiao Chen, our former Chief Financial Officer.
As a result of the foregoing transactions, we ceased all operations relating to our prior business and commenced operations relating to B2C offerings within online sports betting (current business or business). With our current business, augmented by net new development of products and services, we intend to pursue global business opportunities through a platform we’ve designed to be a flexible foundation for corporate growth.
Through our ZenSports brand we offer a modern, full-featured, native mobile, and global online sports betting platform incorporating; a sports book, peer-to-peer betting, eSports wagering, loyalty, and player retention.
In May 2023, we received approval on our Tennessee Sports Gaming Operator license, and we officially launched our sports betting operation in Tennessee in June 2023.
On November 1, 2024 (and then amended and restated on January 8, 2025), we 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 us to use through their software platform over which gaming and betting transactions with 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.
On December 10, 2024, we entered into a Casino and Sportsbook Online Operations Agreement dated as of December 9, 2024 with Wheeling Island Gaming, Inc., a Delaware corporation, 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.
On February 7, 2025, we entered into a Player Account Management Services Agreement with White Hat Gaming Limited, a Malta corporation (“White Hat”), a provider of Internet-based interactive gaming services including but not limited to the operation of a platform delivering player account management services. Pursuant to the terms of the agreement, White Hat will provide us with certain services, including: (i) designing, developing and supporting a desktop-formatted & mobile-device-formatted website, and native mobile application in both iOS and Android formats, designed for enabling the registration of end users, an online account by end users and end users’ access and use of our sports’ betting products and, to the extent applicable, games of chance; and (ii) the software and related technical development required in order to seamlessly integrate a sports wagering system into White Hat’s proprietary player account management platform to support our iGaming, mobile sports betting and other interactive gaming activities.
On March 31, 2025, we received approval on our West Virginia Lottery Sports Wagering and i-gaming interim Managed Service Provider “MSP” license.
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.vipplayinc.com. The information on our website is not made a part of this Quarterly Report. Our headquarters address is 1645 Pine Tree Ln, Suite 2, Sarasota, FL 34236. Our phone number is: (866) 783-9435.
Results of Operations for the Three Months Ended March 31, 2025 and 2024
During the three months ended March 31, 2025 and 2024, we incurred net losses from continuing operations of $5,084,084 and $8,299,051, respectively.
For the three months ended March 31, 2025 and 2024, we had gaming revenues of $497 and negative gaming revenues of $228,124. Negative gaming revenues consisted of net sports betting revenues in the state of Tennessee. Our gaming revenues increased by approximately $229,000 during the three months ended March 31, 2025 as compared to the three months ended March 31, 2024 as a result of operational and risk management procedures, technological improvement to our Sports Gaming System software, and a revamped rewards and marketing program.
The significant driver to our loss in the current period is principally related to the loss on change in fair value of derivatives.
Results of Operations for the Nine Months Ended March 31, 2025 and 2024
During the nine months ended March 31, 2025 and 2024, we incurred net losses from continuing operations of $16,217,414 and $22,145,586, respectively.
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For the nine months ended March 31, 2025 and 2024, we had gaming revenues of $18,327 and negative gaming revenues of $2,210,702. Negative gaming revenues consisted of net sports betting revenues in the state of Tennessee. Our gaming revenues increased by approximately $2,229,000 during the nine months ended March 31, 2025 as compared to the nine months ended March 31, 2024 as a result of operational and risk management procedures, technological improvement to our Sports Gaming System software, and a revamped rewards and marketing program.
The significant drivers to our loss in the current period is principally related to impairment expense of our intangible assets and interest expense on our increasing related party debt. Salaries and wages and sales and marketing costs contribute to our losses and are expected to increase over the coming months once we expand our sports betting operations.
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 March 31, 2025, we had total current assets of $1,767,232, total current liabilities of $31,072,979, and a total working capital deficit of $29,305,747. Net cash used in operating activities was $7,819,524 during the nine months ended March 31, 2025, compared to $8,937,228 during the nine months ended March 31, 2024. The decrease in the use of cash in operating activities is principally the result of a $2,601,620 decrease in net operating assets and a decrease in the net loss of $5,928,172.
Net cash used in investing activities increased by $269,703 during the nine months ended March 31, 2025, compared to the nine months ended March 31, 2024 due to new investments in technology development.
Net cash provided by financing activities decreased by $1,341,136 during the nine months ended March 31, 2025, compared to the nine months ended March 31, 2024. The decrease is primarily due to proceeds from convertible notes issued during the nine months ended March 31, 2024.
As of March 31, 2025, we had a working capital deficit of $29,305,747. We had a net loss from operations of $16,217,414 for the nine months ended March 31, 2025. We do not expect significant revenues and we expect to incur significant increases in operating costs in the short term as we continue to grow 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 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 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.
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Off Balance Sheet Arrangements
As of March 31, 2025, we had no off-balance sheet arrangements.
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 March 31, 2025. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of March 31, 2025, our disclosure controls and procedures were not effective due to the presence of material weaknesses in internal control over financial reporting related to the restatement of our March 31, 2024 form 10Q.
Planned Remediation of Material Weaknesses
Management is actively engaged in implementing remediation plans to address the material weaknesses described above. These remediation efforts include preparation of written documentation of our internal control policies and procedures, and an increase to personnel and technical accounting expertise within the accounting function.
Changes in Internal Control over Financial Reporting
In connection with our continued monitoring and maintenance of our controls procedures as part of the implementation of Section 404 of the Sarbanes-Oxley Act, we continue to review, test, and improve the effectiveness of our internal controls over financial reporting and have made significant improvements to date. There have not been any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the third quarter of our fiscal year ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting other than the ongoing remediation efforts noted above.
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PART II - OTHER INFORMATION
Item 6. Exhibits
| * | Filed herewith. |
| ** | Furnished herewith. |
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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: May 14, 2025 | ||
| By: | /s/ James Mackey | |
| James Mackey | ||
| Chief Financial Officer | ||
| (Principal Financial Officer) | ||
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