VIP Play (VIPZ) 10-Q details losses, leverage and going-concern warning
VIP Play, Inc. reports results for the quarter and nine months ended March 31, 2026, showing a small asset base against heavy debt and continued losses. Total assets were $3,766 thousand, while liabilities reached $42,322 thousand, leaving stockholders’ deficit at $38,556 thousand.
The company recorded a net loss of $11,423 thousand for the quarter and $7,137 thousand for the nine-month period, driven by a net gaming loss, $2,093 thousand of quarterly operating expenses, and a $8,148 thousand loss from changes in derivative fair value. A related-party line of credit totaled $28,075 thousand, and derivative liabilities were $8,335 thousand.
Management discloses an accumulated deficit of $70,265 thousand, negative operating cash flows of $7,220 thousand for the nine months, and states that these conditions raise substantial doubt about the company’s ability to continue as a going concern. The filing also notes an unresolved dispute over a terminated West Virginia market access agreement and approximately $200 thousand in unauthorized player withdrawals from a software defect, of which about $30 thousand has been recovered.
Positive
- None.
Negative
- Going concern risk: Accumulated deficit of $70,265 thousand, recurring losses, and negative operating cash flows of $7,220 thousand lead management to state there is substantial doubt about the company’s ability to continue as a going concern.
- Leverage and related-party dependence: Total liabilities of $42,322 thousand versus $3,766 thousand of assets, including $28,075 thousand outstanding under a related-party line of credit and $8,335 thousand of derivative liabilities.
- Operational and compliance pressures: Net loss of $11,423 thousand for the quarter, unresolved dispute over termination of the West Virginia market access agreement, and approximately $200 thousand in unauthorized withdrawals from a software defect with only about $30 thousand recovered so far.
Insights
Highly leveraged balance sheet, ongoing losses, and going-concern risk.
VIP Play has $3,766 thousand in assets versus $42,322 thousand in liabilities, resulting in a stockholders’ deficit of $38,556 thousand. A related-party line of credit of $28,075 thousand and derivative liabilities of $8,335 thousand dominate the capital structure, leaving little tangible cushion.
Operating performance remains weak. For the quarter, net gaming loss was $313 thousand and total operating expenses were $2,093 thousand, leading to an $11,423 thousand net loss, heavily influenced by an $8,148 thousand loss on derivative fair value. Nine-month operating cash outflows were $7,220 thousand, while cash and cash reserved for users totaled only $83 thousand at period-end.
Management explicitly states that recurring losses, negative cash flows, and a $70,265 thousand accumulated deficit raise substantial doubt about continuing as a going concern. Additional overhangs include a $28.1 million related-party credit reliance, a pending dispute over the West Virginia market access agreement, and roughly $170 thousand of unrecovered unauthorized withdrawals from a prior software defect. Rating: -1 (negative), as these factors materially weaken the financial profile.
Key Figures
Key Terms
going concern financial
derivative liability financial
convertible promissory note financial
Restricted Stock Units financial
Player Account Management Services Agreement financial
Stock Redemption and Purchase Agreement financial
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
For
the quarterly period ended
Commission
File Number:
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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
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Indicate
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| ☒ | Smaller reporting company | |||
| Emerging growth company |
If
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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, 2026, was
VIP Play, Inc.
Form 10-Q
Table of Contents
| PART I - FINANCIAL INFORMATION | 1 |
| ITEM 1. FINANCIAL STATEMENTS | 1 |
| ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 2 |
| ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS | 5 |
| ITEM 4. CONTROLS AND PROCEDURES | 6 |
| PART II - OTHER INFORMATION | 7 |
| ITEM 6. EXHIBITS | 7 |
| SIGNATURES | 8 |
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Our financial statements included in this Form 10-Q are as follows:
| F-1 | Unaudited Condensed Consolidated Balance Sheets as of March 31, 2026 and June 30, 2025; |
| F-3 | Unaudited Condensed Consolidated Statements of Operations for the three and nine months ended March 31, 2026 and 2025; |
| F-4 | Unaudited Condensed Consolidated Statements of Stockholders’ Deficit for the three and nine month periods ended March 31, 2026 and 2025; |
| F-6 | Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended March 31, 2026 and 2025; |
| F-7 | Notes to Unaudited Condensed Consolidated Financial Statements. |
| 1 |
VIP PLAY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands, except number of shares and par value)
| March 31, 2026 | June 30, 2025 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Cash reserved for users | ||||||||
| Related party receivables | - | |||||||
| 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 | ||||||||
| Notes payable | ||||||||
| Convertible notes, net of discount | ||||||||
| 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
(unaudited)
| March 31, 2026 | June 30, 2025 | |||||||
| Stockholders’ deficit: | ||||||||
| Preferred stock, | ||||||||
| Series A preferred stock, $ | - | - | ||||||
| Series B preferred stock, $ | ||||||||
| Series C preferred stock, $ | - | - | ||||||
| Preferred stock value | - | - | ||||||
| Common stock, $ | ||||||||
| 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)
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
For the three months ended March 31, | For the nine months ended March 31, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| 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 | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense): | ||||||||||||||||
| Gain (loss) on change in fair value of derivative | ( | ) | ( | ) | ( | ) | ||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Interest expense - related party | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total other income (expense) | ( | ) | ( | ) | ( | ) | ||||||||||
| Net loss | $ | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Net loss per common share - basic | $ | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Net loss per common share - diluted | $ | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Weighted average number of common shares outstanding - basic | ||||||||||||||||
| Weighted average number of common shares outstanding - 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)
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | (Deficit) | ||||||||||||||||||||||||||||||||||
| Preferred Shares | Preferred Shares | Preferred Shares | Total | |||||||||||||||||||||||||||||||||||||||||
| Series A | Series B | Series C | Common Shares | Additional | Stockholder’ | |||||||||||||||||||||||||||||||||||||||
| $0.001 Par Value | $1.00 Par Value | $0.001 Par Value | $0.001 Par Value | Paid-In | Accumulated | 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 | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Fair value of vested incentive stock options & RSUs | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||
| Net income | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||
| Balance, December 31, 2025 | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Warrants granted for services | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||
| Fair value of vested incentive stock options & RSUs | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||
| Net Loss | - | - | - | - | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||
| Balance, March 31, 2026 | - | $ | - | $ | - | $ | - | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||
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 | Preferred Shares | Preferred Shares | Total | |||||||||||||||||||||||||||||||||||||||||
| Series A | Series B | Series C | Common Shares | Additional | Stockholders’ | |||||||||||||||||||||||||||||||||||||||
| $0.001 Par Value | $1.00 Par Value | $0.001 Par Value | $0.001 Par Value | Paid-In | Accumulated | Equity | ||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | (Deficit) | ||||||||||||||||||||||||||||||||||
| Balance June 30, 2024 | - | $ | - | $ | | - | $ | - | $ | | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||
| Fair value of vested incentive stock options | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||
| Change in par value of common stock | - | - | - | - | - | - | - | ( | ) | - | - | |||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||
| Balance, September 30, 2024 | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Fair value of vested incentive stock options | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||
| Issuance of common stock for cash, net of offering costs | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||
| Balance December 31, 2024 | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Fair value of vested incentive stock options | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||
| Issuance of common stock for accrued offering costs | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||
| Net income (loss) | - | - | - | - | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||
| 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 STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
| 2026 | 2025 | |||||||
| For the Nine Months Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| 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 | - | |||||||
| Amortization of debt discount | ||||||||
| Depreciation and amortization | ||||||||
| Incentive stock option and RSU expense | ||||||||
| Warrants granted for services | - | |||||||
| Impairment of developed technology and tradename | - | |||||||
| (Gain) loss on change in fair value of derivative | ( | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses and other current assets | ( | ) | ||||||
| Related party receivables | ( | ) | - | |||||
| 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 | ( | ) | ( | ) | ||||
| Cash paid for non-gaming development | ( | ) | - | |||||
| 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 | - | |||||||
| Repayment of convertible note | ( | ) | - | |||||
| 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 | $ | |||||||
| NON-CASH FINANCING AND INVESTING ACTIVITIES: | ||||||||
| Insurance financing | $ | |||||||
| Common stock and warrants issued for 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
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 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. On March 31, 2025, the Company received interim approval on its West Virginia i-Gaming and Sports Wagering Management Service Provider License. The Company did not commence operations in West Virginia. In October 2025, the Company received a notice of termination related to its West Virginia market access agreement and is currently involved in an ongoing dispute regarding the validity of the termination and related fee claims. See Note 12 – Commitments and Contingencies.
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 and nine month periods ended March 31, 2026, 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 by U.S. GAAP for complete annual audited consolidated financial statements.
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.
| F-7 |
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 tables present selected financial information with respect to the Company’s single operating segment for the three and nine months ended March 31, 2026 and 2025 (in thousands):
SCHEDULE OF SEGMENT REPORTING
| 2026 | 2025 | |||||||
For the three months ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| 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 on change in fair value of derivative | ( | ) | ( | ) | ||||
| Interest expense | ( | ) | ( | ) | ||||
| Interest expense - related party | ( | ) | ( | ) | ||||
| Interest expense | ( | ) | ( | ) | ||||
| Total other expense, net | ( | ) | ( | ) | ||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| 2026 | 2025 | |||||||
For the nine months ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| 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 | ||||||||
| Loss from Operations | ( | ) | ( | ) | ||||
| Other income (expenses): | ||||||||
| Gain (loss) on change in fair value of derivative | ( | ) | ||||||
| Interest expense | ( | ) | ( | ) | ||||
| Interest expense - related party | ( | ) | ( | ) | ||||
| Interest expense | ( | ) | ( | ) | ||||
| Total other income (expense), net | ( | ) | ||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| F-8 |
During the nine months ended March 31, 2026, the Company evaluated initiatives outside of its core sports wagering operations, including non-gaming digital entertainment opportunities. These initiatives have not generated revenue and were 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.
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 has historically funded its 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 Company to execute its business strategy. 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, 2026, the Company’s cash balances were below the FDIC limits. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk in these accounts.
| F-9 |
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 March 31, 2026 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:
SUMMARY OF PLANT AND EQUIPMENT ESTIMATED USEFUL LIVES
| Equipment |
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 $5 thousand. 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:
SUMMARY OF ESTIMATED LIVES OF INTANGIBLE ASSETS
| Internally developed software and website development | ||||
| Software licenses | ||||
| Gaming licenses |
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.
During
the nine months ended March 31, 2026, the Company paid $
| F-10 |
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
During
the nine months ended March 31, 2026, the Company paid $
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 intangible assets during the three and nine months ended March 31, 2026 and 2025.
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 February 1, 2025 and was continued on a month-to-month basis until June 2025.
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 March 31, 2026 and 2025 was $
| F-11 |
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.
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 three or nine months ended March 31 2026, or 2025.
(in thousands)
SCHEDULE OF DERIVATIVE LIABILITIES
| Description | Total fair value at March 31, 2026 | 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) | Significant other observable inputs (level 2) | Significant unobservable inputs (level 3) | ||||||||||||
| Derivative liability (1) | $ | $ | - | $ | - | $ | ||||||||||
| (1) |
Fair value estimates are made at a specific measurement date based on market conditions and information available to market participants at that time. 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.
| F-12 |
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 March 31, 2026, 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 nine months ended March 31, 2026, the Company retitled the balance sheet caption 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 $
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 players liabilities. 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.
| F-13 |
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.
Stock-based Compensation
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.
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 March 31, 2026 and 2025, 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.
| F-14 |
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 March 31, 2026 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 March 31,
2026 and June 30, 2025, we had
Earnings (Loss) per Share
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 for warrants and stock options and the if-converted method for convertible instruments), 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, 2026 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.
SCHEDULE OF EARNINGS (LOSS) PER SHARE ANTI-DILUTIVE
| For the nine months ended March 31, 2026 | 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 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. ASU 2023-009 applies to all entities subject to income taxes. The Company adopted the standard on July 1, 2025. The adoption of this standard did not 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,” ASU 2024-03 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. ASU 2024-03 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 ASU 2024-03 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.
| F-15 |
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 ASU 2025-05 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.
In September 2025, the FASB issued ASU 2025-06, “Intangibles - Goodwill and Other - Internal-Use Software” to modernize the accounting for software costs. For all entities, the amendments in ASU 2025-06 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.
Correction of Prior Period Error
See Note 2 – Correction of Immaterial Error Related to Prior Periods for a discussion of the correction of a prior period error and the revision of comparative financial information presented in these unaudited condensed consolidated financial statements.
NOTE 2 — CORRECTION OF IMMATERIAL ERROR RELATED TO PRIOR PERIODS
During the quarter ended December 31, 2025, management identified an error related to the accounting for convertible promissory notes issued in September 2023. Specifically, while the embedded conversion features were appropriately bifurcated and recorded as derivative liabilities at issuance, the related debt discount was not amortized to interest expense over the contractual term of the notes as required under U.S. GAAP.
The error resulted in an understatement of non-cash interest expense and an understatement of convertible notes, net in previously issued interim and annual financial statements beginning with the quarter ended September 30, 2023.
Management evaluated the error in accordance with SEC Staff Accounting Bulletin No. 99 (“SAB 99”) and SEC Staff Accounting Bulletin No. 108 (“SAB 108”). Although the error was determined to be immaterial to each previously issued reporting period, management concluded that correcting the error solely through a cumulative catch-up adjustment in the current period would result in significant fluctuations in comparative period amounts and materially affect the comparability of the current period financial statements. Accordingly, prior period comparative financial information presented herein has been revised.
| F-16 |
Impact on Consolidated Statements of Operations
The following tables present the impact of the correction on the Company’s previously reported consolidated statements of operations:
SCHEDULE OF IMPACT ON CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended March 31, 2025
| (in thousands except share data) | As Previously Reported | Adjustment | As Revised | |||||||||
| Interest Expense | ||||||||||||
| Net Loss | ( | ) | ( | ) | ( | ) | ||||||
| Loss per Share (Basic) | ( | ) | - | ( | ) | |||||||
| Loss per Share (Diluted) | ( | ) | - | ( | ) | |||||||
Nine Months Ended March 31, 2025
| (in thousands except share data) | As Previously Reported | Adjustment | As Revised | |||||||||
| Interest Expense | ||||||||||||
| Net Loss | ( | ) | ( | ) | ( | ) | ||||||
| Loss per Share (Basic) | ( | ) | ( | ) | ( | ) | ||||||
| Loss per Share (Diluted) | ( | ) | ( | ) | ( | ) | ||||||
Impact on Consolidated Balance Sheet
The following table presents the impact of the correction on the Company’s consolidated balance sheet as of June 30, 2025:
SCHEDULE OF IMPACT ON CONSOLIDATED BALANCE SHEET
| (in thousands) | As Previously Reported | Adjustment | As Revised | |||||||||
| Convertible Notes, Net | ||||||||||||
| Accumulated Deficit | ( | ) | ( | ) | ( | ) | ||||||
| Total Liabilities | ( | ) | ( | ) | ( | ) | ||||||
Impact on Consolidated Statement of Cash Flows
The following tables present the impact of the correction on the Company’s previously reported consolidated statement of cash flows:
Nine Months Ended March 31, 2025
SCHEDULE OF IMPACT ON CONSOLIDATED STATEMENT OF CASH FLOWS
| (in thousands except share data) | As Previously Reported | Adjustment | As Revised | |||||||||
| Net Loss | ( | ) | ( | ) | ( | ) | ||||||
| Amortization of Debt Discount (Non-Cash) | - | |||||||||||
| Net Cash Used in Operating Activities | ( | ) | - | ( | ) | |||||||
| F-17 |
NOTE 3 - INTANGIBLE ASSETS
As of March 31, 2026, intangible assets consisted of the following:
(in thousands)
SCHEDULE OF INTANGIBLE ASSETS
| Estimated Useful | Remaining Weighted Average | |||||||||||||||||||
| Life | Useful Life | June 30, 2025 | Additions | Impairments | March 31, 2026 | |||||||||||||||
| Developed technology – Gaming – gross carrying value | $ | $ | $ | - | $ | |||||||||||||||
| Developed Technology – Non Gaming – gross carrying value | $ | - | $ | $ | - | $ | ||||||||||||||
| License – Non Gaming | - | $ | $ | - | $ | |||||||||||||||
| Accumulated amortization | $ | ( | ) | $ | ( | ) | $ | - | $ | ( | ) | |||||||||
| Total definite lived intangible assets | $ | $ | $ | - | $ | |||||||||||||||
| Gaming license | - | $ | $ | - | $ | - | $ | |||||||||||||
| Total net intangibles | $ | $ | $ | - | $ | |||||||||||||||
Subsequent
to the filing of our fiscal year 2025 Form 10-K, in September 2025, we identified that the previously reported Developed technology –
Gaming – gross carrying value and related Accumulated amortization as of June 30, 2025 had each been overstated by $
We evaluated the error, both qualitatively and quantitatively, and determined that no prior interim or annual periods were materially misstated. We also evaluated whether the cumulative amount of the overstatement was material to our fiscal year 2026 results and concluded that it was not qualitatively or quantitatively material.
Accordingly,
we recorded an out-of-period adjustment of $
Because the adjustment affected gross carrying value and accumulated amortization in equal and offsetting amounts, it had no impact on total net intangible assets, total assets, total liabilities, stockholders’ deficit, net loss, or cash flows for fiscal years 2025 or 2026.
Amortization
expense of intangible assets for the three months ended March 31, 2026, and 2025, was $
Amortization
expense of intangible assets for the nine months ended March 31, 2026, and 2025, was $
| F-18 |
The estimated future amortization of intangibles subject to amortization at March 31, 2026 was as follows:
(in thousands)
SCHEDULE OF FUTURE AMORTIZATION OF INTANGIBLE
| For the Years Ended June 30, | Amount | |||
| 2026 | $ | |||
| 2027 | ||||
| 2028 | ||||
| Total | $ | |||
NOTE 4 - PLAYERS LIABILITIES
The
players liabilities were comprised of players betting deposits and contestant prize winnings for promotional events. Players liabilities
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 $
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
$
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 $
On
October 1, 2025, the principal balance of Note B ($
| F-19 |
At
March 31, 2026 and June 30, 2025, total principal, net of debt discount, of $
The
fair value of the embedded conversion features associated with the Notes upon issuance was approximately $
As discussed in Note 2 – Correction of Immaterial Error Related to Prior Periods, the debt discount associated with the bifurcation of the conversion features was not properly amortized to interest expense in prior periods. During the nine months ended March 31, 2026, the Company corrected this error through a revision of prior-period comparative financial information, with the resulting adjustments reflected in interest expense for the applicable periods presented.
The
fair value of the conversion feature at March 31, 2026 and June 30, 2025 was $
The following were the significant assumptions used in the Monte-Carlo model.
SCHEDULE OF SIGNIFICANT ASSUMPTIONS CONVERTIBLE DEBT
| 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 8. 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 6 – NOTES PAYABLE AND NOTES PAYABLE - RELATED PARTY
As
of March 31, 2026, 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-20 |
The
outstanding principal balance at March 31, 2026, 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, 2025, 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 7- 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 former 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 March 31, 2026, outstanding borrowings under these notes totaled $
| F-21 |
NOTE 8 – 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.
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, 2026:
SCHEDULE OF FAIR VALUE OF FINANCIAL LIABILITIES
(in thousands)
| Balance at June 30, 2025 | $ | |||
| Embedded conversion feature on new convertible note issued during the period | ||||
| Change in the fair value of the embedded conversion option | ( | ) | ||
| Balance at March 31, 2026 | $ |
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:
SCHEDULE OF FAIR VALUE MEASUREMENT ASSUMPTIONS
Expected volatility | Risk-free interest rate | Expected dividend yield | Expected life (in years) | |||||||||||||
| At June 30, 2025 | % | % | % | |||||||||||||
| At March 31, 2026 | % | % | % |
NOTE 9 - STOCKHOLDERS’ DEFICIT
The
Company is authorized to issue
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-22 |
Series A Convertible Preferred Stock
During
the nine months ended March 31, 2026 and 2025, there were
Series B Convertible Preferred Stock
During
the nine months ended March 31, 2026 and 2025, 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
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
As
of March 31, 2026 and June 30, 2025,
Common Stock
During
the nine months ended March 31, 2026 and 2025, there were
On
September 20, 2024, the Company changed the par value of its common stock from $
NOTE 10 - STOCK OPTIONS AND WARRANTS
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
| F-23 |
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
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
On
October 3, 2025, the Board approved an amendment to the 2023 Stock Option Plan to increase the aggregate number of shares of the Company’s
authorized but unissued common stock that can be awarded under the plan from
On
February 13, 2026, the Board approved the grant of
Below is a table summarizing the changes in stock options outstanding for the nine months ended March 31, 2026:
SCHEDULE OF CHANGES IN STOCK OPTIONS OUTSTANDING
Number of Shares Underlying Outstanding Options | Weighted Average Remaining Contractual Life | Weighted Average Exercise Price | Intrinsic Value | |||||||||||||
| Options outstanding as of June 30, 2025 | $ | $ | - | |||||||||||||
| Options exercisable as of June 30, 2025 | $ | $ | - | |||||||||||||
| Granted | - | - | - | - | ||||||||||||
| Exercised | - | - | - | - | ||||||||||||
| Forfeited or expired | ( | ) | - | - | $ | - | ||||||||||
| Options outstanding as of March 31, 2026 | $ | $ | - | |||||||||||||
| Options exercisable as of March 31, 2026 | $ | $ | - | |||||||||||||
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, 2026, all outstanding stock options were issued according to the Company’s 2023 Plan. There are
During
the three months ended March 31, 2026, the Company issued warrants to a third-party advisor as compensation for services pursuant to
an advisory agreement. Under the agreement, the advisor is entitled to a monthly cash retainer of $
During the three months ended March 31, 2026, the Company elected to compensate the advisor through issuance of warrants rather than cash payments. Each monthly warrant tranche represents compensation for advisory services to be provided during the applicable monthly service period and vests independently on a month-by-month basis. The warrants are exercisable immediately upon vesting, expire five years from issuance, and contain provisions related to cashless exercise, anti-dilution adjustments, down-round protection, fractional share settlement, and beneficial ownership limitations.
During
the three months ended March 31, 2026, the Company issued warrants to purchase an aggregate of
The Company evaluated the warrants under ASC 718, Compensation—Stock Compensation, ASC 480, Distinguishing Liabilities from Equity, and ASC 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity, and concluded the warrants qualify for equity classification. The Company determined that the warrants are indexed to the Company’s own stock and do not require or permit net cash settlement by the Company, other than de minimis cash settlement related to fractional shares. Additionally, the down-round protection feature qualifies for the scope exception under ASU 2017-11 and therefore does not preclude equity classification. As the warrants are classified as equity instruments, the awards are not subsequently remeasured after the applicable grant date.
The
Company measures each monthly warrant tranche at grant-date fair value using the Black-Scholes option pricing model. Significant assumptions
utilized in the valuation include expected volatility, expected term, risk-free interest rate, expected dividend yield, and the market
price of the Company’s common stock on the grant date. Expected volatility was estimated using the historical volatility of comparable
publicly traded gaming and sports wagering companies over a period consistent with the expected term of the warrants. The weighted-average
assumptions utilized in the Black-Scholes valuation model were as follows: expected volatility of
The following table summarizes warrant activity for the three months ended March 31, 2026:
SCHEDULE OF WARRANT ACTIVITY
| Number of Warrants | Weighted Average Exercise Price | |||||||
| Outstanding – beginning of period | $ | |||||||
| Granted | $ | |||||||
| Exercised | — | — | ||||||
| Expired / Cancelled | — | — | ||||||
| Outstanding – end of period | $ | |||||||
As
of March 31, 2026, all outstanding warrants were exercisable and had a weighted average remaining contractual life of approximately
NOTE 11 – RESTRICTED STOCK UNITS
On October 3, 2025, the Board approved an amendment to the 2023 Stock Option Plan which adds 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 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 amendment the Board awarded Mr. Les Ottolenghi, Chief Executive Officer, Principal Executive Officer
and President,
| F-24 |
The Company accounts for stock-based compensation in accordance with ASC 718. Stock-based compensation expense is recognized over the requisite service period of the awards.
On
October 3, 2025, the Company granted
NOTE 12 - 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.
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.
| F-25 |
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 March 31, 2026, the West Virginia Lottery Commission had not yet approved the Operations Agreement.
On October 24, 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 demand. The Company completed mediation with the counterparty; however, the parties did not reach a resolution, and settlement discussions remain ongoing. As of the date of this filing, the outcome of the matter 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.
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 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 March 31, 2026, the Company has recorded player receivables related to this matter totaling approximately $
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.
| F-26 |
NOTE 13 - 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 nine months ended March 31, 2026 and 2025, the Company borrowed approximately $
Transactions with Entities Under Common Control:
In
October 2025, the Company entered into arrangements with entities under common control, FuzeBox AI, Inc. and Eagle II, LLC, dba Loop
TV, each of which is controlled by the Company’s majority shareholder and the Company’s CEO, to provide administrative,
technology and operational support services. The Company recorded related-party receivables totaling $
NOTE 14 - SUBSEQUENT EVENTS
In accordance with ASC Sub-topic 855-10, the Company has analyzed its operations subsequent to March 31, 2026, to the date these unaudited condensed consolidated financial statements were issued, and as of May 14, 2026, there were no other material subsequent events to disclose in these unaudited condensed consolidated financial statements with the exception of the events below.
Additional borrowings:
Subsequent
to the period end, and through May 14, 2026, the Company borrowed an additional $
Warrants:
On
April 6, 2026, the Company issued a warrant to a third-party advisor in connection with an advisory agreement. The warrant is exercisable
for up to
The Company evaluated the warrants under ASC 480 and ASC 815-40 and concluded the warrants qualify for equity classification. Accordingly, the warrants will be accounted for as equity-classified share-based payment awards under ASC 718 and measured at grant-date fair value, with compensation expense recognized over the applicable service periods.
Discontinuance of sports wagering operations:
Subsequent to March 31, 2026, the Company made the decision to discontinue its sports wagering operations. As of March 31, 2026, the Company’s wagering operations remained active, no formal plan of disposal had been implemented, and the Company had not notified the Tennessee Sports Wagering Council (“SWC”), which approval is required prior to initiating a wind-down of operations.
On April 6, 2026, the Company formally notified SWC of its intent to discontinue wagering operations. Following receipt of regulatory approval in mid-April 2026, the Company initiated wind-down activities, including the cessation of wagering operations and communication with customers and vendors.
As part of the wind-down process, the Company implemented a player withdrawal program requiring customers to withdraw account balances by May 10, 2026. The Company is in the process of settling remaining player liabilities and vendor obligations in connection with the wind-down.
In addition, the Company has begun transitioning certain operational activities and vendor relationships to affiliated entities under common control.
The decision to discontinue wagering operations represents a significant strategic shift and is expected to impact the Company’s future operations. However, because these events occurred subsequent to March 31, 2026, no adjustments have been made to the accompanying financial statements.
The Company is continuing to evaluate the financial reporting implications of the wind-down, including potential classification as discontinued operations in future periods.
Following the wind-down of our sportsbook operations, we intend to transition our business model toward enterprise-focused offerings, including artificial intelligence consulting services, development of a fan engagement and data intelligence platform, and data analytics and marketing optimization solutions
| F-27 |
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
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. We are a mobile technology company that has historically focused on delivering digital sports wagering experiences through a proprietary, cloud-native platform.
We previously operated a mobile sportsbook platform in Tennessee, where we were licensed to offer mobile sports betting. In West Virginia, we previously received interim approval for an iGaming and mobile sports betting license in connection with a potential expansion of our gaming operations; however, operations never commenced, and the interim approval has since expired.
Subsequent to March 31, 2026, we initiated a wind-down of our sports wagering operations following regulatory approval from the Tennessee Sports Wagering Council (“SWC”). These operations represent substantially all of our historical revenue. We expect to complete the wind-down of these operations by the end of May 2026.
In connection with this transition, we currently estimate that we will incur costs of $2.0 million to $2.5 million, primarily related to contractual termination costs associated with technology and service provider agreements. These estimates are preliminary and subject to change as the wind-down progresses.
Following the wind-down of our sportsbook operations, we intend to transition our business model toward enterprise-focused offerings, including artificial intelligence consulting services, development of a fan engagement and data intelligence platform, and data analytics and marketing optimization solutions.
We have limited operating history in these new business areas, and there can be no assurance that we will successfully execute this strategic transformation, develop commercially viable products, secure enterprise clients, or achieve profitability sufficient to replace our historical gaming revenue.
We expect this transition to negatively impact our near-term revenue and operating results and may result in a period of reduced or limited revenue as we develop our new business lines.
On December 10, 2024, we entered into a Casino and Sportsbook Online Operations Agreement with a license holder in West Virginia. This agreement granted 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; however, operations never commenced in West Virginia, and the related Operations Agreement was not approved by the West Virginia Lottery Commission. The interim approval has since expired. Subsequent to March 31, 2026, in connection with the wind-down of our sports wagering operations, we are evaluating our plans with respect to West Virginia and related agreements, including certain contractual matters that remain in dispute. See Note 12 – Commitments and Contingencies.
Our product offering historically included a modern sportsbook with differentiated wager types, sweepstakes contests, and socially integrated features designed to enhance player engagement. We have operated in compliance with applicable regulatory frameworks in each jurisdiction.
We began operations in June 2023.
On May 7, 2025, we received regulatory approval from the state of Tennessee to launch our 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 launch. The ZenSports brand and app were discontinued on April 28, 2025.
Our business is a mobile app and online-based technology platform 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 incorporated by reference into this Quarterly 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 March 31, 2026, and 2025
Gaming Revenues and Costs of Revenues
For the three months ended March 31, 2026 and 2025, the Company generated gaming revenues of $102 thousand and $1 thousand, respectively. The $101 thousand increase in gaming revenues during the 2026 period was primarily attributable to increased operating activity following the launch of the Company’s VIP Play application in May 2025, including increased player engagement and deposit activity supported by expanded payment processing capabilities.
Revenue for the three months ended March 31, 2025 was minimal, reflecting reduced operating activity on the Company’s legacy platform. While the ZenSports application remained in service during the period, the Company had ceased further development and was transitioning to its new VIP Play application, which did not commence operations until May 2025.
For the three months ended March 31, 2026 and 2025, we had costs of revenues of $415 thousand and $143 thousand, respectively. Our costs of revenues increased by approximately $272 thousand during the three months ended March 31, 2026 as compared to the three months ended March 31, 2025 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 $1.3 million were incurred during the three months ended March 31, 2026, compared to $956 thousand during the three months ended March 31, 2025. The approximately $385 thousand increase is primarily due to increased headcount, including 3 new executives in June 2025.
Depreciation and amortization for the three months ended March 31, 2026, and 2025 were $125 thousand and $1 thousand, respectively. The increase of approximately $124 thousand is primarily attributable to amortization of the Company’s internally developed VIP Play application, which was placed into service in May 2025. Prior to being placed into service, costs associated with the development of the application were capitalized and not subject to amortization.
Sales and Marketing for the three months ended March 31, 2026, and 2025 were $124 thousand and $412 thousand, respectively. The approximately $288 thousand decrease is principally related to a shift in marketing strategy toward lower-cost digital and social media channels during the current period, resulting in reduced overall marketing spend compared to the prior year period.
General and administrative expenses for the three months ended March 31, 2026 and 2025 were $503 thousand and $456 thousand, respectively. The increase of approximately $47 thousand was primarily attributable to higher accounting and audit fees, including incremental costs associated with the Company’s auditor transition and increased involvement of audit specialists related to the valuation of derivative liabilities. The increase was also related to a new advisory agreement entered into during the period.
Other Expenses
Total other expenses for the three months ended March 31, 2026, and 2025 were $9.0 million and $3.2 million, respectively.
The approximately $5.8 million increase is primarily due to a loss on the change in fair value of the derivative liability of $8.1 million for the three months ended March 31, 2026 as compared to a loss of $2.4 million for the three months ended March 31, 2025. The derivative is related to a conversion feature associated with the line of credit and convertible debt which is remeasured each reporting period.
| 3 |
In addition, interest expense – related party for the three months ended March 31, 2026 increased by approximately $203 thousand compared to the three months ended March 31, 2025. The increase was primarily attributable to higher average outstanding borrowings under the Company’s related party line of credit during the current period.
Interest expense decreased by approximately $78 thousand during the three months ended March 31, 2026 primarily due to the debt discount being fully amortized during the three months ended December 31, 2025 for the convertible notes as well as the repayment of a $500 thousand convertible note in October 2025.
Net Loss
Our net loss for the three months ended March 31, 2026 was $11.4 million, compared to a net loss of $5.2 million for the three months ended March 31, 2025. The $6.2 million increase was driven primarily by an $8.1 million non-cash loss on the change in fair value of our derivative liability, which is remeasured each reporting period and is sensitive to changes in our common stock price and other valuation inputs. Excluding the impact of this non-cash derivative remeasurement, our net loss for the three months ended March 31, 2026 would have been approximately $3.3 million, compared to approximately $2.7 million for the three months ended March 31, 2025, with the remaining increase primarily attributable to higher salaries and wages associated with expanded headcount and higher interest expense on increased borrowings under our related party line of credit.
Results of Operations for the Nine Months Ended March 31, 2026, and 2025
Gaming Revenues and Costs of Revenues
For the nine months ended March 31, 2026 and 2025, we had gaming revenues of $178 thousand and $18 thousand, respectively. Gaming revenue for the nine months ended March 31, 2026 increased by approximately $160 thousand compared to the nine months ended March 31, 2025. The increase was primarily attributable to the launch and ramp-up of the Company’s VIP Play application in May 2025, which resulted in increased player activity and wagering volumes during the current period. In addition, the Company’s implementation of an external payment processor, including the introduction of debit card funding options, contributed to increased customer spending activity. The prior year period also included reduced operating activity as the Company transitioned between platforms, contributing to lower comparative revenues.
For the nine months ended March 31, 2026 and 2025, we had costs of revenues of $874 thousand and $347 thousand, respectively. Our costs of revenues increased by approximately $527 thousand during the nine months ended March 31, 2026 as compared to the nine months ended March 31, 2025 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 $4.2 million were incurred during the nine months ended March 31, 2026, compared to $3.0 million during the nine months ended March 31, 2025. The approximately $1.2 million increase is primarily due to increased headcount, including three new executives in June 2025.
Depreciation and amortization for the nine months ended March 31, 2026 and 2025 were $313 thousand and $955 thousand, respectively. The decrease of approximately $642 thousand was primarily attributable to amortization of the Company’s legacy ZenSports platform during the prior year period, which had a higher carrying value and was fully amortized through December 2024. In contrast, amortization in the current period relates primarily to the Company’s VIP Play application, which was placed into service in May 2025 and therefore reflects only a partial period of amortization.
Impairment of developed technology and tradename for the nine months ended March 31, 2026, and 2025 were $0 and $5.9 million, respectively. The decrease of $5.9 million is attributable to an impairment charge recognized in the prior year period related to the Company’s legacy ZenSports platform and associated tradename.
Sales and marketing expenses for the nine months ended March 31, 2026 and 2025 were $561 thousand and $920 thousand, respectively. The decrease of approximately $359 thousand was primarily attributable to a shift in marketing strategy toward lower-cost digital and social media channels during the current period, resulting in reduced overall marketing spend compared to the prior year period.
General and administrative costs for the nine months ended March 31, 2026, and 2025 were $1.9 million and $2.1 million, respectively. The approximately $196 thousand decrease was primarily due to a decrease in accounting and auditing fees during the nine months ended March 31, 2026 as compared to the nine months ended March 31, 2025 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 nine months ended March 31, 2026.
| 4 |
Other Income (Expenses)
Total other income for the nine months ended March 31, 2026 was $534 thousand and total other expense for the nine months ended March 31, 2025 was $3.3 million, respectively.
The approximately $3.8 million increase is primarily due to a gain on the change in fair value of the derivative liability of $3.0 million as compared to a loss on the change in fair value of the derivative liability of $415 thousand. 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 nine months ended March 31, 2026 decreased by approximately $208 thousand compared to the nine months ended March 31, 2025. The decrease was primarily attributable to the absence of debt discount amortization in the current period, as the related discount was fully amortized in the prior year period. This decrease was partially offset by higher average outstanding borrowings under the Company’s related party lines of credit during the current period.
Interest expense decreased by approximately $223 thousand during the nine months ended March 31, 2026 primarily due the debt discount being fully amortized during the nine months ended March 31, 2026 for the convertible notes as well as the repayment of a $500 thousand convertible note in October 2025.
Net Loss
Our net loss for the nine months ended March 31, 2026 was $7.1 million and our net loss for the nine months ended March 31, 2025 was $16.4 million.
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 include funds generated by operations, levels of accounts payable and accrued expenditures, and capital expenditures, including costs associated with internally developed software.
As of March 31, 2026, we had total current assets of $2.8 million, total current liabilities of $42.3 million, and a working capital deficit of $39.5 million. Net cash used in operating activities was $7.2 million during the nine months ended March 31, 2026, compared to $7.8 million during the nine months ended March 31, 2025. The decrease in net cash used was primarily attributable to a lower net loss in the current period and non-cash gains related to changes in the fair value of derivative liabilities. In addition, the prior year period included significant non-cash charges, including impairment of intangible assets and amortization of debt issuance costs, which did not recur in the current period. These favorable impacts were partially offset by changes in working capital, including increases in related party receivables and higher cash outflows associated with player balances, as well as changes in accrued expenses.
Net cash used in investing activities decreased by approximately $222 thousand during the nine months ended March 31, 2026 compared to the nine months ended March 31, 2025, primarily due to lower capitalized software development costs. During the prior year period, the Company was actively capitalizing development costs related to its legacy ZenSports platform, whereas in the current period development activity was reduced following the cessation of development on the legacy platform and the placement of the VIP Play application into service in May 2025.
Net cash provided by financing activities decreased by approximately $953 thousand during the nine months ended March 31, 2026 compared to the nine months ended March 31, 2025. The decrease was primarily attributable to proceeds from the issuance of common stock in the prior year period, which did not recur in the current period, as well as repayments of convertible debt during the current period.
As of March 31, 2026, the Company had a working capital deficit of $39.5 million, recurring losses from operations, and negative cash flows from operating activities. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the issuance date of these unaudited condensed consolidated financial statements.
Subsequent to March 31, 2026, the Company initiated a wind-down of its sports wagering operations following regulatory approval from the Tennessee Sports Wagering Council (“SWC”), which is expected to significantly impact future revenue-generating activities and change the Company’s future operations and capital requirements.
The Company’s ability to continue operations is dependent upon, among other things, its ability to obtain additional financing and manage operating costs during and following the wind-down process. Management’s plans include seeking additional capital through debt and/or equity financings, reducing certain operating costs as wagering activities are discontinued, and evaluating alternative business strategies. However, there can be no assurance that such financing will be available on acceptable terms, or at all.
The unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Off Balance Sheet Arrangements
As of March 31, 2026, 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.
| 5 |
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, 2026. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer and Chief Accounting Officer.
Based upon that evaluation, our Chief Executive Officer and Chief Accounting Officer concluded that, as of March 31, 2026, our disclosure controls and procedures were not effective due to the previously identified material weakness in internal control over financial reporting.
Material Weakness in Internal Control over Financial Reporting
As previously disclosed in our Form 10-K for the fiscal year ended June 30, 2025, management identified a material weakness in internal control over financial reporting related to:
| ● | Limited segregation of duties due to 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 financial reporting systems. |
Remediation Efforts
During the nine months ended March 31, 2026, management continued remediation efforts to address the identified material weakness. These efforts included:
| ● | Enhancing segregation of duties through reassignment of responsibilities and implementation of compensating controls, including independent review and approval of key transactions; | |
| ● | Implementing formal review controls and documentation requirements over significant and complex accounting areas, including revenue recognition, complex financing transactions, and income tax accounting; and | |
| ● | Strengthening information technology controls, including user access restrictions, periodic access reviews, and formalized procedures for provisioning and modifying access. |
Management has designed and implemented these enhanced controls and has performed and continued testing of their operating effectiveness through the quarter ended March 31, 2026. Based on this testing, management believes the controls are designed appropriately and are operating effectively and have significantly improved the Company’s internal control over financial reporting. However, the controls have not been in operation for a sufficient period of time to conclude that the material weakness has been fully remediated.
Changes in Internal Control over Financial Reporting
During the quarter ended March 31, 2026, there were changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. These changes relate to the remediation activities described above, including the implementation of enhanced review controls, compensating controls for segregation of duties, and improvements to information technology controls.
| 6 |
PART II - OTHER INFORMATION
Item 6. Exhibits
| Incorporated By Reference | ||||||||
Exhibit Number |
Exhibit Description | Form | As Exhibit |
Filing Date | ||||
| 3.1 | Amended and Restated Articles of Incorporation | 10-K | 3.1 | 09/24/2024 | ||||
| 3.2 | Certificate of Designation of Series B Convertible Preferred Stock | 8-K | 3.1 | 01/12/2022 | ||||
| 3.3 | Amended and Restated Bylaws | 10-Q | 3.3 | 11/08/2024 | ||||
| 4.1* | Form of Common Stock Purchase Warrant of VIP Play, Inc. issued to third party advisor | |||||||
| 31.1* | Certification of Principal Executive Officer filed pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |||||||
| 31.2* | Certification of Principal Financial Officer filed pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |||||||
| 32.1** | Certification of Chief Executive Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |||||||
| 32.2** | Certification of Principal Financial Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |||||||
| 101.INS | Inline XBRL Instance Document | |||||||
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | |||||||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |||||||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |||||||
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |||||||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |||||||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | |||||||
| * | Filed herewith. |
| ** | Furnished herewith. |
| 7 |
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, 2026 | ||
| By: | /s/ Amy Weiss | |
| Amy Weiss | ||
| Chief Accounting Officer | ||
| (Principal Financial Officer) | ||
| 8 |