VIP Play : Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

Published: 2026-05-15 06:04:13 ET VIPZ

Published on 05/15/2026 at 06:04 am EDT

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.

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.

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.

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.

Disclaimer

Vip Play Inc. published this content on May 15, 2026, and is solely responsible for the information contained herein. Distributed via Public Technologies (PUBT), unedited and unaltered, on May 15, 2026 at 10:03 UTC.