Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by the words "believes," "project," "expects," "anticipates," "estimates," "intends," "strategy," "plan," "may," "will," "would," "will be," "will continue," "will likely result," and similar expressions. We intend such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and are including this statement for purposes of complying with those safe-harbor provisions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise. Further information concerning our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC.

Overview

We are a next-generation mobile sports wagering company focused on delivering secure, innovative, and engaging digital gaming experiences. We operate a proprietary, cloud-native technology platform currently live in Tennessee, where we are licensed to offer mobile sports betting. In West Virginia, we hold an interim iGaming and mobile sports betting license, positioning us for future expansion as we prepare for launch.

Our product offering includes a modern sportsbook with differentiated wager types, sweepstakes contests, and socially integrated features designed to enhance player engagement. We are committed to responsible gaming and operate in full compliance with applicable regulatory frameworks in each jurisdiction.

We recently began exploring opportunities in the non-gaming digital entertainment space as part of our long-term growth strategy. These initiatives are in the early stages, have not generated revenue to date, and are not material to our current financial results. Accordingly, we continue to view our business as a single operating segment. We will continue to evaluate the impact of these initiatives as they develop and expand.

We began operations in June 2023.

On December 10, 2024, we entered into a Casino and Sportsbook Online Operations Agreement with a license holder in West Virginia. This agreement grants us the right to seek and obtain licenses from the appropriate governing authority to offer and operate interactive online gaming services in West Virginia via the Internet, mobile or other remote or electronic device or data network. On March 31, 2025, we received interim approval on our West Virginia i-Gaming and Sports Wagering Management Service Provider License. As of September 30, 2025, operations have not yet commenced in West Virginia and the Casino and Sportsbook Online Operations Agreement had not yet been approved by the state of Virginia.

On May 7, 2025, we received regulatory approval from the state of Tennessee to launch our new VIP Play brand application. On May 8, 2025 we began a "soft launch" of the VIP Play application and on May 12, 2025, we executed our official VIP Play app launch. The ZenSports brand and app was sunsetted on April 28, 2025.

Our current business is a mobile app and online-based technology company with no demand for a physical storefront location. The website for our business is https://www.viplayinc.com. The information on our website is not made a part of this Annual Report. Our headquarters address is: 8400 W. Sunset Rd., Suite 300 Las Vegas, NV 89113. Our phone number is: (866) 783-9435.

Results of Operations for the Three Months Ended September 30, 2025, and 2024

Gaming Revenues and Costs of Revenues

For the three months ended September 30, 2025 and 2024, we had gaming revenues of $5 thousand and negative gaming revenues of $4 thousand, respectively. Our gaming revenues increased by approximately $9 thousand during the three months ended September 30, 2025 as compared to the three months ended September 30, 2024. During the current quarter, we began utilizing an external payment processor which increased betting activity due to the addition of debit cards.

For the three months ended September 30, 2025 and 2024, we had costs of revenues of $191 thousand and $96 thousand, respectively. Our costs of revenues increased by approximately $95 thousand during the three months ended September 30, 2025 as compared to the three months ended September 30, 2024 primarily due to increased costs related to platform fees incurred in connection with the new Player Account Management Services Agreement entered into in February 2025.

Operating Expenses

Salaries and wages of $1.5 million were incurred during the three months ended September 30, 2025, compared to $926 thousand during the three months ended September 30, 2024. The approximate $574 thousand increase is primarily due to increased headcount, including 3 new executives in June 2025.

Depreciation and amortization for the three months ended September 30, 2025, and 2024 were $83 thousand and $472 thousand, respectively. The approximate $389 thousand decrease is principally due a higher value allocated to our former ZenSports app which was sunsetted in December 2024 as compared to the value of the new VIP Play app which was placed into service in May 2025.

Sales and Marketing for the three months ended September 30, 2025, and 2024 were $279 thousand and $116 thousand, respectively. The approximate $163 thousand increase is principally related to increased billboards and increased podcasts and social media marketing during the three months ended September 30, 2025 as compared to the three months ended September 30, 2024.

General and administrative costs for the three months ended September 30, 2025, and 2024 were $803 thousand and $989 thousand, respectively. The approximate $186 thousand decrease was primarily due to a decrease in accounting and auditing fees during the three months ended September 30, 2025 as compared to the three months ended September 30, 2024 due the timing of audit services provided. The decrease was also due to a decrease in consulting fees for advisory agreements that ended during the year ended June 30, 2025, as well as a decrease in legal fees due to higher fees in the comparative period related to the review of potential new state jurisdictions for expansion of our sports betting operations. The total decrease was partially offset by an increase in operating expense due to the recognition of an allowance for estimated losses related to the payment processing incident that occurred during the three months ended September 30, 2025.

During the quarter, we began investing in initiatives outside of our core sports wagering operations, including entry into the non-gaming digital entertainment space. These efforts are currently in an early stage of development and have not generated revenue to date. Costs associated with these initiatives were not material for the quarter, and management does not currently evaluate them as a separate operating segment. We continue to view our business as a single operating segment for financial reporting purposes.

As these non-gaming activities mature, we expect to continue assessing their impact on our overall business. If these initiatives become material, we may determine that they represent a distinct operating segment in the future, and we would provide expanded disclosures at that time.

Other Expenses

Total other expenses for the three months ended September 30, 2025, and 2024 were $585 thousand and $2.7 million, respectively.

The approximate $2.1 million decrease is primarily due to a gain on the change in fair value of the derivative liability of $1.8 million from September 30, 2024 to September 30, 2025. The derivative is related to a conversion feature associated with the line of credit and convertible debt which is remeasured each reporting period.

In addition, interest expense - related party for the three months ended September 30, 2025 decreased by approximately $284 thousand compared to the three months ended September 30, 2024. The decrease was due to the debt issuance costs being fully amortized into related party interest expense during the three months ended September 30, 2025. This decrease was partially offset by an increase in interest expense on the related party lines of credit due to an increase in principal balance on the lines during the three months ended September 30, 2025.

Net Loss

Our net loss for the three months ended September 30, 2025 and 2024 was $3.5 million and $5.3 million, respectively.

Liquidity and Capital Resources

Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis. Significant factors in the management of liquidity are funds generated by operations, levels of accounts payable and accrued expenditures, and capital expenditures, including the costs associated with internally developed software and attaining Sports Gaming Operator licenses.

As of September 30, 2025, we had total current assets of $2.8 million, total current liabilities of $38.2 million, and a total working capital deficit of $35.4 million. Net cash used in operating activities was $2.5 million during the three months ended September 30, 2025, compared to $2.3 million during the three months ended September 30, 2024. The increase in net cash used primarily reflects lower non-cash adjustments, including decreased depreciation and amortization expense and a smaller loss recognized on derivative liabilities, as well as higher cash outflows related to player balances during the current period. These factors more than offset the benefit of a reduced net loss and favorable changes in accrued expenses.

Net cash used in investing activities increased by approximately $94 thousand during the three months ended September 30, 2025 as compared to the three months ended September 30, 2024 primarily due to increased gaming and non-gaming capital additions.

Net cash provided by financing activities increased by approximately $238 thousand during the three months ended September 30, 2025, compared to the three months ended September 30, 2024. The increase is primarily due to proceeds from a convertible note issued during the three months ended September 30, 2025 as well as increased draws on the lines of credit, and is partially offset by repayments to the note payable during the current period.

Since our current business has a limited history of generating revenues or operating successfully, we will be dependent upon, among other things, achieving a level of profitable operations and receiving additional cash infusions including securing additional lines of credit and raising additional capital through the placement of preferred and/or common stock in order to implement our business plan. Because of our limited operating history, it is difficult to predict our capital needs on a monthly, quarterly, or annual basis. We will have limited capital available to us if we are unable to raise money through private equity offerings or find alternate forms of financing.

We expect our revenues to increase over time but we lack sufficient history to accurately forecast the amount or time required to generate sufficient revenues to cover our current or future burn rate.

We expect to incur significant increases in operating costs. The expected significant increases in costs will include, but not be limited to, costs relating to license maintenance, technology development and maintenance, sales and marketing, labor for both existing and new personnel, and other operating cost increases due to the current inflationary market place we operate in. The expected increase in operating costs is a byproduct of transitioning from a development stage business to a revenue generating operating business.

Off Balance Sheet Arrangements

As of September 30, 2025, we had no off-balance sheet arrangements.

Going Concern

As of September 30, 2025, we had a working capital deficit of $35.4 million. We had a net loss from operations of $3.5 million for the three months ended September 30, 2025. We do not expect significant revenues and we expect to incur significant increases in operating costs in the short term as we commence our sports betting operations. The expected significant increases in costs will include, but not be limited to, costs relating to obtaining gaming licenses, technology development, sales and marketing, and legal and professional fees.

These conditions raise substantial doubt about our ability to continue as a going concern for a period of one year from the issuance of these unaudited condensed consolidated financial statements. Because of these conditions, we will require additional working capital to develop business operations. Management's plans are to raise additional working capital through the sale of debt and/or equity instruments as well as to generate revenues. There are no assurances that we will be able to achieve the level of revenues adequate to generate sufficient cash flow from operations to support our working capital requirements. To the extent that funds generated are insufficient, we will have to raise additional working capital. No assurance can be given that additional financing will be available, or if available, will be on terms acceptable to us. If adequate working capital is not available, we may not be able to continue our operations.

The unaudited condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset-carrying amounts or the amount and classification of liabilities that might be necessary should we be unable to continue as a going concern.