美國
證券交易委員會
華盛頓特區 20549
表單
截至季度期
或
過渡期爲從 ____________ 到 ____________
委員會檔案編號：
高賭注科技公司
(註冊人名稱如章程中所列)
| | | |
| (州或其他管轄區的 | (美國國稅局僱主 |
| | | |
| (主要行政辦公室地址) | (Zip Code) |
(
（註冊人電話號碼，包括區號）
根據法案第12(b)節註冊的證券：
| 每個類別的標題 | 交易標的 | 註冊的每個交易所的名稱 | ||
| | | |
請勾選註冊人是否（1）在過去12個月內（或者註冊人被要求提交此類報告的較短期間內）已按1934年證券交易法第13條或第15(d)條的要求提交了所有必要的報告，及（2）在過去90天內是否受到此類提交要求的約束。是 ☐
請勾選註冊人是否在過去12個月內（或註冊人被要求提交此類文件的較短期間內）已按規章S-t第405條（本章第232.405條）的要求電子提交了每個必須提交的互動數據文件。
請通過勾選的方式指明註冊人是否爲大型加速報告公司、加速報告公司、非加速報告公司、較小報告公司或「新興成長公司」。有關「大型加速報告公司」、「加速報告公司」、「較小報告公司」和「新興成長公司」的定義，請參閱交易法第120億.2條。
| 大型加速報告公司 ☐ | 加速報告公司 ☐ | | 較小報告公司 |
| 成長型企業 |
如果是新興成長型企業，請勾選複選標記，表明註冊者已選擇不使用延長過渡期來符合根據證券交易法第13(a)條規定提供的任何新財務會計準則。
請勾選以下選項以指示註冊人是否爲外殼公司(根據交易所法規則12b-2定義)。是
截至2024年12月4日，註冊公司的
高賭注科技公司及其子公司
關於表格10-Q的季度報告
目錄
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| 第五項。 |
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| 第六項。 |
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關於前瞻性陳述的注意事項
本季度10-Q表格報告包含有關我們及我們的行業的前瞻性陳述，這些陳述涉及重大風險和不確定性。除本季度10-Q表格報告中包含的歷史事實陳述外，所有陳述，包括有關我們未來經營成果或財務狀況、業務策略以及管理層未來運營的計劃和目標的陳述，均爲前瞻性陳述。在某些情況下，這些陳述可以通過使用前瞻性術語識別，例如「認爲」、「估計」、「預期」、「期望」、「計劃」、「打算」、「可能」、「可以」、「會」、「應該」、「大約」、「項目」或「潛在」，或者這些術語或類似術語的否定形式或其他變體，儘管並非所有前瞻性陳述都包含這些詞。
前瞻性陳述涉及風險和不確定性，因爲它們與與High Roller Technologies, Inc.、我們的行業和/或可能會發生或不會發生的經濟或其他一般條件相關的事件、發展和情況有關，這些事件可能在未來的較長或較短時間內以超出或低於預期的程度發生。此外，即使未來的事件、發展和情況與本報告中包含的前瞻性陳述一致，它們也可能無法預測未來週期的結果或發展。儘管我們相信我們在本報告中包含的每個前瞻性陳述都有合理的依據，但此類信息可能有限或不完整。我們的陳述不應被解讀爲我們已對所有相關信息進行了詳盡的調查或審查。
前瞻性聲明並不保證未來的業績，我們的實際運營結果、財務狀況和流動性，以及我們所處行業的發展，可能會因以下因素與本報告中包含的前瞻性聲明有重大差異：
| ● |
我們在全球娛樂和ARVR遊戲行業中有效競爭的能力; |
| ● |
我們管理當前運營和成功收購整合新業務的能力； |
| ● |
我們獲得和維護與ARVR遊戲管理機構許可的能力； |
| ● |
我們無法識別遞延稅資產和稅收虧損結轉； |
| ● |
市場和全球貨幣條件以及我們無法控制的經濟因素，以及一般經濟條件（包括通貨膨脹和上升的利率期貨）對我們的流動性、運營和人員的潛在影響； |
| ● |
在我們所經營的行業中，來自全球其他公司的顯著競爭和競爭壓力； |
| ● |
我們未來籌集資金的能力; |
| ● |
我們在留住或招聘官員、關鍵員工或董事方面的成功； |
| ● |
在外國做業務所帶來的風險； |
| ● |
影響我們產品、稅收、國際貿易法規或其他業務方面的立法、規章或其他政府行爲； |
| ● |
我們營銷工作的成本和效果，以及我們推廣品牌的能力、未來對業務的投資、預期的資本支出，以及我們對資本需求的估計、我們有效地與現有競爭者和新市場參與者競爭的能力； |
| ● |
公司的信息科技系統的性能及其維護數據安防的能力； |
| ● |
訴訟及我們獲取和維護所需知識產權以充分保護我們產品的能力，以及我們避免侵犯或以其他方式違反第三方知識產權的能力； |
| ● |
以及我們不時在證券交易委員會的文件中所描述的其他風險。 |
我們在本季度10-Q表格的季度報告中所含的前瞻性聲明主要基於我們當前的預期、估計、預測和關於未來事件及趨勢的判斷，我們相信這些將可能影響我們的業務、運營結果、財務控件和前景。儘管我們認爲我們對本季度10-Q表格中每一項前瞻性聲明都有合理的依據，但我們無法保證在前瞻性聲明中反映的未來結果、活動水平、績效或事件和情況能夠實現或根本發生。前瞻性聲明中描述的事件的結果受到「風險因素」以及本季度10-Q表格其他部分中所述的風險、不確定性和其他因素的影響。此外，我們在一個競爭激烈和快速變化的環境中運營。新風險和不確定性不時出現，我們無法預測所有可能影響本季度10-Q表格中前瞻性聲明的風險和不確定性。前瞻性聲明中反映的結果、事件和情況可能無法實現或發生，實際結果、事件或情況可能與前瞻性聲明中描述的情況有實質性差異。
我們在本報告中所作的任何前瞻性聲明僅針對作出聲明之日的事件。我們沒有義務更新本《10-Q季度報告》中所作的任何前瞻性聲明，以反映本季度報告日期之後的事件或情況，或反映新信息、實際結果、修訂的預期或意外事件的發生，除非適用法律要求。
在本季度報告表格10-Q中，提到的「我們」、「我們公司」、「我們的」和「公司」指的是High Roller Technologies, Inc.及其直接和間接子公司。
| 截至 | 截至 | |||||||
| 九月三十日 | 12月31日 | |||||||
| (以千爲單位，除股票和每股數據外) | 2024 | 2023 | ||||||
| (未經審計) | ||||||||
| 資產 | ||||||||
| 流動資產 | ||||||||
| 現金及現金等價物 | $ | $ | ||||||
| 受限制現金 | ||||||||
| 預付款項及其他流動資產 | ||||||||
| 總流動資產 | ||||||||
| 應收關聯方 | ||||||||
| 遞延發行成本 | ||||||||
| 物業及設備（淨額） | ||||||||
| 營運租賃使用權資產，淨值 | ||||||||
| 無形資產，淨值 | ||||||||
| 其他資產 | ||||||||
| 總資產 | $ | $ | ||||||
| 負債和股東（赤字）權益 | ||||||||
| 流動負債 | ||||||||
| 應付賬款 | $ | $ | ||||||
| 應付費用 | ||||||||
| 玩家負債 | ||||||||
| 由於附屬公司 | ||||||||
| 短期無擔保應付款給股東 | ||||||||
| 運營租賃義務，當前 | ||||||||
| 總流動負債 | ||||||||
| 其他負債 | ||||||||
| 運營租賃義務，非當前 | ||||||||
| 總負債 | ||||||||
| 股東（赤字）權益 | ||||||||
| 優先股，$ 面值； 授權股份; 截至2024年9月30日和2023年12月31日已發行和流通的股份 | ||||||||
| 普通股，$ 面值； 授權股份; 股份和 截至2024年9月30日和2023年12月31日的已發行和流通股份 | ||||||||
| 額外實收資本 | ||||||||
| 累計虧損 | ( | ) | ( | ) | ||||
| 累計其他綜合收益 | ||||||||
| 股東（負債）的總權益 | ( | ) | ||||||
| 總負債和股東（負債）權益 | $ | $ | ||||||
請參見附帶的未經審計的簡明合併基本報表的說明。
高賭注科技公司及其子公司
濃縮的綜合收益表及綜合損益（虧損）
(未經審計)
| 截至三個月 |
截至九個月 |
|||||||||||||||
| 九月三十日 |
九月三十日 |
|||||||||||||||
| (以千爲單位，除股份及每股數據外) |
2024 |
2023 |
2024 |
2023 |
||||||||||||
| 營業收入 |
$ | $ | $ | $ | ||||||||||||
| 營業費用 |
||||||||||||||||
| 直接營業費用： |
||||||||||||||||
| 關聯方 |
||||||||||||||||
| 其他 |
||||||||||||||||
| 一般及行政： |
||||||||||||||||
| 關聯方 |
||||||||||||||||
| 其他 |
||||||||||||||||
| 廣告和促銷： |
||||||||||||||||
| 關聯方 |
||||||||||||||||
| 其他 |
||||||||||||||||
| 產品和軟件開發： |
||||||||||||||||
| 關聯方 |
||||||||||||||||
| 其他 |
||||||||||||||||
| 總營業費用 |
||||||||||||||||
| 運營損失 |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| 其他費用 |
||||||||||||||||
| 利息費用，淨額 |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| 其他收入（費用） |
( |
) | ||||||||||||||
| 其他總費用 |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| 稅前虧損 |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| 所得稅費用 |
||||||||||||||||
| 淨損失 |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| 其他綜合收益 |
||||||||||||||||
| 外幣折算調整 |
( |
) | ( |
) | ||||||||||||
| 綜合損失 |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| 每股普通股淨損失： |
||||||||||||||||
| 每股普通股淨虧損 - 基本和攤薄 |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| 加權平均流通普通股數量 - 基本和攤薄 |
||||||||||||||||
請參見附帶的未經審計的簡明合併基本報表的說明。
高賭注科技公司及其子公司
簡化合並股東財務報表’ （虧損）權益
(未經審計)
| 普通股 |
||||||||||||||||||||||||
| 累計 |
總計 |
|||||||||||||||||||||||
| 額外 |
其他 |
股東的 |
||||||||||||||||||||||
| 實收資本 |
累計 |
綜合的 |
股權 |
|||||||||||||||||||||
| (以千爲單位，除股份外) |
股份 |
金額 |
資本 |
赤字 |
收入 |
(赤字) |
||||||||||||||||||
| 2022年12月31日 |
$ | $ | $ | ( |
) | $ | $ | ( |
) | |||||||||||||||
| 基於股份的薪酬 |
— | |||||||||||||||||||||||
| 淨損失 |
— | ( |
) | ( |
) | |||||||||||||||||||
| 外幣折算 |
— | ( |
) | ( |
) | |||||||||||||||||||
| 2023年3月31日 |
( |
) | ( |
) | ||||||||||||||||||||
| 通過出資結算關聯應付款 |
||||||||||||||||||||||||
| 基於股份的薪酬 |
— | |||||||||||||||||||||||
| 淨損失 |
— | ( |
) | ( |
) | |||||||||||||||||||
| 外幣折算 |
— | |||||||||||||||||||||||
| 2023年6月30日 |
( |
) | ||||||||||||||||||||||
| 因限制性股票單位歸屬而發行的股份 |
||||||||||||||||||||||||
| 基於股份的薪酬 |
— | |||||||||||||||||||||||
| 淨損失 |
— | ( |
) | ( |
) | |||||||||||||||||||
| 外幣折算 |
— | ( |
) | ( |
) | |||||||||||||||||||
| 2023年9月30日 |
$ | $ | $ | ( |
) | $ | $ | |||||||||||||||||
| 2023年12月31日 |
$ | $ | $ | ( |
) | $ | $ | |||||||||||||||||
| 用於限制性股票單位歸屬的股票 |
||||||||||||||||||||||||
| 基於股份的薪酬 |
— | |||||||||||||||||||||||
| 淨損失 |
— | ( |
) | ( |
) | |||||||||||||||||||
| 外幣折算 |
— | ( |
) | ( |
) | |||||||||||||||||||
| 2024年3月31日 |
( |
) | ||||||||||||||||||||||
| 用於限制性股票單位歸屬的股票 |
||||||||||||||||||||||||
| 基於股份的薪酬 |
— | |||||||||||||||||||||||
| 淨損失 |
— | ( |
) | ( |
) | |||||||||||||||||||
| 外幣折算 |
— | ( |
) | ( |
) | |||||||||||||||||||
| 2024年6月30日 |
( |
) | ( |
) | ||||||||||||||||||||
| 爲限制性股票單位的歸屬而發行的股票 |
||||||||||||||||||||||||
| 基於股份的薪酬 |
— | |||||||||||||||||||||||
| 淨損失 |
— | ( |
) | ( |
) | |||||||||||||||||||
| 外幣折算 |
— | |||||||||||||||||||||||
| 2024年9月30日 |
$ | $ | $ | ( |
) | $ | $ | ( |
) | |||||||||||||||
請參見附帶的未經審計的簡明合併基本報表的說明。
(未經審計)
| 截至九個月 |
||||||||
| 九月三十日 |
||||||||
| (以千爲單位) |
2024 |
2023 |
||||||
| 經營活動產生的現金流 |
||||||||
| 淨損失 |
$ | ( |
) | $ | ( |
) | ||
| 調整淨虧損與經營活動使用的現金的折算： |
||||||||
| 攤銷和折舊 |
||||||||
| 匯率期貨收益 |
( |
) | ( |
) | ||||
| 非現金利息費用 |
||||||||
| 非現金租賃費用 |
||||||||
| 待繳稅款的變動 |
||||||||
| 基於股份的薪酬 |
||||||||
| Ellmount壓力位清算損失 |
||||||||
| 經營資產和負債的變動： |
||||||||
| 應收/應付關聯方 |
||||||||
| 預付款項及其他流動資產 |
( |
) | ||||||
| 其他資產 |
( |
) | ||||||
| 應付賬款 |
( |
) | ||||||
| 應付費用 |
( |
) | ||||||
| 玩家負債 |
||||||||
| 其他負債 |
( |
) | ||||||
| 經營租賃負債 |
( |
) | ||||||
| 經營活動產生的淨現金（使用）提供 |
( |
) | ||||||
| 投資活動產生的現金流量 |
||||||||
| 對資本化軟件的投資 |
( |
) | ( |
) | ||||
| 購買房地產和設備 |
( |
) | ( |
) | ||||
| 投資活動中使用的淨現金 |
( |
) | ( |
) | ||||
| 融資活動產生的現金流 |
||||||||
| 遞延發行成本支付 |
( |
) | ( |
) | ||||
| 債務發行所得 |
||||||||
| Ellmount壓力位的清算 |
( |
) | ||||||
| 融資活動所使用的淨現金（或提供的淨現金） |
( |
) | ||||||
| 匯率變化對現金、現金等價物和受限現金的影響 |
( |
) | ||||||
| 現金、現金等價物和限制性現金的淨變動 |
( |
) | ( |
) | ||||
| 現金、現金等價物和限制性現金 - 期初餘額 |
||||||||
| 現金、現金等價物和限制性現金 - 期末餘額 |
$ | $ | ||||||
| 現金流量的補充披露： |
||||||||
| 支付的稅款 |
$ | $ | ||||||
| 非現金融資活動： |
||||||||
| 關聯方債務轉換爲普通股 |
$ | $ | ||||||
| 以租賃義務交換使用權資產的獲得 |
$ | $ | ||||||
請參見附帶的未經審計的簡明合併基本報表的說明。
High Roller Technologies, Inc.（「公司」或「High Roller」）於 2021年12月21日， 旨在尋求在美國證券交易所進行首次公開募股。High Roller是Ellmount Entertainment Ltd（「娛樂」）的直接母公司。娛樂公司總部位於馬耳他，已運營超過十年，並在域名『casinoroom.com』下，依據馬耳他遊戲管理局和瑞典遊戲管理局頒發的許可，提供全球客戶的在線賭場遊戲業務。
娛樂的子公司
Wowly NV（「Wowly」）是娛樂的全資子公司。
Wowly，在庫拉索組織，代表娛樂管理某些與互聯網相關的廣告服務。
Ellmount 壓力位 SA（「壓力位」），之前位於哥斯達黎加，爲 娛樂 提供服務，這些服務目前由 Lunar Ventures Limited（「風險投資」）提供，如下所述，在其關閉之前 首先 的季度 2024.
Deep Dive Holdings LTD，註冊於馬耳他， 2024年9月， 作爲我們合併的馬耳他運營和服務實體的控股公司，並且擁有 無 相關的運營。
Highroller的子公司
在 2022年3月， 公司收購了在英屬維爾京群島法律下注冊的HR娛樂有限公司，該公司擁有在全球範圍內運營HighRoller.com域名的許可，HR娛樂因此成爲公司的全資子公司。
在 2023年5月30日， Ventures在馬耳他註冊。Ventures提供的服務主要包括客戶支持、激活和留存、風險管理、支付和欺詐管理、Facebook維護、電話營銷以及每月支持交易報告。
在 2024年2月15日 Interstellar Entertainment N.V. 在庫拉索註冊成立，主要目的是擴大我們目前由全資子公司HR Entertainment持有的庫拉索子許可證，並申請直接向庫拉索遊戲管理局申請ARVR遊戲許可證。庫拉索遊戲管理局已經要求所有申請實體必須在庫拉索註冊才能獲得ARVR遊戲許可證。在 2024年3月 Interstellar Entertainment N.V. 是公司在庫拉索註冊的全資子公司，向庫拉索遊戲管理局申請獲得許可證，並在 2024年7月 獲得許可證 號 OGL/2024/1042/0564 運營 highroller.com 和 fruta.com 域名。
反向股票分割
在 2024年1月16日， 公司的董事會批准並且股東批准了一個 1-對-
票據 2 — 重要會計政策摘要
公司的完整會計政策在 註釋中描述 2 在公司截至 2023年12月31日的合併基本報表及附註中提交給SEC的S-1/A在 2024年10月7日。 自 2023年12月31日, 公司的重要會計政策已經發生了 無 重大變更。
編制基礎和合並原則
隨附的未經審計的簡明合併財務報表包括High Roller Technologies, Inc.及其全資子公司的賬目。合併後，所有公司間帳戶和交易均已清除。隨附的未經審計的簡明合併財務報表是根據美國普遍接受的中期財務信息會計原則（「美國公認會計原則」）以及Form的指示編制和列報的 10-問答和文章 8法規 S-X 並根據美國證券交易委員會（「SEC」）的中期報告規則和條例。在這些規則允許的情況下，可以壓縮或省略美國公認會計原則通常要求的某些腳註和財務信息。截至的簡明合併資產負債表 2023 年 12 月 31 日，源自經審計的合併財務報表，但確實如此 不 包括美國公認會計原則要求的所有披露。本中期報告中包含的信息應與公司截至年度的經審計的合併財務報表及其附註一起閱讀 2023年12月31日， 正如之前向美國證券交易委員會提交的那樣。
管理層認爲，這些未經審計的簡明合併基本報表是在與公司的年度合併基本報表及其附註相同的基礎上編制的，幷包括所有調整，僅由被認爲對公正呈現公司財務狀況和經營成果所必需的正常經常性調整組成。所呈現的中期經營成果是 不 不一定表明完整財政年度預期的結果。
持續經營
公司淨營運資本缺口爲$
公司的未經審計的合併財務報表是基於其將繼續作爲一個持續經營主體的假設，這意味着在正常業務過程中實現資產和償還負債。公司歷史上通過關聯公司及相關方的持續財務支持來滿足其營運資金需求。公司能否繼續作爲持續經營主體，取決於其獲得必要融資的能力，以滿足其持續的義務並在到期時償還因正常業務運營所產生的負債，資助其業務活動的發展和擴展，並在未來產生可持續的運營利潤和現金流。
由於這些因素， 截止到2024年9月30日， 管理層已經得出結論，關於公司能否持續經營存在重大疑慮。公司在這些簡明合併基本報表發佈之日起的 12 個月內是否能夠持續經營取決於其是否能夠從運營中產生足夠的現金流以滿足其義務， 不 至今該公司已能做到這一點，並且獲得額外的資本融資 可能 必要的融資，其中可能存在 無 確保公司在這些努力中將會成功。公司的獨立註冊公共會計師事務所，在其對我們截至財年的合併基本報表的報告中， 2023年12月31日， 也對我們作爲持續經營能力的能力表示了重大懷疑。附帶的合併基本報表不 不 包括可能因這種不確定性而導致的任何調整。
在 2024年10月 公司完成了首次公開募股，並在紐交所上市，籌集了約$
由於市場條件的不確定性，導致公司在獲得更多資金方面的能力存在疑問， 無 保證公司能夠在必要時以可接受的條款獲得額外融資，以繼續開展和發展業務。
如果現金資源不足以滿足公司的持續現金需求，公司將需要縮減或停止其運營，或者如有可能通過戰略聯盟或合資企業獲得資金，這可能會要求公司放棄對ARVR遊戲許可證和/或運營的權利和/或控制權，或者完全停止運營。
風險與不確定性
公司的業務和運營對全球一般業務和經濟控件非常敏感。這些控件包括短期和長期的利率期貨、通貨膨脹、債務和股票資本市場的波動、現金轉移規則和限制，以及世界經濟的一般控件。超出公司控制的許多因素可能導致這些控件的波動。一般業務和經濟控件的不利發展可能對公司的財務控件和運營結果產生重大不利影響。
公司的業務和運營也對不斷變化的在線ARVR遊戲監管和許可要求敏感。此外，公司還與許多目前擁有廣泛資金的企業、市場營銷和銷售業務的公司競爭。公司 可能 將無法成功地與這些公司競爭。公司的行業板塊特點是科技和市場需求的快速變化。因此，公司的產品、服務或專業知識 可能 可能會變得過時或難以出售。公司的未來成功將取決於其適應科技進步、預見客戶和市場需求以及增強其正在開發的當前科技的能力。
估計的使用
編制未經審計的簡明合併基本報表以符合美國公認會計原則，管理層需要做出判斷、估計和假設，這些判斷、估計和假設會影響會計政策的應用以及資產、負債、營業收入和費用的報告金額。其中一些判斷可能是主觀和複雜的，因此，實際結果可能在不同的假設或條件下與這些估計存在重大差異。管理層基於歷史經驗和與整體基本報表相關的各種被認爲合理的假設來做出其估計，這些估計的結果構成了判斷資產和負債賬面價值的基礎， 不 從其他來源可以清楚地看出。管理層定期評估開發估計所使用的關鍵因素和假設，利用當前可用的信息、事實和情況的變化、歷史經驗和合理的假設。經過這種評估後，如果認爲合適，則會相應調整這些估計。實際結果可能與這些估計存在差異。重大估計包括與潛在法律和其他負債的應計假設、託管資金的金額的回收、無形資產的實現、基於股份的補償、應計獎金、假設借款利率和遞延稅務資產的實現有關的估計。
現金及現金等價物和受限制現金
現金及現金等價物由流動的支票帳戶和具有原始到期日的即刻訪問互聯網銀行帳戶組成， 九十天或更短時間，且面臨價值變化的風險微乎其微。公司至今未因我們的銀行業務實踐而遭受任何損失。 不
在合併資產負債表中，法律上限制提取或使用的現金及現金等價物，按適用情況被分類爲流動或非流動限制現金。
娛樂和人力資源娛樂與各種中介方保持單獨帳戶，以將客戶的互動ARVR遊戲帳戶中的現金與用於運營活動的現金分開。娛樂在每個期間結束時所稱的玩家資金被分類爲限制現金。玩家資金包括在互動ARVR遊戲提款中已由玩家發起但在每個期間結束時仍在待處理的現金金額，以及在每個期間結束時尚未結算的任何賭注的價值。
D用戶體驗 F只讀存儲器 A附屬公司
應收關聯公司的款項包括預計從某些共同控制的關聯公司收回的金額。應收款項反映了公司根據內部服務安排記錄的收入，用於維護和運營iCasino平台，代表互動公司。截止到 2024年9月30日 和 2023年12月31日， 應收關聯公司主要反映來自Spike Up和Happy Hour 娛樂控股公司的款項（見備註 12）。公司定期評估應收關聯公司的款項的可收回性，併爲預計收回的款項建立備抵。 不 否 在合併基本報表中記錄了所呈現期間的津貼。
遞延發行成本
遞延發行成本包括與股權融資交易相關的付款，包括法律費用。這些成本被遞延，並在公司首次公開募股完成時計入額外實收資本。 三 截至月份 十二月 31, 2024 與公司首次公開募股的完成有關 於2024年10月。
由於附屬機構
由於關聯方包括公司欠某些關聯方和附屬公司的款項。應付給關聯方的金額 可能 包括公司對關聯方或附屬公司員工提供的服務的付款，或對關聯方或附屬公司代表公司支付的款項的報銷。
樂租賃
根據《租賃（ASC主題）》，公司在開始時確定安排是否爲租賃。 842使用權（「ROU」）資產和租賃負債在開始日期確認，基於租賃期限內剩餘租賃付款的現值。在此計算中，公司僅考慮在開始時已固定和可確定的付款。由於公司的大多數租賃不 不 提供隱含利率，公司在確定租賃付款的現值時，根據開始日期可用的信息使用增量借款利率。增量借款利率是基於公司對其信用評級的理解的假設利率。使用權資產還包括在開始前支付的任何租賃付款，並記錄在扣除收到的任何租賃激勵後的淨值。公司的租賃條款 可能 包括在確定公司會合理地行使這些選項時延長或終止租賃的選擇權。當確定行使這些選項的可能性時，公司考慮基於合同、資產、實體和市場的因素。公司的租賃協議 可能 包含變量成本，如公共區域維護、保險、房地產稅或其他費用。可變租賃成本在合併運營報表中按發生時計入費用。公司的租賃協議通常不 不 包含任何殘餘價值保證或限制性契約。
The right-of-use asset components of operating leases are included in operating leases, right-of-use assets, net in the condensed consolidated balance sheets, while the current portion of operating lease liabilities are included in operating lease obligation, current in current liabilities, and the long-term portion of operating lease liabilities is included in operating lease obligation, non-current in non-current liabilities in the condensed consolidated balance sheets.
Foreign Currency and Foreign Exchange Risk
The unaudited condensed consolidated financial statements are presented in United States Dollars ($), which is the Company’s reporting currency.
Foreign currency exchange risk is the risk that the Company’s results of operations and/or financial condition could be impacted by unfavorable changes in exchange rates. The Company has transactions denominated in currencies other than the U.S. Dollar, principally the Euro but also other foreign currencies including Norwegian Krone, New Zealand Dollar and Canadian Dollar, that expose the Company’s operations to risk from the effects of exchange rate movements. Such movements may impact future revenues, expenses, and cash flows. Translation adjustments resulting from the process of translating the local currency financial statements into U.S. dollars are included in determining other comprehensive income. Changes in the value of the Company’s cash balance due to fluctuations in foreign exchange rate are presented on the unaudited condensed consolidated statements of cash flows as effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash. As of September 30, 2024 and December 31, 2023,
In most of the Company’s operations, the Company transacts primarily in the Euro, including wagered amounts, net revenue, revenue share, and employee-related compensation costs. Operating arrangements with payment service providers who convert player funds to the Euro from other currencies, for example the Canadian Dollar, could further negatively impact foreign currency exchange risk if the exchange spot rates used are unfavorable as compared to European Central Bank exchange rates. Foreign currency gains and losses arising from transactions denominated in currencies other than the functional currency are included in net loss and are included within general and administrative expenses. For the nine months ended September 30, 2024 and 2023, the Company incurred foreign currency transaction losses of $
The effects of foreign currency translation adjustments are included in stockholders’ equity (deficit) as a component of accumulated other comprehensive loss in the accompanying condensed consolidated balance sheets. Foreign currency fluctuations between the functional and reporting currency can significantly impact the currency translation adjustment component of accumulated other comprehensive income.
Credit Risk
The Company’s credit risk arises from cash and cash equivalents, and restricted cash and deposits with banks and other financial institutions. The Company maintains balances in banks in the United States and outside of the United States, primarily within the European Union. For funds held within the United States, the Federal Deposit Insurance Corporation insures $250 thousand per depositor per FDIC insured bank. For funds held within the European Union, the European Deposit Insurance Scheme insures €100 thousand per depositor per bank. The Company has funds in Finland, Cyprus, Lithuania, and Malta that are protected under this scheme. The Company mitigates potential cash risk by diversifying bank accounts with insured banking institutions within the United States and European Union. Furthermore, the Company maintains cash in payment service provider accounts and other such financial institutions that may or may not be protected under the previously mentioned insurance schemes. The Company mitigates this potential risk by drawing down funds and transferring them to insured bank accounts on a regular basis. Any loss incurred or lack of access to such funds could have an adverse impact on the Company’s financial conditions, results of operations and cash flows period.
Reclassification
Certain prior period amounts have been reclassed for comparability related to the components of operating expenses to conform to the current period classification. There was no impact on the Company's previously reported net loss, net working capital, total liabilities, or total stockholders' equity (deficit).
Recent Accounting Pronouncements
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures (“ASU 2023-07”). The amendments in ASU 2023-07 are intended to improve reportable segment disclosure primarily through enhanced disclosures about significant segment expenses. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The amendments in ASU 2023-07 should be applied retrospectively to all prior periods presented in the financial statements. Early adoption is permitted. The Company is currently evaluating the disclosure impact that ASU 2023-07 may have on its financial statement presentation and disclosures.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740), Improvements to Income Tax Disclosures (“ASU 2023-09”). The amendments in ASU 2023-09 are intended to increase transparency through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. ASU 2023-09 is effective for annual periods beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the disclosure impact that ASU 2023-09 may have on its financial statement presentation and disclosures.
Management does not believe that any other recently issued, but not yet effective, authoritative guidance, if currently adopted, would have a material impact on the Company’s financial statement presentation or disclosures.
Note 3 — Revenue
The components of disaggregated revenue for the three and nine months ended September 30, 2024 and 2023 were as follows:
| For the Three Months Ended |
For the Nine Months Ended |
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| September 30, |
September 30, |
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| (in thousands) |
2024 |
2023 |
2024 |
2023 |
||||||||||||
| Net gaming revenue |
$ | $ | $ | $ | ||||||||||||
| Net revenue generated through intra-group services arrangements |
||||||||||||||||
| Total Revenue |
$ | $ | $ | $ | ||||||||||||
The Company’s revenue by country for those with significant revenue for the three and nine months ended September 30, 2024 and 2023 is summarized as follows:
| Nine Months Ended September 30, |
||||||||||||||||
| (in thousands) |
2024 |
2023 |
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| Finland |
$ | % | $ | % | ||||||||||||
| New Zealand |
% | % | ||||||||||||||
| Norway |
% | % | ||||||||||||||
| Canada |
% | % | ||||||||||||||
| Rest of world |
% | % | ||||||||||||||
| Total Revenue |
$ | % | $ | % | ||||||||||||
| Three Months Ended September 30, |
||||||||||||||||
| (in thousands) |
2024 |
2023 |
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| Finland |
$ | % | $ | % | ||||||||||||
| New Zealand |
% | % | ||||||||||||||
| Norway |
% | % | ||||||||||||||
| Canada |
% | % | ||||||||||||||
| Rest of world |
% | % | ||||||||||||||
| Total Revenue |
$ | % | $ | % | ||||||||||||
As of September 30, 2024 and December 31, 2023, the Company did not record any contract assets or liabilities.
Note 4 — Cash and cash equivalents
The following table reconciles cash and cash equivalents, and restricted cash in the condensed consolidated balance sheets to the totals shown on the unaudited condensed consolidated statements of cash flows as of September 30, 2024 and December 31, 2023:
| September 30, |
December 31, |
|||||||
| (in thousands) |
2024 |
2023 |
||||||
| Cash and cash equivalents |
$ | $ | ||||||
| Restricted cash |
||||||||
| Total cash and cash equivalents, and restricted cash |
$ | $ | ||||||
The following table presents cash and cash equivalents, and restricted cash held in accounts in each country (translated into USD) as of September 30, 2024 and December 31, 2023:
| September 30, |
December 31, |
|||||||
| (in thousands) |
2024 |
2023 |
||||||
| Cash and cash equivalents: |
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| Malta |
$ | $ | ||||||
| Finland |
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| United States |
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| United Kingdom |
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| Cyprus |
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| Lithuania |
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| Switzerland |
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| Other |
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| Restricted cash |
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| Malta |
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| Denmark |
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| United Kingdom |
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| Singapore |
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| Cyprus |
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| Other |
||||||||
| Total cash and cash equivalents, and restricted cash |
$ | $ | ||||||
Note 5 — Prepaid expenses and other current assets
Prepaid expenses and other current assets at September 30, 2024 and December 31, 2023 are summarized as follows:
| September 30, |
December 31, |
|||||||
| (in thousands) |
2024 |
2023 |
||||||
| VAT recoverable |
$ | $ | ||||||
| Payment provider receivables |
||||||||
| Prepaid income tax |
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| Other prepaids |
||||||||
| Total prepaid and other current assets |
$ | $ | ||||||
Note 6 — Intangible assets, Net
Intangible assets, net at September 30, 2024 and December 31, 2023 are summarized as follows:
| September 30, 2024 | |||||||||||||||||||
| Weighted | |||||||||||||||||||
| Average | |||||||||||||||||||
| Remaining | |||||||||||||||||||
| Amortization | Gross | Accumulated | Net | ||||||||||||||||
| Period | Carrying | Accumulated | Impairment | Carrying | |||||||||||||||
| (years) | Amount | Amortization | Amount | Amount | |||||||||||||||
| Trademarks | Indefinite | $ | $ | — | $ | ( | ) | $ | |||||||||||
| Domain name | Indefinite | — | — | ||||||||||||||||
| Capitalized software | ( | ) | — | ||||||||||||||||
| $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||
| December 31, 2023 | |||||||||||||||||||
| Weighted | |||||||||||||||||||
| Average | |||||||||||||||||||
| Remaining | |||||||||||||||||||
| Amortization | Gross | Accumulated | Net | ||||||||||||||||
| Period | Carrying | Accumulated | Impairment | Carrying | |||||||||||||||
| (years) | Amount | Amortization | Amount | Amount | |||||||||||||||
| Trademarks | Indefinite | $ | $ | — | $ | ( | ) | $ | |||||||||||
| Domain name | Indefinite | — | — | ||||||||||||||||
| Capitalized software | ( | ) | — | ||||||||||||||||
| $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||
Trademarks and domain names have no amortization as the Company recognizes these identified intangibles assets as having an indefinite useful life. The Company considered various economic and competitive factors, including but not limited to, the life of trademarks that have been in existence with trademarks generally in the casino industry. The Company expects to generate cash flows from these intangible assets for an indefinite period of time. The Company’s trademarks and domain names are located in Europe. There was impairment during the three and nine months ended September 30, 2024 and 2023.
For the nine months ended September 30, 2024, the Company capitalized $
Note 7 — Property and equipment
Property and equipment at September 30, 2024 and December 31, 2023 are summarized as follows:
| September 30, | December 31, | |||||||
| (in thousands) | 2024 | 2023 | ||||||
| Machinery, furniture, and equipment | $ | $ | ||||||
| Leasehold improvements | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Total property and equipment, net | $ | $ | ||||||
The Company recorded depreciation expense on property and equipment of $
Note 8 — Accrued expenses
Accrued Expenses at September 30, 2024 and December 31, 2023 are summarized as follows:
| September 30, |
December 31, |
|||||||
| (in thousands) |
2024 |
2023 |
||||||
| VAT and other non income tax liabilities |
$ | $ | ||||||
| Accrued expenses |
||||||||
| Accrued deferred offering costs |
||||||||
| Accrued licensing fee |
||||||||
| Accrued marketing |
||||||||
| Accrued payroll |
||||||||
| Other accrued expenses |
||||||||
| Total accrued expenses |
$ | $ | ||||||
Note 9 — Stockholders’ equity (deficit)
The Company is authorized to issue
The holders of common stock are entitled to one vote per share on any matter submitted to a vote at a meeting of stockholders.
On October 22, 2024, the Company signed a firm commitment underwriting agreement (“Underwriting Agreement”) with ThinkEquity LLC (“IPO”) to sell at the initial closing on October 24, 2024, an aggregate of
Note 10 — Net loss per share
The computation of net loss per common share and the weighted average common shares outstanding for the three months and nine months ended September 30, 2024 and 2023 is summarized as follows:
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| (in thousands, except share and per share data) | 2024 | 2023 | 2024 | 2023 | ||||||||||||
| Basic | ||||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average number of shares used in computing net loss per share – basic | ||||||||||||||||
| Net loss per share - basic | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Diluted | ||||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average number of shares used in computing net loss per share – diluted | ||||||||||||||||
| Net loss per share - diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
As of September 30, 2024 and 2023, the Company excluded the outstanding securities summarized below, which entitle the holders thereof to acquire shares of common stock, from its calculation of earnings per share for the three months and nine months ended September 30, 2024 and 2023, as their effect would have been anti-dilutive. The additional securities excluded from the dilutive earnings per share calculation are as follows:
| As of and for the Three Months Ended | As of and for the Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Warrants | ||||||||||||||||
| Stock options | ||||||||||||||||
| Restricted stock units | ||||||||||||||||
Note 11 — Share-based compensation
The Company adopted its 2024 Equity Incentive Plan in January 2024 to provide equity-based compensation incentives in the form of options, restricted stock unit awards, performance awards, restricted stock awards, stock appreciation rights, and other forms of awards to employees, directors and consultants, including employees and consultants or affiliates, to purchase the Company’s common stock in order to motivate, reward and retain personnel. Upon adoption, an aggregate of
A summary of option activity for the nine months ended September 30, 2024 and the year ended December 31, 2023 is presented below:
| Weighted- | ||||||||||||
| Average | ||||||||||||
| Weighted- | Remaining | |||||||||||
| Average | Contractual | |||||||||||
| Number of | Exercise | Term | ||||||||||
| Options | Price | (In Years) | ||||||||||
| Outstanding - January 1, 2023 | $ | |||||||||||
| Granted | $ | — | ||||||||||
| Exercised | $ | — | ||||||||||
| Modified/Cancelled | ( | ) | $ | |||||||||
| Expired/Forfeited | $ | — | ||||||||||
| Outstanding - December 31, 2023 | $ | |||||||||||
| Granted | $ | 9.56 | ||||||||||
| Exercised | $ | — | ||||||||||
| Modified/Cancelled | ( | ) | $ | — | ||||||||
| Expired/Forfeited | $ | — | ||||||||||
| Outstanding - September 30, 2024 | $ | |||||||||||
| Exercisable - September 30, 2024 | $ | |||||||||||
Options granted during the nine months ended September 30, 2024 were valued using the Black-Scholes option-pricing model with the following assumptions. There were
| For the Nine Months Ended | ||||
| September 30, 2024 | ||||
| Weighted average grant date fair value | $ | |||
| Expected term (years) | 5.14-5.52 | |||
| Risk-free interest rate | % | |||
| Expected volatility | % | |||
| Expected dividends yield | % | |||
| Exercise price | $ | |||
The Company estimates its expected volatility by using a combination of historical share price volatilities of similar companies within the Company’s industry. The risk-free interest rate assumption is based on observed interest rates for the appropriate term of the Company’s options on a grant date. The expected option term assumption is estimated using the simplified method and is based on the mid-point between vest date and the remaining contractual term of the option, since the Company does not have sufficient exercise history to estimate expected term of its historical option awards.
Share-based compensation related to options is included in the unaudited condensed consolidated statements of operations as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| (in thousands) | 2024 | 2023 | 2024 | 2023 | ||||||||||||
| General and administrative | $ | $ | $ | $ | ||||||||||||
| Advertising and promotions | ||||||||||||||||
| Product software and development | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
Compensation cost related to non-vested option awards not yet recognized as of September 30, 2024 was $
On March 8, 2023, the Company amended a stock option agreement originally issued on September 1, 2022 to purchase
A summary of RSU activity for the nine months ended September 30, 2024 and the year ended December 31, 2023 is presented below:
| Weighted | ||||||||
| Average | ||||||||
| Number of | Grant Date | |||||||
| Units | FV | |||||||
| RSUs outstanding at January 1, 2023 | $ | |||||||
| Granted | $ | |||||||
| Vested | ( | ) | $ | |||||
| Forfeited | $ | |||||||
| RSUs outstanding at December 31, 2023 | $ | |||||||
| Granted | $ | |||||||
| Vested | ( | ) | $ | |||||
| Forfeited | ( | ) | $ | |||||
| RSUs outstanding at September 30, 2024 | $ | |||||||
The total fair value of RSUs vested during the nine months ended September 30, 2024 and 2023 was $
Stock-based compensation related to RSUs is included in the unaudited condensed consolidated statements of operations as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| (in thousands) | 2024 | 2023 | 2024 | 2023 | ||||||||||||
| General and administrative | $ | $ | $ | $ | ||||||||||||
| Advertising and promotions | ||||||||||||||||
| Product software and development | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
Of the
Warrants
As of September 30, 2024, the Company had the following warrants outstanding:
| Weighted- | ||||||||||||
| Average | ||||||||||||
| Weighted- | Remaining | |||||||||||
| Average | Contractual | |||||||||||
| Number of | Exercise | Term | ||||||||||
| Shares | Price | (In Years) | ||||||||||
| Warrants outstanding - January 1, 2023 | $ | |||||||||||
| Issued | $ | — | ||||||||||
| Exercised | $ | — | ||||||||||
| Expired | $ | — | ||||||||||
| Warrants outstanding - December 31, 2023 | $ | |||||||||||
| Issued | $ | — | ||||||||||
| Exercised | $ | — | ||||||||||
| Expired | $ | — | ||||||||||
| Warrants outstanding - September 30, 2024 | $ | |||||||||||
| Warrants exercisable - September 30, 2024 | $ | |||||||||||
There was
12. Related party transactions
Service Agreements
The Company had previously entered into an Intra-Group Services Agreement with Interactive, pursuant to which, among other things, the Company and its subsidiaries provided certain specified services to Interactive. In addition, Interactive provides certain services to the Company. Beginning in 2022, the Company no longer provided specified services to Interactive, but Interactive continued to provide specified services to the Company. There also exists an agreement with another affiliate, Spike Up, wherein Spike Up provides marketing and promotion and other operating support for the Company.
For the three months ended September 30, 2024 and 2023, the Company generated revenues of $
For the three months ended September 30, 2024 and 2023, the Company recognized $
For the three months ended September 30, 2024 and 2023, the Company also incurred other costs from Spike Up that were included in the unaudited condensed consolidated statement of operations, consisting of $
For the three and nine months ended September 30, 2024 and 2023, the Company recognized an immaterial amount in both periods, for services performed by Interactive for the Company which was included in general and administrative expenses in the unaudited condensed consolidated statements of operations.
Happy Hour Solutions Ltd., a company registered in Cyprus and a subsidiary of Happy Hour Entertainment Holdings Ltd., one of our principal shareholders, is the holder of an Estonian gaming license, and as of October 21, 2021 entered into a Services Agreement with HR Entertainment Ltd., a company registered in the British Virgin Islands, whereby Happy Hour Solutions would provide gaming and technical and solutions, as well as hosting and cloud services, customer services, management information systems and other operational services for HR Entertainment. Pending receipt of an Estonian gaming license, for which we intend to apply following close of our public offering, we entered into several agreements with Happy Hour Solutions Ltd., including:
| ● | a Domain License Agreement, dated January 1, 2022 (which we refer to as the “Effective Date”), that gives Happy Hour Solutions the right to use our domain: |
| ● | a Nominee Agreement, dated as of the Effective Date, which allows Happy Hour Solutions to, among other business solutions, process payments made on the aforementioned domain and allows us to host, manage, administer, operate and support, and enter into contracts in the ordinary course of business in the name of Happy Hour Solutions; and |
| ● | in March 2024, Online Gaming Operations Agreement, as further described therein, pursuant to which we continue to supply Happy Hour Solutions, with services that commenced as of the Effective Date, related to the operation of an online casino primarily through our existing personnel, technical solutions, and commercial relationships while utilizing the Happy Hour Solutions Estonian gaming license and which allows us to recognize the revenues generated thereof as agreed upon by the parties. |
The Happy Hour Solutions Agreements collectively allow HR Entertainment access to additional online gaming revenues. In consideration of these agreements, HR Entertainment pays Happy Hour Solutions consideration of
As of March 1, 2022, the Company entered into an agreement with Funnz (formerly known as WKND) to perform various services in connection with the conduct of the Company’s business. Funnz is a wholly-owned subsidiary of Happy Hour Entertainment Holdings Ltd. For the three months ended September 30, 2024 and 2023, such services totaled $
Due From/Due to Affiliates
The components of related party balances included in due from affiliates and due to affiliates on the unaudited condensed consolidated balance sheets as of September 30, 2024 and December 31, 2023 are summarized as follows:
| September 30, | December 31, | |||||||
| (in thousands) | 2024 | 2023 | ||||||
| Due from affiliates | ||||||||
| Spike Up | $ | $ | ||||||
| Happy Hours Entertainment Holdings | ||||||||
| Other | ||||||||
| Total due from affiliates | $ | $ | ||||||
| Due to affiliates | ||||||||
| Interactive | $ | $ | ||||||
| Spike Up | ||||||||
| Happy Hour Solutions | ||||||||
| Funnz (formerly known as WKND) | ||||||||
| Other | ||||||||
| Total due to affiliates | $ | $ | ||||||
As of September 30, 2024 and December 31, 2023, the total amount due to Spike Up includes $
Short-Term Unsecured Notes Payable to Stockholders
On June 6, 2024, the Company entered into interest free short-term unsecured loans with existing shareholders for $
13. Income Taxes
The Company recognized federal, state and foreign income tax expense of $
14. Commitment and contingencies
Legal Claims
The Company operates in an emerging online gaming industry. For internet based online gaming operations, there is uncertainty as to which country’s law ought to be applied, as the internet operations can be linked to several jurisdictions. Legislation concerning online gaming is under review in many jurisdictions. The Company monitors the legal situation within the United States, European Union (the “EU”), and any of its key markets to ensure the Company will be in a position to continue operating in those jurisdictions.
In the normal course of business, the Company may be subject to claims and litigation. The Company reviews its legal proceedings and claims, regulatory reviews and inspections, and other legal matters on an ongoing basis and follows appropriate accounting guidance when making accrual and disclosure decisions are required. If necessary, the Company establishes accruals for those contingencies when the incurrence of a loss is probable and can be reasonably estimated, and the Company discloses the amount accrued and the amount of a reasonably possible loss in excess of the amount accrued if such disclosure is necessary for the Company’s unaudited condensed consolidated financial statements to not be misleading. The Company does not record an accrual when the likelihood of loss being incurred is probable, but the amount cannot be reasonably estimated, or when the loss is believed to be only reasonably possible or remote, although disclosures are made for material matters as required by ASC 450-20, Contingencies.
For the nine months ended September 30, 2024 and 2023, the Company had certain pending or threatened legal claims or actions in which there was a probable outcome. Ellmount Entertainment, Ltd, a wholly-owned subsidiary of the Company, has litigation pending in Austria and Germany regarding player claims and related legal fees. The Company has provided an appropriate provision for these claims and related fees, which are included in accrued expenses in the consolidated balance sheets at September 30, 2024 and December 31, 2023. The Company currently is not targeting these markets and does not anticipate further claims of a similar nature in these markets. The Company is also currently subject to administrative claims initiated by the Czech Ministry of Finance regarding the operation of gambling activities in 2018 without a license and has been ordered to pay a fine of approximately $
Principal Commitments
The Company’s principal commitments primarily consist of operating lease obligations for office space, services agreements, and other contractual commitments. The principal commitments and contingencies are described below.
15. Leases
In January 2024, the Company entered into a lease for office space and car parking bays in Malta. The term of the lease is for years, although the Company may terminate the lease at any time after years. The monthly rent payment for the office is approximately $
Right-of-use assets for these administrative office leases as of September 30, 2024, and December 31, 2023, are summarized as follows:
| September 30, | December 31, | |||||||
| (in thousands) | 2024 | 2023 | ||||||
| Malta Office | ||||||||
| Operating lease, right-of-use asset, net | $ | $ | ||||||
The Company has no other material operating or financing leases with terms greater than 12 months.
Lease expense for operating leases recorded in the balance sheet is included in operating costs and expenses and is based on the future minimum lease payments recognized on a straight- line basis over the term of the lease plus any variable lease costs. Operating lease expenses, inclusive of short-term and variable lease expenses, included in the Company’s unaudited condensed consolidated statements of operations for the three months ended September 30, 2024, were thousand. Operating lease expenses, inclusive of short-term and variable lease expenses, included in the Company’s unaudited condensed consolidated statements of operations for the nine months ended September 30, 2024 and 2023, were $
Annual maturities analysis under the Malta lease agreement at September 30, 2024 is as follows:
| Year ending December 31, | ||||
| 2024 (remainder) | $ | |||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| Thereafter | ||||
| Total | ||||
| Less: Present value discount | ( | ) | ||
| Lease obligations, net | $ |
Operating lease obligations are based on the net present value of the remaining lease payments over the remaining lease term. In determining the present value of lease payments, the Company used its incremental borrowing rate on the date of adoption of ASU 2016-02, Leases. As of September 30, 2024, the weighted average remaining lease term is
16. Subsequent events
The Company evaluated subsequent events that occurred after the balance sheet date through December 4, 2024, the date that these condensed consolidated financial statements were available to be issued. Based upon this review, the Company did not identify any subsequent events that would have required adjustment to or disclosure in the condensed consolidated financial statements other than the below.
In October 2024, the Company received the final decision from the Supreme Administrative Court of Czech Republic denying Company’s appeal relating to administrative claims initiated by the Czech Ministry of Finance regarding the operation of gambling activities in 2018 without a license and affirmed the imposed fine of CZK (approximately $
On October 22, 2024, the Company signed a firm commitment underwriting agreement (“Underwriting Agreement”) with ThinkEquity LLC (“IPO”) to sell at the initial closing on October 24, 2024, an aggregate of
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial condition and results of operations together with our condensed consolidated financial statements and the related notes thereto and other financial information included elsewhere in this Quarterly Report on Form 10-Q. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. You should review the “Note Regarding Forward-Looking Statements” and “Risk Factors” sections of this Quarterly Report on Form 10-Q for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
Unless the context requires otherwise, all references in this MD&A to the “Company,” “we,” “us,” or “our” refer to the company, High Roller Technologies, Inc. and its subsidiaries.
Our Business
We are an evolving and growth-oriented iCasino and entertainment company that focuses primarily on online casino betting in Europe and other markets. Our mission is to offer consistently superior customer experience by (i) providing fast onboarding, easy log-in and re-log-in, (ii) assuring efficient and secure payment processing, (iii) providing prompt payouts on player winnings, (iv) offering generous bonuses, bonus play and free spins on popular games, (v) utilizing an interactive environment for player engagement leading to longer stays online and more play, (vi) maintaining 24/7/365 customer service to assure customer satisfaction and (vii) providing an array of responsible gaming tools and AI models to ensure a safe gaming experience.
High Roller Technologies, Inc. was incorporated in Delaware in 2021 as a holding company, with the intent to seek an initial public offering on a United States securities exchange. In January 2022 we launched HighRoller.com to deliver more immersive real money gaming experiences for the iCasino market. Prior to our transition to the HighRoller.com Platform we operated our online iCasino activities under the casinoroom.com domain name. We operate an online gaming business offering casino games to customers in various jurisdictions worldwide under the HighRoller.com and fruta.com domain names principally utilizing our Curacao license, and under our Happy Hour Solutions Agreements accessing revenue generated under the Estonian license. Unless further extended, the Happy Hour Solutions Agreements terminate on the earlier of our receipt of an Estonian license or December 31, 2025.
Through our Platform we provide iCasino, or online casino, consisting of the full suite of games available in land-based casinos, such as blackjack, roulette, baccarat, poker, and slot machines. We generate revenue through hold, or gross winnings, as users play against the house. We believe iCasino provides lower volatility versus land-based casinos due to easier advance-based predictions on gaming rules and statistics.
We currently are present and active in several markets around the world. Our focus will primarily be to enter regulated markets in Europe, North and South America. We intend to seek entry into one or more regulated North American markets utilizing proceeds from this offering but have not identified any target or budgeted any amount for such entries. We currently expect that initial entry into any of these regulated North American markets to occur in approximately twelve months from the receipt of proceeds from this initial public offering. No assurance can be given that these efforts will prove successful. Our business may suffer if we are unable to open new geographical markets or if we are unable to continue expanding within existing markets.
We are implementing a multi-brand strategy to launch new brands utilizing our current licenses and using our existing resources. The scalability of our Platform allows the Company to use existing resources to launch new brands that provide access to new target demographics and generate new revenues through existing player acquisition channels while maintaining the current cost structure with nominal incremental costs. The conversion of marketing spend into new player acquisition or existing player reactivation on our current and future portfolio of brands will ultimately determine where player acquisition funds are spent on a market-to-market basis. While no assurances can be given that these efforts will be successful, and management’s time as well as nominal incremental costs may be spent with limited financial results, management believes that this strategy mitigates any material negative impact on operations or financial position by leveraging scalable processes and technologies within our Platform. If market reception is successful, a new brand may generate material revenue. We soft launched our second active brand, Fruta.com, in December 2023, allowing select players to test the website prior to going live in February 2024. We are currently exploring opportunities for other future brand launches. We expect to launch at least one new brand over the next twelve months to expand our market share in existing markets and reduce customer acquisition costs and attrition rates through cross-selling and brand diversification.
We obtain our iCasino game offerings from over 70 suppliers such as Pragmatic Play, Push Gaming, Evolution Gaming for Live Dealer Services, Big Time Gaming, Red Tiger Gaming, Play’n Go, Netent, Quickspin and others. These content and gaming licenses are subject to standard revenue-share agreements, whereby suppliers receive a percentage of the net gaming revenue generated from their respective casino games and payment combinations, including agreed upon fixed costs.
Our plan is to excite the iCasino industry by focusing on streaming and social experiences based on real money gaming experiences for the customer.
During the first half of 2022, we rebranded our iCasino operations from CasinoRoom.com to HighRoller.com and concurrently commenced to reposition our legacy gaming operator “CasinoRoom.com” into an online casino ratings and reviews portal that would generate high-value leads and targeted search engine traffic (SEO) for HighRoller.com and customer leads for other casinos particularly in markets that we do not serve. We believe that our new CasinoRoom.com affiliate model site may further enable us to support future brands which we may launch or acquire with targeted traffic.
Spike Up Media, an affiliate of our founders, is one of a handful of globally foremost providers of lead generation and we believe that our association with Spike Up Media provides high-quality, cost-effective lead generation converting into active customers which together with our favorable customer acquisition costs and customer retention will result in favorable gross operating margins.
Reverse Stock Split
On January 16, 2024, our Board of Directors approved and our shareholders ratified a 1-for-3.95689 reverse stock split of our outstanding shares of common stock, which became effective on that date. All share and per share amounts have been retroactively restated.
Results of Operations
The following table sets forth a summary of our consolidated results of operations for the periods indicated. The results of historical periods are not necessarily indicative of the results of operations for any future period.
| For the Three Months Ended |
For the Nine Months Ended |
|||||||||||||||
| September 30, |
September 30, |
|||||||||||||||
| (in thousands, except shares and per share data) |
2024 |
2023 |
2024 |
2023 |
||||||||||||
| Revenues |
$ | 7,516 | $ | 7,569 | $ | 19,826 | $ | 22,484 | ||||||||
| Operating expenses |
||||||||||||||||
| Direct operating costs: |
||||||||||||||||
| Related party |
598 | 1,992 | 2,020 | 3,242 | ||||||||||||
| Other |
2,671 | 1,242 | 7,740 | 6,887 | ||||||||||||
| General and administrative: |
||||||||||||||||
| Related party |
2 | 59 | 167 | 309 | ||||||||||||
| Other |
1,877 | 2,436 | 7,169 | 7,212 | ||||||||||||
| Advertising and promotions: |
||||||||||||||||
| Related party |
194 | 1,222 | 408 | 1,570 | ||||||||||||
| Other |
2,289 | 629 | 5,367 | 3,786 | ||||||||||||
| Product and software development: |
||||||||||||||||
| Related party |
46 | 58 | 193 | 157 | ||||||||||||
| Other |
313 | 116 | 541 | 278 | ||||||||||||
| Total operating expenses |
7,990 | 7,754 | 23,605 | 23,441 | ||||||||||||
| Loss from operations |
(474 | ) | (185 | ) | (3,779 | ) | (957 | ) | ||||||||
| Other expenses |
||||||||||||||||
| Interest expense, net |
(27 | ) | (29 | ) | (77 | ) | (91 | ) | ||||||||
| Other income (expenses) |
— | 15 | 2 | (39 | ) | |||||||||||
| Total other expenses |
(27 | ) | (14 | ) | (75 | ) | (130 | ) | ||||||||
| Loss before income taxes |
(501 | ) | (199 | ) | (3,854 | ) | (1,087 | ) | ||||||||
| Income tax expense |
— | 9 | — | 9 | ||||||||||||
| Net loss |
$ | (501 | ) | $ | (208 | ) | $ | (3,854 | ) | $ | (1,096 | ) | ||||
| Other comprehensive income |
||||||||||||||||
| Foreign currency translation adjustment |
145 | (123 | ) | 17 | (121 | ) | ||||||||||
| Comprehensive loss |
$ | (356 | ) | $ | (331 | ) | $ | (3,837 | ) | $ | (1,217 | ) | ||||
| Net loss per common share: |
||||||||||||||||
| Net loss per common share – basic and diluted |
$ | (0.07 | ) | $ | (0.03 | ) | $ | (0.55 | ) | $ | (0.17 | ) | ||||
| Weighted average common shares outstanding – basic and diluted |
7,013,302 | 6,951,385 | 7,005,541 | 6,533,276 | ||||||||||||
Revenue
Revenue decreased by $2,658 thousand or 12%, to $19,826 thousand during the nine months ended September 30, 2024, as compared to $22,484 thousand during the nine months ended September 30, 2023. The decrease was primarily due to the exit from Hungary due to a change in the regulatory environment in the second half of 2023, further impacted by decreases across some of our existing markets, partially offset by increases in Finland. The amount of real money bets during the nine months ended September 30, 2024, and 2023 was approximately $505,707 thousand and $535,300 thousand, respectively. Although total real money bets decreased by approximately 1% during the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023, the decrease in revenue of approximately 12% during the same periods was the result of a higher return to players. We expect to see further increases in revenue from Finland continuing through the end of 2024, offsetting, at least in part, the decrease in revenue resulting from our exit from Hungary.
Revenue was flat, decreasing by $53 thousand or less than 1%, to $7,516 thousand during the three months ended September 30, 2024, as compared to $7,569 thousand during the three months ended September 30, 2023. Increase in Finland for 3 months ended September 30, 2024 offset exit from Hungary in second half of 2023.
The Company’s revenue by country for those with significant revenue for the periods indicated are as follows:
| Nine Months Ended September 30, |
||||||||||||||||
| (in thousands) |
2024 |
2023 |
||||||||||||||
| Finland |
$ | 8,610 | 44 | % | $ | 6,025 | 27 | % | ||||||||
| New Zealand |
4,720 | 24 | % | 5,809 | 26 | % | ||||||||||
| Norway |
2,812 | 14 | % | 4,550 | 20 | % | ||||||||||
| Canada |
2,653 | 13 | % | 3,462 | 15 | % | ||||||||||
| Rest of world |
1,031 | 5 | % | 2,638 | 12 | % | ||||||||||
| Total Revenue |
$ | 19,826 | 100 | % | $ | 22,484 | 100 | % | ||||||||
| Three Months Ended September 30, |
||||||||||||||||
| (in thousands) |
2024 |
2023 |
||||||||||||||
| Finland |
$ | 3,797 | 50 | % | $ | 2,176 | 29 | % | ||||||||
| New Zealand |
1,624 | 22 | % | 1,993 | 26 | % | ||||||||||
| Norway |
934 | 12 | % | 1,684 | 22 | % | ||||||||||
| Canada |
877 | 12 | % | 1,199 | 16 | % | ||||||||||
| Rest of world |
284 | 4 | % | 517 | 7 | % | ||||||||||
| Total Revenue |
$ | 7,516 | 100 | % | $ | 7,569 | 100 | % | ||||||||
Direct operating costs
Direct operating costs (related party) decreased by $1,222 thousand or 38%, to $2,020 thousand during the nine months ended September 30, 2024, as compared to $3,242 thousand for the nine months ended September 30, 2023, which is primarily related to a decrease in user acquisition related revenue share paid to a related party affiliated company.
Direct operating costs (other) increased by $853 thousand or 12%, to $7,740 thousand for the nine months ended September 30, 2024 as compared to $6,887 thousand for the nine months ended September 30, 2023, which is primarily related to the use of non-related party affiliates across the comparative periods.
Of the total direct operating costs of $9,760 thousand and $10,129 thousand for the nine months ended September 30, 2024, and 2023, respectively, $4,245 thousand and $4,665 thousand was related to revenue share paid to marketing partners for the successful acquisition of revenue generating players through their marketing channels.
Direct operating costs (related party) decreased by $1,394 thousand or 70%, to $598 thousand during the three months ended September 30, 2024, as compared to $1,992 thousand for the three months ended September 30, 2023, which is primarily related to a decrease in user acquisition related revenue share paid to a related party affiliated company.
Direct operating costs (other) increased by $1,429 thousand or 115%, to $2,671 thousand for the three months ended September 30, 2024, as compared to $1,242 thousand for the three months ended September 30, 2023, which is primarily related to the use of non-related party affiliates across the comparative periods.
Of the total direct operating costs of $3,269 thousand and $3,234 thousand for the three months ended September 30, 2024, and 2023, respectively, $1,408 thousand and $1,563 thousand was related to revenue share paid to marketing partners for the successful acquisition of revenue generating players through their marketing channels.
General and administrative
General and administrative (related party) decreased by $142 thousand, or 46%, to $167 thousand for the nine months ended September 30, 2024, as compared to $309 thousand for the nine months ended September 30, 2023. The decrease was primarily driven by our decreased reliance on an affiliated company for administrative services.
General and administrative expenses (other) decreased by $43 thousand or 1%, to $7,169 thousand for the nine months ended September 30, 2024, as compared to $7,212 thousand for the nine months ended September 30, 2023. The decrease was primarily driven by a decrease in employee costs and professional services. Also included in general and administrative expenses (other) are foreign currency transaction losses, which decreased by $432 thousand to $1,084 thousand for the nine months ended September 30, 2024, as compared to $1,516 thousand for the nine months ended September 30, 2023.
General and administrative (related party) decreased by $57 thousand or 97%, to $2 thousand for the three months ended September 30, 2024, as compared to $59 thousand for the three months ended September 30, 2023.The increase was primarily driven by the decrease in reliance on related parties to perform administrative work and other professional services.
General and administrative expenses (other) increased by $559 thousand or 23%, to $1,877 thousand for the three months ended September 30, 2024, as compared to $2,436 thousand for the three months ended September 30, 2023. The increase was primarily driven by in house administrative salaries compared to related party services performed on behalf of the company in the same period.
Also included in general and administrative expenses (other) are foreign currency transaction losses, which increased by $42 thousand to $369 thousand for the three months ended September 30, 2024, as compared to $327 thousand for the three months ended September 30, 2023.
Advertising and promotions
Advertising and promotions (related party) expenses decreased by $1,162 thousand or 74%, to $408 thousand for the nine months ended September 30, 2024, as compared to $1,570 thousand for the nine months ended September 30, 2023. The decrease was primarily driven by our decrease in reliance on an affiliated company for user acquisition.
Advertising and promotions expenses (other) increased by $1,581 thousand or 42%, to $5,367 thousand for nine months ended September 30, 2024, as compared to $3,786 thousand for nine months ended September 30, 2023. The increase is primarily attributable to an increase in people related costs, including stock compensation expense; and increases in customer retention and other marketing services
Advertising and promotions (related party) expenses decreased by $1,028 thousand or 84%, to $194 thousand for the three months ended September 30, 2024, as compared to $1,222 thousand for the three months ended September 30, 2023. The decrease was primarily related to decrease in reliance on affiliated companies for customer acquisition and marketing services.
Advertising and promotions expenses (other) increased by $1,660 thousand or 264%, to $2,289 thousand for the three months ended September 30, 2024, as compared to $629 thousand for the three months ended September 30, 2023. The increase is attributable to the increase in reliance on 3rd party companies compared to affiliated companies for the same period, as well as an increase in people related costs for in house marketing team.
Product and software development
Product and software development (related party) expenses increased by $36 thousand or 23%, to $193 thousand for the nine months ended September 30, 2024, as compared to $157 thousand for the nine months ended September 30, 2023. The increase is primarily driven by an increase in product development activity utilizing development resources from a related party.
Product and software development (other) expenses increased by $263 thousand or 95%, to $541 thousand for the nine months ended September 30, 2024, as compared to $278 thousand for the nine months ended September 30, 2023. The increase is primarily driven by an increase in product development activity utilizing development resources from third parties as well as internal development resources.
Product and software development (related party) was $46 thousand for the three months ended September 30, 2024, as compared to $58 thousand for the three months ended September 30, 2023, the decrease is due to reduced reliance on affiliate companies product development services and consulting fees.
Product and software development (other) increased by $197 thousand or 170%, to $313 thousand for the three months ended September 30, 2024 as compared to $116 thousand for the three months ended September 30, 2023.The increase was primarily related to the increase reliance on 3rd party companies and in house development resources.
Loss from operations
Loss from operations was $3,779 thousand for the nine months ended September 30, 2024, as compared to $957 thousand for the nine months ended September 30, 2023, primarily due to the decreases in revenue due primarily to the exit of a market in the second half of 2023, while the loss is partially offset by a reduction in operating expenses over the same period.
Loss from operations was $474 thousand for the three months ended September 30, 2024, as compared to $185 thousand for the three months ended September 30, 2023, due to the decrease in revenue offset with the decrease in operating expenses.
Interest expense, net
Interest expense, net was $77 thousand for the nine months ended September 30, 2024, as compared to $91 thousand for the nine months ended September 30, 2023, and consisted primarily of non-cash interest expense related to the amortization of the present value discount of the domain name purchase liability (a related party liability).
Interest expense, net was $27 thousand for the three months ended September 30, 2024, as compared to $29 thousand for the three months ended September 30, 2023, and consisted primarily of primarily of non-cash interest expense related to the amortization of the present value discount of the domain name purchase liability (a related party liability).
Loss before income taxes
Loss before income taxes was $3,854 thousand for the nine months ended September 30, 2024, as compared to $1,087 thousand for the nine months ended September 30, 2023.
Loss before income taxes was $501 thousand for the three months ended September 30, 2024, as compared to loss before income taxes of $199 thousand for the three months ended September 30, 2023.
Income tax expense (benefit)
Income tax expense (benefit) was $0 and $9 thousand for the nine months ended September 30, 2024 and 2023, respectively.
Income tax expense was $0 for the three months ended September 30, 2024 as compared to an income tax expense of $9 thousand for the three months ended September 30, 2023.
Net loss
Net loss was $3,854 thousand for the nine months ended September 30, 2024, as compared to net loss of $1,096 thousand for the nine months ended September 30, 2023.
Net loss was $501 thousand for the three months ended September 30, 2024, as compared to net loss of $208 thousand for the three months ended September 30, 2023.
Other Trends Impacting Our Business
Our results of operations can and generally do fluctuate due to other factors such as level of customer engagement, online casino results and other factors that are outside of our control or that we cannot reasonably predict. Our quarterly financial performance depends on our ability to attract and retain customers. Customer engagement in our online offerings may vary due to, among other things, customer satisfaction with our platform, our offerings and those of our competitors, our marketing efforts, public sentiment or an economic downturn. As customer engagement varies, so may our quarterly financial performance.
Our quarterly and annual financial results may also be impacted by the number and amount of betting losses and jackpot payouts we experience. Although our losses are limited per stake to a maximum payout in our online casino offering, when looking at bets across a period of time, these losses can be significant. As part of our online casino offerings, we offer local progressive jackpot games that are operated by us and larger progressive jackpots which are “global,” operating across multiple operators and guaranteed by our game suppliers, generally Games Global or Netent. Each time a customer plays one of our local progressive jackpot games, we contribute a portion of the amount bet to the jackpot for that game or group of games. When a progressive jackpot is won, the jackpot is paid out and is reset to a predetermined base amount. As winning the jackpot is determined by a random mechanism, we cannot foresee when a jackpot will be won and we do not insure against jackpot payouts. Paying the local progressive jackpot decreases our cash position and, depending upon the size of the jackpot, payouts may have a significant negative affect on our cash flow and financial condition. Global progressive jackpots are guaranteed and paid by the game suppliers and are not a liability directly affecting us.
We operate within the global gaming and entertainment industry, which is comprised of diverse products and offerings that compete for consumers’ time and disposable income. We face and expect to continue to face significant competition from other industry players both within existing and new markets including from competitors with access to more resources or experience. Customer demands for new and innovative offerings and features require us to continue to invest in new technologies and content to improve the customer experience. Many jurisdictions in which we operate or intend to operate in the future have unique regulatory and/or technological requirements, which require us to have robust, scalable networks and infrastructure, and agile engineering and software development capabilities. The global gaming and entertainment industry has seen significant consolidation, regulatory change and technological development over the last few years, and we expect this trend to continue into the foreseeable future, which may create opportunities for us but may also create competitive and margin pressures.
Liquidity and Capital Resources
We measure liquidity in terms of our ability to fund the cash requirements of our business operations, including working capital and capital expenditure needs, contractual obligations and other commitments, with cash flows from operations. Our current working capital needs relate mainly to supporting our existing businesses, the growth of these businesses in their existing markets and their expansion into other geographic regions, as well as our employees’ compensation and benefits. Historically, we have relied on affiliates and related party relationships to support our working capital needs for operations.
We had $2,087 thousand in cash and cash equivalents as of December 31, 2023 (excluding customer cash deposits, which we segregate from our operating cash balances on behalf of our real-money customers for all jurisdictions and products, and restricted cash). For the year ended December 31, 2023 we had net loss of $2,818 thousand, had net cash provided by operations of $763 thousand, an accumulated deficit of $21,220 thousand, and negative working capital of $4,577 thousand.
We had $1,329 thousand in cash and cash equivalents as of September 30, 2024 (excluding customer cash deposits, which we segregate from our operating cash balances on behalf of our real-money customers for all jurisdictions and products, and restricted cash). For the nine months ended September 30, 2024 we had net loss of $3,854 thousand, had net cash used in operations of $1,355 thousand, an accumulated deficit of $25,074 thousand and negative working capital of $8,776 thousand. On June 6, 2024, the Company entered into interest free short-term unsecured loans with existing shareholders for $500 thousand. The loans are due and payable on or before December 31, 2024. If not paid on or before maturity the notes will accrue interest at a rate of 10% per year from the date of funds receipt. The loans are expected to be repaid substantially from operations. We believe that our existing cash resources and the expected revenue and cash flows from operations together with net proceeds from this offering will be sufficient to fund our operating and capital expenditure requirements for the next 18 to 24 months.
In June 2023 we entered into a debt conversion agreement with Ellmount Interactive A.B. and Spike Up Media A.B. pursuant to which we issued 631,809 shares of common stock, valued at $7.91 per share, to Spike Up in exchange for $5,000 thousand that we owed to Spike Up through June 30, 2023 for services provided to our subsidiary, HR Entertainment Ltd. Following this stock issuance, we owed Spike Up a balance of approximately $421 thousand, for such services, that was paid in the ordinary course of business.
The report of our independent registered public accounting firm that accompanies our audited consolidated financial statements for the fiscal years ended December 31, 2023 and December 31, 2022, includes a going concern explanatory paragraph in which such firm expressed that there is substantial doubt about our ability to continue as a going concern. Our unaudited condensed consolidated financial statements contained in this Quarterly Report do not include any adjustments that might result if we are unable to continue as a going concern. Our ability to continue as a going concern is dependent upon our ability to obtain the necessary financing to meet continuing obligations and repay our liabilities arising from normal business operations when they come due, to fund the development and expansion of our business activities, and to generate sustainable profitable operations and cash flows in the future. Management’s plan is to provide for our capital requirements by raising equity capital through one or more private placements or public offerings. No assurance can be given that we will be able to secure sufficient additional financing as and when necessary and on acceptable terms, or at all, to sustain and improve operating results and cash flows under the new business model.
At September 30, 2024 and December 31, 2023, we did not have any transactions, obligations or relationships that could be considered off-balance sheet arrangements.
Cash Flows
The following table shows our cash flows from operating activities, investing activities and financing activities for the stated periods:
| Nine Months Ended |
||||||||
| September 30, |
||||||||
| (in thousands) |
2024 |
2023 |
||||||
| Net cash (used in) provided by operating activities |
$ | (1,355 | ) | $ | 579 | |||
| Net cash (used in) provided by investing activities |
(325 | ) | (394 | ) | ||||
| Net cash (used in) provided by financing activities |
334 | (319 | ) | |||||
| Effective of exchange rate changes on cash |
222 | (22 | ) | |||||
| Net change in cash and cash equivalents, and restricted cash |
$ | (1,124 | ) | $ | (156 | ) | ||
Net cash used in operations during the nine months ended September 30, 2024, increased by $1,934 thousand to $1,355 thousand as compared to net cash provided by operations of $579 thousand during the nine months ended September 30, 2023. The increase during the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023, is primarily due to a a net increase in the various operating asset and liability accounts, particularly the net increase in due from/due to affiliates, as well as an increase in stock based compensation expense.
Net cash used in investing activities during the nine months ended September 30, 2024, was $325 thousand as compared to net cash used by investing activities of $394 thousand during the nine months ended September 30, 2023. The change is due to an increase in capitalized internal-use software costs and the purchase of property and equipment during the period.
Net cash provided by financing activities for the nine months ended September 30, 2024 was $334 thousand as compared to net cash used in financing activities of $319 thousand for the nine months ended September 30, 2023, and is related to the payment of deferred offering costs and a loan made by existing shareholders.
Restricted cash (current) was $1,592 thousand and $1,958 thousand at September 30, 2024 and December 31, 2023, respectively.
Critical Accounting Estimates
The preparation of the audited consolidated financial statements and the unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, revenue and expenses. Some of those judgments can be subjective and complex, and therefore, actual results could differ materially from those estimates under different assumptions or conditions. Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Management regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly. Actual results could differ from those estimates. Significant estimates include those related to assumptions used in accruals for potential legal and other liabilities, recovery of amounts held in escrow, realization of intangible assets, share-based compensation, accrued jackpots and the realization of deferred tax assets.
The following critical accounting estimates affect the more significant judgements and estimates used in the preparation of our audited consolidated financial statements and the unaudited condensed consolidated financial statements.
Impairment of Long-Lived Assets
Our long-lived assets consist of property and equipment, operating lease-right of use assets and indefinite lived assets (i.e. trademarks and domain names).
We evaluate long-lived assets for indicators of impairment at least annually or when events or changes in circumstances indicate that their carrying amounts may not be recoverable. The factors that would be considered by management in performing this assessment include current operating results, trends and prospects, the manner in which the long-lived asset is used and the effects of obsolescence, demand, competition and other economic factors. If indicators of impairment are identified, we perform an undiscounted cash flow analysis of the long-lived assets. Asset groups are written down only to the extent that their carrying value is lower than their respective fair value. Fair values of the asset group are determined by discounting the cash flows at a rate that approximates the cost of capital of a market participant.
Indefinite-lived intangible assets consist of trademarks and domain names. Indefinite-lived intangible assets are not amortized; rather they are tested for impairment at least annually, or more frequently if adverse events or changes in circumstances indicate that the carrying value may not be recoverable. In addition, management evaluates whether events and circumstances continue to support an indefinite useful life. Impairment tests are performed, at a minimum, in the fourth quarter of each year.
To test indefinite-lived intangible assets for impairment, we first assess the qualitative factors to determine whether it is more likely than not that the fair value of the indefinite-lived intangible asset is less than its carrying amount as a basis for determining whether it is necessary to perform a quantitative impairment test. If we determine that it is more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying amount, then the quantitative impairment test is performed. The qualitative assessment requires the consideration of factors such as recent market transactions, macroeconomic conditions, and changes in projected future cash flows. The quantitative assessment compares the fair value of an indefinite-lived intangible asset to its carrying amount. If the carrying amount of an indefinite-lived intangible asset exceeds its fair value, an impairment loss is recognized for the excess. Fair values of indefinite-lived intangible assets are determined based on discounted cash flows.
We evaluated qualitative factors at December 31, 2023 related to the HighRoller domain name and concluded that it is not more likely than not that the fair value of the indefinite lived intangible asset is less than its carrying amount. Therefore, no further impairment considerations were deemed necessary on the HighRoller domain name as of December 31, 2023.
We did not have any impairment of indefinite-lived intangible assets for the year ended December 31, 2023 or the period ended September 30, 2024.
Share-Based Compensation
We record share-based compensation in accordance with ASC 718, Compensation-Stock Compensation (“ASC 718”) and recognize share-based compensation expense in the period in which a grantee is required to provide service, which is generally over the vesting period of the individual share-based payment award. Compensation expense for awards with performance conditions is not recognized until it is probable that the performance target will be achieved. Compensation expense for awards is recognized over the requisite service period on a straight-line basis. Forfeitures are accounted for as they occur.
Unit awards are classified as either an equity award or a liability award depending on whether the award contains certain repurchase provisions. Equity-classified awards are valued as of the grant date based upon the price of the underlying unit or share and a number of assumptions, including volatility, performance period, risk-free interest rate and expected dividends. Liability-classified awards are valued at fair value at each reporting date.
Income Taxes
We comply with the accounting and reporting requirements of ASC 740, Income Taxes (“ASC 740”), which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for differences between the financial statement and tax bases of assets and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances in respect of deferred tax assets are provided for, if necessary, to reduce deferred tax assets to amounts more likely than not to be realized.
ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim period, disclosure and transition. Any interest and penalties related to uncertain tax positions will be recognized as a component of income tax expense.
Recently Adopted Accounting Pronouncements
Recently issued and adopted accounting pronouncements are described in Note 2 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
Management does not believe that any other recently issued, but not yet effective, authoritative guidance, if currently adopted, would have a material impact on our financial statement presentation or disclosures.
Emerging Growth Company Accounting Election
Section 102(b)(1) of the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”) exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can choose not to take advantage of the extended transition period and comply with the requirements that apply to non-emerging growth companies, and any such election to not take advantage of the extended transition period is irrevocable. We are an “emerging growth company” as defined in Section 2(a) of the Securities Act of 1933, as amended, and has elected to take advantage of the benefits of this extended transition period. The Company remains an emerging growth company and is expected to continue to take advantage of the benefits of the extended transition period. This may make it difficult or impossible to compare the Company financial results with the financial results of another public company that is either not an emerging growth company or is an emerging growth company that has chosen not to take advantage of the extended transition period exemptions for emerging growth companies because of the potential differences in accounting standards used.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a smaller reporting company, we are not required to provide the information required by this Item 3.
Item 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Control and Procedures
As of September 30, 2024, the end of the period covered by this Form 10-Q, our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer each concluded that, as of September 30, 2024, the end of the period covered by this Form 10-Q, we did not maintain effective disclosure controls and procedures at the reasonable assurance level, as described below.
| ● |
During 2022, certain issues were identified that indicated the existence of deficiencies in the Company’s internal ability to prepare consolidated financial statements, reflecting material weakness in the Company’s internal control over financial reporting. |
| ● |
During 2023, the Company expanded its financial and accounting staff, which included adding a Chief Financial Officer, a Controller, a Director of Accounting and Financial Reporting, as well as requisite supporting staff. As a result, the Company believes that it has adequate staff resources to address accounting and reporting requirements under U.S. GAAP and SEC reporting standards, and to implement internal controls. |
| ● |
The Company has retained the services of qualified outside consultants with expertise to perform specific accounting and finance tasks or functions, and to assist in the design and installation of accounting and internal control systems. The Company has not yet completed the process to establish adequate internal controls over financial reporting, and it expects that this process will continue through the remainder of 2024, and possibly longer. |
While the deficiencies described above did not result in any material misstatements to the Company’s condensed unaudited consolidated financial statements for the period ending September 30, 2024, they did represent a material weakness as of September 30, 2024, since there existed a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements would not be prevented or detected on a timely basis.
Management’s Remediation Measures
Management is committed to maintaining a strong internal control environment. Accordingly, management is in the process of implementing a plan to remediate the material weakness described above as soon as possible.
Changes in Internal Control over Financial Reporting
Except as described above, there were no significant changes in the internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the nine-months ended September 30, 2024, that have materially affected, or are reasonably likely to materially affect, the internal control over financial reporting.
Inherent Limitations on Effectiveness of Controls and Procedures
The Company’s management, including the Chief Executive Officer and Chief Financial Officer, believes that disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives and are effective at the reasonable assurance level. However, management does not expect that the disclosure controls and procedures or the internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
In the normal course of business, the Company may be subject to claims and litigation. The Company reviews its legal proceedings and claims, regulatory reviews and inspections, and other legal matters on an ongoing basis and follows appropriate accounting guidance when making accrual and disclosure decisions are required. If necessary, the Company establishes accruals for those contingencies when the incurrence of a loss is probable and can be reasonably estimated, and the Company discloses the amount accrued and the amount of a reasonably possible loss in excess of the amount accrued if such disclosure is necessary for our financial statements to not be misleading. The Company does not record an accrual when the likelihood of loss being incurred is probable, but the amount cannot be reasonably estimated, or when the loss is believed to be only reasonably possible or remote, although disclosures will be made for material matters as required by ASC 450-20, Contingencies.
The Company had certain pending or threatened legal claims or actions in which there was a probable outcome. Ellmount Entertainment, Ltd., a subsidiary of the Company, has litigation pending in Austria and Germany regarding player claims and related legal fees. The Company currently is not targeting these markets and does not anticipate further claims of a similar nature that may be material in these markets. The Company is also currently subject to administrative claims initiated by the Czech Ministry of Finance regarding the operation of gaming activities in 2018 without a license and has been ordered to pay a fine of approximately $216 thousand, which is under appeal. The Company is not currently aware of any other material regulatory or tax claims. The Company has provided appropriate provision for these claims in accrued expenses in its consolidated balance sheets at September 30, 2024 and December 31, 2023 and 2022 to the extent that such claims can be reasonably estimated. See Note 14, Commitments and Contingencies, of Notes to Condensed Consolidated Financial Statements.
In addition to the information set forth in this Form 10-Q, you should also carefully review and consider the risk factors contained in our other registration statements, reports and periodic filings with the SEC that could materially and adversely affect our business, financial condition, and results of operations. The risk factors we have identified and discussed, however, do not identify all risks that we face because our business operations could also be affected by additional factors that are not known to us or that we currently consider to be immaterial to our operations.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
(b) Use of Proceeds from the Sale of Registered Securities
None.
(c) Purchases of Equity Securities by the Registrant and Affiliated Purchasers.
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosure
Not applicable.
EXHIBIT INDEX
| * |
Filed electronically herewith. |
Pursuant to the requirements of Section 13 or 15(d) 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.
| HIGH ROLLER TECHNOLOGIES, INC. |
|
| Date: December 4, 2024 |
/s/ Ben Clemes |
| Ben Clemes |
|
| Chief Executive Officer |
|
| (Principal Executive Officer) |
|
| Date: December 4, 2024 |
/s/ Matt Teinert |
| Matt Teinert |
|
| Chief Financial Officer |
|
| (Principal Financial Officer and |
|
| Principal Accounting Officer) |