美国
证券交易委员会
华盛顿特区 20549
表单
截至季度期
或
过渡期为从 ____________ 到 ____________
委员会档案编号：
高赌注科技公司
(注册人名称如章程中所列)
| | | |
| (州或其他管辖区的 | (美国国税局雇主 |
| | | |
| (主要行政办公室地址) | (Zip Code) |
(
（注册人电话号码，包括区号）
根据法案第12(b)节注册的证券：
| 每个类别的标题 | 交易标的 | 注册的每个交易所的名称 | ||
| | | |
请勾选注册人是否（1）在过去12个月内（或者注册人被要求提交此类报告的较短期间内）已按1934年证券交易法第13条或第15(d)条的要求提交了所有必要的报告，及（2）在过去90天内是否受到此类提交要求的约束。是 ☐
请勾选注册人是否在过去12个月内（或注册人被要求提交此类文件的较短期间内）已按规章S-t第405条（本章第232.405条）的要求电子提交了每个必须提交的互动数据文件。
请通过勾选的方式指明注册人是否为大型加速报告公司、加速报告公司、非加速报告公司、较小报告公司或“新兴成长公司”。有关“大型加速报告公司”、“加速报告公司”、“较小报告公司”和“新兴成长公司”的定义，请参阅交易法第120亿.2条。
| 大型加速报告公司 ☐ | 加速报告公司 ☐ | | 较小报告公司 |
| 成长型企业 |
如果是新兴成长型企业，请勾选复选标记，表明注册者已选择不使用延长过渡期来符合根据证券交易法第13(a)条规定提供的任何新财务会计准则。
请勾选以下选项以指示注册人是否为外壳公司(根据交易所法规则12b-2定义)。是
截至2024年12月4日，注册公司的
高赌注科技公司及其子公司
关于表格10-Q的季度报告
目录
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| 项目3。 |
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| 项目4。 |
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| 项目1. |
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| 项目1A。 |
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| 项目2. |
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| 项目3。 |
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| 项目4。 |
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| 第五项。 |
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| 第六项。 |
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关于前瞻性陈述的注意事项
本季度10-Q表格报告包含有关我们及我们的行业的前瞻性陈述，这些陈述涉及重大风险和不确定性。除本季度10-Q表格报告中包含的历史事实陈述外，所有陈述，包括有关我们未来经营成果或财务状况、业务策略以及管理层未来运营的计划和目标的陈述，均为前瞻性陈述。在某些情况下，这些陈述可以通过使用前瞻性术语识别，例如“认为”、“估计”、“预期”、“期望”、“计划”、“打算”、“可能”、“可以”、“会”、“应该”、“大约”、“项目”或“潜在”，或者这些术语或类似术语的否定形式或其他变体，尽管并非所有前瞻性陈述都包含这些词。
前瞻性陈述涉及风险和不确定性，因为它们与与High Roller Technologies, Inc.、我们的行业和/或可能会发生或不会发生的经济或其他一般条件相关的事件、发展和情况有关，这些事件可能在未来的较长或较短时间内以超出或低于预期的程度发生。此外，即使未来的事件、发展和情况与本报告中包含的前瞻性陈述一致，它们也可能无法预测未来周期的结果或发展。尽管我们相信我们在本报告中包含的每个前瞻性陈述都有合理的依据，但此类信息可能有限或不完整。我们的陈述不应被解读为我们已对所有相关信息进行了详尽的调查或审查。
前瞻性声明并不保证未来的业绩，我们的实际运营结果、财务状况和流动性，以及我们所处行业的发展，可能会因以下因素与本报告中包含的前瞻性声明有重大差异：
| ● |
我们在全球娱乐和ARVR游戏行业中有效竞争的能力; |
| ● |
我们管理当前运营和成功收购整合新业务的能力； |
| ● |
我们获得和维护与ARVR游戏管理机构许可的能力； |
| ● |
我们无法识别递延税资产和税收亏损结转； |
| ● |
市场和全球货币条件以及我们无法控制的经济因素，以及一般经济条件（包括通货膨胀和上升的利率期货）对我们的流动性、运营和人员的潜在影响； |
| ● |
在我们所经营的行业中，来自全球其他公司的显著竞争和竞争压力； |
| ● |
我们未来筹集资金的能力; |
| ● |
我们在留住或招聘官员、关键员工或董事方面的成功； |
| ● |
在外国做业务所带来的风险； |
| ● |
影响我们产品、税收、国际贸易法规或其他业务方面的立法、规章或其他政府行为； |
| ● |
我们营销工作的成本和效果，以及我们推广品牌的能力、未来对业务的投资、预期的资本支出，以及我们对资本需求的估计、我们有效地与现有竞争者和新市场参与者竞争的能力； |
| ● |
公司的信息科技系统的性能及其维护数据安防的能力； |
| ● |
诉讼及我们获取和维护所需知识产权以充分保护我们产品的能力，以及我们避免侵犯或以其他方式违反第三方知识产权的能力； |
| ● |
以及我们不时在证券交易委员会的文件中所描述的其他风险。 |
我们在本季度10-Q表格的季度报告中所含的前瞻性声明主要基于我们当前的预期、估计、预测和关于未来事件及趋势的判断，我们相信这些将可能影响我们的业务、运营结果、财务控件和前景。尽管我们认为我们对本季度10-Q表格中每一项前瞻性声明都有合理的依据，但我们无法保证在前瞻性声明中反映的未来结果、活动水平、绩效或事件和情况能够实现或根本发生。前瞻性声明中描述的事件的结果受到“风险因素”以及本季度10-Q表格其他部分中所述的风险、不确定性和其他因素的影响。此外，我们在一个竞争激烈和快速变化的环境中运营。新风险和不确定性不时出现，我们无法预测所有可能影响本季度10-Q表格中前瞻性声明的风险和不确定性。前瞻性声明中反映的结果、事件和情况可能无法实现或发生，实际结果、事件或情况可能与前瞻性声明中描述的情况有实质性差异。
我们在本报告中所作的任何前瞻性声明仅针对作出声明之日的事件。我们没有义务更新本《10-Q季度报告》中所作的任何前瞻性声明，以反映本季度报告日期之后的事件或情况，或反映新信息、实际结果、修订的预期或意外事件的发生，除非适用法律要求。
在本季度报告表格10-Q中，提到的“我们”、“我们公司”、“我们的”和“公司”指的是High Roller Technologies, Inc.及其直接和间接子公司。
| 截至 | 截至 | |||||||
| 九月三十日 | 12月31日 | |||||||
| (以千为单位，除股票和每股数据外) | 2024 | 2023 | ||||||
| (未经审计) | ||||||||
| 资产 | ||||||||
| 流动资产 | ||||||||
| 现金及现金等价物 | $ | $ | ||||||
| 受限制现金 | ||||||||
| 预付款项及其他流动资产 | ||||||||
| 总流动资产 | ||||||||
| 应收关联方 | ||||||||
| 递延发行成本 | ||||||||
| 物业及设备（净额） | ||||||||
| 营运租赁使用权资产，净值 | ||||||||
| 无形资产，净值 | ||||||||
| 其他资产 | ||||||||
| 总资产 | $ | $ | ||||||
| 负债和股东（赤字）权益 | ||||||||
| 流动负债 | ||||||||
| 应付账款 | $ | $ | ||||||
| 应付费用 | ||||||||
| 玩家负债 | ||||||||
| 由于附属公司 | ||||||||
| 短期无担保应付款给股东 | ||||||||
| 运营租赁义务，当前 | ||||||||
| 总流动负债 | ||||||||
| 其他负债 | ||||||||
| 运营租赁义务，非当前 | ||||||||
| 总负债 | ||||||||
| 股东（赤字）权益 | ||||||||
| 优先股，$ 面值； 授权股份; 截至2024年9月30日和2023年12月31日已发行和流通的股份 | ||||||||
| 普通股，$ 面值； 授权股份; 股份和 截至2024年9月30日和2023年12月31日的已发行和流通股份 | ||||||||
| 额外实收资本 | ||||||||
| 累计亏损 | ( | ) | ( | ) | ||||
| 累计其他综合收益 | ||||||||
| 股东（负债）的总权益 | ( | ) | ||||||
| 总负债和股东（负债）权益 | $ | $ | ||||||
请参见附带的未经审计的简明合并基本报表的说明。
高赌注科技公司及其子公司
浓缩的综合收益表及综合损益（亏损）
(未经审计)
| 截至三个月 |
截至九个月 |
|||||||||||||||
| 九月三十日 |
九月三十日 |
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| (以千为单位，除股份及每股数据外) |
2024 |
2023 |
2024 |
2023 |
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| 营业收入 |
$ | $ | $ | $ | ||||||||||||
| 营业费用 |
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| 直接营业费用： |
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| 关联方 |
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| 其他 |
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| 一般及行政： |
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| 关联方 |
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| 其他 |
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| 广告和促销： |
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| 关联方 |
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| 其他 |
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| 产品和软件开发： |
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| 关联方 |
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| 其他 |
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| 总营业费用 |
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| 运营损失 |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| 其他费用 |
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| 利息费用，净额 |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| 其他收入（费用） |
( |
) | ||||||||||||||
| 其他总费用 |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| 税前亏损 |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| 所得税费用 |
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| 净损失 |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| 其他综合收益 |
||||||||||||||||
| 外币折算调整 |
( |
) | ( |
) | ||||||||||||
| 综合损失 |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| 每股普通股净损失： |
||||||||||||||||
| 每股普通股净亏损 - 基本和摊薄 |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| 加权平均流通普通股数量 - 基本和摊薄 |
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请参见附带的未经审计的简明合并基本报表的说明。
高赌注科技公司及其子公司
简化合并股东财务报表’ （亏损）权益
(未经审计)
| 普通股 |
||||||||||||||||||||||||
| 累计 |
总计 |
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| 额外 |
其他 |
股东的 |
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| 实收资本 |
累计 |
综合的 |
股权 |
|||||||||||||||||||||
| (以千为单位，除股份外) |
股份 |
金额 |
资本 |
赤字 |
收入 |
(赤字) |
||||||||||||||||||
| 2022年12月31日 |
$ | $ | $ | ( |
) | $ | $ | ( |
) | |||||||||||||||
| 基于股份的薪酬 |
— | |||||||||||||||||||||||
| 净损失 |
— | ( |
) | ( |
) | |||||||||||||||||||
| 外币折算 |
— | ( |
) | ( |
) | |||||||||||||||||||
| 2023年3月31日 |
( |
) | ( |
) | ||||||||||||||||||||
| 通过出资结算关联应付款 |
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| 基于股份的薪酬 |
— | |||||||||||||||||||||||
| 净损失 |
— | ( |
) | ( |
) | |||||||||||||||||||
| 外币折算 |
— | |||||||||||||||||||||||
| 2023年6月30日 |
( |
) | ||||||||||||||||||||||
| 因限制性股票单位归属而发行的股份 |
||||||||||||||||||||||||
| 基于股份的薪酬 |
— | |||||||||||||||||||||||
| 净损失 |
— | ( |
) | ( |
) | |||||||||||||||||||
| 外币折算 |
— | ( |
) | ( |
) | |||||||||||||||||||
| 2023年9月30日 |
$ | $ | $ | ( |
) | $ | $ | |||||||||||||||||
| 2023年12月31日 |
$ | $ | $ | ( |
) | $ | $ | |||||||||||||||||
| 用于限制性股票单位归属的股票 |
||||||||||||||||||||||||
| 基于股份的薪酬 |
— | |||||||||||||||||||||||
| 净损失 |
— | ( |
) | ( |
) | |||||||||||||||||||
| 外币折算 |
— | ( |
) | ( |
) | |||||||||||||||||||
| 2024年3月31日 |
( |
) | ||||||||||||||||||||||
| 用于限制性股票单位归属的股票 |
||||||||||||||||||||||||
| 基于股份的薪酬 |
— | |||||||||||||||||||||||
| 净损失 |
— | ( |
) | ( |
) | |||||||||||||||||||
| 外币折算 |
— | ( |
) | ( |
) | |||||||||||||||||||
| 2024年6月30日 |
( |
) | ( |
) | ||||||||||||||||||||
| 为限制性股票单位的归属而发行的股票 |
||||||||||||||||||||||||
| 基于股份的薪酬 |
— | |||||||||||||||||||||||
| 净损失 |
— | ( |
) | ( |
) | |||||||||||||||||||
| 外币折算 |
— | |||||||||||||||||||||||
| 2024年9月30日 |
$ | $ | $ | ( |
) | $ | $ | ( |
) | |||||||||||||||
请参见附带的未经审计的简明合并基本报表的说明。
(未经审计)
| 截至九个月 |
||||||||
| 九月三十日 |
||||||||
| (以千为单位) |
2024 |
2023 |
||||||
| 经营活动产生的现金流 |
||||||||
| 净损失 |
$ | ( |
) | $ | ( |
) | ||
| 调整净亏损与经营活动使用的现金的折算： |
||||||||
| 摊销和折旧 |
||||||||
| 汇率期货收益 |
( |
) | ( |
) | ||||
| 非现金利息费用 |
||||||||
| 非现金租赁费用 |
||||||||
| 待缴税款的变动 |
||||||||
| 基于股份的薪酬 |
||||||||
| Ellmount压力位清算损失 |
||||||||
| 经营资产和负债的变动： |
||||||||
| 应收/应付关联方 |
||||||||
| 预付款项及其他流动资产 |
( |
) | ||||||
| 其他资产 |
( |
) | ||||||
| 应付账款 |
( |
) | ||||||
| 应付费用 |
( |
) | ||||||
| 玩家负债 |
||||||||
| 其他负债 |
( |
) | ||||||
| 经营租赁负债 |
( |
) | ||||||
| 经营活动产生的净现金（使用）提供 |
( |
) | ||||||
| 投资活动产生的现金流量 |
||||||||
| 对资本化软件的投资 |
( |
) | ( |
) | ||||
| 购买房地产和设备 |
( |
) | ( |
) | ||||
| 投资活动中使用的净现金 |
( |
) | ( |
) | ||||
| 融资活动产生的现金流 |
||||||||
| 递延发行成本支付 |
( |
) | ( |
) | ||||
| 债务发行所得 |
||||||||
| Ellmount压力位的清算 |
( |
) | ||||||
| 融资活动所使用的净现金（或提供的净现金） |
( |
) | ||||||
| 汇率变化对现金、现金等价物和受限现金的影响 |
( |
) | ||||||
| 现金、现金等价物和限制性现金的净变动 |
( |
) | ( |
) | ||||
| 现金、现金等价物和限制性现金 - 期初余额 |
||||||||
| 现金、现金等价物和限制性现金 - 期末余额 |
$ | $ | ||||||
| 现金流量的补充披露： |
||||||||
| 支付的税款 |
$ | $ | ||||||
| 非现金融资活动： |
||||||||
| 关联方债务转换为普通股 |
$ | $ | ||||||
| 以租赁义务交换使用权资产的获得 |
$ | $ | ||||||
请参见附带的未经审计的简明合并基本报表的说明。
High Roller Technologies, Inc.（“公司”或“High Roller”）于 2021年12月21日， 旨在寻求在美国证券交易所进行首次公开募股。High Roller是Ellmount Entertainment Ltd（“娱乐”）的直接母公司。娱乐公司总部位于马耳他，已运营超过十年，并在域名‘casinoroom.com’下，依据马耳他游戏管理局和瑞典游戏管理局颁发的许可，提供全球客户的在线赌场游戏业务。
娱乐的子公司
Wowly NV（“Wowly”）是娱乐的全资子公司。
Wowly，在库拉索组织，代表娱乐管理某些与互联网相关的广告服务。
Ellmount 压力位 SA（“压力位”），之前位于哥斯达黎加，为 娱乐 提供服务，这些服务目前由 Lunar Ventures Limited（“风险投资”）提供，如下所述，在其关闭之前 首先 的季度 2024.
Deep Dive Holdings LTD，注册于马耳他， 2024年9月， 作为我们合并的马耳他运营和服务实体的控股公司，并且拥有 无 相关的运营。
Highroller的子公司
在 2022年3月， 公司收购了在英属维尔京群岛法律下注册的HR娱乐有限公司，该公司拥有在全球范围内运营HighRoller.com域名的许可，HR娱乐因此成为公司的全资子公司。
在 2023年5月30日， Ventures在马耳他注册。Ventures提供的服务主要包括客户支持、激活和留存、风险管理、支付和欺诈管理、Facebook维护、电话营销以及每月支持交易报告。
在 2024年2月15日 Interstellar Entertainment N.V. 在库拉索注册成立，主要目的是扩大我们目前由全资子公司HR Entertainment持有的库拉索子许可证，并申请直接向库拉索游戏管理局申请ARVR游戏许可证。库拉索游戏管理局已经要求所有申请实体必须在库拉索注册才能获得ARVR游戏许可证。在 2024年3月 Interstellar Entertainment N.V. 是公司在库拉索注册的全资子公司，向库拉索游戏管理局申请获得许可证，并在 2024年7月 获得许可证 号 OGL/2024/1042/0564 运营 highroller.com 和 fruta.com 域名。
反向股票分割
在 2024年1月16日， 公司的董事会批准并且股东批准了一个 1-对-
票据 2 — 重要会计政策摘要
公司的完整会计政策在 注释中描述 2 在公司截至 2023年12月31日的合并基本报表及附注中提交给SEC的S-1/A在 2024年10月7日。 自 2023年12月31日, 公司的重要会计政策已经发生了 无 重大变更。
编制基础和合并原则
随附的未经审计的简明合并财务报表包括High Roller Technologies, Inc.及其全资子公司的账目。合并后，所有公司间账户和交易均已清除。随附的未经审计的简明合并财务报表是根据美国普遍接受的中期财务信息会计原则（“美国公认会计原则”）以及Form的指示编制和列报的 10-问答和文章 8法规 S-X 并根据美国证券交易委员会（“SEC”）的中期报告规则和条例。在这些规则允许的情况下，可以压缩或省略美国公认会计原则通常要求的某些脚注和财务信息。截至的简明合并资产负债表 2023 年 12 月 31 日，源自经审计的合并财务报表，但确实如此 不 包括美国公认会计原则要求的所有披露。本中期报告中包含的信息应与公司截至年度的经审计的合并财务报表及其附注一起阅读 2023年12月31日， 正如之前向美国证券交易委员会提交的那样。
管理层认为，这些未经审计的简明合并基本报表是在与公司的年度合并基本报表及其附注相同的基础上编制的，并包括所有调整，仅由被认为对公正呈现公司财务状况和经营成果所必需的正常经常性调整组成。所呈现的中期经营成果是 不 不一定表明完整财政年度预期的结果。
持续经营
公司净营运资本缺口为$
公司的未经审计的合并财务报表是基于其将继续作为一个持续经营主体的假设，这意味着在正常业务过程中实现资产和偿还负债。公司历史上通过关联公司及相关方的持续财务支持来满足其营运资金需求。公司能否继续作为持续经营主体，取决于其获得必要融资的能力，以满足其持续的义务并在到期时偿还因正常业务运营所产生的负债，资助其业务活动的发展和扩展，并在未来产生可持续的运营利润和现金流。
由于这些因素， 截止到2024年9月30日， 管理层已经得出结论，关于公司能否持续经营存在重大疑虑。公司在这些简明合并基本报表发布之日起的 12 个月内是否能够持续经营取决于其是否能够从运营中产生足够的现金流以满足其义务， 不 至今该公司已能做到这一点，并且获得额外的资本融资 可能 必要的融资，其中可能存在 无 确保公司在这些努力中将会成功。公司的独立注册公共会计师事务所，在其对我们截至财年的合并基本报表的报告中， 2023年12月31日， 也对我们作为持续经营能力的能力表示了重大怀疑。附带的合并基本报表不 不 包括可能因这种不确定性而导致的任何调整。
在 2024年10月 公司完成了首次公开募股，并在纽交所上市，筹集了约$
由于市场条件的不确定性，导致公司在获得更多资金方面的能力存在疑问， 无 保证公司能够在必要时以可接受的条款获得额外融资，以继续开展和发展业务。
如果现金资源不足以满足公司的持续现金需求，公司将需要缩减或停止其运营，或者如有可能通过战略联盟或合资企业获得资金，这可能会要求公司放弃对ARVR游戏许可证和/或运营的权利和/或控制权，或者完全停止运营。
风险与不确定性
公司的业务和运营对全球一般业务和经济控件非常敏感。这些控件包括短期和长期的利率期货、通货膨胀、债务和股票资本市场的波动、现金转移规则和限制，以及世界经济的一般控件。超出公司控制的许多因素可能导致这些控件的波动。一般业务和经济控件的不利发展可能对公司的财务控件和运营结果产生重大不利影响。
公司的业务和运营也对不断变化的在线ARVR游戏监管和许可要求敏感。此外，公司还与许多目前拥有广泛资金的企业、市场营销和销售业务的公司竞争。公司 可能 将无法成功地与这些公司竞争。公司的行业板块特点是科技和市场需求的快速变化。因此，公司的产品、服务或专业知识 可能 可能会变得过时或难以出售。公司的未来成功将取决于其适应科技进步、预见客户和市场需求以及增强其正在开发的当前科技的能力。
估计的使用
编制未经审计的简明合并基本报表以符合美国公认会计原则，管理层需要做出判断、估计和假设，这些判断、估计和假设会影响会计政策的应用以及资产、负债、营业收入和费用的报告金额。其中一些判断可能是主观和复杂的，因此，实际结果可能在不同的假设或条件下与这些估计存在重大差异。管理层基于历史经验和与整体基本报表相关的各种被认为合理的假设来做出其估计，这些估计的结果构成了判断资产和负债账面价值的基础， 不 从其他来源可以清楚地看出。管理层定期评估开发估计所使用的关键因素和假设，利用当前可用的信息、事实和情况的变化、历史经验和合理的假设。经过这种评估后，如果认为合适，则会相应调整这些估计。实际结果可能与这些估计存在差异。重大估计包括与潜在法律和其他负债的应计假设、托管资金的金额的回收、无形资产的实现、基于股份的补偿、应计奖金、假设借款利率和递延税务资产的实现有关的估计。
现金及现金等价物和受限制现金
现金及现金等价物由流动的支票账户和具有原始到期日的即刻访问互联网银行账户组成， 九十天或更短时间，且面临价值变化的风险微乎其微。公司至今未因我们的银行业务实践而遭受任何损失。 不
在合并资产负债表中，法律上限制提取或使用的现金及现金等价物，按适用情况被分类为流动或非流动限制现金。
娱乐和人力资源娱乐与各种中介方保持单独账户，以将客户的互动ARVR游戏账户中的现金与用于运营活动的现金分开。娱乐在每个期间结束时所称的玩家资金被分类为限制现金。玩家资金包括在互动ARVR游戏提款中已由玩家发起但在每个期间结束时仍在待处理的现金金额，以及在每个期间结束时尚未结算的任何赌注的价值。
D用户体验 F只读存储器 A附属公司
应收关联公司的款项包括预计从某些共同控制的关联公司收回的金额。应收款项反映了公司根据内部服务安排记录的收入，用于维护和运营iCasino平台，代表互动公司。截止到 2024年9月30日 和 2023年12月31日， 应收关联公司主要反映来自Spike Up和Happy Hour 娱乐控股公司的款项（见备注 12）。公司定期评估应收关联公司的款项的可收回性，并为预计收回的款项建立备抵。 不 否 在合并基本报表中记录了所呈现期间的津贴。
递延发行成本
递延发行成本包括与股权融资交易相关的付款，包括法律费用。这些成本被递延，并在公司首次公开募股完成时计入额外实收资本。 三 截至月份 十二月 31, 2024 与公司首次公开募股的完成有关 于2024年10月。
由于附属机构
由于关联方包括公司欠某些关联方和附属公司的款项。应付给关联方的金额 可能 包括公司对关联方或附属公司员工提供的服务的付款，或对关联方或附属公司代表公司支付的款项的报销。
乐租赁
根据《租赁（ASC主题）》，公司在开始时确定安排是否为租赁。 842使用权（“ROU”）资产和租赁负债在开始日期确认，基于租赁期限内剩余租赁付款的现值。在此计算中，公司仅考虑在开始时已固定和可确定的付款。由于公司的大多数租赁不 不 提供隐含利率，公司在确定租赁付款的现值时，根据开始日期可用的信息使用增量借款利率。增量借款利率是基于公司对其信用评级的理解的假设利率。使用权资产还包括在开始前支付的任何租赁付款，并记录在扣除收到的任何租赁激励后的净值。公司的租赁条款 可能 包括在确定公司会合理地行使这些选项时延长或终止租赁的选择权。当确定行使这些选项的可能性时，公司考虑基于合同、资产、实体和市场的因素。公司的租赁协议 可能 包含变量成本，如公共区域维护、保险、房地产税或其他费用。可变租赁成本在合并运营报表中按发生时计入费用。公司的租赁协议通常不 不 包含任何残余价值保证或限制性契约。
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 |
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| 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, |
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| (in thousands) |
2024 |
2023 |
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| Finland |
$ | % | $ | % | ||||||||||||
| New Zealand |
% | % | ||||||||||||||
| Norway |
% | % | ||||||||||||||
| Canada |
% | % | ||||||||||||||
| Rest of world |
% | % | ||||||||||||||
| Total Revenue |
$ | % | $ | % | ||||||||||||
| Three Months Ended September 30, |
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| (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 |
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| 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 |
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| 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, |
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| (in thousands) |
2024 |
2023 |
||||||
| VAT recoverable |
$ | $ | ||||||
| Payment provider receivables |
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| 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 |
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| Accrued deferred offering costs |
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| Accrued licensing fee |
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| Accrued marketing |
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| Accrued payroll |
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| Other accrued expenses |
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| 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) |