10-Q/A: Apple iSports Group Restates Financials After Accounting Errors

Apple iSports Group has restated its financial statements for the first three quarters of 2023 due to errors in accounting for research and development intellectual property and share counts.

Summary

• Apple iSports Group, formerly Prevention Insurance.com, has filed an amended quarterly report (Form 10-Q/A) for the period ended September 30, 2023.
• The company restated its previously issued financial statements due to errors in accounting for research and development intellectual property rights and incorrect reporting of common shares outstanding.
• The restatement resulted in a reclassification of $19,506 from common stock to additional paid-in capital on the December 31, 2022 balance sheet.
• The company's net loss for the nine months ended September 30, 2023, was $2,269,015, compared to a net loss of $1,001,013 for the same period in 2022.
• Operating expenses for the nine months ended September 30, 2023, totaled $2,233,385, a significant increase from $981,712 in the same period of 2022.
• The company had no revenue for both the three and nine month periods ended September 30, 2023 and 2022.
• The company's current liabilities as of September 30, 2023, were $3,800,704, including $2,281,602 in loans payable to related parties.
• As of December 28, 2023, there were 202,784,211 shares of common stock outstanding.
• The company is developing a digital sports betting and gaming platform with licenses in Australia and North Dakota.

Sentiment

Score: 3

Explanation: The document reveals significant financial losses, a lack of revenue, and material weaknesses in internal controls, which are major concerns for investors. The company's dependence on related party loans and the need for additional capital raise further contribute to a negative sentiment.

Positives

• The company has secured a provisional Northern Territory Online Bookmaking License.
• The company has a license in North Dakota as an Advanced Deposit Wagering provider.
• The company is developing a digital sports betting and gaming platform.
• The company has established a core team with industry experience.
• The company has secured private placement funding and loans from related parties.

Negatives

• The company has incurred significant net losses of $2,269,015 for the nine months ended September 30, 2023.
• The company has substantial current liabilities of $3,800,704 as of September 30, 2023.
• The company has no revenue for the reported periods.
• The company's operating expenses have increased significantly.
• The company has identified material weaknesses in its disclosure controls and procedures.
• The company's financial statements have been restated due to accounting errors.

Risks

• The company has a history of net losses and negative cash flow from operations.
• The company is dependent on additional capital resources to continue as a going concern.
• The company's ability to obtain additional financing is uncertain.
• The company's disclosure controls and procedures were not effective, leading to a restatement of financials.
• The company is dependent on related parties for funding.
• The company faces competition from existing and new products in the sports betting industry.
• The company's success depends on market acceptance of its products and services.
• The company is subject to government regulations regarding the sports betting industry.

Future Outlook

The company expects its Northern Territory Online Bookmaking license to be issued in the first calendar quarter of 2024 and the TRPB examination to be completed in Q4 2023. The company will seek market access licenses for sports betting in a number of US states over a 3-year time-line.

Management Comments

• Management plans to obtain additional capital from management and significant stockholders.
• Management is seeking third-party equity and/or debt financing.
• Management cannot provide any assurances that the Company will be successful in accomplishing any of its plans.

Industry Context

The company is operating in the competitive online sports betting and gaming industry, which is experiencing growth and increasing regulation. The company is seeking to establish itself in both the Australian and US markets, which have different regulatory landscapes.

Comparison to Industry Standards

• The company's lack of revenue and significant net losses are concerning compared to established players in the sports betting industry, such as DraftKings and Flutter Entertainment, which have substantial revenue streams.
• The company's reliance on related party loans is not uncommon for early-stage companies but raises questions about long-term financial sustainability compared to companies with access to broader capital markets.
• The company's focus on obtaining licenses in specific jurisdictions is a common strategy in the industry, but the timeline for achieving profitability is uncertain compared to companies with established market presence.
• The restatement of financials due to accounting errors is a significant issue that needs to be addressed to build investor confidence, as it is not a common occurrence for established public companies.

Related Party Transactions

• The company has significant loan payables to related parties, totaling $2,281,602 as of September 30, 2023.
• The company has accrued interest to related parties of $50,332 as of September 30, 2023.
• The company has amounts due to related parties of $4,999 as of September 30, 2023.

Stakeholder Impact

• Shareholders are negatively impacted by the restatement of financials and the company's significant losses.
• Employees may be concerned about the company's financial stability and future prospects.
• Customers are not yet impacted as the platform is still under development.
• Suppliers and creditors face increased risk due to the company's financial challenges.

Next Steps

• The company expects the Northern Territory Online Bookmaking license to be issued in the first calendar quarter of 2024.
• The company expects the TRPB examination to be completed in Q4 2023.
• The company will seek market access licenses for sports betting in a number of US states over a 3-year time-line.
• The company plans to improve its disclosure controls and procedures and internal control over financial reporting.

Key Dates

Keywords

sports betting, gaming platform, financial restatement, intellectual property, online bookmaking, ADW license, related party loans, operating expenses, net loss, disclosure controls