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

Apple iSports Group, formerly Prevention Insurance, has restated its financials for the quarter ended June 30, 2023, due to errors in accounting for research and development intellectual property and share counts.

Summary

• Apple iSports Group, previously known as Prevention Insurance, filed an amended quarterly report (Form 10-Q/A) for the period ending June 30, 2023.
• The restatement was necessary due to incorrect accounting for research and development intellectual property rights and misstated common shares outstanding.
• The company incorrectly recorded 202,704,211 shares outstanding when the actual number was 7,642,211, leading to a reclassification of $19,506 from common stock to additional paid-in capital.
• The restatement impacts the Condensed Consolidated Balance Sheets, Statements of Comprehensive Loss, Statements of Stockholders' Deficit, and Statements of Cash Flows for the six months ended June 30, 2023.
• The company's net loss for the six months ended June 30, 2023, was $1,688,426, compared to a net loss of $592,677 for the same period in 2022.
• Operating expenses for the six months ended June 30, 2023, totaled $1,666,904, a significant increase from $589,064 in 2022, primarily due to increased activity in subsidiaries and research and development expenses.
• The company had no revenue for the six months ended June 30, 2023 and 2022.
• The company's cash and cash equivalents were $891 as of June 30, 2023, down from $19,857 at the end of 2022.
• The company has a going concern issue and is dependent on additional capital resources to continue operations.

Sentiment

Score: 2

Explanation: The document reveals significant financial issues, including a restatement due to accounting errors, substantial losses, low cash reserves, and a going concern issue. The company's dependence on related party loans and the ineffectiveness of its disclosure controls further contribute to a negative outlook.

Positives

• The company has secured a provisional Northern Territory Online Bookmaking license in Australia.
• The company has a license in North Dakota as an Advanced Deposit Wagering (ADW) provider, pending completion of a TRPB examination.
• The company is developing a digital sports betting and gaming platform.

Negatives

• The company restated its financials due to material accounting errors.
• The company has a significant net loss of $1,688,426 for the six months ended June 30, 2023.
• The company's operating expenses have increased significantly.
• The company has very low cash reserves of $891 as of June 30, 2023.
• The company has a going concern issue and is dependent on additional capital resources.
• The company's disclosure controls and procedures were deemed ineffective.

Risks

• The company's ability to continue as a going concern is in doubt due to its net losses and negative cash flow.
• The company is dependent on related party loans and additional capital to fund its operations.
• The company's disclosure controls and procedures were not effective, leading to the restatement of financials.
• The company faces risks related to market acceptance of its products and services, competition, and government regulations.
• The company's plans and objectives are based on assumptions that may prove inaccurate.

Future Outlook

The company plans to obtain additional capital from management and significant stockholders and seek third-party equity and/or debt financing to continue as a going concern. The company also plans to launch its sports betting platform in October 2023.

Management Comments

• Management concluded that the company's previously issued financial statements should be restated due to accounting errors.
• Management plans to obtain additional capital to meet minimal operating expenses.
• Management cannot provide any assurances that the company will be successful in accomplishing its plans.

Industry Context

The company is operating in the competitive online sports betting and gaming industry, which is experiencing growth but also faces regulatory challenges. The company is seeking to establish itself in both the Australian and US markets.

Comparison to Industry Standards

• The company's lack of revenue and significant net losses are concerning compared to established players in the online sports betting industry, such as DraftKings and Flutter Entertainment, which have substantial revenue streams.
• The company's reliance on related party loans is not typical of larger, more established companies in the sector, which often have access to broader capital markets.
• The company's development of a proprietary platform is similar to other companies in the sector, but the company's financial position is weaker than many of its competitors.
• The company's licensing in Australia and North Dakota is a positive step, but it needs to secure additional licenses to compete effectively in the US market.

Related Party Transactions

• The company has significant related party loans and payables.
• Loans from Cres Discretionary Trust No. 2, Apple iSports Investment Group Pty, and ABA Investment Group Pty Ltd are significant.
• The company has related party payables to Cooper Hill Assets Inc and officers and directors.

Stakeholder Impact

• Shareholders face significant risk due to the company's financial instability and going concern issue.
• Employees may be impacted by the company's financial difficulties.
• Customers may be affected by the potential delay or failure of the company's platform launch.
• Suppliers and creditors face risk due to the company's financial instability.

Next Steps

• The company plans to launch its sports betting platform in October 2023.
• The company needs to complete the TRPB examination to receive its ADW license in North Dakota.
• The company needs to secure additional capital to continue operations.
• The company needs to improve its disclosure controls and procedures.

Key Dates

Keywords

restatement, financials, accounting errors, sports betting, gaming platform, intellectual property, going concern, related party loans, operating expenses, net loss, disclosure controls, capital raise