10-K: VIP Play Reports FY25 Loss, Cites Going Concern Risk

VIP Play, Inc. reported a net loss of $18.9 million for fiscal year 2025, a significant improvement from the prior year, but faces substantial doubt about its ability to continue as a going concern without further financing.

Summary

• The net loss for fiscal year 2025 was $18,881,931, a decrease from $30,385,693 in fiscal year 2024.
• Negative gaming revenues improved to $(86,473) in FY2025 from $(2,299,532) in FY2024, driven by lower promotional credits and a more efficient acquisition mix.
• Operating expenses increased due to a $5,909,318 impairment of developed technology and tradename related to sunsetting the ZenSports app.
• Sales and marketing expenses decreased by $1,109,208, primarily due to a reduction in promotional non-cash bonuses.
• Total other expenses decreased by $12,269,026, mainly due to a $47,000 gain on the change in fair value of derivative liability in FY2025, compared to a $9,532,758 loss in FY2024, and reduced related-party interest expense.
• The working capital deficit increased to $31,919,904 as of June 30, 2025, from $20,782,894 as of June 30, 2024.
• Net cash used in operating activities decreased to $10,430,726 in FY2025 from $11,301,366 in FY2024.
• The company launched its new VIP Play brand application in Tennessee on May 12, 2025, after sunsetting the ZenSports brand on April 28, 2025.
• Interim approval for a West Virginia i-Gaming and Sports Wagering Management Service Provider License was received on March 31, 2025, but operations have not yet commenced there as of September 29, 2025.
• Material weaknesses in internal control over financial reporting were identified, including limited segregation of duties, insufficient review controls over complex accounting estimates, and inadequate information technology controls.
• The Chairman of the Board, Bruce Cassidy, beneficially owns 74.48% of the total voting power of outstanding common and preferred stock.
• A software defect discovered subsequent to June 30, 2025, resulted in approximately $200,000 in unauthorized player withdrawals, with $27,000 recouped as of September 29, 2025.

Sentiment

Score: 3

Explanation: The company shows some operational progress with the VIP Play launch and West Virginia license, and a reduced net loss. However, the substantial accumulated deficit, increasing working capital deficit, negative operating cash flow, going concern warning, material weaknesses in internal controls, and heavy reliance on related-party financing indicate significant underlying financial instability and high risk.

Positives

• Net loss significantly decreased to $18.9 million in fiscal year 2025 from $30.4 million in fiscal year 2024.
• Negative gaming revenues improved from $(2.3) million in FY2024 to $(86,473) in FY2025, attributed to lower promotional credits and a more efficient acquisition mix.
• Successfully launched the new VIP Play brand application in Tennessee on May 12, 2025, replacing the ZenSports app.
• Received interim approval for an i-Gaming and mobile sports betting license in West Virginia on March 31, 2025, positioning for future expansion.
• Entered a multi-year agreement with Kambi Group on November 7, 2024, to power sportsbook growth in Tennessee and future markets.
• Cybersecurity measures are in place, aligning with ISO/IEC 27001:2022 standards, including intrusion detection, firewall management, and network segmentation.

Negatives

• Incurred a net loss of $18,881,931 for fiscal year 2025.
• Has an accumulated deficit of $62,386,705 as of June 30, 2025.
• Working capital deficit increased to $31,919,904 as of June 30, 2025.
• Experienced negative cash flows from operations of $10,430,726 for fiscal year 2025.
• Substantial doubt exists about the ability to continue as a going concern without additional financing.
• Dependent on outside financing, currently generating de minimis revenues, and projected revenues do not cover expenses.
• Recorded an impairment of developed technology and tradename of $5,909,318 due to sunsetting the ZenSports app.
• Identified material weaknesses in internal control over financial reporting, including limited segregation of duties, insufficient review controls, and IT controls.
• A software defect led to unauthorized player withdrawals of approximately $200,000, with only $27,000 recouped as of September 29, 2025.
• The Chairman of the Board, Bruce Cassidy, controls 74.48% of the total voting power, limiting influence for other stockholders.
• Several executive officers and the Chairman failed to timely file Section 16(a) reports.

Risks

• Limited operating history makes it difficult to accurately evaluate operations, business plan, performance, and prospects.
• Inability to raise sufficient capital to meet ongoing operating needs and fund growth plans could lead to cessation of operations.
• Reductions in discretionary consumer spending could adversely affect demand for online gaming offerings.
• Projections are subject to significant risks, assumptions, estimates, and uncertainties, including future legislation and regulatory changes, which may cause actual results to differ materially.
• Information technology and infrastructure may be vulnerable to cyber-attacks, employee error, or malfeasance, potentially leading to data breaches, legal claims, regulatory penalties, and reputational damage.
• Reliance on third-party service providers for critical functions (e.g., content delivery, payment processing, sportsbook algorithms) exposes the company to risks if these providers fail or terminate relationships.
• Dependence on the continued compatibility of the app with major mobile operating systems (iOS, Android) and third-party distribution platforms (Apple App Store, Google Play Store) poses risks if these platforms change policies or restrict distribution.
• Growth prospects depend on the legal status and pace of online sports betting and gaming legalization in various jurisdictions, which may be slower than anticipated or accompanied by unfavorable restrictions/taxes.
• Failure to comply with regulatory requirements or obtain/maintain necessary licenses in any jurisdiction could impact operations across all jurisdictions.
• The success and win/hold rates of sports betting offerings are subject to an element of chance and factors beyond control, potentially leading to higher-than-anticipated user winnings.
• Negative events or media coverage relating to sports betting, online sports betting, or underlying sports/athletes could adversely impact user retention and attraction.
• Potential governmental investigations, inquiries, legal proceedings, and enforcement actions could result in substantial fines or require changes to business practices.
• Difficulty accessing services of banks, credit card issuers, and payment processing services providers could hinder operations.
• Inability to hire and retain key personnel, particularly CEO Les Ottolenghi, could substantially affect future success.
• Commercial success depends on operating without infringing the intellectual property rights of third parties, with potential for costly litigation or licensing requirements.
• The Chairman of the Board's majority voting power (74.48%) may limit the influence of other stockholders and could discourage potential acquirers.
• Compliance with changing corporate governance and public disclosure regulations may result in additional expenses and diversion of management time.
• Material weaknesses in internal control over financial reporting could adversely affect the accuracy and reliability of financial statements.
• The common stock price may be volatile and fluctuate widely, potentially resulting in substantial losses for investors.
• The company has not paid cash dividends in the past and does not expect to in the future, limiting return on investment to stock price appreciation.
• Shares may be subject to the Penny Stock Reform Act, affecting the ability to sell shares in any secondary market.
• Future Rule 144 sales by affiliates could have a depressive effect on the stock price due to increased supply.
• FINRA sales practice requirements may limit broker-dealers' ability to recommend the stock, affecting liquidity.

Future Outlook

The company expects revenues to increase over time but lacks sufficient history to accurately forecast the amount or time required to cover its burn rate. It anticipates significant increases in operating costs for license maintenance, technology development, sales and marketing, and labor as it transitions from a development stage to a revenue-generating operating business. The company plans to seek jurisdictional approval in multiple additional U.S. jurisdictions for expansion beyond Tennessee and West Virginia. Management believes that existing stockholders, prospective new investors, and future revenues will provide the additional cash needed to meet obligations and allow business development. The company intends to form an audit committee and other applicable committees once sufficient funding is raised and plans to adopt a Code of Ethics and an insider trading policy prior to the end of fiscal year ending June 30, 2026. The company expects to recoup the majority of the remaining $173,000 from unauthorized player withdrawals over the coming months.

Management Comments

• Management believes that these forward-looking statements are reasonable as and when made, there can be no assurance that future developments affecting us will be those that we anticipate.
• Management believes the existing stockholders, prospective new investors, and future revenues will provide the additional cash needed to meet our obligations as they become due and will allow the expansion of the sports betting technology into additional jurisdictions.
• Management believes that the actions presently being taken to obtain additional funding and implement its strategic plan provides the opportunity for our Company to continue as a going concern.
• Management is evaluating and implementing remediation measures to address these matters [material weaknesses in internal control].
• The Company believes that the Defect will not have a material impact on its first quarter 2026 results.

Industry Context

The online sports betting market has historically been characterized by an inefficient and costly approach to user acquisition, with escalating costs often not translating to corresponding profitability in the U.S. market. The company aims to differentiate itself by avoiding programs with questionable return on investment, focusing on advanced data and behavioral analytics, and unique loyalty programs for retention and referrals. As of August 2025, 38 U.S. states and the District of Columbia had legalized sports betting, with 32 allowing online betting, indicating a growing but highly competitive and regulated market. The industry is subject to extensive and evolving regulations, requiring licenses and payment of significant taxes or a percentage of gross gaming revenue.

Comparison to Industry Standards

• The company acknowledges that the online sports betting market has cycled through an inherently inefficient and costly approach to user acquisition, where escalating costs have not translated to corresponding profitability in the U.S. market, and aims to avoid such programs.
• The company states its cybersecurity approach aligns with ISO/IEC 27001:2022 standards, a recognized international benchmark for information security management.

Management Changes

Corporate Governance

Legal Proceedings

• No currently pending material legal proceedings.

Related Party Transactions

• Promissory note with John Linss (former CEO and director) for $1,700,000 (initially), amended on February 19, 2024, with an outstanding principal balance of $511,342 as of June 30, 2025.
• Multiple amended and restated discretionary non-revolving lines of credit and a new discretionary revolving line of credit with Excel Family Partners, LLLP, a company controlled by Bruce Cassidy (Chairman of the Board).
• Outstanding principal on related party lines of credit totaled $19,586,000 as of June 30, 2025, with accrued interest of $1,659,726.
• An additional $2,899,665 was borrowed from Excel Family Partners, LLP, subsequent to June 30, 2025, through September 29, 2025.
• A promissory note for $30,000 is owed to Eagle Investment Group, LLC, also controlled by Bruce Cassidy.

Stakeholder Impact

• Shareholders face significant dilution risk from future equity financing, limited influence due to the Chairman's majority voting power, potential for stock price volatility, no anticipated cash dividends, and the risk of losing their entire investment due to going concern issues.
• Employees may experience increased headcount due to sports betting activity and receive responsible gaming training, with potential for new hires to address internal control weaknesses.
• Customers (players) are impacted by the transition to the new VIP Play app, potential for improved experience with the Kambi Group partnership, but also face risks of service interruptions due to third-party reliance or IT issues, and the impact of unauthorized withdrawals due to a software defect.
• Creditors are exposed to substantial debt and a growing working capital deficit, coupled with the company's going concern risk.
• Regulatory authorities are involved in ongoing licensing processes and compliance oversight, with the company subject to extensive and evolving regulations and the risk of fines or license revocation for non-compliance.

Next Steps

• Commence operations in West Virginia following interim license approval.
• Design, budget, and fund a longer-term marketing plan to streamline effective marketing programs.
• Identify, budget, and secure funding for expansion into multiple additional U.S. jurisdictions.
• Remediate identified material weaknesses in internal control over financial reporting, including appointing additional qualified personnel and adopting sufficient written policies and procedures.
• Reshape the Board of Directors to include additional members who would advise on a Code of Ethics and insider trading policy.
• Form an audit committee and other applicable committees once sufficient funding is raised.
• Continue efforts to recoup the majority of the remaining $173,000 from unauthorized player withdrawals.

Key Dates

Recommendation

The company faces severe financial distress, evidenced by a substantial accumulated deficit of over $62 million, an increasing working capital deficit of $31.9 million, and persistent negative operating cash flows of $10.4 million. These conditions have led to a going concern warning from its auditors. Its heavy reliance on related-party financing, coupled with identified material weaknesses in internal controls and a recent software defect causing unauthorized withdrawals, highlights significant operational and governance risks. While there is some operational progress with the VIP Play launch and West Virginia license, these are early-stage developments that do not offset the profound financial instability and high execution risk. The majority voting control by the Chairman further concentrates risk. Investors face a high probability of substantial losses.

Keywords

Mobile sports wagering, online gaming, sports betting, iGaming, Tennessee, West Virginia, VIP Play, ZenSports, Kambi Group, financial results, SEC filing, 10-K, going concern, internal controls, cybersecurity, capital raise, related party transactions, corporate governance