JACKPOT DIGITAL INC.
Consolidated Interim Financial Statements Three Months Ended March 31, 2024 and 2023 (Expressed in Canadian Dollars)
(Unaudited)
Index | Page |
Notice of No Auditor Report | 2 |
Condensed Interim Financial Statements | |
Condensed Balance Sheets | 3 |
Condensed Statements of Comprehensive Loss | 4 |
Condensed Statements of Changes in Shareholders' Deficiency | 5 |
Condensed Statements of Cash Flows | 6 |
Notes to Condensed Financial Statements | 7 - 39 |
Notice of No Auditor Review of Condensed Interim Financial Statements
In accordance with National Instrument 51-102 released by the Canadian Securities Administrators, the Company discloses that its auditors have not reviewed these unaudited condensed interim financial statements as at March 31, 2024 and for the three months ended March 31, 2024 and 2023.
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JACKPOT DIGITAL INC.
Consolidated Balance Sheets
(Expressed in Canadian Dollars)
March 31, | December 31, | |||||
2024 | 2023 | |||||
Assets (note 11) | ||||||
Current | ||||||
Cash and cash equivalents (note 5) | $ | 110,658 | $ | 99,948 | ||
Accounts receivable (note 5) | 408,738 | 355,659 | ||||
Due from related parties (notes 8) | 132,947 | 124,859 | ||||
Prepaid expenses and deposits | 176,881 | 152,901 | ||||
Gaming Systems | 829,224 | 733,367 | ||||
3,578,510 | 3,855,873 | |||||
Investment in 37 Capital Inc. ("37 Capital") (note 9) | 3,723 | 6,703 | ||||
Deposit (note 10) | - | - | ||||
Equipment | 121,081 | 134,992 | ||||
Intangible Assets | 328,931 | 348,038 | ||||
Right-of Use Assets (note 12) | 796,101 | 873,266 | ||||
Total Assets | $ | 5,657,570 | $ | 5,952,239 | ||
Liabilities | ||||||
Current | ||||||
Accounts payable and accrued liabilities | $ | 2,599,320 | $ | 2,670,740 | ||
Deferred royalty liability (note 6) | 207,158 | 175,042 | ||||
Lease liability (note 12) | 293,147 | 290,803 | ||||
Interest payable | 4,863,170 | 4,536,620 | ||||
Deferred revenue (note 13) | 47,509 | 46,291 | ||||
Loans payable (note 11) | - | - | ||||
Convertible debentures (note 11) | 270,340 | 270,340 | ||||
Deferred Royalty Liability (note 6) | 8,280,644 | 7,989,836 | ||||
161,052 | 177,202 | |||||
Lease Liability (note 12) | 528,643 | 608,504 | ||||
Deferred Revenue (note 13) | 504,436 | 491,504 | ||||
Non-Convertible Secured Debentures (note 11) | 2,296,442 | 2,199,384 | ||||
Convertible Debentures (note 11) | 4,908,430 | 4,837,181 | ||||
Total Liabilities | 16,679,647 | 16,303,611 | ||||
Shareholders' Deficiency | ||||||
Capital Stock (note 7) | 62,156,050 | 62,156,050 | ||||
Reserves (notes 7) | 1,277,057 | 2,060,919 | ||||
Convertible Debentures - Equity Portion (note 11) | 867,574 | 867,574 | ||||
Deficit | (75,322,758) | (75,435,915) | ||||
Total Shareholders' Deficiency | (11,022,077) | (10,351,372) | ||||
Total Liabilities and Shareholders' Deficiency | $ | 5,657,570 | $ | 5,952,239 | ||
On behalf of the Board: | ||||||
"Jake H. Kalpakian" (signed) | "Neil Spellman" (signed) | |||||
..................................................................... | ………………………………………….… | |||||
Jake H. Kalpakian, Director | Neil Spellman, Director | |||||
See notes to consolidated financial statements. | 3 |
JACKPOT DIGITAL INC.
Consolidated Statements of Comprehensive Loss
(Expressed in Canadian Dollars)
March 31, | March 31, | |||
2024 | 2023 | |||
Revenues | ||||
Electronic gaming tables | $ | 385,261 | $ | 487,027 |
Table sales | 419,771 | 102,615 | ||
805,032 | 589,642 | |||
Cost of sales | 222,870 | 122,799 | ||
Gross Profit | 582,162 | 466,843 | ||
Expenses | ||||
Advertising and promotion | 16,890 | 12,580 | ||
Amortization | 273,540 | 232,138 | ||
Consulting fees | 69,034 | 58,465 | ||
Foreign exchange (gain)/loss | 199,783 | (83) | ||
Gain on extinguishment of debt (note 11) | - | (614,087) | ||
Impairment loss on gaming systems | - | 696 | ||
Interest and finance expense | 344,757 | 303,203 | ||
Interest and other income | (2,262) | - | ||
Legal, accounting and audit (recovery) | (137,292) | 39,269 | ||
Management fees | 99,000 | 99,000 | ||
Regulatory and transfer agent fees | 46,315 | 60,034 | ||
Rent, office and miscellaneous | 43,375 | 31,681 | ||
Salaries and benefits | 245,353 | 391,198 | ||
Travel, meals and entertainment | 63,711 | 73,278 | ||
Share of net loss of 37 Capital Inc. | 2,980 | 1,996 | ||
1,265,184 | 689,368 | |||
Net Loss and Comprehensive Loss for the Period | $ | (683,022) | $ | (222,525) |
Basic and Diluted Loss Per Share | $ | (0.01) | $ | (0.00) |
Weighted Average Number of Common Shares | ||||
Outstanding | 133,392,727 | 131,959,302 |
See notes to consolidated financial statements. | 4 |
JACKPOT DIGITAL INC.
Consolidated Statements of Changes in Shareholders' Deficiency
(Expressed in Canadian Dollars)
Capital Stock | Reserves | Equity Portion of | ||||||||||||
Warrants and | Convertible | Shareholders' | ||||||||||||
Common Shares | Amount | Other | Options | Debentures | Deficit | Deficiency | ||||||||
Balance, December 31, 2022 | 131,959,302 | $ | 62,041,953 | $ | 1,493,767 | $ | 1,281,242 | $ | 12,536 | $ | (72,984,693) | $ | (8,155,195) | |
Net loss for the period | - | - | - | - | - | (222,525) | (222,525) | |||||||
Convertible debenture issued | - | - | - | - | 44,430 | - | 44,430 | |||||||
Broker warrants issued | - | - | 691 | - | - | - | 691 | |||||||
Share-based payment | - | - | - | 21,689 | - | - | 21,689 | |||||||
Expiry of warrants | - | - | (107,022) | - | - | 107,022 | - | |||||||
Expiry of options | - | - | - | (273,879) | - | 273,879 | - | |||||||
Balance, March 31, 2023 | 131,959,302 | 62,041,953 | 1,387,436 | 1,029,052 | 56,966 | (72,826,317) | (8,310,910) | |||||||
Net loss for the period | - | - | - | - | - | (3,055,671) | (3,055,671) | |||||||
Convertible debenture issued | - | - | - | - | 823,144 | - | 823,144 | |||||||
Convertible debenture conversion/shares for | ||||||||||||||
debt | 1,333,425 | 100,007 | - | - | (12,536) | - | 87,471 | |||||||
Broker warrants issued | - | - | 4,609 | - | - | - | 4,609 | |||||||
Share-based payment | - | - | - | 93,985 | - | - | 93,985 | |||||||
Exercise of warrants | 100,000 | 14,090 | (8,090) | - | - | - | 6,000 | |||||||
Expiry of warrants | - | - | (386,119) | - | - | 386,119 | - | |||||||
Expiry of options | - | - | - | (59,954) | - | 59,954 | - | |||||||
Balance, December 31, 2023 | 133,392,727 | $ | 62,156,050 | $ | 997,836 | $ | 1,063,083 | $ | 867,574 | $ | (75,435,915) | $ | (10,351,372) | |
Net loss for the period | - | - | - | - | - | (683,022) | (683,022) | |||||||
Share-based payment | - | - | - | 12,317 | - | - | 12,317 | |||||||
Expiry of warrants | - | - | (50,767) | - | - | 50,767 | - | |||||||
Expiry of options | - | - | - | (745,412) | - | 745,412 | - | |||||||
Balance, March 31, 2024 | 133,392,727 | $ | 62,156,050 | $ | 947,069 | $ | 329,988 | $ | 867,574 | $ | (75,322,758) | $ | (11,022,077) |
See notes to consolidated financial statements. | 5 |
JACKPOT DIGITAL INC.
Consolidated Statements of Cash Flows
(Expressed in Canadian Dollars)
March 31, | March 31, | |||
2024 | 2023 | |||
Operating Activities | ||||
Loss and Comprehensive Loss for the Period | $ | (683,022) | $ | (222,525) |
Items not affecting cash | ||||
Amortization | 273,540 | 232,138 | ||
Interest expense and finance expense | 384,566 | 293,422 | ||
Unrealized foreign exchange loss | 156,516 | (1,705) | ||
Share-based payment | 12,317 | 21,689 | ||
Repairs and maintenance | 24,910 | 31,310 | ||
Gain on sale of gaming systems | (290,854) | (77,768) | ||
Impairment loss on gaming systems | - | 696 | ||
Gain on extinguishment of debt | - | (614,087) | ||
Share of net loss of 37 Capital Inc. | 2,980 | 1,996 | ||
(119,047) | (334,834) | |||
Changes in non-cash working capital | ||||
Accounts receivable | (53,079) | (11,884) | ||
Due from related parties | (8,088) | (11,459) | ||
Prepaid expenses and deposits | (23,980) | - | ||
Accounts payable and accrued liabilities | (68,920) | (54,589) | ||
Deferred revenue | - | 91,301 | ||
(154,067) | 13,369 | |||
Cash Used in Operating Activities | (273,114) | (321,465) | ||
Financing Activities | ||||
Funds from convertible debentures, net of issuance | ||||
cost | - | 246,550 | ||
Funds from loan payable | - | 265,000 | ||
Repayment of loan payable | - | (55,000) | ||
Payment of lease liability | (63,496) | (73,447) | ||
Obligations to issue debenture | - | 334,877 | ||
Cash Provided by Financing Activities | (63,496) | 717,980 | ||
Investing Activities | ||||
Purchase of gaming systems | (71,393) | (6,931) | ||
Purchase of intangible assets | (2,676) | - | ||
Purchase of equipment and prototypes | - | (309) | ||
Proceeds of sale of gaming systems | 419,771 | - | ||
Cash Used in Investing Activities | 345,702 | (7,240) | ||
Effect of Foreign Currency Translation on Cash | 1,618 | 162 | ||
Net Change in Cash and Cash Equivalents | 10,710 | 389,437 | ||
Cash and Cash Equivalents, Beginning of Period | 99,948 | 101,289 | ||
Cash and Cash Equivalents, End of Period | $ | 110,658 | $ | 490,726 |
See notes to consolidated financial statements. | 6 |
JACKPOT DIGITAL INC.
Notes to Consolidated Financial Statements Three months ended March 31, 2024 and 2023 (Expressed in Canadian Dollars, unless otherwise stated)
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NATURE OF OPERATIONS
The principal business of Jackpot Digital Inc. (the "Company" or "Jackpot") is the developing, marketing, and leasing of electronic table games to casino operators. The Company's common shares trade on the TSX Venture Exchange ("TSX-V") under the symbol "JJ" and on the OTCQB under the trading symbol "JPOTF". A certain number of the Company's warrants trade on the TSX- V under the symbols "JJ.WT.B" and "JJ.WT.C". The Company's common shares are also listed for trading on the Frankfurt Exchange under the symbol "LVH3".
The Company's office is located at Suite 575 - 510 Burrard Street, Vancouver, British Columbia, Canada, V6C 3A8, and the Company's warehouse is located at 4664 Lougheed Highway, Unit W030, Burnaby, British Columbia, Canada, V5C 5T5. The Company's registered office is located at Suite 3200 - 650 West Georgia Street, Vancouver, British Columbia, Canada, V6B 4P7. - GOING CONCERN
These consolidated financial statements have been prepared on the basis of accounting principles applicable to a "going concern", which assumes the Company will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of operations.
Several adverse conditions may cast significant doubt on the validity of this assumption. The Company has incurred a net loss and comprehensive loss of $683,022 during the three months ended March 31, 2024 (March 31, 2023: $222,525), has incurred significant operating losses over the past two fiscal years (2023 - $3,278,196; 2022 - $5,123,052), has a working capital deficiency of $7,451,420 (December 31, 2023: working capital deficiency of $7,256,469). There are no assurances that sufficient funding will be available to the Company to continue operations for an extended period of time.
The application of the going concern concept is dependent upon the Company's ability to generate future profitable operations and receive continued financial support from its shareholders. Management is actively engaged in the review and due diligence on new projects and is seeking to raise the necessary capital to meet its funding requirements. There can be no assurance that management's plan will be successful.
If the going concern assumption were not appropriate for these consolidated financial statements, then adjustments would be necessary to the carrying values of assets and liabilities, the reported expenses, and the balance sheet classifications used. Such adjustments could be material. - BASIS OF PRESENTATION
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Statement of compliance
These condensed interim financial statements are prepared in accordance with International Accounting Standard 34 Interim Financial Reporting using the accounting policies consistent with International Financial Reporting Standards ("IFRS"), as issued by the International Accounting Standards Board ("IASB"). They do not include all of the information required for full annual financial statements.
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Statement of compliance
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JACKPOT DIGITAL INC.
Notes to Consolidated Financial Statements Three months ended March 31, 2024 and 2023 (Expressed in Canadian Dollars, unless otherwise stated)
3. BASIS OF PRESENTATION (Continued)
- Basis of measurement
These condensed interim financial statements have been prepared under the historical cost basis, except for certain financial instruments, which are measured at fair value.
These condensed interim financial statements have been prepared under the accrual basis of accounting, except for cash flow information. - Approval of the consolidated financial statements
The condensed interim financial statements of Jackpot for the three months ended March 31, 2024 were approved and authorized for issue by the Board of Directors on May 30, 2024. - Functional and presentation currency
These consolidated financial statements are presented in Canadian dollars, which is the Company's and subsidiaries' functional currency. - Significant accounting judgments, estimates and assumptions
The preparation of the consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, revenues, and expenses. Actual results may differ from these estimates.
Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Accounting estimates will, by definition, seldom equal the actual results. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.
Significant assumptions about the future and other sources of estimated uncertainty that management has made as at the consolidated balance sheet dates that could result in a material adjustment to the carrying amount of assets and liabilities in the event that actual results differ from assumptions made, related to, but are not limited to, the following:
Critical accounting estimates
Critical accounting estimates and assumptions made by management that may result in a material adjustment to the carrying amounts of assets and liabilities include, but are not limited to, the following:
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JACKPOT DIGITAL INC.
Notes to Consolidated Financial Statements Three months ended March 31, 2024 and 2023 (Expressed in Canadian Dollars, unless otherwise stated)
3. BASIS OF PRESENTATION (Continued)
- Significant accounting judgments, estimates and assumptions (continued) Critical accounting estimates (continued)
- Recoverability of accounts receivable and allowance for doubtful accounts
The Company monitors its exposure for credit losses on its customer and related parties receivable balances and the credit-worthiness of the customers and related parties on an ongoing basis and records related allowances for doubtful accounts. Allowances are estimated based upon specific customer and related parties balances, where a risk of default has been identified, and also include a provision for non- customer specific defaults based upon historical experience and aging of accounts. As of December 31, 2023, the Company recorded an allowance for doubtful accounts of $nil (December 31, 2022 - $nil). If circumstances related to specific customers and related parties change, estimates of the recoverability of receivables could also change. - Intangible assets, gaming systems, and equipment - useful lives
Amortization is recorded on the straight-line basis based upon management's estimate of the useful life and residual value. The estimates are reviewed at least annually and are updated if expectations change as a result of the technical obsolescence or legal and other limits to use. A change in the useful life or residual value will impact the reported carrying value of the intangible assets, gaming systems and equipment resulting in a change in related amortization expense. - Fair value of equity instruments
The fair value of equity instruments is subject to the limitations of the Black-Scholes option pricing model, as well as other pricing models that incorporate market data and involves uncertainty in estimates used by management in the assumptions. Because option pricing models require inputs of highly subjective assumptions, including the volatility of share prices, changes in subjective input assumptions can materially affect the fair value estimate. - Recoverability of asset carrying values
Determining the amount of impairment of intangible assets and gaming systems requires an estimation of the recoverable amount, which is defined as the higher of fair value less the cost of disposal or value in use. Many factors used in assessing recoverable amounts are outside of the control of management and it is reasonably likely that assumptions and estimates will change from period to period. - Right-of-useassets and lease liability
The right of use assets and lease liability are measured by discounting the future lease payments at incremental borrowing rate. The incremental borrowing rate is an estimated rate the Company would have to pay to borrow over a similar term and with similar security, the funds necessary to obtain an asset of a similar value to the right- of-use asset in a similar economic environment.
- Recoverability of accounts receivable and allowance for doubtful accounts
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JACKPOT DIGITAL INC.
Notes to Consolidated Financial Statements Three months ended March 31, 2024 and 2023 (Expressed in Canadian Dollars, unless otherwise stated)
3. BASIS OF PRESENTATION (Continued)
- Significant accounting judgments, estimates and assumptions (continued) Critical accounting estimates (continued)
- Discount rates for convertible debentures
Convertible debentures are separated into their liability and equity components on the consolidated balance sheets. The liability component is initially recognized at fair value, calculated at the net present value of the liability based upon non-convertible debt issued by comparable issuers and accounted for at amortized cost using the effective interest rate method. The effective interest rate used is the estimated rate for non-convertible debt with similar terms at the time of issue. - Discount rate for deferred royalty liability
The deferred royalty liability was initially recognized at fair value, calculated at the net present value of the minimum future royalty payments and subsequently accounted for at amortized cost using the effective interest rate method. The discount rate used is based on the estimated market rate for debt at the time of initial recognition.
- Discount rates for convertible debentures
Critical accounting judgments
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Recovery of deferred tax assets
The measurement of income taxes payable and deferred income tax assets and liabilities requires management to make judgments in the interpretation and application of the relevant tax laws. The actual amount of income taxes only becomes final upon filing and acceptance of the tax return by the relevant tax authorities, which occurs subsequent to the issuance of the consolidated financial statements. - Debentures
In accordance with the substance of the contractual arrangement, convertible debentures are compound financial instruments that are accounted for separately by their components: a financial liability and an equity instrument.
The identification of convertible debenture components is based on interpretations of the substance of the contractual arrangement and therefore requires judgment from management. The separation of the components affects the initial recognition of the convertible debenture at issuance and the subsequent recognition of interest on the liability component. The determination of the fair value of the liability is also based on a number of assumptions, including contractual future cash flows, discount factors and the presence of any derivative financial instruments. - Modification verses extinguishment of financial liability
Judgment is required in applying IFRS 9 Financial Instruments to determine whether the amended terms of the loan agreements are a substantial modification of an existing financial liability and whether it should be accounted for as an extinguishment of the original financial liability.
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Jackpot Digital Inc. published this content on 03 June 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 03 June 2024 19:01:02 UTC.