High Roller Technologies Inc

Note1 — Nature of operations**

High Roller Technologies, Inc. (the “Company” or “High Roller”) was incorporated in Delaware on* December 21, 2021,*with the intent to seek an initial public offering on a United States securities exchange. High Roller is the direct parent company of Ellmount Entertainment Ltd (“Entertainment”). Entertainment, which is based in Malta, has been in operation for over a decade and operated an online gaming business offering casino games to customers worldwide under the domain name ‘casinoroom.com’ under licenses issued by the Malta Gaming Authority and Swedish Gaming Authority.

Subsidiaries of entertainment

Wowly NV (“Wowly”) is a wholly owned subsidiary of Entertainment.

Wowly, which is organized in Curacao, manages certain internet related advertising services on behalf of Entertainment.

Ellmount Support SA (“Support”), which was based in Costa Rica, provided services to Entertainment that are currently being provided by Lunar Ventures Limited (“Ventures”), as described below, prior to its wind down infirst quarter of2024.

Deep Dive Holdings LTD, which is organized in Malta in* September 2024,acts as a holding company for our consolidated Maltese operating and service entities and hasno* operations.

Subsidiaries of Highroller

In* March 2022,*the Company acquired HR Entertainment Ltc, an entity organized under the laws of British Virgin Islands, which holds a worldwide license to operate the HighRoller.com domain, and HR Entertainment became a wholly-owned subsidiary of the Company.

On* May 30, 2023,*Ventures was incorporated in Malta. The services provided by Ventures principally include customer support, activation, and retention, risk management, payments, and fraud management, Facebook maintenance and telemarketing, and monthly reporting on support transactions.

On* February 15, 2024Interstellar Entertainment N.V. was incorporated in Curacao for the primary purpose of extending our current Curacao sublicense previously held by our wholly-owned subsidiary HR Entertainment, and to apply for a gaming license directly with the Curacao Gaming Control Board. The Curacao Gaming Control Board has mandated that all applying entities seeking to receive a gaming license must be domiciled in Curacao. In March 2024,Interstellar Entertainment N.V., a wholly owned subsidiary of the Company incorporated in Curacao, applied to obtain a license from the Curacao Gaming Control Board and in July 2024was issued licenseno.* OGL/2024/1042/0564 to operate the highroller.com and fruta.com domains.

Reverse stock split

On* January 16, 2024,the Company’s Board of Directors approved and the shareholders ratified a1*-for-3.95689 reverse stock split of the Company’s outstanding common stock, which became effective on* January 16, 2024.Fractional shares, if any, were rounded up or down to the nearest whole share, as appropriate. As a result of this reverse split, all share and per share amounts have been retroactively adjusted for the impact of the reverse stock split for all periods presented. The reverse stock split didnot* impact the number of authorized shares of common stock, which remained at 60,000,000 shares, or the authorized shares of preferred stock, which remained at 10,000,000 shares, nor the $0.001 par value of such shares.

Note2 — Summary of significant accounting polices

The Company’s complete accounting policies are described in Note2 to the Company’s consolidated financial statements and notes for the year ended* December 31, 2023* as filed with the SEC in form S-1/A on* October 7, 2024.Since December 31, 2023*, there have beenno material changes to the Company’s significant accounting policies.

Basis of Presentation and Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements include the accounts of High Roller Technologies, Inc., and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated upon consolidation. The accompanying unaudited condensed consolidated financial statements have been prepared and presented in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and the instructions to From10-Q and Article8 of Regulation S-X and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) for interim reporting. As permitted under those rules, certain footnotes and financial information that are normally required under U.S. GAAP can be condensed or omitted. The condensed consolidated balance sheet as of* December 31, 2023*, was derived from audited consolidated financial statements but doesnot include all disclosures required by U.S. GAAP. The information included in this interim report should be read in conjunction with the audited consolidated financial statements and notes thereto of the Company for the year ended* December 31, 2023,*as previously filed with the SEC.

In the opinion of management, these unaudited condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and notes thereto of the Company and include all adjustments, consisting only of normal recurring adjustments considered necessary for the fair presentation of the Company’s financial position and operating results. Operating results for the interim periods presented arenot necessarily indicative of the results expected for a full fiscal year.

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Going concern

The Company had a net working capital deficiency of $8,776 thousand, an accumulated deficit of $25,074 thousand and unrestricted cash resources of $1,329 thousand at* September 30, 2024*. During the years ended* December 31, 2023and2022*, the Company incurred a net loss of $2,818 thousand and $3,058 thousand, respectively, and during thenine months ended* September 30, 2024and2023*, the Company incurred a net loss of $3,854 thousand and $1,096 thousand, respectively.

The Company’s unaudited condensed consolidated financial statements have been presented on the basis that it will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has financed its working capital requirements historically through the continuing financial support of affiliates and related parties. The Company’s ability to continue as a going concern is dependent upon its ability to obtain the necessary financing to meet its continuing obligations and repay its liabilities arising from normal business operations when they become due, to fund the development and expansion of its business activities, and to generate sustainable operating profits and cash flows in the future.

As a result of these factors, at* September 30, 2024,management had concluded that there was substantial doubt about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern for12* months from the date that these condensed consolidated financial statements are being issued is dependent upon its ability to generate sufficient cash flows from operations to meet its obligations, which it hasnot been able to accomplish to date, and to obtain additional capital financing as* maybe necessary, of which there can beno* assurance that the Company will be successful in these efforts. The Company’s independent registered public accounting firm, in its report on our consolidated financial statements for the fiscal year ended* December 31, 2023,has also expressed substantial doubt about our ability to continue as a going concern. The accompanying condensed consolidated Financial statements donot* include any adjustments that might result from this uncertainty.

In* October 2024*the Company completed its initial public offering and listed its common stock on the NYSE American which generated approximately $9,027,600. The Company’s pro forma cash position after the completion of its IPO was $11,941 thousand and its proforma working capital was $252 thousand.

As market conditions present uncertainty as to the Company’s ability to secure additional funds, there can beno assurance that the Company will be able to secure additional financing on acceptable terms, as and when necessary, to continue to conduct and develop operations.

If cash resources are insufficient to satisfy the Company’s ongoing cash requirements, the Company would be required to scale back or discontinue its operations, or obtain funds, if available, through strategic alliances or joint ventures that could require the Company to relinquish rights to and/or control of gaming licenses and/or operations, or to discontinue operations entirely.

Risk and Uncertainties

The Company’s business and operations are sensitive to general business and economic conditions worldwide. These conditions include short-term and long-term interest rates, inflation, fluctuations in debt and equity capital markets, cash transfer rules and restrictions, and the general condition of the world economy. A host of factors beyond the Company’s control could cause fluctuations in these conditions. Adverse developments in these general business and economic conditions could have a material adverse effect on the Company’s financial condition and the results of its operations.

The Company’s business and operations are also sensitive to continually evolving online gaming regulatory and licensing requirements. In addition, the Company competes with many companies that currently have extensive and well-funded businesses, marketing and sales operations. The Company* maybe unable to compete successfully against these companies. The Company’s industry is characterized by rapid changes in technology and market demands. As a result, the Company’s products, services, or expertise may*become obsolete or unmarketable. The Company’s future success will depend on its ability to adapt to technological advances, anticipate customer and market demands, and enhance its current technology under development.

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Use of Estimates

The preparation of 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 arenot 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, hypothetical borrowing rates and the realization of deferred tax assets.

Cash and Cash Equivalents, and Restricted Cash

Cash and cash equivalents consist of liquid checking and instant access internet banking accounts with original maturities ofninety days or less that are subject to an insignificant risk of change in value. The Company hasnot experienced any losses to date resulting from our banking practices.

Cash and cash equivalents that are legally restricted as to withdrawal or usage are classified as current or non-current restricted cash, as applicable, in the consolidated balance sheets.

Entertainment and HR Entertainment maintain separate accounts with various intermediary parties to segregate cash that resides in customers’ interactive gaming accounts from cash used in operating activities. Player funds denoted as such by Entertainment at the end of each period are classified as restricted cash. Player funds include cash amounts that reside in players’ interactive gaming withdrawals that were initiated by players but that are still pending at the end of each period, and the value of any bets that are unsettled at the end of each period.

DUE FROM AFFILIATES

Due from affiliates consists of amounts expected to be collected from certain affiliated companies under common control. Amounts due reflect the revenues recorded by the Company under intra-group services arrangements for maintenance and operations of the iCasino platform on behalf of Interactive. As of* September 30, 2024and December 31, 2023,due from affiliates primarily reflected amounts due from Spike Up and Happy Hour Entertainment Holdings (see Note12*). On a periodic basis, the Company evaluates the collectability of amounts due from affiliates and establishes an allowance for amountsnot expected to be collected.No allowance was recorded for the periods presented in the consolidated financial statements.

Deferred Offering Costs

Deferred offering costs consist of payments with respect to the equity financing transaction, including legal fees. Such costs are deferred and were charged to additional paid-in capital during thethree months ended* December**31,* 2024 in conjunction with the completion of the Company's initial public offering in* October 2024.*

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Due to AFFILIATES

Due to affiliates consists of amounts owed by the Company to certain of its related parties and affiliates. Amounts due to affiliates* may*include payment for services provided to the Company by employees of the related party or affiliate, or reimbursement of amounts paid by the related party or affiliate on the Company’s behalf.

Leases

Under Leases (ASC Topic842), the Company determines if an arrangement is a lease at inception. Right-of-use (“ROU”) assets and lease liabilities are recognized at commencement date based on the present value of remaining lease payments over the lease term. For this purpose, the Company considers only payments that are fixed and determinable at the time of commencement. As most of the Company’s leases donot provide an implicit rate, the Company uses the incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The incremental borrowing rate is a hypothetical rate based on the Company’s understanding of what its credit rating would be. The ROU asset also includes any lease payments made prior to commencement and is recorded net of any lease incentives received. The Company’s lease terms* mayinclude options to extend or terminate the lease when it is reasonably certain that the Company will exercise such options. When determining the probability of exercising such options, the Company considers contract-based, asset-based, entity-based, and market-based factors. The Company’s lease agreements maycontain variable costs such as common area maintenance, insurance, real estate taxes or other costs. Variable lease costs are expensed as incurred on the consolidated statements of operations. The Company’s lease agreements generally donot* contain any residual value guarantees or restrictive covenants.

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* mayimpact 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*,94% and 97%, respectively, of the Company’s cash, cash equivalents and restricted cash reside in bank accounts located outside of the United States. The Company’s primary foreign currency exchange risk occurs between the time when other foreign currencies are exchanged for wagering on the Platform, and when those funds are settled to the Company in Euro. The relatively stable status of the Euro reduces but doesnot eliminate the Company’s exposure to foreign currency exchange risk. In addition, gains and losses related to translating certain cash balances from the Euro to the U.S. Dollar, as well as payable balances also impact net income. As the Company’s foreign operations expand, results* maybe impacted further by fluctuations in the exchange rates of the currencies in which the Company does business. The Company hasnot* used any derivative financial instruments to manage its foreign currency exchange risk exposure.

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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 thenine months ended* September 30, 2024and2023*, the Company incurred foreign currency transaction losses of $1,084 thousand and $1,516 thousand, respectively. For thethree months ended* September 30, 2024and2023*, the Company incurred foreign currency transaction losses of $369 thousand and $327 thousand, respectively. While the Company expects these losses to persist through2024, it continues to manage and negotiate contracts with payment providers.

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* mayor 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 wasno 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 (Topic280*), Improvements to Reportable Segment Disclosures (“ASU2023-07”). The amendments in ASU2023-07 are intended to improve reportable segment disclosure primarily through enhanced disclosures about significant segment expenses. ASU2023-07 is effective for fiscal years beginning after* December 15, 2023,and interim periods within fiscal years beginning after December 15, 2024.The amendments in ASU2023*-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 ASU2023-07 * may*have on its financial statement presentation and disclosures.

In* December 2023,the FASB issued ASU2023*-09, Income Taxes (Topic740), Improvements to Income Tax Disclosures (“ASU2023-09”). The amendments in ASU2023-09 are intended to increase transparency through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. ASU2023-09 is effective for annual periods beginning after* December 15, 2024,with early adoption permitted. The Company is currently evaluating the disclosure impact that ASU2023*-09 * may*have on its financial statement presentation and disclosures.

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Management doesnot believe that any other recently issued, butnot yet effective, authoritative guidance, if currently adopted, would have a material impact on the Company’s financial statement presentation or disclosures.

Note3 — Revenue

The components of disaggregated revenue for thethree andnine months ended* September 30, 2024and2023* were as follows:

The Company’s revenue by country for those with significant revenue for thethree andnine months ended* September 30, 2024and2023* is summarized as follows:

As of* September 30, 2024* and* December 31, 2023*, the Company didnot record any contract assets or liabilities.

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Note4 — 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*:

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*:

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Note5 — Prepaid expenses and other current assets

Prepaid expenses and other current assets at* September 30, 2024* and* December 31, 2023* are summarized as follows:

Note6 — Intangible assets, Net

Intangible assets, net at* September 30, 2024* and* December 31, 2023* are summarized as follows:

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Trademarks and domain names haveno amortization as the Company recognizes these identified intangibles assets as having an indefinite useful life. The Company considered various economic and competitive factors, including butnot 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 wasno impairment during thethree andnine months ended* September 30, 2024and2023*.

For thenine months ended* September 30, 2024*, the Company capitalized $150 thousand of costs incurred with respect to internal-use software, related to development of enhancements to the functionality of the software placed into service during thefourth quarter of2023. The customer database was fully amortized in2014, but was still in use through* September 30, 2024*. The Company recorded $53 thousand and $141 thousand in amortization expense on internal-use software for thethree andnine months ended* September 30, 2024*, respectively, which is included in general and administrative expenses in the condensed consolidated statements of operations. The Company’s internal use software is in use in Europe. There wasno amortization expense for thenine months ended* September 30, 2023* as it was placed into service in thefourth quarter of2023.

Note7 — Property and equipment

Property and equipment at* September 30, 2024* and* December 31, 2023* are summarized as follows:

The Company recorded depreciation expense on property and equipment of $0 thousand and $2 thousand for thethree months ended* September 30, 2024and2023,* respectively, and $31 thousand and $5 thousand for thenine months ended* September 30, 2024and2023*, respectively, which is included in general and administrative expenses in the condensed consolidated statements of operations.

Note8 — Accrued expenses

Accrued Expenses at* September 30, 2024* and* December 31, 2023* are summarized as follows:

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Note9 — Stockholders’** equity (deficit)**

The Company is authorized to issue 60,000,000 shares of common stock and 10,000,000 shares of undesignated preferred stock. The common stock and undesignated preferred stock have a par value of $0.001 per share.

The holders of common stock are entitled toone 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 1,250,00 shares of common stock, for gross proceeds of $10,000,000 and net proceeds after underwriting commissions and other offering expenses of approximately $9,027,600. In addition, the Company issued 62,500 warrants (“Warrants”) to the underwriter and its assignees to purchase up to 62,500 shares of common stock. The Warrants are exercisable beginning April 20, 2025at an exercise price of $10.00 per share and expire on October 22, 2029.*The holders of the Warrants have been provided with certain demand and piggy-back registration rights. The Warrants have typical representations, warranties and anti-dilution rights. The offering proceeds will be invested in a variety of capital preservation instruments, including short-term, investment-grade, interest-bearing instruments and U.S. government securities, until needed.

Note10 — Net loss per share

The computation of net loss per common share and the weighted average common shares outstanding for thethree months andnine months ended* September 30, 2024and2023* is summarized as follows:

As of* September 30, 2024and2023*, 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 thethree months andnine months ended* September 30, 2024and2023,* as their effect would have been anti-dilutive. The additional securities excluded from the dilutive earnings per share calculation are as follows:

Note11 — Share-based compensation

The Company adopted its2024 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 1,700,000 shares of common stock was reserved for grant and issuance pursuant to the equity incentive plan.

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A summary of option activity for thenine months ended* September 30, 2024* and the year ended* December 31, 2023* is presented below:

Options granted during thenine months ended* September 30, 2024* were valued using the Black-Scholes option-pricing model with the following assumptions. There wereno options granted during the year ended* December 31, 2023*.

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 doesnot 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:

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Compensation cost related to non-vested option awardsnot yet recognized as of* September 30, 2024* was $138 thousand and will be recognized over the next 2.58 years.

On* March 8, 2023,the Company amended a stock option agreement originally issued on September 1, 2022to purchase 111,198 shares of common stock at the initial public offering price. The amendment issued 111,198 restricted stock units (“RSUs”) in lieu of the 111,198 stock options. One-half of the RSUs vest over three years and half of the RSUs vest upon the completion of certain performance milestones. On September 1, 2023,13,900 RSUs vested into shares of common stock, and approximately 1,158 shares will continue to vest on thefirst* day of each month until the end of the vesting period in2026. The Company accounted for the amendment as a modification. The Company determined the modification of the time-based awards to be a Type I: Probable-to-probable modification, under ASC718-20. The Company performed a fair value calculation of the awards immediately before and after the modification, resulting in $54 thousand of incremental cost to be recorded, which will be recognized on a straight-line basis over the remaining requisite service period. The Company determined the modification of the performance-based awards to be a Type IV: Improbable-to-improbable modification, under ASC718-20. The compensation cost related to the performance-based awards after the modification is based on the fair value on the modification date. The fair value of the Milestone Vesting RSUs was determined to be $242 thousand. As of* September 30, 2024*, there has beenno compensation cost recognized in relation to the Milestone Vesting RSUs. No share-based compensation expense has been recorded related to the performance-based awards as the Company determined they are currentlynot probable of being achieved.

A summary of RSU activity for thenine months ended* September 30, 2024* and the year ended* December 31, 2023* is presented below:

The total fair value of RSUs vested during thenine months ended* September 30, 2024and2023* was $344 thousand and $188 thousand, respectively.

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Stock-based compensation related to RSUs is included in the unaudited condensed consolidated statements of operations as follows:

Of the 149,623 RSUs granted during thenine months ended* September 30, 2024*,60,812 were determined to be performance RSUs, of which 30,406 vest upon the Company generating specified net gaming revenue targets for the year ending* December 31, 2024and 30,406 vest upon generating specified net gaming revenue targets for the year ending December 31, 2025.As of September 30, 2024*, the Company determined it wasnot probable of these performance conditions being met and thereforeno expense has been recognized. Total compensation cost related to non-vested time-based RSUsnot yet recognized as of* September 30, 2024* was approximately $200 thousand which will be recognized on a straight-line basis through the end of the vesting period in2026. There wasno total compensation cost related to non-vested performance-based RSUsnot yet recognized as of* September 30, 2024*.

Warrants

As of* September 30, 2024*, the Company had the following warrants outstanding:

There wasno share-based compensation expense related to warrants incurred during thethree andnine months ended* September 30, 2024* or2023.

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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 in2022, the Companyno 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 thethree months ended* September 30, 2024and2023,* the Company generated revenues of $1,064 thousand and $546 thousand, respectively, related to the services performed by Interactive and Spike Up for the Company, which was included in net revenues in the unaudited condensed consolidated statements of operations. For thenine months ended* September 30, 2024and2023,* the Company generated revenues of $1,336 thousand and $1,056 thousand, respectively, related to the services performed by Interactive and Spike Up for the Company, which was included in net revenues in the unaudited condensed consolidated statements of operations.

For thethree months ended* September 30, 2024and2023,* the Company recognized $164 thousand and $1,295 thousand, respectively, for marketing and other operating costs performed by Spike Up on behalf of the Company, which was included in advertising and promotion in the unaudited condensed consolidated statements of operations. For thenine months ended* September 30, 2024and2023,* the Company recognized $436 thousand and $1,570 thousand, respectively, for marketing and other operating costs performed by Spike Up on behalf of the Company, which was included in advertising and promotion in the unaudited condensed consolidated statements of operations.

For thethree months ended* September 30, 2024and2023,* the Company also incurred other costs from Spike Up that were included in the unaudited condensed consolidated statement of operations, consisting of $592 thousand and $1,569 thousand, respectively, included in direct operating costs. For thenine months ended* September 30, 2024and2023,* the Company also incurred other costs from Spike Up that were included in the unaudited condensed consolidated statement of operations, consisting of $1,959 thousand and $3,195 thousand, respectively, included in direct operating costs.

For thethree andnine months ended* September 30, 2024and2023*, 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:

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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 500 thousand euros per month. Beginning in thefourth quarter of2023, the Company also recognized certain administrative costs performed by certain subsidiaries of Happy Hour Entertainment Holdings. For thethree andnine months ended* September 30, 2024and2023,* the Company recognized an immaterial amount in both periods, for services performed for the Company by Happy Hour Entertainment Holdings and its wholly owned subsidiaries which was included in general and administrative expenses in condensed consolidated statements of operations.

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 thethree months ended* September 30, 2024and2023,* such services totaled $0 and $120 thousand, respectively, included in product and software development expenses in the unaudited condensed consolidated statement of operations. For thenine months ended* September 30, 2024*, such services totaled $30 thousand, included in product and software development expenses in the unaudited condensed consolidated statement of operations. For thenine months ended* September 30, 2023*, such services totaled $204 thousand, with $47 thousand included in direct operating expenses and $157 thousand included in product and software development expenses in the unaudited condensed consolidated statement of operations.

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:

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As of* September 30, 2024* and* December 31, 2023*, the total amount due to Spike Up includes $2,727 thousand and $2,702 thousand, respectively, related to the HighRoller.com domain name purchase (see Note6), with the respective remaining balances related to user acquisition costs.

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 $500 thousand. The loans are due and payable on or before December 31, 2024.Ifnot* paid on or before maturity, the notes will accrue interest at a rate of 10% per year from the date of the original receipt of the funds. The loans are expected to be repaid substantially from operations.

13. Income Taxes

The Company recognized federal, state and foreign income tax expense of $0 and$$8,611 for thenine months ended* September 30, 2024,and2023,* respectively. The effective tax rates for thenine months ended* September 30, 2024,and2023,* were 0% and (0.8)%, respectively. The difference between the Company’s effective tax rate and the U.S. statutory tax rate of 21% was due to a valuation allowance recorded on the Company’s net U.S. deferred tax assets and valuation allowances recorded on deferred tax assets in foreign jurisdictions where the Company operates. The Company evaluates the realizability of the deferred tax assets on a quarterly basis and establishes a valuation allowance when it is more likely thannot that all or a portion of a deferred tax asset* may**not* be realized. The Company evaluates its tax positions and recognizes tax benefits that, more-likely-than-not, will be sustained upon examination based on the technical merits of the position. The Company didnot have any unrecognized tax benefits as of* September 30, 2024or December 31, 2023.*

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* maybe 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 tonot* be misleading. The Company doesnot 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 ASC450-20, Contingencies.

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For thenine months ended* September 30, 2024and2023*, 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 isnot targeting these markets and doesnot 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 in2018 without a license and has been ordered to pay a fine of approximately $216 thousand. The Company has provided a full provision for these administrative claims in accrued expenses in the condensed consolidated balance sheets at* September 30, 2024* and* December 31, 2023*.

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 forsix years, although the Company mayterminate the lease at any time after three years. The monthly rent payment for the office is approximately $15 thousand for thefirst* year, with a 3% annual increase.

Right-of-use assets for these administrative office leases as of* September 30, 2024*, and* December 31, 2023*, are summarized as follows:

The Company hasno other material operating or financing leases with terms greater than12 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 thethree months ended* September 30, 2024,were$12* thousand. Operating lease expenses, inclusive of short-term and variable lease expenses, included in the Company’s unaudited condensed consolidated statements of operations for thenine months ended* September 30, 2024and2023*, were $126 thousand and $19 thousand, respectively.

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Annual maturities analysis under the Malta lease agreement at* September 30, 2024* is as follows:

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 ASU2016-02, Leases. As of* September 30, 2024*, the weighted average remaining lease term is 5.75 years and the weighted average discount rate used to determine the operation lease liability was 4.5%.

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 didnot* 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 in2018* without a license and affirmed the imposed fine of CZK 5million (approximately $209 thousand ). The Company has been making quarterly payments on this imposed fine since* September 2022and expects that that the amount of the fine will be fully paid inQ1* 2025.

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 1,250,00 shares of common stock, for gross proceeds of $10,000,000 and net proceeds after underwriting commissions and other offering expenses of approximately $9,027,600. In addition, the Company issued 62,500 warrants (“Warrants”) to the underwriter and its assignees to purchase up to 62,500 shares of common stock. The Warrants are exercisable beginning April 20, 2025at an exercise price of $10.00 per share and expire on October 22, 2029.*The holders of the Warrants have been provided with certain demand and piggy-back registration rights. The Warrants have typical representations, warranties and anti-dilution rights. The offering proceeds will be invested in a variety of capital preservation instruments, including short-term, investment-grade, interest-bearing instruments and U.S. government securities, until needed.

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