| Summary of Significant Accounting Policies | Note 2 – Summary of Significant Accounting
Policies A summary of the significant accounting policies
applied in the preparation of the accompanying condensed consolidated financial statements follows: Basis of presentation and principles of
consolidation The accompanying unaudited condensed consolidated
financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United
States of America (“U.S. GAAP”) for interim financial information, and with the rules and regulations of the United
States Securities and Exchange Commission (the “SEC”) set forth in Article 8 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim
financial statements furnished reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management,
necessary to a fair statement of the results for the interim periods presented. Unaudited interim results are not necessarily indicative
of the results for the full fiscal year. These financial statements should be read along with the Annual Report filed on Form 10-K
of the Company for the annual period ended June 30, 2020. The consolidated balance sheet as of June 30, 2020 was derived from the
audited consolidated financial statements as of and for the year then ended. The condensed consolidated statements include the
accounts of the Company and its wholly owned subsidiaries. All material intercompany transactions and balances have been eliminated
on consolidation. The Company’s financial statements are
prepared using the accrual basis of accounting in accordance and the Company’s functional and reporting currency is the U.S.
dollar. Reclassifications Certain prior year amounts have been reclassified
to conform to the current period presentation. The Company reclassified taxes payable from accounts payable and accrued expenses
and sales and marketing from general and administrative. Use of estimates The preparation of condensed consolidated financial
statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets
and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates. Cash and Cash Equivalents Cash and cash equivalents include cash on hand,
and all highly liquid debt instruments purchased with an original maturity of three months or less. As at September 30, 2020 and
June 30, 2020 there were no cash equivalents. At times, cash deposits may exceed FDIC-insured limits. At September 30, 2020 and
June 30, 2020, the amount the Company had on deposit funds that exceeded the FDIC-insured limits were approximately $8,500,000
and $12,000,000, respectively. Prepaid Expenses Prepaid expenses consist of stock based compensation,
consulting and insurance and services paid in advance, for which the Company has not yet received the benefit. Equipment Equipment is stated at cost less accumulated
depreciation and accumulated impairment losses. Cost includes expenditures that are directly attributable to the acquisition of
the asset. Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate,
only when it is probable that future economic benefits associated with the item will flow to the Company and the cost can be measured
reliably. Repairs and maintenance costs are charged to
the statements of operations, during the year in which they are incurred. Depreciation is provided for over the estimated
useful life of the asset as follows:
Furniture and equipment 5 years
Computer equipment 3 years Useful lives and residual values are reviewed
and adjusted, if appropriate, at the end of each reporting period. An asset’s carrying amount is written down immediately
to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. The cost and accumulated
depreciation of assets retired or sold are removed from the respective accounts and any gain or loss is recognized in operations. Business Acquisition
Accounting The Company applies
the acquisition method of accounting for business acquisitions. The Company allocates the purchase price of our business acquisitions
based on the fair value of identifiable tangible and intangible assets. The difference between the total cost of the acquisition
and the sum of the fair values of acquired tangible and identifiable intangible assets less liabilities is recorded as goodwill. Goodwill and Intangible Assets The Company has recorded
intangible assets, including goodwill, in connection with business acquisitions. Estimated useful lives of amortizable intangible
assets are determined by management based on an assessment of the period over which the asset is expected to contribute to future
cash flows. The allocation of intangible assets impacts the amounts allocable to goodwill. In accordance with
U.S. GAAP for goodwill and other indefinite-lived intangibles, the Company tests these assets for impairment annually and whenever
events or circumstances make it more likely than not that impairment may have occurred. For the purposes of that assessment, the
Company has determined to assign assets acquired in business combinations to a single reporting unit including all goodwill and
indefinite-lived intangible assets acquired in business combinations. Operating Leases In February 2016, the FASB issued ASU No. 2016-02,
Leases (Topic 842), which requires lessees to recognize most leases on their balance sheets as a right-of-use asset with a corresponding
lease liability. Lessor accounting under the standard is substantially unchanged. Additional qualitative and quantitative disclosures
are also required. The Company adopted the standard effective July 1, 2019 using the cumulative-effect adjustment transition method,
which applies the provisions of the standard at the effective date without adjusting the comparative periods presented. The Company
adopted the following practical expedients and elected the following accounting policies related to this standard update:
● The option to not reassess prior conclusions related to the identification, classification and accounting for initial direct costs for leases that commenced prior to July 1, 2019.
● Short-term lease accounting policy election allowing lessees to not recognize right-of-use assets and liabilities for leases with a term of 12 months or less.
● The option to not separate lease and non-lease components for certain equipment lease asset categories such as freight car, vehicles and work equipment.
● The package of practical expedients applied to all of its leases, including (i) not reassessing whether any expired or existing contracts are or contain leases, (ii) not reassessing the lease classification for any expired or existing leases, and (iii) not reassessing initial direct costs for any existing leases. As a result of the above, the adoption of ASC
842 did not have a material effect on the consolidated financial statements. The Company will review for the existence of embedded
leases in future agreements. Adoption of this standard
resulted in the recognition of operating lease right-of-use assets of $367,513 and lease liabilities of $236,807 on the consolidated
balance sheet as of August 1, 2020 as part of the acquisition of LHE Enterprises Limited. The standard did not materially impact
operating results or liquidity. Disclosures related to the amount, timing and uncertainty of cash flows arising from leases are
included in Note 10. Impairment of Long-Lived Assets The Company reviews its long-lived assets for
impairment whenever events and circumstances indicate that the carrying value of an asset might not be recoverable. An impairment
loss, measured as the amount by which the carrying amount exceeds the fair value, is recognized if the carrying amount exceeds
estimated undiscounted future cash flows. Internal-Use Software Capitalized internal-use software costs include
external consulting fees, payroll and payroll-related costs and stock-based compensation for employees in the Company’s development
and information technology groups who are directly associated with, and who devote time to, the Company’s internal-use software
projects. Capitalization begins when the planning stage is complete and the Company commits resources to the software project,
and continues during the application development stage. Capitalization ceases when the software has been tested and is ready for
its intended use. Costs incurred during the planning, training and post-implementation stages of the software development life-cycle
are expensed as incurred. Income Taxes The Company accounts for income taxes under
ASC 740 “Income Taxes,” which codified SFAS 109, “Accounting for Income Taxes” and FIN 48 “Accounting
for Uncertainty in Income Taxes – an Interpretation of FASB Statement No. 109.” Under the asset and liability method
of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between
the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets
and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Under ASC 740, the effect on deferred tax assets and liabilities of a change
in tax rates is recognized in income in the period the enactment occurs. A valuation allowance is provided for certain deferred
tax assets if it is more likely than not that the Company will not realize tax assets through future operations. FASB issued ASC 740-10 “Accounting for
Uncertainty in Income Taxes”. ASC 740-10 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s
financial statements. This standard requires a company to determine whether it is more likely than not that a tax position will
be sustained upon examination based upon the technical merits of the position. If the more-likely-than-not threshold is met, a
company must measure the tax position to determine the amount to recognize in the financial statements. Derivative Instruments The Company evaluates its convertible notes
and warrants to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately
accounted for in accordance with Paragraph 815-10-05-4 of the Codification and Paragraph 815-40-25 of the Codification. The result
of this accounting treatment is that the fair value of the embedded derivative is marked-to-market each balance sheet date and
recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the
statements of operations as other income or expense. Upon conversion or exercise of a derivative instrument, the instrument is
marked to fair value at the conversion date and then that fair value is reclassified to equity. In circumstances where the embedded conversion
option in a convertible instrument is required to be bifurcated and there are also other embedded derivative instruments in the
convertible instrument that are required to be bifurcated, the bifurcated derivative instruments are accounted for as a single,
compound derivative instrument. The classification of derivative instruments,
including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting
period. Equity instruments that are initially classified as equity that become subject to reclassification are reclassified to
liability at the fair value of the instrument on the reclassification date. Derivative instrument liabilities are classified in
the balance sheet as current or non-current to correspond with its host instrument. The Company marks to market the fair value
of the remaining embedded derivative warrants at each balance sheet date and records the change in the fair value of the remaining
embedded derivative warrants as other income or expense in the statements of operations. The Company utilizes the Monte Carlo Method
that values the liability of the debt conversion feature derivative financial instruments and derivative warrants based on exercise
contingencies. The reason the Company selected the lattice binomial model is that in many cases there may be multiple embedded
features or the features of the bifurcated derivatives may be so complex that a Black-Scholes valuation does not consider all of
the terms of the instrument. Therefore, the fair value may not be appropriately captured by simple models. Fair Value of Financial Instruments ASC 820 “Fair Value Measurement”
defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles and enhances
disclosures about fair value measurements. Fair value is defined under ASC 820 as the exchange price that would be received for
an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability
in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value
under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes a
fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable,
that may be used to measure fair value as follows: Level 1 – unadjusted quoted prices in
active markets for identical assets or liabilities; Level 2 – inputs other than quoted prices
that are observable for asset or liability or indirectly; and Level 3 – inputs that are not based on
observable market data. The carrying amounts of the Company’s
financial instruments including cash, amounts receivables, prepaid expenses and other current assets, accounts payable, accrued
liabilities, and due to shareholder approximate their fair values due to their short-term nature. Income (Loss) Per Share Basic income (loss) per share is computed by
dividing net income (loss) attributable to common shareholders (the numerator) by the weighted-average number of common shares
outstanding (the denominator) for the period. In periods of losses, diluted loss per share is computed on the same basis as basic
loss per share as the inclusion of any other potential shares outstanding would be anti-dilutive. The following securities were excluded from
weighted average diluted common shares outstanding for the three months ended September 30, 2020 and 2019 because their inclusion
would have been antidilutive.
As of September 30,
2020 2019
Common stock equivalents:
Common stock options 51,942 51,942
Warrants 5,993,129 804,390
Convertible notes - 375,833
Equity to be issued 2,667 2,667
Totals 6,047,738 1,234,832 Foreign Currency Translation Monetary assets and liabilities are translated
from British pound sterling, Euros, and Canadian dollars into U.S. dollars, which is the functional currency of the Company, at
the year-end exchange rate, while foreign currency expenses are translated at the exchange rate in effect on the date of the transaction.
The resultant gains or losses are included in the statement of operations. Non-monetary items are translated at historical rates. Stock-based compensation The Company applies ASC 718-10, “Share-Based
Payment,” which requires the measurement and recognition of compensation expenses for all share-based payment awards made
to employees and directors including employee stock options under the Company’s stock plans based on estimated fair values. ASC 718-10 requires companies to estimate the
fair value of equity-based payment awards on the date of grant using an option-pricing model. The fair value of the award is recognized
as an expense on a straight-line basis over the requisite service periods in the Company’s statement of operations and comprehensive
loss. The Company recognizes share-based award forfeitures as they occur rather than estimated by applying a forfeiture rate due
to lack of historical experience. The Company accounts for stock-based compensation
in accordance with ASC Topic 718-10, “Compensation – Stock Compensation”. Therefore, the measurement of compensation
expense for all stock awards granted are at the fair value on the date of grant and recognition of compensation expense is based
on the related service periods for awards expected to vest, which is typically the performance period. The Company has adopted
ASU 2018-07, Compensation – Stock Compensation. There was no accounting impact related to the adoption of ASU 2018-07. All issuances of stock options or other equity
instruments to non-employees as consideration for goods or services received by the Company are accounted for based on the fair
value of the equity instruments issued. The Company recognizes compensation expense for the fair value of non-employee awards based
on the straight-line method over the requisite service period of each award. The Company estimates the fair value of stock options
granted as equity awards using a Black-Scholes options pricing model. Advertising Advertising consist primarily of online search
and advertising, trade shows, marketing fees, and other promotional expenses. Online search and advertising costs, which are expensed
as incurred, include online advertising media such as banner ads and pay-per-click payments to search engines. Advertising expense
for the three months ended September 30, 2020 and 2019 was approximately $315,000 and $26,000, respectively. Revenue Recognition The Company generates revenue from end-users
(“customers”) placing bets on its online gambling sites it operates for its brands. The Company recognizes revenue
through the following steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract;
(3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5)
recognize revenue when each performance obligation is satisfied. The performance obligations in the contract are the settlements
of each individual bet. The transaction price is the total Gross Gaming Revenue of the transactions settled, less any bonuses accrued
with them, less any profit share required to be paid to the externally owned brands, net of amounts hedged to offset potential
losses. The Company records revenue as Net Gaming Revenue
(“NGR”), which is the difference between the amount of money players wager minus the amount that they win, less any
bonus costs. The Company records liabilities for amounts due to users of which the balance consists of user deposits and user winnings
less user withdrawals and user losses. The Company applies a practical expedient by
accounting for its performance obligations on a portfolio basis as these bets have similar characteristics and the Company reasonably
expects the effects on the financial statements of applying the revenue recognition guidance to the portfolio will not differ materially
from that which would result if applying the guidance to an individual bet placed. The Company grants two types of bonuses which
are standard in the gaming industry: (i) Free bet whereby upon making a deposit and get another free bet regardless of the outcome
of the first bet (ii) Deposit match bonus in which the Company will match the player’s deposit up to a certain specified
percentage or amount. The bonuses typically expire 3-6 months after they are granted. These bonuses represent consideration payable
to a customer and therefore are treated as a reduction of the transaction price for the wagering transaction. The transaction price
for the bonus is variable based on the percentage of rewards expected to expire. We evaluate bets that users place on websites
owned by third party brands in order to determine whether we are acting as the principal or as the agent when providing services,
which we consider in determining if revenue should be reported gross or net. An entity is a principal if it has the ability to
direct the use of and obtain substantially all the remaining benefits from, the asset. Control includes the ability to prevent
other entities from directing the use of, and obtaining the benefits from, an asset. For these arrangements, we are the principal
as we control the wagering service; therefore, any charges, including any applicable simulcast fees, we incur for delivering the
wagering service are presented as operating expenses. Receivables Reserved for Users User deposit receivables are stated at the
amount the Company expects to collect from a payment processor. These arise due to the timing differences between a user’s
deposit and the receipt of the payment into the Company’s bank accounts. Receivables also arise as the result of the securitization
policies of certain payment processors. Recent Accounting Pronouncements The Company has implemented all new accounting
pronouncements that are in effect and that may impact its financial statements. In May 2014, the Financial Accounting Standards
Board (“FASB”) issued ASU No. 2014-09, Revenue from Contracts with Customers (“Topic 606”). Topic 606 supersedes
the revenue recognition requirements in Accounting Standards Codification (“ASC”) Topic 605, Revenue Recognition (“Topic
605”), and requires the recognition of revenue when promised goods or services are transferred to customers in an amount
that reflects the considerations to which the entity expects to be entitled to in exchange for those goods or services. Collectively,
we refer to Topic 606 as the “new standard.” We adopted the requirements of the new standard
as of July 1, 2020, using the modified retrospective method. The impact of adopting the new standard had no impact on our fiscal
2020 and fiscal 2019 financial statements as revenues is not material and resulted in no cumulative effect adjustment on net income
or cash flows. Upon adoption, the Company recorded no contract assets and a contract liability in the amount of $1,258,919. For
the three months ended September 30, 2020, the Company recognized approximately $54,000 as revenues in relation to the contract
liabilities recorded upon adoption. We applied the new standard using a practical
expedient where all related GAAP changes are made retrospectively to contracts that are not completed contracts at the date of
initial application. The Company does not need to restate contracts that begin and are completed within the same annual reporting
period. Recently issued accounting standards In July 2017, the FASB issued Accounting Standards
Update No. 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging
(Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features; (Part II) Replacement of the Indefinite
Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling
Interests with a Scope Exception (“ASU 2017-11”). ASU 2017-11 allows companies to exclude a down round feature when
determining whether a financial instrument (or embedded conversion feature) is considered indexed to the entity’s own stock.
As a result, financial instruments (or embedded conversion features) with down round features may no longer be required to be accounted
for as derivative liabilities. A company will recognize the value of a down round feature only when it is triggered and the strike
price has been adjusted downward. For equity-classified freestanding financial instruments, an entity will treat the value of the
effect of the down round as a dividend and a reduction of income available to common shareholders in computing basic earnings per
share. For convertible instruments with embedded conversion features containing down round provisions, entities will recognize
the value of the down round as a beneficial conversion discount to be amortized to earnings. ASU 2017-11 is effective for fiscal
years beginning after December 15, 2018, and interim periods within those fiscal years. The Company adopted ASU 2017-11 which did
not have any impact on the Company’s financial statement presentation or disclosures. In August 2018, the FASB issued ASU 2018-15,
Intangibles-Goodwill and Other- Internal-Use Software (Subtopic 350-40). This ASU addresses customer’s accounting for implementation
costs incurred in a cloud computing arrangement that is a service contract and also adds certain disclosure requirements related
to implementation costs incurred for internal-use software and cloud computing arrangements. The amendment aligns the requirements
for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing
implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use
software license). This ASU is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal
years, with early adoption permitted. The amendments in this ASU can be applied either retrospectively or prospectively to all
implementation costs incurred after the date of adoption. The Company is evaluating the effect of adopting this new accounting
guidance to determine the impact it may have on the Company’s financial statements. In October 2018, the FASB issued ASU 2018-17,
Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities. ASU 2018-17 eliminates
the requirement that entities consider indirect interests held through related parties under common control in their entirety when
assessing whether a decision-making fee is a variable interest. Instead, the reporting entity will consider such indirect interests
on a proportionate basis. This update is effective for fiscal years beginning after December 15, 2020. We are currently evaluating
the impact of this update on our consolidated financial statements and related disclosures. In December 2019, the FASB issued ASU No. 2019-12,
Income Taxes (Topic 740) (“ASU 2019-12”): Simplifying the Accounting for Income Taxes. The new standard eliminates
certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim
period, and the recognition of deferred tax liabilities for outside basis differences related to changes in ownership of equity
method investments and foreign subsidiaries. The guidance also simplifies aspects of accounting for franchise taxes and enacted
changes in tax laws or rates, and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill.
For public business entities, it is effective for fiscal years beginning after December 15, 2020, including interim periods within
those fiscal years. We are currently evaluating the potential impact of this standard on our consolidated financial statements. In June 2020, the FASB issued ASU No. 2020-06,
Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic
815-40). This standard eliminates the beneficial conversion and cash conversion accounting models for convertible instruments.
It also amends the accounting for certain contracts in an entity’s own equity that are currently accounted for as derivatives
because of specific settlement provisions. In addition, the new guidance modifies how particular convertible instruments and certain
contracts that may be settled in cash or shares impact the diluted EPS computation. For public business entities, it is effective
for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years using the fully retrospective
or modified retrospective method. Early adoption is permitted but no earlier than fiscal years beginning after December 15, 2020,
including interim periods within those fiscal years. We are currently evaluating the potential impact of this standard on our consolidated
financial statements. From time to time, new accounting pronouncements
are issued by the Financial Accounting Standard Board (“FASB”) or other standard setting bodies that the Company adopts
as of the specified effective date. The Company does not believe that the impact of recently issued standards that are not yet
effective will have a material impact on the Company’s financial position or results of operations upon adoption. |
