Quarterly Report for Quarter Ending September 30, 2023 (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 000-56290

KeyStar Corp.

(Exact name of registrant as specified in its charter)

Nevada		85-0738656
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
1645 Pine Tree Ln, Suite 2SarasotaFL		34236
(Address of principal executive offices)		(Zip Code)

Registrant's telephone number: (866)783-9435

78 SW 7th Street, Suite 500, Miami, FL33130

(Former name or former address, if changed since last report)

Securities registered under Section 12(b) of the Exchange Act: None

Securities registered under Section 12(g) of the Exchange Act:

Common Stock, par value of $0.0001

(Title of each class)

Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐ No☒

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes☒ No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.:

	Large accelerated filer	☐	Accelerated filer	☐
	Non-accelerated filer	☒	Smaller reporting company	☒
			Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

The number of shares of the issuer's common stock outstanding as of April 19, 2024, was 67,821,632shares, par value $0.0001 per share.

KeyStar Corp.

Form 10-Q

Table of Contents

PART I - FINANCIAL INFORMATION	1
ITEM 1. FINANCIAL STATEMENTS	1
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	2
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS	5
ITEM 4. CONTROLS AND PROCEDURES	5
PART II - OTHER INFORMATION	6
ITEM 1. LEGAL PROCEEDINGS	6
ITEM 6. EXHIBITS	6
SIGNATURES	7

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Our financial statements included in this Form 10-Q are as follows:

F-1	Condensed Consolidated Balance Sheets as of September 30, 2023 (unaudited), and June 30, 2023;
F-3	Condensed Consolidated Statements of Operations for the three months ended September 30, 2023, and 2022 (unaudited);
F-4	Condensed Consolidated Statement of Stockholders' Equity (Deficit) for the three month period ended September 30, 2023, and 2022 (unaudited);
F-6	Condensed Consolidated Statements of Cash Flow for the three months ended September 30, 2023, and 2022 (unaudited);
F-7	Notes to Condensed Consolidated Financial Statements.

KEYSTAR CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

		September 30, 2023			June 30, 2023
		(unaudited)
ASSETS
Current assets:
Cash		$	113,593			$	333,974
Cash reserved for users			1,043,424				21,422
Prepaid expenses and other current assets			861,410				1,194,288
Total current assets			2,018,427				1,549,684
Other assets:
Equipment, net			3,398				3,813
Intangible assets, net			7,746,186				8,067,198
Debt issuance costs, net			6,489,941				5,672,151
Security deposit			9,683				9,683
Total other assets			14,249,208				13,752,845
Total assets		$	16,267,635			$	15,302,529
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued expenses		$	1,662,649			$	1,219,018
Accrued expenses - related party			80,967				323,904
Players balances			1,424,090				134,946
Notes payable - current			1,076,472				1,189,694
Notes payable - related party, net of discount			30,000				1,306,655
Convertible notes - current			85,407				-
Line of credit - related party			7,388,801				3,851,877
Derivative liability			7,294,811				6,859,452
Total current liabilities			19,043,197				14,885,546
Long-term liabilities:
Notes payable - long-term			850,000				850,000
Total long-term liabilities			850,000				850,000
Total liabilities			19,893,197				15,735,546
Commitments and contingencies

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

KEYSTAR CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS - Continued

		September 30, 2023			June 30, 2023
		(unaudited)
Stockholders' deficit:
Preferred stock, $0.0001par value, 25,000,000shares authorized Series A preferred stock, 2,000,000shares designated, 0and 0shares issued and outstanding as of September 30, 2023, and June 30, 2023, respectively			-				-
Series B preferred stock, 12,000shares designated, 11,693and 11,693shares issued and outstanding as of September 30, 2023, and June 30, 2023, respectively			11,693				11,693
Series C preferred stock, 6,700,000shares designated, 2,499,998and 2,499,998shares issued and outstanding as of September 30, 2023, and June 30, 2023, respectively			250				250
Common stock, $0.0001par value, 475,000,000shares authorized, 41,905,000and 41,905,000shares issued and outstanding as of September 30, 2023, and June 30, 2023, respectively			4,191				4,191
Additional paid-in capital			14,535,687				12,669,930
Accumulated deficit			(18,177,383	)			(13,119,081	)
Total stockholders' deficit			(3,625,562	)			(433,017	)
Total liabilities and stockholders' deficit		$	16,267,635			$	15,302,529

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

KEYSTAR CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

		For the three months ended September 30,
		2023			2022 (Restated)
Gaming loss, net		$	(218,624	)		$	-
Costs of gaming revenue			405,244				856
Net gaming loss			(623,868	)			(856	)
Operating expenses:
Salaries and wages			815,341				1,863,643
Depreciation and amortization			432,427				-
Sales and marketing			1,216,067				77,711
Impairment expense			-				95,936
General and administrative			708,002				301,735
Total operating expenses			3,171,837				2,339,025
Other income (expense):
Other income			-				5,011
Gain on change in fair value of derivative			329,235				-
Interest expense			(39,252	)			-
Interest expense - related party			(1,552,580	)			(7,416	)
Total other income (expense)			(1,262,597	)			(2,405	)
Net loss from continuing operations, net of income taxes			(5,058,302	)			(2,342,286	)
Net income (loss) from discontinued operations, net of income taxes			-				(9,380	)
Net loss		$	(5,058,302	)		$	(2,351,666	)
Less: deemed dividend from the purchase of Series C preferred stock			(1,006,000	)			-
Net loss attributable to common stockholders			(6,064,302	)			(2,351,666	)
Net loss per common share - basic and diluted		$	(0.14	)		$	(0.06	)
Weighted average number of common shares outstanding - basic and diluted			41,905,000				39,230,000

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

KEYSTAR CORP.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT

(unaudited)

		Preferred Shares Series A $0.0001 Par Value			Preferred Shares Series B $1.00 Par Value			Preferred Shares Series C $0.0001 Par Value			Common Shares $0.0001 Par Value			Additional Paid-In		Accumulated			Total Stockholders' Equity
		Shares			Amount			Shares			Amount			Shares			Amount			Shares			Amount			Capital			(Deficit)			(Deficit)
Balance, June 30, 2023			-			$	-				11,693			$	11,693				2,499,998			$	250				41,905,000			$	4,191			$	12,669,930		$	(13,119,081	)		$	(433,017	)
Fair value of vested incentive stock -			-				-								-								-								-				112,720				-				112,720
Fair value of warrant granted as part of amended related party demand line of credit			-				-				-				-				-				-				-				-				1,753,037				-				1,753,037
Net loss for the period			-				-				-				-				-				-				-				-				-			(5,058,302	)			(5,058,302	)
Balance, September 30, 2023			-			$	-				11,693			$	11,693				2,499,998			$	250				41,905,000			$	4,191			$	14,535,687		$	(18,177,383	)		$	(3,625,562	)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

KEYSTAR CORP.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT - continued

(unaudited)

		Preferred Shares Series A $0.0001 Par Value		Preferred Shares Series B $1.00 Par Value			Preferred Shares Series C $0.0001 Par Value			Common Shares $0.0001 Par Value			Additional Paid-In			Stock Subscriptions			Accumulated			Total Stockholders' Equity
		Shares			Amount		Shares			Amount			Shares			Amount			Shares			Amount			Capital			Receivable			Deficit			(Deficit)
Balance, June 30, 2022 (Restated)			2,000,000			$	200			11,693			$	11,693				666,666			$	67				29,800,000			$	2,980			$	327,435			$	(102,760	)		$	(775,205	)		$	(535,590	)
Receipt of cash from issuance of preferred stock			-				-			-				-				-				-				-				-				-				102,760				-				102,760
Purchase and redemption of preferred stock for cash			(2,000,000	)			(200	)			-				-				-				-				-				-				(21,800	)			-				-				(22,000	)
Issuance of common stock for cash			-				-				-				-				-				-				1,430,000				143				1,429,857				-				-				1,430,000
Issuance of Common stock for acquisition of certain assets of ZenSports			-				-				-				-				-				-				6,500,000				650				6,499,350				-				-				6,500,000
Issuance of Common stock for acquisition of certain assets of Ultimate Gamer			-				-				-				-				-				-				1,500,000				150				56,286				-				-				56,436
Issuance of preferred stock for cash			-				-				-				-				2,166,665				217				-				-				649,783				-				-				650,000
Issuance of preferred stock as compensation			-				-				-				-				2,980,000				298				-				-				36,442				-				-				36,740
Net loss for the period			-				-				-				-				-				-				-				-				-				-				(2,351,666	)			(2,351,666	)
Balance, September 30, 2022 (Restated)			-			$	-				11,693			$	11,693				5,813,331			$	582				39,230,000			$	3,923			$	8,977,352			$	-			$	(3,126,871	)		$	5,866,679

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

KEYSTAR CORP.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(unaudited)

		For the Three Months Ended September 30,
		2023			2022 (Restated)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss		$	(5,058,302	)		$	(2,351,666	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Loss on assignment of assets							(4,698	)
Amortization of debt issuance costs - related party			935,248				-
Depreciation and amortization			432,427				-
Impairment of intangible assets							62,180
Fair value of vested incentive stock options			112,720				-
Non-cash compensation, related party			-				36,740
Discount on related party note payable			323,345				-
Gain (loss) on change in fair value of derivative			(329,235	)
Changes in operating assets and liabilities:
Prepaid expenses and other current assets			332,878				(6,785	)
Accounts payable and accrued expenses			443,631				90,857
Accounts payable and accrued expenses - related party			(82,937	)			(5,368	)
Players balances			1,289,144				68,102
Net cash used in operating activities			(1,601,081	)			(2,110,639	)
CASH FLOWS FROM INVESTING ACTIVITIES
Cash paid for capitalized software			(111,000	)			(52,437	)
Cash paid for acquisition of assets of ZenSports			-				(570,858	)
Net cash used in investing activities			(111,000	)			(623,295	)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments of note payable, related party			-				(35,000	)
Cash paid for repurchase of preferred stock			-				(22,000	)
Proceeds from issuance of common stock			-				1,430,000
Proceeds from issuance of Series C convertible preferred stock			-				650,000
Proceeds from line of credit, related party			1,776,924				1,035,584
Proceeds from convertible notes			850,000				-
Repayments of note payable, current			(113,222	)			-
Cash received in satisfaction of stock subscriptions receivable			-				102,760
Net cash provided by financing activities			2,513,702				3,161,344
NET CHANGE IN CASH			801,621				427,410
CASH AT BEGINNING OF PERIOD			355,396				66,241
CASH AT END OF PERIOD		$	1,157,017			$	493,651
DISCLOSURE OF CASH AND CASH RESERVERD FOR USERS:
CASH			113,593				493,651
CASH RESERVED FOR USERS			1,043,424				-
CASH AT END OF PERIOD		$	1,157,017			$	493,651
SUPPLEMENTAL INFORMATION:
Interest paid		$	8,500			$	-
NON-CASH FINANCING AND INVESTING ACTIVITIES:
Common stock issued for acquisition of assets of ZenSports Inc.		$			$	6,500,000
Common stock issued for acquisition of assets of Ultimate Gamer, LLC		$			$	56,436
Payoff of related party note payable with related party line of credit		$	1,760,000			$	-

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

KEYSTAR CORP.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023

NOTE 1 - OVERVIEW AND ORGANIZATION & SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Overview and Organization

KeyStar Corp. (the "Company," "we", "us" and "our") was incorporated on April 16, 2020, under the laws of the State of Nevada, as KeyStar Corp. The company has two wholly owned subsidiaries, one was formed on December 21, 2021, under the State of Nevada, as UG Acquisition Sub, Inc., the second KeyStar TN LLC was formed on December 9, 2022.

Currently the singular focus is on business-to-consumer (B2C) sports betting in one targeted jurisdiction, Tennessee. In May 2023, the company received approval on its Tennessee Sports Gaming Operator license. The Company officially launched its Sports Betting operation in Tennessee in June 2023.

Prior to September 15, 2022, our business consisted of the retail sale of masks and similar products, and convention services (together, the prior business). Through our e-commerce sales channel, we sold KN-95 facemasks, disposable facemasks, and disinfectant wipes through an online store in the United States of America.

On August 26, 2022, the Company entered into an Asset Purchase Agreement to purchase certain technological assets from ZenSports, Inc. The assets were purchased to allow us to offer gambling and entertainment opportunities through technology, principally the online gaming technology and use of the name ZenSports. We did not acquire all the assets of the Company, the assets we didn't purchase include, among other assets, ZenSport's legal entity name "ZenSports, Inc." and those assets related to ZenSports' physical casino called the Big Wheel Casino, located in Lovelock, Nevada. See Note 3.

On September 12, 2022, we entered into an Asset Purchase Agreement between the Company and Excel Members, LLC ("Excel"), a company controlled by Bruce Cassidy, the chairman of our board of directors, to acquire certain assets of Excel a company of which a Company controlled by Mr. Cassidy is the manager, and effectively has a controlling interest. Excel acquired certain assets of a company, Ultimate Gamer, LLC, which was formerly an Esports tournament company, through the assignment for the benefit of the creditor's court process. See Notes 3 and 11.

On September 15, 2022, we executed an assignment and assumption agreement whereby we assigned our e-commerce sales channel and the convention services operating assets to TopSight Corporation ("TopSight"), a company owned by our former Chief Financial Officer Zixiao Chen, effectively discontinuing our historical operations.

After the foregoing transactions, we have effectively ceased our prior business operations and assembled a comprehensive platform capability that enables both business-to-business and direct-to-consumer offerings within the online sports betting, eSports, and fintech/digital currency markets.

Basis of Presentation

The foregoing unaudited interim financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions for Form 10-Q and Regulation S-X as promulgated by the Securities and Exchange Commission ("SEC"). Accordingly, these financial statements do not include all of the disclosures required by generally accepted accounting principles in the United States of America for complete financial statements. These unaudited interim financial statements should be read in conjunction with the audited financial statements and the notes thereto included on Form 10-K for the year ended June 30, 2023, filed on March 8, 2024. In the opinion of management, the unaudited interim financial statements furnished herein include all adjustments, all of which are of a normal recurring nature, necessary for a fair statement of the results for the interim period presented.

Operating results for the three month period ended September 30, 2023, are not necessarily indicative of the results that may be expected for the year ending June 30, 2024. The condensed balance sheet at June 30, 2023, has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles in the U.S. for complete financial statements.

Restatement of Previously Issued Financials

During fiscal 2023, the Company completed its final valuation of the assets purchased from ZenSports on August 26, 2022. Management determined that the value of the assets purchased were understated during the three months ended September 30, 2022 for asset acquisition costs initially expensed, and overstated during the three months ended September 30, 2022 for expenses that were initially included as part of the asset purchase. The value of the assets reflected in the June 30, 2023 audited financial statements was recorded based on this final valuation. See below for adjustments needed for the interim three month period ended September 30, 2022.

In evaluating whether the previously issued Consolidated Financial Statements were materially misstated for the interim period ending September 30, 2022, the Company applied the guidance of Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 250, Accounting Changes and Error Corrections, SEC Staff Accounting Bulletin ("SAB") Topic 1.M, Assessing Materiality, and SAB Topic 1.N, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements and concluded that the effect of the errors on prior period interim financial statements was material; and therefore as noted in SAB Topic 1.N. the Company has restated the September 30, 2022 consolidated financial statements in accordance with FASB ASC 250-10-45-23.

		For the three months ended						For the three months ended
		September 30, 2022						September 30, 2022
		As Previously Reported			Adjustments			As Revised
Salaries and wages		$	833,050			$	1,030,593			$	1,863,643
General and administrative		$	488,500			$	(186,765	)		$	301,735
Total net loss		$	(1,411,055	)		$	(940,611	)		$	(2,351,666	)
Net loss per common share - basic and diluted		$	(0.04	)		$	(0.02	)		$	(0.06	)

Principals of Consolidation

The consolidated financial statements represent the results of KeyStar Corp. and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated upon consolidation of these entities.

Segment Reporting

The Company operates as one reportable segment under Accounting Standards Codification "ASC" 280, Segment Reporting. The chief operating decision maker regularly reviews the financial information of the Company at a consolidated level in deciding how to allocate resources and in assessing performance.

Use of Estimates

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates. Significant estimates and assumptions reflected in the financial statements relate to and include, but are not limited to, the valuation of debt and equity instruments, the valuation and expensing of equity awards, accounting for contingencies and uncertainties, purchase price allocations, including fair value estimates of intangible assets, the estimated useful lives of fixed assets and intangible assets, internally developed software costs and accrued expenses.

Going Concern

The Company's condensed consolidated financial statements are prepared using the accrual method of accounting in accordance with accounting principles generally accepted in the United States of America and have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities in the normal course of business. The Company has an accumulated deficit of $18,177,383as of September 30, 2023. The Company had a net loss from continuing operations of $5,058,302and negative cash flows of $1,601,081from operations for the three months ended September 30, 2023. These conditions raise substantial doubt about the entity's ability to continue as a going concern for a period of one year from the issuance of these financial statements.

The Company is dependent upon, among other things, achieving a level of profitable operations and receiving additional cash infusions including securing additional lines of credit and raising additional capital through placement of preferred and/or common stock in order to implement its business plan. There can be no assurance that the Company will be successful in order to continue as a going concern. The Company is funding its initial operations by securing a related party line of credit, issuing preferred stock, and issuing common stock through private placements.

We cannot be certain that capital will be provided when it is required or in amounts sufficient to meet our operating requirements. Management believes the existing shareholders, the prospective new investors, and future sales will provide the additional cash needed to meet the Company's obligations as they become due and will allow the development of its core business operations. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, it may contain restrictions on our operations, in the case of debt financing, or cause substantial dilution for our stockholders, in the case of equity financing.

Cash and Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Cash includes amounts deposited in financial institutions in excess of insurable Federal Deposit Insurance Company (FDIC) limits. At times throughout the year, the Company may maintain cash balances in certain bank accounts in excess of FDIC limits. As of September 30, 2023, the Company's cash balance exceeded the FDIC limits by approximately $793,000. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk in these accounts.

Cash Reserved for Users

The Company maintains separate bank accounts to segregate users' funds from operational funds. User funds are held by KeyStar TN, LLC, a Tennessee limited liability company and wholly owned subsidiary of the Company, which was organized for the purpose of protecting users' funds in the event of creditor claims. As of September 30, 2023 and June 30, 2023, approximately $1,043,000and $135,000was reserved for users.

Equipment

Equipment is stated at cost, less accumulated depreciation and amortization. Depreciation is calculated using the straight-line method over the asset's estimated useful life. Expenditures for maintenance and repairs are expensed as incurred. When retired or otherwise disposed of, the related carrying value and accumulated depreciation are removed from the respective accounts, and the net difference less any amount realized from the disposition is reflected in earnings. Estimated useful lives are as follows:

Equipment

3to 5years

Intangible assets include developed technology, internally developed software and website development costs, gaming license, and trademarks.

Internally developed capitalized software and website development and the KeyStar trade name is stated at cost, less accumulated amortization on the balance sheet. Amortization is calculated using the straight-line method over the asset's estimated useful life. The capitalization policy for the company is to capitalize intangible assets greater than $5,000. Expenditures for maintenance and repairs are expensed as incurred. When retired or otherwise disposed of, the related carrying value and accumulated depreciation are removed from the respective accounts and the net difference less any amount realized from the disposition is reflected in earnings. Developed technology is principally related to technological assets acquired through Asset Purchase Agreements which are recorded at relative fair value based on the purchase consideration, less accumulated amortization on the balance sheet. Amortization is calculated using the straight-line method over the asset's estimated useful life. Expenditures for maintenance and repairs are expensed as incurred. When retired or otherwise disposed of, the related carrying value and accumulated depreciation are removed from the respective accounts, and the net difference less any amount realized from the disposition is reflected in earnings. Developed technology was placed in service on June 8, 2023. See Note 3.

Estimated useful lives are as follows:

Developed technology		5years
Capitalized software and website development		3years
Trade marks		3-5years

Developed Technology

Developed technology primarily relates to the design and development of sports betting software for online sportsbook.

Internally Developed Software

Software that is developed for internal use is accounted for pursuant to ASC 350-40, Intangibles, Goodwill and Other-Internal-Use Software. Qualifying costs incurred to develop internal-use software are capitalized when (i) the preliminary project stage is completed, (ii) management has authorized further funding for the completion of the project and (iii) it is probable that the project will be completed and perform as intended. These capitalized costs include compensation for employees who develop internal-use software and external costs related to development of internal use software. Capitalization of these costs ceases once the project is substantially complete and the software is ready for its intended purpose. Internally developed software is amortized using the straight-line method over an estimated useful life. All other expenditures, including those incurred in order to maintain an intangible asset's current level of performance, are expensed as incurred. When intangible assets are retired or disposed of, the cost and accumulated amortization thereon are removed, and any resulting gain or losses are included in the consolidated statements of operations.

Gaming licenses

Certain costs, generally legal and professional fees, are required to attain jurisdictional gaming licenses in order to legally operate our core sports betting business. Gaming licenses, with indefinite useful lives, are tested at least on an annual basis as to the assets that have been impaired. Intangible assets determined to have an indefinite useful life are not amortized. Gaming licenses are assets that are determined to have an indefinite useful life are not amortized and are included in intangible assets in the balance sheet. Annual gaming license fees and legal and professional fees required to maintain the licenses are recorded as period costs in the statement of operations.

Trademarks

Trademarks are carried at cost and are mainly related to branding and promotion, with indefinite useful lives. The Company tests at least on an annual basis whether trademarks with indefinite useful lives are impaired. Intangible assets determined to have an indefinite useful life are not amortized and are included in intangible assets in the balance sheet.

The Company conducts its annual impairment tests at June 30 of each year or whenever events and changes in circumstances suggest that the carrying amount may not be recoverable. At June 30, 2023, management determined that the acquired Ultimate Gamer trademarks were fully impaired pursuant to the annual impairment test and, as such has written off the carrying value of trademarks.

Impairment of Long-Lived Assets

Intangible assets include the cost of developed technology, trademarks and trade names and gaming licenses. Intangible assets are amortized utilizing the straight-line method over their remaining economic useful lives. The Company reviews long-lived assets and intangible assets for potential impairment annually and when events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. In the event the expected undiscounted future cash flows resulting from the use of the asset is less than the carrying amount of the asset, an impairment loss is recorded equal to the excess of the asset's carrying value over its fair value. If an asset is determined to be impaired, the loss is measured based on quoted market prices in active markets, if available. If quoted market prices are not available, the estimate of fair value is based on various valuation techniques, including a discounted value of estimated future cash flows. In the event that management decides to no longer allocate resources to an asset, an impairment loss equal to the remaining carrying value of the asset is recorded. The Company performed a qualitative test as of June 30, 2023, and determined that the common control developed technology and trademarks acquired would no longer be invested in and would not be generating cash flows for the foreseeable future. Impairment charges of $48,533related to these intangible assets were expensed (See Notes 3 and 4). The Company did not record any impairment charges related to intangibles assets during the three months ended September 30, 2023.

Lease Commitments

The Company has no long-term lease commitments. Effective January 10, 2023, The Company moved its headquarters to Miami Florida. As part of the move effective January 1, 2023, the Company assumed the office lease of a related party, ZenSports, Inc. The lease expired on September 30, 2023, and had a minimum monthly lease payment of $6,500(See Note 13).

The Company rented office space for its former corporate headquarters in Las Vegas Nevada on a month-to-month lease for $1,700per month. The Las Vegas lease was terminated effective January 31, 2023. Prior to September 15, 2022, the company rented a storage facility for its inventory on a variable month-to-month lease agreement, rents ranged from $58to $123per month.

ASC Topic 842 provides for certain practical expedients when adopting the guidance. The Company elected to apply the short-term lease exception; therefore, the Company will not record an ROU asset or corresponding lease liability for leases with an initial term of twelve months or less that are not reasonably certain of being renewed and instead will recognize a single lease cost allocated over the lease term, generally on a straight-line basis.

Fair Value of Financial Instruments

The Company recognized the fair value of financial instruments in accordance with FASB ASC 820, Fair Value Measurements and Disclosures, "Fair Value Measurements", which provides a framework for measuring fair value under GAAP. Fair value is defined 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. The standard also expands disclosures about instruments measured at fair value and establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1 - Quoted prices for identical assets and liabilities in active markets;

Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, such as quoted market prices for similar assets and liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability.

Level 3 - Unobservable inputs that are supported by little to no market activity.

The Company's derivative liabilities are carried at fair value and are classified as Level 3 liabilities.

The Company's financial instruments consist principally of cash, prepaid expenses, accounts payable, accrued expenses, related party notes payable, related party line of credit, and notes payable approximate the fair value because of their short maturities.

The Company's Derivative liabilities are determined based on "Level" 3 inputs, which are significant and unobservable and have the lowest priority. There were no transfers into our out of "Level 3" during the three months ended September 30, 2023, or 2022.

Description		Total fair value at September 30, 2023			Quoted prices in Active markets (level 1)			Significant other observable inputs (level 2)			Significant unobservable inputs (level 3)
Derivative liability (1)		$	7,294,811			$	-			$	-			$	7,294,811

Description		Total fair value at June 30, 2023			Quoted prices in Active markets (level 1)			Quoted prices in Active markets (level 2)			Quoted prices in Active markets (level 3)
Derivative liability (1)		$	6,859,452			$	-			$	-			$	6,859,452

(1)	The Company has estimated the fair value of these derivatives using the Monte-Carlo model.

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial statement. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could transfer a liability in an orderly transaction between willing and able maker participants. In general, the Company's policy in estimating fair values is to first look at observable market prices for the identical assets and liabilities in active markets, where available. When these are not available other inputs used to model fair value such as prices of similar instruments, yield curves, volatilities., prepayment speeds, default rates credit spreads, rely first on observable data from active markets. Depending on the availability of observable inputs and prices, different valuation models could produce materially different fair value estimates. The values presented may not represent future fair value as discussed above.

Derivative Liabilities

The Company accounts for derivative instruments in accordance with ASC 815, "Derivatives and Hedging" and all derivative instruments are reflected as either assets or liabilities at fair value in the balance sheet. The Company uses estimates of fair value to value its derivative instruments. Fair value is defined as the price to sell an asset or transfer a liability in an orderly transaction between willing and able market participants. In general, the Company's policy in estimating fair values is to first look at observable market prices for identical assets and liabilities in active markets, where available. When these are not available, other inputs are used to model fair value such as prices of similar instruments, yield curves, volatilities, prepayment speeds, default rates, and credit spreads, relying first on observable data from active markets. Depending on the availability of observable inputs and prices, different valuation models could produce materially different fair value estimates. The values presented may not represent future fair values and may not be realizable. The Company categorizes its fair value estimates in accordance with ASC 820 based on the hierarchical framework associated with the three levels of price transparency utilized in measuring financial instruments at fair value as discussed above. As of September 30, 2023, and June 30, 2023, the Company had a derivative liability of $7,294,811and $6,859,452, respectively.

Players Balances

The player's balances were comprised of sports betting deposits assumed and recorded at the fair market value acquired from ZenSports, Inc. on August 26, 2022, as part of an asset purchase agreement. The balances as of September 30, 2023 and June 30, 2023, are comprised of players betting deposits and contestant prize winnings for eSports and other promotional events. During May 2023, the company was approved by the state of Tennessee for its Sports Betting license and commenced Sports Betting operations on June 8, 2023, as such, the Company began accepting new sports betting deposits in addition to recording only payouts on the acquired players liability balances.

Revenue Recognition

The Company records revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers ("ASC 606"). ASC 606 requires companies to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, the standard requires more detailed disclosures to enable readers of the financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.

The Company determines revenue recognition through the following steps:

	●	Identify the contract, or contracts, with the customer;
	●	Identify the performance obligations in the contract;
	●	Determine the transaction price;
	●	Allocate the transaction price to performance obligations in the contract; and
	●	Recognize revenue when, or as, the Company satisfies performance obligations by transferring the promised good or services.

The Company provides online sportsbook betting services with its technical infrastructure to its direct customers. Sportsbook or sports betting involves a user wagering money on an outcome or series of outcomes occurring. When a user's wager wins, the Company pays the user a pre-determined amount known as fixed odds. Sportsbook revenue is generated by setting odds such that there is a built-in theoretical margin in each sports wagering opportunity offered to users. Sportsbook revenue is generated from users' wagers net of payouts made on users' winning wagers and incentives awarded to users. Each wager placed by a user creates a single performance obligation for the Company. The performance obligation is satisfied once the event wagered on has been completed. Any unsettled wagers are recorded as a players balance liability. Net gaming revenue is the aggregate of gaming wins and losses based on results of each event that customers wager bets on.

Cost of Revenue

Cost of revenue consists primarily of variable costs, principally recurring online platform costs directly associated with revenue-generating activities including payment processing and supporting technology costs, web hosting, regulatory compliance software and Sports Betting privilege taxes.

Revenue Recognition from our former business

The Company recognizes revenue in accordance with generally accepted accounting principles as outlined in the Financial Accounting Standard Board's ("FASB") Accounting Standards Codification ("ASC") 606, Revenue From Contracts with Customers, which consists of five steps to evaluating contracts with customers for revenue recognition: (a) identify the contract with the customer; (ii) identity the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price; and (v) recognize revenue when or as the entity satisfied a performance obligation.

Revenue recognition for our prior business occurred at the time we satisfy a service performance obligation to our customers or when control of product transfers to customers upon shipment, provided there are no material remaining performance obligations required of the Company or any matters of customer acceptance. We only recorded revenue when collectability was probable. All payments are received upon order of services and prior to delivery of the product, so we have no accounts receivable.

The Company's prior business was providing quality merchandise through its former online store in the United States of America. Due to the COVID-19 pandemic, the Company was focusing on providing disposable face masks and KN-95 face masks at affordable prices. Customers ordered and paid for the products through the online store, when the Company confirmed the order and payment, the Company delivered the product through common carriers, at which point the Company recognized revenue, as this is when our performance obligation is satisfied. The Company recorded actual sales returns when the customers returned the products. The transaction price has not been affected by returns as the Company did have significant returns.

All prior business operations, including sales and revenues, are included in the net income (loss) from discontinued operations, net of income taxes in the statement of operations. For the three months ended September 30, 2023, and 2022, the Company recognized sales of products $0and $536, respectively.

Cost of Revenues from our former business

Costs of revenues from our prior business primarily consisted of outsourced vendors for both types of revenues. The Company includes product costs (i.e., material, direct labor, and overhead costs) and shipping and handling expenses in cost of revenues. All prior business operations, including cost of revenues, are included in the net income (loss) from discontinued operations, net of income taxes in the statement of operations.

Stock -based Compensation

The Company records stock-based compensation in accordance with ASC 718 "Compensation- Stock Compensation", using the fair value method. All transactions in which services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.

The Company accounts for Stock-based compensation awards issued to non-employees for services as prescribed by ASC 718, at either the fair value of the services rendered or the instruments issued in exchange for such services, whichever is more readily determinable, using the measurement date guidelines enumerated in Accounting Standards Updated ("ASU") 2018-07.

The Company uses the Black Scholes pricing model to calculate the fair value of stock-based awards. This model is affected the Company's stock price as well as assumptions regarding a number of subjective variables. These subjective variables include, but are not limited to, the Company's expected stock price volatility over the term of the awards, and actual projected employee stock option exercise behaviors. The value of the portion of the award that is ultimately expected to vest is recognized as an expense in the consolidated statement of operations over the requisite service period.

Sales and Marketing

Sales and marketing expenses consist primarily of expenses associated with advertising and costs related to free to play contests. Advertising costs are expensed as incurred and are included in sales and marketing expense in our condensed consolidated unaudited statements of operations. Advertising costs include those costs associated with communicating with potential customers and generally use some form of media, such as internet, radio, print, television, or billboards. Advertising costs also include costs associated with strategic league and team partnerships. During the three months ended September 30, 2023 and 2022, advertising costs calculated in accordance with U.S. GAAP were $1,190,010and $16,455, respectively.

General and Administrative

General and administrative expenses consist of costs not related to sales and marketing, product and technology or revenue. General and administrative costs include professional services (including legal, regulatory, audit and accounting), rent and facilities maintenance, contingencies and insurance.

Income Taxes

The Company accounts for income taxes under an asset and liability approach. This process involves calculating the temporary and permanent differences between the carrying amounts of the assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The temporary differences result in deferred tax assets and liabilities, which would be recorded on the Company's balance sheet in accordance with ASC 740, which established financial accounting and reporting standards for the effect of income taxes. The Company must assess the likelihood that its deferred tax assets will be recovered from future taxable income, and, to the extent the Company believes that recovery is not likely, the Company must establish a valuation allowance. Changes in the Company's valuation allowance in a period are recorded through the income tax provision on the statements of operations.

ASC 740-10 clarifies the accounting for uncertainty in income taxes recognized in an entity's financial statements and prescribes a recognition threshold and measurement attributes for financial statement disclosure of tax positions taken or expected to be taken on a tax return.

Under ASC 740-10, the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more likely than not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. Additionally, ASC 740-10 provides guidance on derecognition, classification, interest, and penalties, accounting in interim periods, disclosure, and transition. As a result of the implementation of ASC 740-10, the Company recognized no material adjustment in the liability for unrecognized income tax benefits.

Earnings (loss) per Share

Basic net (loss) earnings per common share is computed by dividing net (loss) income by the weighted average number of vested common shares outstanding during the period. Diluted net income per common share is computed by dividing net income by the weighted average number vested of common shares, plus the net impact of common shares (computed using the treasury stock method), if dilutive, resulting from the exercise of dilutive securities. In periods when losses are reported, the weighted-average number of common shares outstanding excludes common stock equivalents because their inclusion would be anti-dilutive. As of September 30, 2023 and June 30, 2023 the Company excluded the common stock equivalents summarized below, which entitle the holders thereof to ultimately acquire shares of common stock, from its calculation of earnings per share, as their effect would have been anti-dilutive.

		For the three months ended September 30, 2023			For the year ended June 30, 2023
Stock Options			6,250,000				6,500,000
Series A Preferred Shares			-				-
Series B Preferred Shares			1,169,300				1,169,300
Series C Preferred Shares			8,333,327				8,333,327
Warrants			10,000,000				5,600,000
Shares issuable upon conversion of convertible notes			2,125,000				-
Shares issuable upon conversion of line of credit			18,594,620				17,130,907
Total potentially dilutive shares			46,472,247				38,733,534

Recent Accounting Pronouncements

All recently issued ASUs by the FASB have no material impact on the Company's consolidated results of operations or financial position.

NOTE 2 - EQUIPMENT

Equipment and Website development costs of $7,903of $26,637, respectively, were acquired on September 12, 2022, as part of the acquisition of the assets of Ultimate Gamer, LLC in a common control transaction. The equipment was recorded at the net book value of Ultimate Gamer, LLC on the date of close, and are included in the account balances below. See Notes 1 and 11.

The Company's equipment consisted of the following as of:

		September 30, 2023			June 30, 2023
Equipment		$	4,980			$	4,980
Total			4,980				4,980
Less: accumulated depreciation			1,582				1,167
Equipment, net		$	3,398			$	3,813

Depreciation expense of equipment during the three months ended September 30, 2023, and 2022 was $415and $0, respectively.

NOTE 3 - LONG LIVED INTANGIBLE ASSETS

The Zensports, Inc. assumed developed technology and trademark were recorded and allocated using relative fair value, based on a third party valuation in accordance with the provisions of ASC 350 of the acquired costs from ZenSports, Inc. on August 26, 2022, as part of an asset purchase agreement. There was noimpairment recorded for these assets during the three months ended September 30, 2023, or the year that ended June 30, 2023. See Note 1.

The Ultimate Gamer developed technology and trademarks were acquired on September 12, 2022, as part of the acquisition of the assets of Ultimate Gamer, LLC in a common control transaction. The developed technology and trademarks acquired were recorded at the net book value of Ultimate Gamer, LLC on the date of close, which included the depreciation for September 2022. As of June 30, 2023, as part of the repositioning of the company's operations, management determined that acquired developed technology and trademarks of Ultimate Gamer, LLC would no longer be invested in and would not be generating cash flows for the foreseeable future and as such fully expensed the assets as part of the Company's annual impairment analysis. The remaining value of the developed technology (website) of $26,637and the remaining value of the trademarks, $21,896were fully written off and is included in impairment of intangible assets in the statement of operations.

Gaming license costs are primarily comprised of legal and professional fees associated with our application for a gaming license in Tennessee. There was noimpairment recorded during the three months ended September 30, 2023, and 2022, respectively. See Note 1.

Long-lived and other intangible assets held, net of impairment are comprised of the following at:

		September 30, 2023			June 30, 2023
Developed technology		$	7,632,638			$	7,521,638
Tradenames and trademarks			560,999				560,999
Gaming licenses			135,837				135,837
Impairment charges			(48,533	)			(48,533	)
Total			8,280,941				8,169,941
Less: accumulated amortization			(534,755	)			(102,743	)
Net carrying value		$	7,746,186			$	8,067,198

Amortization expense of business intellectual property for three months ended September 30, 2023, and 2022, was $405,056and $0, respectively. Amortization expense of tradenames for the three months ended September 30, 2023, and 2022, was $26,955and $0, respectively. Amortization expense is included in the statement of operations.

NOTE 4 - PLAYERS BALANCES

The player's balances were comprised of sports betting deposits assumed and recorded at the fair market value acquired from ZenSports, Inc. on August 26, 2022, as part of an asset purchase agreement. During May 2023, the company was approved by the state of Tennessee for its Sports Betting license and commenced Sports Betting operations on June 8, 2023, as such, the Company began accepting new sports betting deposits in addition to recording only payouts on the acquired players liability balances. Players balances were $1,424,090and $134,946as of September 30, 2023 and June 30, 2023, respectively.

NOTE 5 - CONVERTIBLE DEBT

On August 23, 2023, the Company entered into a Convertible Note Purchase Agreement and a Convertible Promissory Note with an unrelated party in the principal amount of $200,000. On August 28, 2023, the Company entered into a Note Purchase Agreement and a Convertible Promissory Note with another unrelated party in the principal amount of $500,000. On September 1, 2023, the Company entered into a Convertible Note Purchase Agreement and a Convertible Promissory Note with a third unrelated party in the principal amount of $150,000. These Notes are part of a private convertible debt offering of up to $2,000,000the Company is undertaking to raise additional reserve funds required to cover increases in wagers. The outstanding principal under the Notes, which will accrue interest at a rate equal to twelve percent (12%) per annum, is due and payable in a single balloon payment by us on the date that is one year following the date of issuance of each of the Notes. Accrued interest is to be paid monthly in cash beginning the first month after the issuance of each of the Notes. The Company has no right to prepay all or any portion of the outstanding principal under the Notes prior to the Maturity Date. The outstanding principal under the Notes and accrued and unpaid interest are convertible into shares of the Company's common stock, par value $.0001per share, at a conversion price equal to 80% of the lowest price per share that we sell shares of our common stock during the period beginning with the date of issuance of each of the Notes until the Maturity Date, and if no shares are sold in such period, at a conversion price equal to $1.00per share. The number of Conversion Shares issuable upon the conversion of the Notes is subject to adjustment from time to time upon the occurrence of certain events such as stock splits or combinations and stock or other distributions of assets to equity holders.

The conversion option was valued by the Company using the Monte-Carlo model.

The following are the significant assumptions used in the Monte-Carlo model. See Note 8.

		Expected volatility			Risk-free interest rate			Expected dividend yield			Expected life (in years)
At September 1, 2023			68.2	%			4.87	%			0	%			2.00

NOTE 6 - NOTES PAYABLE AND NOTES PAYABLE - RELATED PARTY

On April 27, 2020, the Company executed a promissory note with Zixiao Chen, our former Chief Financial Officer for $35,000. The note bears interest at 10% per annum and is due in two business days after demand for payment. The note was repaid in full on July 25, 2022, with $7,853of accrued interest waived by Ms. Chen as per the terms of the assignment and assumption agreement. The waiver of accrued interest has been recorded in the statement of operations as part of the gain (loss) on assignment of assets for the three months ended September 30, 2022.

On December 30, 2020, the Company executed a promissory note with TopSight, a company owned by Zixiao Chen, our former Chief Financial Officer for cash proceeds of $30,000. The note bears interest at 10%per annum and is due in two business days after the demand for payment. On December 17, 2021, TopSight entered into a note purchase and assignment agreement with Eagle Investment Group, LLC, a company controlled by Bruce Cassidy (our former Chief Executive Officer through June 14, 2022) the Chairman of our Board of Directors to assign the note to Eagle Investment Group, LLC. Concurrently, we entered into an Allonge agreement with TopSight to change the noteholder from TopSight to Eagle Investment Group, LLC.

As of September 30, 2023, and June 30, 2023, the principal balance is $30,000and $30,000and accrued interest is $8,246and $7,496, respectively. The interest expense for the three months ended September 30, 2022 and 2022 was $750and $750, respectively.

On February 27, 2023, the Company entered into Stock Redemption and Purchase Agreement with John Linss, our former Chief Executive Officer and former member of the board of directors, and his wholly owned Corespeed, LLC for the purchase of Series C Convertible Preferred Stock owned by Linss' Corespeed, LLC. The Company paid $300,000at the closing and entered into a promissory note with Mr. Linss for the remaining $1,700,000of the purchase price. The Note bears interest at a rate of 5%per annum,, and requires the following payments: (i) no less than $850,000.00, in aggregate, of one or more payments is due by the 12-month anniversary of the Note; and (ii) a balloon payment for the balance of the Note is due by the earlier of the 24-month anniversary of the Note or five days after the Company's common stock is listed for public trading on either the Nasdaq Stock Market, the New York Stock Exchange, or the NYSE American. The outstanding principal balance at September 30, 2023, is $1,700,000, with $850,000being classified as Note Payable- Current on the balance sheet, and accrued interest is $50,207. The interest expense for the three months ended September 30, 2023 is $21,697. See Notes 1, 10, and 13.

On May 5, 2023, the Company entered into a Promissory Note with Excel Family Partners, LLLP, a company controlled by Bruce Cassidy (our former Chief Executive Officer through June 14, 2022) the Chairman of our Board of Directors in the principal amount of $1,600,000. The Note matures on November 4, 2023, at which time the outstanding principal amount under the Note, along with a flat funding fee of $160,000is due and payable in full at loan maturity. In connection with entering the Note, the Company issued a Common Stock Warrant to purchase 1,600,000shares of our common stock at an exercise price of $0.25per share (the "Warrant"). The Warrant may be exercised, in whole or in part, at any time through May 4, 2028, on either a cash or cashless basis.

The note payable and the warrants were issued in a single transaction and as such were allocated among the freestanding instruments identified. The warrants were valued by the Company using the Black-Scholes option pricing model with the allocated fair value of $485,017recorded as a note discount to be amortized over the 6 month life of the note.

On September 14, 2023, the principal balance of $1,600,000and the flat funding fee of $160,000was paid in full by the fourth amended line of credit with Excel Family Partners, LLLP (See Note 7).

On May 24, 2023, the Company entered into a short term note payable with a premium finance company to fund their technology services and cyber liability insurance. The total premiums, taxes and fees financed was $434,250at an annual percentage rate of 8.88%. After a down payment of $72,994was made upon execution of the Note, ten monthly payments remained in the amount of $37,744each. The final monthly payment is due on March 24, 2024. The balance of this Note was $226,472as of September 30, 2023, and is included as part of Notes Payable - Current in the balance sheet.

NOTE 7- LINE OF CREDIT - RELATED PARTY

On February 22, 2022, the Company executed a non-revolving line of credit demand note for $250,000with Excel Family Partners, LLLP ("Excel") a company controlled by Bruce Cassidy (our former Chief Executive Officer through June 14, 2022) the Chairman of and sole director our board of directors. The note bears interest at 5% per annum. The Note does not constitute a committed line of credit. Loans under the note are made by Excel in its sole and absolute discretion.

On August 16, 2022, the non-revolving line of credit demand note was increased to $2,000,000under the amended and restated discretionary non-revolving line of credit demand note under the same terms and conditions.

On February 24, 2023, the Company entered into a second amended and restated discretionary non-revolving line of credit demand note with Excel in the principal amount of not more than $4,000,000. The Note amends and restates that certain amended and restated discretionary non-revolving line of credit demand Note. All loans made under the Note accrue interest at a fixed rate per annum equal to 15.0%. The note does not constitute a committed line of credit. Loans under the Note are made by Excel in its sole discretion. Upon repayment of any amount of principal or interest under the Note, we may not reborrow under the note.

The amended note includes a conversion option that Excel may, at its sole option, convert all or any portion of the debt into fully paid and non-assessable shares of common stock of the Company's common stock.at a conversion price in an amount equal to the product of the lowest recent price multiplied by 80%. The lowest price is defined, as of each applicable conversion rate, the lowest price per share that Company has sold one or more Shares to an investor or lender within the 24-month period prior to the applicable conversion date; provided, however, that if no shares were sold within such 24-month period, the lowest recent price will be $0.50per Share. The conversion option was valued by the Company using the Monte-Carlo model. See Notes 1 and 9.

The following are the significant assumptions used in the Monte-Carlo model.

		Expected volatility			Risk-free interest rate			Expected dividend yield			Expected life (in years)
At February 24, 2023			108.5	%			4.84	%			0	%			1.77

The note includes a common stock warrant exercisable up to 4,000,000shares of the Company's common stock for $0.25per share, with an expiration date of February 1, 2028. The warrants were valued by the Company using the Black-Scholes option pricing model.

The following are the significant assumptions used in the Black-Scholes model:

		Expected volatility			Risk-free interest rate			Expected dividend yield			Expected life (in years)
At February 24, 2023			111.60	%			4.20	%			0	%			2

The amended non-revolving line of credit was exchanged and modified on substantially different terms from the non-revolving line of credit demand note it replaced and as such is treated as a debt modification. The Company incurred debt issuance costs of $7,624,859, which is the sum of the fair value of the conversion feature in the note, and the fair value of the warrant. This total amount was included in the debt issuance costs on the accompanying balance sheet, net of amortization, for the year ended June 30, 2023. The Company will amortize the debt issuance costs over sixteen months, which is the estimated life of the debt.

On July 18, 2023, the Company entered into a Third Amended and Restated Discretionary Non-Revolving Line Of Credit Demand Note with Excel Family Partners, LLLP, ("Excel") in the principal amount of not more than $5,000,000(the "Note"). The Note amends and restates that certain Second Amended and Restated Discretionary Non-Revolving Line Of Credit Demand Note between us and Excel entered into on February 24, 2023, in the principal amount of not more than $4,000,000(the "Former Note"). Excel is controlled by Mr. Bruce Cassidy, our Secretary and sole member of our board of directors (the "Board"). The Note does not constitute a committed line of credit. Loans under the Note are made by Excel in its sole and absolute discretion. Upon repayment of any amount of principal or interest under the Note, we may not reborrow under the Note. All loans made under the Note accrue interest at a fixed rate per annum equal to 15.0%. In connection with entering into the Note payable agreement, the Company issued Excel a Common Stock Warrant to purchase 1,000,000shares of our common stock at an exercise price of $0.25per share (the "Warrant"). The Warrant may be exercised, in whole or in part, at any time through July 17, 2028, on either a cash or cashless basis. The Note includes a conversion option that Excel may, at its sole option, convert all or any portion of the debt into fully paid and non-assessable shares of common stock of the Company's common stock.at a conversion price in an amount equal to the product of the lowest recent price multiplied by 80%. The lowest price is defined, as of each applicable conversion rate, the lowest price per share that Company has sold one or more Shares to an investor or lender within the 24-month period prior to the applicable conversion date; provided, however, that if no Shares were sold within such 24-month period, the lowest recent price will be $0.50per Share.

The following are the significant assumptions used in the Black-Scholes model for the warrants:

		Expected volatility			Risk-free interest rate			Expected dividend yield			Expected life (in years)
At July 18, 2023			83.4	%			4.62	%			0	%			4.8

At the date of the third amendment, the remaining unamortized debt issuance costs were $5,393,193. These costs were added to the fair value of the warrants granted as part of the amendment to increase the total debt issuance costs to $5,785,727. As per the terms of the amendment, these total costs will now be amortized over a period of twenty two months.

On September 14, 2023, the Company entered into a Fourth Amended and Restated Discretionary Non-Revolving Line Of Credit Demand Note with Excel Family Partners, LLLP, a Florida limited liability limited partnership ("Excel") in the principal amount of not more than $10,000,000. The Note amends and restates that certain Third Amended and Restated Discretionary Non-Revolving Line Of Credit Demand Note between us and Excel entered into on July 18, 2023 in the principal amount of not more than $5,000,000(the "Former Note"). Excel is controlled by Mr. Bruce Cassidy, our Secretary and sole member of our board of directors (the "Board"). The Note does not constitute a committed line of credit. Loans under the Note are made by Excel in its sole and absolute discretion. Upon repayment of any amount of principal or interest under the Note, we may not reborrow under the Note. In connection with entering into the Note payable agreement, the Company issued Excel a Common Stock Warrant to purchase 3,400,000shares of our common stock at an exercise price of $0.25per share (the "Warrant"). The Warrant may be exercised, in whole or in part, at any time through September 13, 2028, on either a cash or cashless basis. The Note includes a conversion option that Excel may at its sole option, convert all or any portion of the debt into fully paid and non-assessable shares of the Company's common stock at a conversion price in an amount equal to the product of the lowest recent price multiplied by 80%. The lowest price is defined, as of each applicable conversion rate, the lowest price per share that Company has sold one or more Shares to an investor or lender within the 24-month period prior to the applicable conversion date; provided, however, that if no Shares were sold within such 24-month period, the lowest recent price will be $0.50per Share.

The following are the significant assumptions used in the Black-Scholes model for the warrants:

At the date of the fourth amendment, the remaining unamortized debt issuance costs were $5,308,162. These costs were added to the fair value of the warrants granted as part of the amendment to increase the total debt issuance costs to $6,668,666. As per the terms of the amendment, these total costs will now be amortized over a period of twenty months.

As of the date of the Fourth Amended and Restated Discretionary Non-Revolving Line of Credit Demand Note, the aggregate outstanding principal balance was $6,888,801, which includes: (i) the outstanding principal balance under the Former Note of $4,251,877as of July 24, 2023; (ii) the $500,000borrowed under the Former Note on August 17, 2023; (iii) conversion of all accrued and unpaid interest under the Former Note through September 13, 2023 in the amount of $376,924; and (iv) the $1,760,000borrowed under the Note as of September 14, 2023 to pay in full the bridge loan evidenced by the Promissory Note, dated May 5, 2023, in the principal amount of $1,600,000made by Excel to the Company and the related funding fee due and owing in connection with such bridge loan. See Note 6. On September 15, 2023, the Company borrowed an additional $250,000under the Fourth Amended and Restated Discretionary Non-Revolving Line of Credit Demand Note, As of September 30, 2023, the aggregate outstanding principal balance was $7,388,801.

At September 30, 2023, the remaining unamortized debt issuance costs were $6,489,941and $935,248of amortization was included in interest expense during the three months ended September 30, 2023.

NOTE 8 - DERIVATIVE LIABILITIES

On February 24, 2023, July 18, 2023 and September 14, 2023, the Company entered into the second, third and fourth amended and restated discretionary non-revolving line of credit demand notes ("LOC") with a related party (See Note 7). On August 23, 2023, August 28, 2023 and September 1, 2023, the Company also entered into a Convertible Note Purchase Agreement and a Convertible Promissory Note with three unrelated parties (See Note 5). The LOC and Convertible Promissory Notes contain conversion options that qualify for embedded derivative classification. The fair value of the liability is re-measured at the end of every reporting period and the change in fair value is reported in the statement of operations as a gain or loss on change in fair value of derivatives.

The table below sets forth a summary of the changes in the fair value of the Company's Level 3 financial liabilities for the three months ended September 30, 2023:

Balance at June 30, 2023		$	6,859,452
Embedded conversion option of convertible debt			764,594
Change in the fair value of the embedded conversion option			(329,235	)
Balance at September 30, 2023		$	7,294,811

The Company uses Level 3 inputs for its valuation methodology for the embedded conversion option liabilities as their fair values were determined by using Monte-Carlo model based on various assumptions.

Significant changes in any of these inputs in isolation would result in a significant change in the fair value measurement. As required, these are classified based on the lowest level of input that is significant to the fair value measurement. The following table shows the assumptions used in the calculations:

		Expected volatility			Risk-free interest rate			Expected dividend yield			Expected life (in years)
At June 30, 2023			108-114	%			4.20-5.18	%			0	%			.5-2
At September 30, 2023			70.5	%			5.21	%			0	%			1.59

NOTE 9 - STOCKHOLDERS' DEFICIT

The Company is authorized to issue 475,000,000shares of common stock, par value $0.0001per share, and 25,000,000shares of preferred stock, par value $0.0001per share; of which 2,000,000shares have been designated as Series A Convertible Preferred Stock, 12,000shares have been designated as Series B Convertible Preferred Stock and 6,700,000shares have been designated as Series C Convertible Preferred Stock.

The Series A Convertible Preferred Stock has a liquidation preference of $0.10per share, has super-voting rights of 100 votes per share.Each share of Series A may be converted into 100shares of common stock at the option of the Holder thereof and without the payment of additional consideration by the Holder thereof, at any time, into shares of Common Stock at a conversion rate of one hundred (100) shares of Common Stock for every one (I) share of Series A Convertible Preferred Stock.

The Series B Convertible Preferred Stock has a liquidation preference of $1.00per share, has super-voting rights, and votes are determined by multiplying (a) the number of Series B shares held by such holder and (b) the conversion ratio, and each Series B share may be converted into 100shares of common stock. Each Holder shall have the right to convert any of all of such Holder's shares of Series B Preferred Stock into shares of common stock at the conversion ratio. Upon the closing of an underwritten, follow-on public offering of shares of the Company's common stock with gross offering proceeds of not less than $6,000,000, each then-outstanding share of Series B Convertible Preferred Stock shall be automatically converted into shares of common stock at the conversion ratio without any affirmative action required of the Holder.

The Series C Convertible Preferred Stock has a liquidation preference of $0.30per share, plus a 6% per annum liquidation coupon compounded annually since the date of issuance paid only upon a liquidation event, have the right to vote for all matters submitted, including the election of directors, and all other matters as required by law. The Series C shares shall automatically convert into common stock by multiplying the number of Series C shares to be converted by the quotient obtained by dividing (x) the liquidation value by (y) the conversion value upon the date that is the earlier of (a) the closing date of an underwritten, follow-on public offering of shares of the Company's common stock with gross offering proceeds of not less than $6,000,000; (b) the date the Company receives written notice from a holder of Series C shares of such holder's desire and intention to convert all or some of such holder's Series C shares; and (c) June 15, 2024.

Series A Convertible Preferred Stock

During the three months ended September 30, 2023 and 2022, there were no issuances of Series A Convertible Preferred Stock and as at September 30, 2023 and June 30, 2023, no shares were outstanding.

Series B Convertible Preferred Stock

During the three months ended September 30, 2023 and 2022, there were noissuances of Series B Convertible Preferred Stock and as at September 30, 2023 and June 30, 2023, 11,693and 11,693shares were outstanding.

Series C Convertible Preferred Stock

On July 11, 2022, the Company sold 2,166,666shares of its Series C Convertible Preferred Stock at $0.30per share for total proceeds of $650,000to related parties. A company managed by a member of Excel Family Partners, LLLP a company controlled by Bruce Cassidy (our former Chief Executive Officer through June 14, 2022) the Chairman of our board of directors purchased 1,000,000shares, Zen SRQ LLC a company associated with a former member of the board of directors purchased 833,332shares and Core Speed, LLC a Company owned by John Linss our former Chief Executive Officer and former member of our board of directors purchased 333,333shares. The proceeds were used to fund operations. See Notes 1 and 13.

On August 16, 2022, John Linss our former Chief Executive Officer and former member of our board of directors was issued 2,980,000shares of our Series C Convertible Preferred Stock as part of an amendment to his employment agreement. The stock was valued at $0.30per share, the recent cash price paid for all previous issuances of Series C Convertible Preferred stock, and vests over a 3-year period unless certain milestones are met, in which case it will fully vest sooner.

Common Stock

On August 26, 2022, we issued 6,500,000shares of common stock issued for the acquisition of certain assets of ZenSports Inc pursuant to an asset purchase agreement, 1,500,000shares of common stock issued for the acquisition of certain assets of Ultimate Gamer LLC pursuant to an asset purchase agreement. See Notes 3 and 13.

On August 26, 2022, we closed on a private offering of our common stock where we sold an aggregate of 750,000shares of our common stock to 11 third-party investors at a price of $1.00per share for an aggregate purchase price of $750,000(the "Private Offering"). Each of the investors had access to information concerning us and our business prospects and represented to us in connection with their purchase that they: (i) acquired the securities for investment only and not with a view to or for sale in connection with any distribution thereof; (ii) were accredited investors (iii) could bear the risks of the investment, and (iv) could hold the securities for an indefinite period of time. The offer, sale, and issuance of the shares were deemed to be exempt from registration under the Securities Act in reliance on Section 4(a)(2) of the Securities Act and/or Rule 506(b) of Regulation D promulgated thereunder, as transactions by an issuer not involving a public offering. See Note 3.

From August 26 to September 26, 2022, we had multiple closings on our private offering whereby we issued a total of 680,000shares of Common stock at $1.00per share for proceeds of $250,000, $80,000, $100,000and $250,000totaling $680,000to unaffiliated accredited investors. The proceeds were used for operating capital.

NOTE 10 - STOCK OPTIONS

On December 28, 2021, the board of directors (the "Board") approved the 2021 stock option plan ("2021 Plan"). The 2021 Plan was subject to the approval of our stockholders within 12 months of the Board's approval. We did not seek approval of the 2021 Plan from our stockholders on or before December 28, 2022, and no awards of any type were granted under the 2021 Plan.

On April 10, 2023, the Board terminated the 2021 Plan and approved a new stock option plan for our director's officers, employees, advisors, and contractors containing the same terms and conditions as the 2021 Plan (the "2023 Plan"). The 2023 Plan is also subject to approval of our stockholders within 12 months from the date of the Board's approval. In connection with the approval of the 2023 Plan, the Board granted Incentive Stock Options ("ISOs") and Non statutory Stock Options ("NSOs") under the 2023 Plan to employees and advisors of the Company to purchase a total of 3,250,000shares of our common stock at an exercise price of $0.50per share (the "Awards").

The 2023 Plan provides eligible participants with benefits consisting of one or more of the following: ISOs, NSOs, and bonuses in the form of our common stock ("Stock Bonuses"). The Board or a committee of directors will administer the 2023 Plan and determine what employees or officers will receive an award under the 2023 Plan. ISOs, which are intended to be compliant with Section 422 of the Internal Revenue Code, may be awarded only to our employees. NSOs and Stock Bonuses are not subject to Section 422 of the Internal Revenue Code and can be awarded to employees and non-employees.

As with the 2021 Plan, the aggregate number of shares of our authorized but unissued common stock that can be awarded under the 2023 Plan is 5,960,000, whether in the form ISOs, NSOs, or Stock Bonuses (or a combination thereof). Awards can be issued under the 2023 Plan for ten years from the date the Board approved the 2023 Plan. ISOs may be exercised during a period no longer than ten years from the date of the award (five years for individuals who own more than 10% of the combined voting power of the Company). NSOs may be exercised for a maximum period of ten years from the date of the award.

Below is a table summarizing the changes in stock options outstanding for the three months ended September 30, 2023:

					Weighted
					Average
		Number of			Exercise
		Options			Price ($)
Outstanding at June 30, 2023			3,250,000			$	0.50
Granted			-				-
Exercised			-				-
Expired			-				-
Forfeited			125,000				0.50
Outstanding at September 30, 2023			3,125,000			$	0.50
Exercisable at September 30, 2023			1,019,965			$	0.50

A total of 125,000stock options were forfeited on September 15, 2023 as per the terms of a separation agreement with the former Chief Financial Officer.

As of September 30, 2023, all outstanding stock options were issued according to the Company's 2023 Plan. There are 2,835,000unissued shares of common stock available for future issuance under the 2023 Plan.

NOTE 11 - COMMITMENTS AND CONTINGENCIES

Commitments and Contingencies are as follows:

On January 10, 2023, the Board appointed Mark Thomas ("Thomas") as the new Chief Executive Officer appointment, Thomas has served as the Company's Chief Marketing Officer and Chief Product Officer since June 2022. In lieu of an employment agreement, Thomas received a written offer letter (the "Offer") that states he will receive an annual salary of $380,000, and he is eligible to participate in the Company's benefit plans.

On February 6, 2023, the Company entered into a supplement to the Offer agreement with Mr. Thomas that sets forth the following terms and conditions relating to the Incentive Compensation.

Within 60 calendar days after the Company has $1,000,000or more in Gross Gaming Revenue, the Board will engage at least two executive compensation consultants to provide reports to the Board regarding the compensation of Chief Executive Officers of comparable companies. The Board will timely review and consider such reports in determining potential adjustments to your "Annual Salary." Any adjustments will be at the Board's sole discretion.

	1.	In the event that the Company receives a sports betting license (or equivalent) in the State of Tennessee, within 30 days after the issue date, Mr. Thomas will receive a cash bonus of $50,000.
	2.	For the next 24 months, in each event that the Company receives a sports betting license (or equivalent) in a new jurisdiction (other than the State of Tennessee), within 30 days after the issue date, Mr. Thomas will receive a cash bonus in an amount equal to the lesser of (a) $100,000, or (b) the product of 0.01% multiplied by the subject jurisdiction's trailing 12-month sports betting handle (using the most recent 12 months reported by Legal Sports Report ("LSR") which currently posts such data at www.legalsportsreport.com/sports-betting/revenue/).After the 24-month period, the Board (or its Compensation Committee, if any) will review and consider an extension or adjustment to this bonus structure. Any extensions or adjustments will be at the Board's sole discretion.
	3.	If the net loss of the Company for its 2022-2023 fiscal year, as determined by the Company's Chief Financial Officer, is less than $6,197,719(the "Benchmark"), Mr. Thomas will be eligible for a cash bonus in an amount equal to 8% of the difference of the actual net loss minus the Benchmark. The cash bonus will be due within 30 days after the determination of the 2022-2023 fiscal year net loss.

Mr. Thomas' employment with the Company will continue to be "at will.". If said employment with Company is terminated without "Cause," he will be entitled to severance through continued payments of his current annual base salary of $380,000for 6 months.

During May 2023, Mr. Thomas was paid a $50,000bonus pursuant to the supplemental offer agreement upon the Company being granted a sports betting license in the state of Tennessee.

Mr. Thomas' employment was terminated on October 31, 2023. See Note 13.

During August 2022, the company entered into a 60-month contract extension with a vendor for hosting services in Nevada with the intention of using said service in multiple domestic and international jurisdictions pursuant to the Company's expansion plans at that time. During May 2023, the company was informed by the Tennessee Sports Wagering and Advisory Council that the vendor was not approved for hosting Sports Betting technology in Tennessee. Since the services cannot be used in Tennessee and the Company is no longer actively engaged in seeking gaming licensing in other domestic or international jurisdictions, we have entered into negotiations to settle the remaining contract. We have not come to a settlement agreement with the vendor and as such we recorded a $262,834accrual for the remaining balance of the contract.

During May 2023, the Company was issued $500,000in a surety bond at an annual premium cost of $12,500. The surety bond is held for Tennessee Sports Wagering and Advisory Council for use and benefit in order for the Company to satisfy state license requirements. There have been no claims against such bonds and the likelihood of future claims is remote.

Legal matter contingencies

The Company believes, based on current knowledge and after consultation with counsel, that it is not currently party to any material pending proceedings, individually or in the aggregate, the resolution of which would have a material effect on the Company. Provisions for losses are established in accordance with ASC 450, "Contingencies" when warranted. Once established, such provisions are adjusted when there is more information available about an event that occurs requiring a change.

NOTE 12 - RELATED PARTY TRANSACTIONS

Transactions with our former and current Chief Executive Officers:

On June 14, 2022, the Company entered into an employment agreement with John Linss, as the Company's former Chief Executive Officer. The agreement was amended on August 16, 2022. The agreement and amended agreement work in tandem and provide for a 3-year term at an annual base salary of $500,000, a $112,000signing bonus, and certain other bonuses and stock grants.

On July 11, 2022, the company sold 333,333shares of its convertible preferred series C stock at $0.30per share for total proceeds of $100,000to Core Speed, LLC a Company owned by our former Chief Executive officer. See Note 12.

Effective January 10, 2023, John Linss, our former Chief Executive Officer and former member of our board of directors resigned. As part of the separation agreement and release as of that date, the Parties agreed that Mr. Linss through his ownership of CoreSpeed, LLC has rights set forth in the Award Agreement concerning the restricted preferred series C convertible stock that the Parties will consider Linss' resignation a Vesting Acceleration Event of the restricted series C convertible stock.

Linss and CoreSpeed, LLC, as part of the above-noted separation and release agreement, have agreed to sell and KeyStar has agreed to purchase all of the Subject Shares for a total of $2,000,000pursuant to the terms of the stock redemption and purchase agreement. See Notes 1 and 9.

On January 10, 2023, the Board appointed Mark Thomas ("Thomas") as the new Chief Executive Officer. In lieu of an employment agreement, Thomas received a written offer letter (the "Offer") that states he will receive an annual salary of $380,000, and he is eligible to participate in the Company's benefit plans. On February 6, 2023, the Company entered into a supplement to the Offer agreement with Mr. Thomas relating to the Incentive Compensation. See Note 11.

Transactions with our former Chief Financial Officer:

In July, 2022, the Company's former Chief Financial Officer, Zixiao Chen was paid $20,000as part of the Assignment and Assumption agreement described below.

On April 27, 2020, the Company executed a promissory note with our former Chief Financial Officer for $35,000. The note bears interest at 10% per annum and is due in two business days after the demand for payment. The note was repaid in full on July 26, 2022. See Note 6.

On July 26, 2022, the Company made 3 payments to the Company's former Chief Financial Officer totaling $77,000for the settlement of the two above-noted liabilities, to redeem and retire the 2,000,000shares of Series A Convertible Preferred Stock owned by her and outstanding, and in anticipation of the execution of assignment and assumption agreement to assume agreed upon assets and liabilities of the prior business. The Series A shares were redeemed and retired on July 26, 2022. The assignment and assumption agreement was executed on September 15, 2022. The payments were made as follows:

-	On July 26, 2022, the Company paid off $17,837in accrued expenses owing to the Company's former Chief Financial Officer for $20,000, the excess payment of $2,163was recorded against the gain on assignment in the statement of operations.
-	On July 26, 2022, the Company paid off the promissory note held by the Company's former Chief Financial Officer for $35,000. The accrued interest was waived. See Note 6.
-	On July 26, 2022, the company redeemed and retired the 2,000,000shares of Series A Convertible Preferred Stock owned by Ms. Chen for $22,000. See Note 9.

Transactions with our former Chief Executive Officer and current Chairman of our Board of Directors:

On July 11, 2022, the company sold 1,000,000shares of its convertible preferred series C stock at $0.30per share for total proceeds of $300,000to a company managed by a member of Excel Family Partners, LLLP a company controlled by Bruce Cassidy (our former Chief Executive Officer through June 14, 2022) and the Chairman of our board of directors. See Note 9.

On August 16, 2022, the non-revolving line of credit demand note with Excel Family Partners, LLLP ("Excel") a company controlled by Bruce Cassidy (our former Chief Executive Officer through June 14, 2022) the Chairman of our board of directors, which can exert significant influence over the Company, was increased to $2,000,000under the same terms and conditions. See Notes 6, 7 and 8.

On February 24, 2023, the Company entered into a second amended and restated discretionary non-revolving line of credit demand note with Excel in the principal amount of not more than $4,000,000and granted a common stock warrant exercisable up to 4,000,000shares of the Company's common stock. See Notes 6, 7, 8 and 9.

On May 5, 2023, the Company entered into a Promissory Note with Excel Family Partners, LLLP, a company controlled by Bruce Cassidy (our former Chief Executive Officer through June 14, 2022) the Chairman of our Board of Directors in the principal amount of $1,600,000. The Note matures on November 4, 2023, at which time the outstanding principal amount under the Note, along with a flat funding fee of $160,000is due and payable in full at loan maturity. In connection with entering the Note, the Company issued a Common Stock Warrant to purchase 1,600,000shares of our common stock at an exercise price of $0.25per share (the "Warrant"). The Warrant may be exercised, in whole or in part, at any time through May 4, 2028, on either a cash or cashless basis. On September 14, 2023, this Note and the flat funding fee were paid in full from the Discretionary Non-Revolving Line Of Credit Demand Note with Excel Family Partners, LLLP, ("Excel"). See Notes 6, 7, 8 and 9.

On July 18, 2023, the Company entered into a Third Amended and Restated Discretionary Non-Revolving Line Of Credit Demand Note with Excel Family Partners, LLLP, ("Excel") in the principal amount of not more than $5,000,000and granted a common stock warrant exercisable up to 1,000,000shares of the Company's common stock. See Notes 6, 7, 8 and 9.

On September 14, 2023, the Company entered into a Fourth Amended and Restated Discretionary Non-Revolving Line Of Credit Demand Note with Excel Family Partners, LLLP, a Florida limited liability limited partnership ("Excel") in the principal amount of not more than $10,000,000and granted a common stock warrant exercisable up to 3,400,000shares of the Company's common stock. See Notes 6, 7, 8 and 9.

On September 12, 2022, we entered into an asset purchase agreement with Excel Members, LLC, a company controlled by Bruce Cassidy, our Cassidy (our former Chief Executive Officer through June 14, 2022) the Chairman of our Board of Directors, to acquire certain assets of a company acquired previously by Excel through an assignment for the benefit of creditors. Ultimate Gamer, LLC ("UG"), which was formerly in the business of organizing and operating in-person and online video game competitions tournaments, originally owned these assets. The purchased assets included the brand name Ultimate Gamer.

We purchased a portion of UG assets, consisting primarily of intellectual property, including trademarks, domain name registrations, and UG's databases of users and gamers for 1,500,000shares of our common stock, See Notes 3, and 9.

Other related party transactions:

On July 11, 2022, the company sold 833,332shares of its convertible preferred series C stock at $0.30per share for total proceeds of $250,000to Zen SRQ LLC a company where a former member of the board of directors owns a 25% non-controlling interest.

Effective January 1, 2023, the Company assumed the office lease of a related party, ZenSports, Inc. The lease expires on September 30, 2023, and has a monthly lease payment of $6,500. See Note 1.

NOTE 13 - SUBSEQUENT EVENTS

In accordance with ASC 855-10, the Company has analyzed its operations subsequent to September 30, 2023, to the date these financial statements were issued, and as of April 19, 2024, there were no other material subsequent events to disclose in these financial statements.

Effective October 31, 2023, Mark Thomas resigned as the Company's Chief Executive Officer, Principal Executive Officer, President, Chief Technology Officer, interim Chief Financial Officer and interim Treasurer. The Company entered into a Consulting Agreement with Thomas, effective November 1, 2023 for professional services. As part of the Consulting Agreement, Thomas will receive bi-monthly compensation at a rate of $200per hour and reimbursement for all reasonable travel, entertainment, and other expenses incurred by Thomas in connection with his duties under the Consulting Agreement. The Consulting Agreement is for a term of 12 months, and may be terminated by either party at any time, without cause or further obligation, with at least fifteen (15) calendar days' written notice. This agreement was terminated on January 27, 2024.

On November 2, 2023, the Board appointed Walter Tabaschek as the new Chief Financial Officer, Principal Financial and Accounting Officer and Treasurer of the Company. Tabaschek's employment began on November 17, 2023. The Company did not enter into an Employment Agreement with Tabaschek. He received a simple offer letter stating that he will receive an annual salary of $275,000and he'll soon be granted options to purchase up to 350,000shares of the Company's common stock pursuant to the terms and conditions of the Company's stock plan. He was also eligible to participate in the Company's other benefit plans.

On December 27, 2023, a total of $1,540,000of the principal amount due under the Former Note was assigned from Excel to eight (8) third parties (each, a "Debt Assignee") pursuant to an Assignment and Assumption for each Debt Assignee. The following day, the Company received a total of nine (9) Conversion Notices which elected, in aggregate, that a total of $10,366,653of indebtedness under the Former Note be converted at a conversion price of $0.40per Share (based on the sale by the Company of Shares within the last two years at $0.50per share multiplied by 80%) into 25,916,632Shares (the "Conversion Shares"). Excel converted $8,826,653into 22,066,632Conversion Shares. The Debt Assignees, collectively, converted $1,540,000into an aggregate of 3,850,000Conversion Shares.

The offer, sale and issuance of the Conversion Shares were deemed to be exempt from registration under the Securities Act of 1933, as amended (the "Securities Act"), in reliance on Section 4(a)(2) of the Securities Act and/or Rule 506(b) of Regulation D promulgated thereunder, as transactions by an issuer not involving a public offering. The converting debt holders acquired the Conversion Shares for investment only and not with a view to or for sale in connection with any distribution thereof and appropriate legends were affixed to the Conversion Shares upon issuance thereof.

On December 29, 2023, the Company entered into a Fifth Amended and Restated Discretionary Non-Revolving Line Of Credit Demand Note with Excel Family Partners, LLLP, a Florida limited liability limited partnership ("Excel") in the principal amount of not more than $2,000,000(the "Note"). The Note amends and restates that certain Fourth Amended and Restated Discretionary Non-Revolving Line Of Credit Demand Note between us and Excel entered into on September 14, 2023 in the principal amount of not more than $10,000,000(the "Former Note"). Excel is controlled by Mr. Bruce Cassidy, our Secretary and sole member of our board of directors (the "Board"). The Note does not constitute a committed line of credit. Loans under the Note are made by Excel in its sole and absolute discretion. Upon repayment of any amount of principal or interest under the Note, we may not reborrow under the Note.

A total of $10,366,653of indebtedness under the Former Note was converted into shares of common stock (the "Shares") at a conversion price of $0.40per Share (based on the sale by the Company of Shares within the last two years at $0.50per share multiplied by 80%) on December 28, 2023. As a result of the conversion, the outstanding indebtedness under the Former Note was reduced to $1,135,000, which is the aggregate outstanding principal balance of all loans under the Note as of the date of the Note.

On October 1, 2023, the Company entered into a renewed lease for office space in Miami, Florida. The lease expires on October 31, 2024, and has a minimum monthly lease payment of $6,500.

On February 4, 2024, the entered into a lease for office space in Sarasota, Florida. The lease expires on February 1, 2025, and has a monthly lease payment of $1,600.

On January 8, 2024, the Company sold 400,000of common stock to an unrelated party for cash proceeds of $300,000.

On February 19, 2024, the Company entered into a first amendment to the $1,700,000promissory note with John Linss, our former Chief Executive Officer and former member of the board of directors, and his wholly owned Corespeed, LLC. As per the amendment, $425,000was paid on February 27, 2024 and equal monthly payments of principal and interest of $59,665shall be paid to Mr. Linss monthly, beginning on April 1, 2024 for a period of twenty four months. The amended maturity date of the note is the earliest of (a) April 1, 2026, (b) upon the occurrence of an uplisting, the fifth day after the occurrence of the uplisting, or (c) upon the occurrence of a change of control. All other terms of the original note remain the same.

On February 23, 2024, a Complaint and Demand for Arbitration was filed against us with the American Arbitration Association, Las Vegas Regional Office. The complaint alleges that the Company made misrepresentations of material facts and engaged in deceptive trade practices in connection with the purchase of certain assets pursuant to an asset purchase agreement dated August 26, 2022. The Claimant is requesting an award of recission damages in the amount of $6,500,000, plus three times that amount as treble damages pursuant to Nevada Revised Statutes 598A.210. We believe the claims made by the Claimant are without merit and we intend to vigorously refute such claims. The ultimate outcome of this arbitration proceeding cannot presently be determined. However, in management's opinion, the likelihood of a material adverse outcome is remote. Accordingly, adjustments, if any, that might result from the resolution of this matter have not been reflected in the financial statements.

On March 1, 2024, the board of directors of the Company appointed James Mackey as the Company's new Chief Financial Officer, Principal Financial and Accounting Officer and Treasurer, effective immediately. He received an offer letter stating that he will receive an annual salary of $275,000. He is also eligible to participate in the Company's other benefit plans.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by the words "believes," "project," "expects," "anticipates," "estimates," "intends," "strategy," "plan," "may," "will," "would," "will be," "will continue," "will likely result," and similar expressions. We intend such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and are including this statement for purposes of complying with those safe-harbor provisions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse affect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise. Further information concerning our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC.

Overview

As used in this Quarterly Report and unless otherwise indicated, the terms the "Company," "we", "us" and "our" mean KeyStar Corp., a Nevada corporation formed on April 16, 2020.

In the summer of 2022, our business consisted solely of providing online retail sales of masks and similar products and convention services (together, prior business). Through our e-commerce sales channel, we sold KN-95 facemasks, disposable facemasks, and disinfectant wipes through an online store in the United States of America (US). Through our convention sales channel, we offered convention services, which connected US buyers to Chinese manufacturers.

On June 15, 2022, we hired a new Chief Executive Officer and Chief Financial Officer along with certain key employees of ZenSports, Inc. to explore business opportunities related to software and mobile application development and services related to such technology.

On August 26, 2022, we entered into an Asset Purchase Agreement to purchase certain technological assets, as well as the brand ZenSports, from ZenSports, Inc. The assets were purchased to allow us to offer online sports betting, eSports, DeFi fintech and various entertainment services, on a direct-to-consumer (B2C) and business-to-business basis. We did not acquire the entity ZenSports Inc. On September 12, 2022, we entered into an Asset Purchase Agreement with Excel Members, LLC, a company controlled by Bruce Cassidy, a member of our Board of Directors (the "Board"), to acquire certain assets of a company acquired previously by Excel Members through an assignment for the benefit of creditors. Ultimate Gamer, LLC, which was formerly in the business of organizing and operating in-person and online video game competitions tournament, originally owned these assets. The purchased assets included the brand name Ultimate Gamer.

On September 15, 2022, we entered into an agreement to assign all of the assets in connection with or relating to our prior business owned or used by us (discontinued operations), and to delegate any and all liabilities owed by us, to TopSight Corporation, a company owned by Zixiao Chen, our former Chief Financial Officer.

As a result of the foregoing transactions, we ceased all operations relating to our prior business and commenced operations relating to B2C offerings within online sports betting (current business or business). With our current business, augmented by net new development of products and services, we intend to pursue global business opportunities through a platform we've designed to be a flexible foundation for corporate growth.

Through our ZenSports brand we offer a modern, full-featured, native mobile, and global online sports betting platform incorporating; a sports book, peer-to-peer betting, eSports wagering, loyalty, and player retention.

In May 2023, we received approval on our Tennessee Sports Gaming Operator license, and we officially launched our sports betting operation in Tennessee in June 2023.

Our current business is a mobile app and online-based technology company with no demand for a physical storefront location. The website for our business is https://www.keystarcorp.com. The information on our website is not made a part of this Quarterly Report. Our headquarters address is 1645 Pine Tree Ln, Suite 2, Sarasota, FL 34236. Our phone number is: (866) 783-9435.

Results of Operations for the Three Months Ended September 30, 2023, and 2022

During the three months ended September 30, 2023, and 2022, we incurred net losses from continuing operations of $5,058,302 and $2,342,287, respectively, and net losses from discontinued operations of $0 and $9,380, respectively.

For the three months ended September 30, 2023 and 2022, we had a loss of $218,624 and $0 from our continuing operations. Loss from continuing operations consisted of net sports betting revenues which commenced in June of 2023 upon the approval of our gaming license. In February 2023, we applied for a gaming license in Tennessee.

The significant driver to our losses is principally related to salary, wages, and contracting fees to ready our acquired technology for operating in Tennessee. In addition, legal, professional and abandoned jurisdictional licensing fees associated with our licensing activities and legal fees associated with fundraising. Operating and sales and marketing costs contribute to our losses and are expected to increase over the coming months once we expand our sports betting operations. In addition, we had non-cash expenses contributing to our loss for debt amortization costs of $935,248 and $0, respectively, as part of the restructuring of the related party demand line of credit debt of 7,338,801, interest expense on notes payable of $656,583 and $7,416, respectively, and a loss of $329,235 and $0, respectively, on the change in fair value of derivatives for the three months ended September 30, 3023 and 2022.

The assets and liabilities of our discontinued operations for the three months ended September 30, 2022 have been adjusted to reflect the assignment to TopSight Corporation and are included in gain on assignment of assets in the statement of operations.

Revenues, cost of revenues, and operating expenses from our prior business were all related to sales of KN95 masks and similar products, and convention services, and resulted in a net income (loss) from discontinued operations, net of income taxes of $0 and $(9,380) for the three months ended September 30, 2023, and 2022, respectively.

During the three months ended September 30, 2022, we closed two asset acquisitions. We funded these activities by securing funding of $650,000 for the issuance of 2,166,665 shares of our Series C Convertible Preferred Stock, an aggregate of $1,430,000 from the issuance of 1,430,000 shares of our common stock from private placements, and from an increase in our related party demand line of credit from $4,000,000 to $10,000,000 on which we drew down $1,776,924 in principal borrowings.

Liquidity and Capital Resources

Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis. Significant factors in the management of liquidity are funds generated by operations, levels of accounts payable and accrued expenditures, and capital expenditures, including the costs associated with internally developed software and attaining Sports Gaming Operator licenses.

As of September 30, 2023, we had total current assets of $2,018,427, total current liabilities of $19,043,197, and a total working capital deficit of $17,024,770. Net cash used in operating activities was $1,601,081 during the three months ended September 30, 2023, compared to $2,110,639 during the three months ended September 30, 2022. The decrease in the use of cash in operating activities is principally the result of a $1,835,912 decrease in net operating assets and liabilities and a decrease in non-cash transactions of $1,380,283, offset by an increase in a net loss of $2,706,637. The increase in net loss is primarily a result of commencing operations.

Net cash used in investing activities decreased by $512,295 during the three months ended September 30, 2023, compared to the three months ended September 30, 2022. The decrease is primarily the result of the acquisition of certain assets of ZenSports and Ultimate Gamer, capitalized cost of our internally developed software, capitalized costs of attaining our Tennessee gaming license, and the costs associated with the disposition of our prior business.

Net cash provided by financing activities decreased by $647,642 during the three months ended September, 2023, compared to the three months ended September 30, 2022. The decrease is primarily due to shares of common stock and preferred stock during the three months ended September 30, 2023, and is partially offset by increased draws from the related party demand line of credit and the issuance of convertible notes during the three months ended September 30, 2023.

We were incorporated on April 16, 2020. Since inception, our efforts and operations from our prior business to the date of disposition have been devoted primarily to startup and development activities, resulting in negative cash flows and an accumulated deficit from inception through disposition on September 15, 2022. During the three months ended September 30, 2022, we closed on acquisitions of certain assets of ZenSports and Ultimate Gamer and divested our prior business.

We purchased the assets of ZenSports and Ultimate Gamer so we could offer gambling, eSports entertainment, and DeFi opportunities through the acquired technology we are currently enhancing. In January 2023, John Linss our former Chief Executive Officer (CEO) resigned and was replaced by Mark Thomas. Mr. Thomas was the founder and remains the CEO of ZenSports, Inc., the company we acquired our sports betting technology from. As a result of this change in leadership and consultation with the Board, we adjusted our business plan to solely focus on sports betting in one jurisdiction, Tennessee, for the foreseeable future. Our current management team believes this singular focus will facilitate the revenue generation process more quickly and cost-effectively by focusing on our limited resources.

As of the filing date of this Quarterly Report, we have ceased all operations relating to our prior business and are focused on executing our adjusted business plan for our current business. Since our current business has a limited history of generating revenues or operating successfully, we will be dependent upon, among other things, achieving a level of profitable operations and receiving additional cash infusions, including securing additional lines of credit and raising additional capital through the placement of preferred and/or common stock in order to implement our business plan. Because of our limited operating history, it is difficult to predict our capital needs on a monthly, quarterly, or annual basis. We will have limited capital available to us if we are unable to raise money through private equity offerings or find alternate forms of financing, which we do not have in place at this time.

Off Balance Sheet Arrangements

As of September 30, 2023, we had no off-balance sheet arrangements.

Going Concern

As of September 30, 2023, we had a working capital deficit of $17,024,770. We had a net loss from continuing operations of $5,058,302 for the three months ended September 30, 2023. We do not expect significant revenues and we expect to incur significant increases in operating costs in the short term as we commence our sports betting operations. The expected significant increases in costs will include, but not be limited to, costs relating to obtaining gaming licenses, technology development, sales and marketing, and legal and professional fees.

These conditions raise substantial doubt about our ability to continue as a going concern for a period of one year from the issuance of these financial statements. Because of these conditions, we will require additional working capital to develop business operations. Management's plans are to raise additional working capital through the sale of debt and/or equity instruments as well as to generate revenues once we attain a gaming license. There are no assurances that we will be able to achieve the level of revenues adequate to generate sufficient cash flow from operations to support our working capital requirements. To the extent that funds generated are insufficient, we will have to raise additional working capital. No assurance can be given that additional financing will be available, or if available, will be on terms acceptable to us. If adequate working capital is not available, we may not be able to continue our operations.

The financial statements do not include any adjustments relating to the recoverability and classification of asset-carrying amounts or the amount and classification of liabilities that might be necessary should we be unable to continue as a going concern.

Item 3. Quantitative and Qualitative Disclosure About Market Risks

A smaller reporting company is not required to provide the information required by this Item.

Item 4. Controls and Procedures

Evaluation of Effectiveness of Disclosure Controls and Procedures

We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of September 30, 2023. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2023, our disclosure controls and procedures were not effective due to the presence of material weaknesses in internal control over financial reporting.

Changes in Internal Control over Financial Reporting

In connection with our continued monitoring and maintenance of our controls procedures as part of the implementation of Section 404 of the Sarbanes-Oxley Act, we continue to review, test, and improve the effectiveness of our internal controls over financial reporting. There have not been any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the first quarter of our fiscal year ended June 30, 2024, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

On February 23, 2024, ZenSports, Inc. filed a Complaint and Demand for Arbitration against us with the American Arbitration Association, Las Vegas Regional Office. In the complaint, ZenSports alleges that we made misrepresentations of material facts and engaged in deceptive trade practices in connection with our purchase of certain assets from ZenSports pursuant to an asset purchase agreement dated August 26, 2022. ZenSports is requesting an award of recission damages in the amount of $6,500,000, plus three times that amount as treble damages pursuant to Nevada Revised Statutes 598A.210. We believe the claims made by ZenSports are without merit and we intend to vigorously refute such claims. The ultimate outcome of this arbitration proceeding cannot presently be determined. However, in management's opinion, the likelihood of a material adverse outcome is remote. Accordingly, adjustments, if any, that might result from the resolution of this matter have not been reflected in the financial statements.

Item 6. Exhibits

				Incorporated By Reference
Exhibit Number		Exhibit Description		Form		As Exhibit		Filing Date
3.1		Articles of Incorporation		S-1		3.1		02/11/2021
3.2		Certificate of Amendment		S-1		3.2		02/11/2021
3.3		Certificate of Designation of Series B Convertible Preferred Stock		8-K		3.1		01/12/2022
3.4		Certificate of Designation of Series C Convertible Preferred Stock		8-K		3.1		07/05/2022
3.5		Amended and Restated Bylaws		8-K		3.1		10/04/2022
4.1		Common Stock Warrant of KeyStar Corp. issued to Excel Family Partners, LLP, dated July 18, 2023		8-K		4.1		07/24/2023
4.2		Form of Convertible Promissory Note of KeyStar Corp.		8-K		4.1		08/29/2023
4.3		Common Stock Warrant of KeyStar Corp. issued to Excel Family Partners, LLP, dated September 14, 2023		8-K		4.1		09/19/2023
10.1		Third Amended and Restated Discretionary Non-Revolving Line Of Credit Demand Note dated July 18, 2023 made by KeyStar Corp.		8-K		10.1		07/24/2023
10.2		Form of Convertible Note Purchase Agreement of KeyStar Corp		8-K		10.1		08/29/2023
10.3		Fourth Amended and Restated Discretionary Non-Revolving Line Of Credit Demand Note dated September 14, 2023 made by KeyStar Corp.		8-K		10.1		09/19/2023
31.1*		Certification of Principal Executive Officer filed pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*		Certification of Principal Financial Officer filed pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1**		Certification of Chief Executive Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2**		Certification of Chief Financial Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS		Inline XBRL Instance Document
101.SCH		Inline XBRL Taxonomy Extension Schema Document
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

*	Filed herewith.
**	Furnished herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	KEYSTAR CORP.
	(Registrant)
Date: April 19, 2024
	By:	/s/ James Mackey
		James Mackey
		Chief Financial Officer
		(Principal Financial Officer)

Public link

Please use the above public link if you want to share this noodl on another website.