Jackpot Digital : Q1 March 31, 2024 FS

JACKPOT DIGITAL INC.

Consolidated Interim Financial Statements Three Months Ended March 31, 2024 and 2023 (Expressed in Canadian Dollars)

(Unaudited)

Index	Page
Notice of No Auditor Report	2
Condensed Interim Financial Statements
Condensed Balance Sheets	3
Condensed Statements of Comprehensive Loss	4
Condensed Statements of Changes in Shareholders' Deficiency	5
Condensed Statements of Cash Flows	6
Notes to Condensed Financial Statements	7 - 39

Notice of No Auditor Review of Condensed Interim Financial Statements

In accordance with National Instrument 51-102 released by the Canadian Securities Administrators, the Company discloses that its auditors have not reviewed these unaudited condensed interim financial statements as at March 31, 2024 and for the three months ended March 31, 2024 and 2023.

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JACKPOT DIGITAL INC.

Consolidated Balance Sheets

(Expressed in Canadian Dollars)

				March 31,		December 31,
				2024		2023
	Assets (note 11)
	Current
	Cash and cash equivalents (note 5)		$	110,658	$	99,948
	Accounts receivable (note 5)			408,738		355,659
	Due from related parties (notes 8)			132,947		124,859
	Prepaid expenses and deposits			176,881		152,901
	Gaming Systems			829,224		733,367
			3,578,510		3,855,873
	Investment in 37 Capital Inc. ("37 Capital") (note 9)		3,723		6,703
	Deposit (note 10)			-		-
	Equipment			121,081		134,992
	Intangible Assets			328,931		348,038
	Right-of Use Assets (note 12)			796,101		873,266
	Total Assets		$	5,657,570	$	5,952,239
	Liabilities
	Current
	Accounts payable and accrued liabilities		$	2,599,320	$	2,670,740
	Deferred royalty liability (note 6)			207,158		175,042
	Lease liability (note 12)			293,147		290,803
	Interest payable			4,863,170		4,536,620
	Deferred revenue (note 13)			47,509		46,291
	Loans payable (note 11)			-		-
	Convertible debentures (note 11)			270,340		270,340
	Deferred Royalty Liability (note 6)			8,280,644		7,989,836
			161,052		177,202
	Lease Liability (note 12)			528,643		608,504
	Deferred Revenue (note 13)			504,436		491,504
	Non-Convertible Secured Debentures (note 11)		2,296,442		2,199,384
	Convertible Debentures (note 11)			4,908,430		4,837,181
	Total Liabilities			16,679,647		16,303,611
	Shareholders' Deficiency
	Capital Stock (note 7)			62,156,050		62,156,050
	Reserves (notes 7)			1,277,057		2,060,919
	Convertible Debentures - Equity Portion (note 11)		867,574		867,574
	Deficit			(75,322,758)		(75,435,915)
	Total Shareholders' Deficiency			(11,022,077)		(10,351,372)
	Total Liabilities and Shareholders' Deficiency		$	5,657,570	$	5,952,239
On behalf of the Board:
"Jake H. Kalpakian" (signed)		"Neil Spellman" (signed)
.....................................................................		………………………………………….…
Jake H. Kalpakian, Director		Neil Spellman, Director
See notes to consolidated financial statements.	3

JACKPOT DIGITAL INC.

Consolidated Statements of Comprehensive Loss

(Expressed in Canadian Dollars)

		March 31,		March 31,
		2024		2023
Revenues
Electronic gaming tables	$	385,261	$	487,027
Table sales		419,771		102,615
		805,032		589,642
Cost of sales		222,870		122,799
Gross Profit		582,162		466,843
Expenses
Advertising and promotion		16,890		12,580
Amortization		273,540		232,138
Consulting fees		69,034		58,465
Foreign exchange (gain)/loss		199,783		(83)
Gain on extinguishment of debt (note 11)		-		(614,087)
Impairment loss on gaming systems		-		696
Interest and finance expense		344,757		303,203
Interest and other income		(2,262)		-
Legal, accounting and audit (recovery)		(137,292)		39,269
Management fees		99,000		99,000
Regulatory and transfer agent fees		46,315		60,034
Rent, office and miscellaneous		43,375		31,681
Salaries and benefits		245,353		391,198
Travel, meals and entertainment		63,711		73,278
Share of net loss of 37 Capital Inc.		2,980		1,996
		1,265,184		689,368
Net Loss and Comprehensive Loss for the Period	$	(683,022)	$	(222,525)
Basic and Diluted Loss Per Share	$	(0.01)	$	(0.00)
Weighted Average Number of Common Shares
Outstanding		133,392,727		131,959,302

See notes to consolidated financial statements.

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JACKPOT DIGITAL INC.

Consolidated Statements of Changes in Shareholders' Deficiency

(Expressed in Canadian Dollars)

	Capital Stock		Reserves		Equity Portion of
					Warrants and			Convertible			Shareholders'
	Common Shares		Amount		Other		Options	Debentures		Deficit		Deficiency
Balance, December 31, 2022	131,959,302	$	62,041,953	$	1,493,767	$	1,281,242	$	12,536	$	(72,984,693)	$	(8,155,195)
Net loss for the period	-		-		-		-		-		(222,525)		(222,525)
Convertible debenture issued	-		-		-		-		44,430		-		44,430
Broker warrants issued	-		-		691		-		-		-		691
Share-based payment	-		-		-		21,689		-		-		21,689
Expiry of warrants	-		-		(107,022)		-		-		107,022		-
Expiry of options	-		-		-		(273,879)		-		273,879		-
Balance, March 31, 2023	131,959,302		62,041,953		1,387,436		1,029,052		56,966		(72,826,317)		(8,310,910)
Net loss for the period	-		-		-		-		-		(3,055,671)		(3,055,671)
Convertible debenture issued	-		-		-		-		823,144		-		823,144
Convertible debenture conversion/shares for
debt	1,333,425		100,007		-		-		(12,536)		-		87,471
Broker warrants issued	-		-		4,609		-		-		-		4,609
Share-based payment	-		-		-		93,985		-		-		93,985
Exercise of warrants	100,000		14,090		(8,090)		-		-		-		6,000
Expiry of warrants	-		-		(386,119)		-		-		386,119		-
Expiry of options	-		-		-		(59,954)		-		59,954		-
Balance, December 31, 2023	133,392,727	$	62,156,050	$	997,836	$	1,063,083	$	867,574	$	(75,435,915)	$	(10,351,372)
Net loss for the period	-		-		-		-		-		(683,022)		(683,022)
Share-based payment	-		-		-		12,317		-		-		12,317
Expiry of warrants	-		-		(50,767)		-		-		50,767		-
Expiry of options	-		-		-		(745,412)		-		745,412		-
Balance, March 31, 2024	133,392,727	$	62,156,050	$	947,069	$	329,988	$	867,574	$	(75,322,758)	$	(11,022,077)

See notes to consolidated financial statements.

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JACKPOT DIGITAL INC.

Consolidated Statements of Cash Flows

(Expressed in Canadian Dollars)

		March 31,		March 31,
		2024		2023
Operating Activities
Loss and Comprehensive Loss for the Period	$	(683,022)	$	(222,525)
Items not affecting cash
Amortization		273,540		232,138
Interest expense and finance expense		384,566		293,422
Unrealized foreign exchange loss		156,516		(1,705)
Share-based payment		12,317		21,689
Repairs and maintenance		24,910		31,310
Gain on sale of gaming systems		(290,854)		(77,768)
Impairment loss on gaming systems		-		696
Gain on extinguishment of debt		-		(614,087)
Share of net loss of 37 Capital Inc.		2,980		1,996
		(119,047)		(334,834)
Changes in non-cash working capital
Accounts receivable		(53,079)		(11,884)
Due from related parties		(8,088)		(11,459)
Prepaid expenses and deposits		(23,980)		-
Accounts payable and accrued liabilities		(68,920)		(54,589)
Deferred revenue		-		91,301
		(154,067)		13,369
Cash Used in Operating Activities		(273,114)		(321,465)
Financing Activities
Funds from convertible debentures, net of issuance
cost		-		246,550
Funds from loan payable		-		265,000
Repayment of loan payable		-		(55,000)
Payment of lease liability		(63,496)		(73,447)
Obligations to issue debenture		-		334,877
Cash Provided by Financing Activities		(63,496)		717,980
Investing Activities
Purchase of gaming systems		(71,393)		(6,931)
Purchase of intangible assets		(2,676)		-
Purchase of equipment and prototypes		-		(309)
Proceeds of sale of gaming systems		419,771		-
Cash Used in Investing Activities		345,702		(7,240)
Effect of Foreign Currency Translation on Cash		1,618		162
Net Change in Cash and Cash Equivalents		10,710		389,437
Cash and Cash Equivalents, Beginning of Period		99,948		101,289
Cash and Cash Equivalents, End of Period	$	110,658	$	490,726

See notes to consolidated financial statements.

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JACKPOT DIGITAL INC.

Notes to Consolidated Financial Statements Three months ended March 31, 2024 and 2023 (Expressed in Canadian Dollars, unless otherwise stated)

1. NATURE OF OPERATIONS
   The principal business of Jackpot Digital Inc. (the "Company" or "Jackpot") is the developing, marketing, and leasing of electronic table games to casino operators. The Company's common shares trade on the TSX Venture Exchange ("TSX-V") under the symbol "JJ" and on the OTCQB under the trading symbol "JPOTF". A certain number of the Company's warrants trade on the TSX- V under the symbols "JJ.WT.B" and "JJ.WT.C". The Company's common shares are also listed for trading on the Frankfurt Exchange under the symbol "LVH3".
   The Company's office is located at Suite 575 - 510 Burrard Street, Vancouver, British Columbia, Canada, V6C 3A8, and the Company's warehouse is located at 4664 Lougheed Highway, Unit W030, Burnaby, British Columbia, Canada, V5C 5T5. The Company's registered office is located at Suite 3200 - 650 West Georgia Street, Vancouver, British Columbia, Canada, V6B 4P7.
2. GOING CONCERN
   These consolidated financial statements have been prepared on the basis of accounting principles applicable to a "going concern", which assumes the Company will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of operations.
   Several adverse conditions may cast significant doubt on the validity of this assumption. The Company has incurred a net loss and comprehensive loss of $683,022 during the three months ended March 31, 2024 (March 31, 2023: $222,525), has incurred significant operating losses over the past two fiscal years (2023 - $3,278,196; 2022 - $5,123,052), has a working capital deficiency of $7,451,420 (December 31, 2023: working capital deficiency of $7,256,469). There are no assurances that sufficient funding will be available to the Company to continue operations for an extended period of time.
   The application of the going concern concept is dependent upon the Company's ability to generate future profitable operations and receive continued financial support from its shareholders. Management is actively engaged in the review and due diligence on new projects and is seeking to raise the necessary capital to meet its funding requirements. There can be no assurance that management's plan will be successful.
   If the going concern assumption were not appropriate for these consolidated financial statements, then adjustments would be necessary to the carrying values of assets and liabilities, the reported expenses, and the balance sheet classifications used. Such adjustments could be material.
3. BASIS OF PRESENTATION
4. 1. Statement of compliance
      These condensed interim financial statements are prepared in accordance with International Accounting Standard 34 Interim Financial Reporting using the accounting policies consistent with International Financial Reporting Standards ("IFRS"), as issued by the International Accounting Standards Board ("IASB"). They do not include all of the information required for full annual financial statements.

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JACKPOT DIGITAL INC.

Notes to Consolidated Financial Statements Three months ended March 31, 2024 and 2023 (Expressed in Canadian Dollars, unless otherwise stated)

3. BASIS OF PRESENTATION (Continued)

1. Basis of measurement
   These condensed interim financial statements have been prepared under the historical cost basis, except for certain financial instruments, which are measured at fair value.
   These condensed interim financial statements have been prepared under the accrual basis of accounting, except for cash flow information.
2. Approval of the consolidated financial statements
   The condensed interim financial statements of Jackpot for the three months ended March 31, 2024 were approved and authorized for issue by the Board of Directors on May 30, 2024.
3. Functional and presentation currency
   These consolidated financial statements are presented in Canadian dollars, which is the Company's and subsidiaries' functional currency.
4. Significant accounting judgments, estimates and assumptions
   The preparation of the consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, revenues, and expenses. Actual results may differ from these estimates.
   Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Accounting estimates will, by definition, seldom equal the actual results. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.
   Significant assumptions about the future and other sources of estimated uncertainty that management has made as at the consolidated balance sheet dates that could result in a material adjustment to the carrying amount of assets and liabilities in the event that actual results differ from assumptions made, related to, but are not limited to, the following:
   Critical accounting estimates
   Critical accounting estimates and assumptions made by management that may result in a material adjustment to the carrying amounts of assets and liabilities include, but are not limited to, the following:

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JACKPOT DIGITAL INC.

Notes to Consolidated Financial Statements Three months ended March 31, 2024 and 2023 (Expressed in Canadian Dollars, unless otherwise stated)

3. BASIS OF PRESENTATION (Continued)

1. Significant accounting judgments, estimates and assumptions (continued) Critical accounting estimates (continued)
2. • Recoverability of accounts receivable and allowance for doubtful accounts
     The Company monitors its exposure for credit losses on its customer and related parties receivable balances and the credit-worthiness of the customers and related parties on an ongoing basis and records related allowances for doubtful accounts. Allowances are estimated based upon specific customer and related parties balances, where a risk of default has been identified, and also include a provision for non- customer specific defaults based upon historical experience and aging of accounts. As of December 31, 2023, the Company recorded an allowance for doubtful accounts of $nil (December 31, 2022 - $nil). If circumstances related to specific customers and related parties change, estimates of the recoverability of receivables could also change.
   • Intangible assets, gaming systems, and equipment - useful lives
     Amortization is recorded on the straight-line basis based upon management's estimate of the useful life and residual value. The estimates are reviewed at least annually and are updated if expectations change as a result of the technical obsolescence or legal and other limits to use. A change in the useful life or residual value will impact the reported carrying value of the intangible assets, gaming systems and equipment resulting in a change in related amortization expense.
   • Fair value of equity instruments
     The fair value of equity instruments is subject to the limitations of the Black-Scholes option pricing model, as well as other pricing models that incorporate market data and involves uncertainty in estimates used by management in the assumptions. Because option pricing models require inputs of highly subjective assumptions, including the volatility of share prices, changes in subjective input assumptions can materially affect the fair value estimate.
   • Recoverability of asset carrying values
     Determining the amount of impairment of intangible assets and gaming systems requires an estimation of the recoverable amount, which is defined as the higher of fair value less the cost of disposal or value in use. Many factors used in assessing recoverable amounts are outside of the control of management and it is reasonably likely that assumptions and estimates will change from period to period.
   • Right-of-useassets and lease liability
     The right of use assets and lease liability are measured by discounting the future lease payments at incremental borrowing rate. The incremental borrowing rate is an estimated rate the Company would have to pay to borrow over a similar term and with similar security, the funds necessary to obtain an asset of a similar value to the right- of-use asset in a similar economic environment.

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JACKPOT DIGITAL INC.

Notes to Consolidated Financial Statements Three months ended March 31, 2024 and 2023 (Expressed in Canadian Dollars, unless otherwise stated)

3. BASIS OF PRESENTATION (Continued)

1. Significant accounting judgments, estimates and assumptions (continued) Critical accounting estimates (continued)
2. • Discount rates for convertible debentures
     Convertible debentures are separated into their liability and equity components on the consolidated balance sheets. The liability component is initially recognized at fair value, calculated at the net present value of the liability based upon non-convertible debt issued by comparable issuers and accounted for at amortized cost using the effective interest rate method. The effective interest rate used is the estimated rate for non-convertible debt with similar terms at the time of issue.
   • Discount rate for deferred royalty liability
     The deferred royalty liability was initially recognized at fair value, calculated at the net present value of the minimum future royalty payments and subsequently accounted for at amortized cost using the effective interest rate method. The discount rate used is based on the estimated market rate for debt at the time of initial recognition.

Critical accounting judgments

• Recovery of deferred tax assets
  The measurement of income taxes payable and deferred income tax assets and liabilities requires management to make judgments in the interpretation and application of the relevant tax laws. The actual amount of income taxes only becomes final upon filing and acceptance of the tax return by the relevant tax authorities, which occurs subsequent to the issuance of the consolidated financial statements.
• Debentures
  In accordance with the substance of the contractual arrangement, convertible debentures are compound financial instruments that are accounted for separately by their components: a financial liability and an equity instrument.
  The identification of convertible debenture components is based on interpretations of the substance of the contractual arrangement and therefore requires judgment from management. The separation of the components affects the initial recognition of the convertible debenture at issuance and the subsequent recognition of interest on the liability component. The determination of the fair value of the liability is also based on a number of assumptions, including contractual future cash flows, discount factors and the presence of any derivative financial instruments.
• Modification verses extinguishment of financial liability
  Judgment is required in applying IFRS 9 Financial Instruments to determine whether the amended terms of the loan agreements are a substantial modification of an existing financial liability and whether it should be accounted for as an extinguishment of the original financial liability.

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