Jackpot Digital : Q4 December 31, 2023 FS

JACKPOT DIGITAL INC.

Consolidated Financial Statements

December 31, 2023 and 2022

(Expressed in Canadian Dollars)

Index	Page
Independent Auditors' Report to the Shareholders	2	-	5
Consolidated Financial Statements
Consolidated Balance Sheets		6
Consolidated Statements of Comprehensive Loss		7
Consolidated Statements of Changes in Shareholders' Deficiency		8
Consolidated Statements of Cash Flows		9
Notes to Consolidated Financial Statements	10	-	50

INDEPENDENT AUDITORS' REPORT

TO THE SHAREHOLDERS OF JACKPOT DIGITAL INC.

Opinion

We have audited the consolidated financial statements of Jackpot Digital Inc. (the "Company"), which comprise:

• the consolidated balance sheets as at December 31, 2023 and 2022;
• the consolidated statements of comprehensive loss for the years then ended;
• the consolidated statements of changes in shareholders' deficiency for the years then ended;
• the consolidated statements of cash flows for the years then ended; and
• the notes to the consolidated financial statements, including material accounting policy information.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as at December 31, 2023 and 2022, and its consolidated financial performance and consolidated cash flows for the years then ended in accordance with International Financial Reporting Standards ("IFRS").

Basis for Opinion

We conducted our audits in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditors' Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our opinion.

Material Uncertainty Related to Going Concern

We draw attention to Note 2 in the consolidated financial statements, which indicates that the Company incurred a net loss of $3,278,196 during the year ended December 31, 2023 and, as of that date, has a deficit of $75,435,915 and a working capital deficiency of $7,256,469. As stated in Note 2, these events or conditions, along with other matters as set forth in Note 1, indicate that a material uncertainty exists that may cast significant doubt on the Company's ability to continue as a going concern. Our opinion is not modified in respect of this matter.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements for the year ended December 31, 2023. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

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2

VANCOUVER

1700-475 Howe St Vancouver, BC V6C 2B3

1. 604 687 1231

1. 604 688 4675

LANGLEY

600-19933 88 Ave Langley, BC V2Y 4K5

1. 604 282 3600

1. 604 357 1376

NANAIMO

201-1825 Bowen Rd Nanaimo, BC V9S 1H1

1. 250 755 2111

1. 250 984 0886

Except for the matter described in the Material Uncertainty Related to Going Concern section, we have determined that there are no other key audit matters to communicate in our auditors' report.

Other Information

Management is responsible for the other information. The other information comprises the information included in Management's Discussion and Analysis.

Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.

We obtained Management's Discussion and Analysis prior to the date of this auditors' report. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRS, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company's financial reporting process.

Auditors' Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

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3

VANCOUVER

1700-475 Howe St Vancouver, BC V6C 2B3

1. 604 687 1231

1. 604 688 4675

LANGLEY

600-19933 88 Ave Langley, BC V2Y 4K5

1. 604 282 3600

1. 604 357 1376

NANAIMO

201-1825 Bowen Rd Nanaimo, BC V9S 1H1

1. 250 755 2111

1. 250 984 0886

• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
• Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors' report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors' report. However, future events or conditions may cause the Company to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

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4

VANCOUVER

1700-475 Howe St Vancouver, BC V6C 2B3

1. 604 687 1231

1. 604 688 4675

LANGLEY

600-19933 88 Ave Langley, BC V2Y 4K5

1. 604 282 3600

1. 604 357 1376

NANAIMO

201-1825 Bowen Rd Nanaimo, BC V9S 1H1

1. 250 755 2111

1. 250 984 0886

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors' report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partner on the audit resulting in this independent auditors' report is Sukhjit Gill

Chartered Professional Accountants

Vancouver, British Columbia

April 29, 2024

SMYTHE LLP | smythecpa.com

5

VANCOUVER

1700-475 Howe St Vancouver, BC V6C 2B3

1. 604 687 1231

1. 604 688 4675

LANGLEY

600-19933 88 Ave Langley, BC V2Y 4K5

1. 604 282 3600

1. 604 357 1376

NANAIMO

201-1825 Bowen Rd Nanaimo, BC V9S 1H1

1. 250 755 2111

1. 250 984 0886

JACKPOT DIGITAL INC.

Consolidated Balance Sheets

(Expressed in Canadian Dollars)

	As at December 31		2023		2022
	Assets (note 15)
	Current
	Cash and cash equivalents (note 5)	$	99,948	$	101,289
	Accounts receivable (note 5)		355,659		326,339
	Due from related parties (notes 5 and 11)		124,859		120,139
	Prepaid expenses and deposits		152,901		51,792
			733,367		599,559
	Gaming Systems (note 8)		3,855,873		2,483,000
	Investment in 37 Capital Inc. ("37 Capital") (note 12)		6,703		9,111
	Deposit (note 13)		-		38,000
	Equipment (note 7)		134,992		281,410
	Intangible Assets (note 9)		348,038		156,437
	Right-of Use Assets (note 16)		873,266		276,133
	Total Assets	$	5,952,239	$	3,843,650
	Liabilities
	Current
	Accounts payable and accrued liabilities	$	2,670,740	$	1,532,582
	Deferred royalty liability (note 6)		175,042		70,201
	Lease liability (note 16)		290,803		297,962
	Interest payable (note 15)		4,536,620		3,837,751
	Deferred revenue (note 17)		46,291		305,100
	Loans payable (note 15)		-		7,277
	Convertible debentures (note 15)		270,340		2,279,631
	Non-convertible secured debentures (note 15)		-		2,905,887
			7,989,836		11,236,391
	Deferred Royalty Liability (note 6)		177,202		259,133
	Lease Liability (note 16)		608,504		-
	Deferred Revenue (note 17)		491,504		503,321
	Non-Convertible Secured Debentures (note 15)		2,199,384		-
	Convertible Debentures (note 15)		4,837,181		-
	Total Liabilities		16,303,611		11,998,845
	Shareholders' Deficiency
	Capital Stock (note 10)		62,156,050		62,041,953
	Reserves (notes 10 and 15)		2,060,919		2,775,009
	Convertible Debentures - Equity Portion (note 15)		867,574		12,536
	Deficit		(75,435,915)		(72,984,693)
	Total Shareholders' Deficiency		(10,351,372)		(8,155,195)
	Total Liabilities and Shareholders' Deficiency	$	5,952,239	$	3,843,650
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.

6

JACKPOT DIGITAL INC.

Consolidated Statements of Comprehensive Loss

(Expressed in Canadian Dollars)

Years Ended December 31		2023		2022
Revenues (note 22)
Electronic gaming tables	$	1,565,188	$	1,401,220
Table sales		496,919		30,000
		2,062,107		1,431,220
Cost of sales (note 22)		364,812		364,297
Gross Profit		1,697,295		1,066,923
Expenses
Salaries and benefits (notes 10(d), 11 and 14)		1,607,204		1,491,374
Interest and finance expense (notes 6, 15 and 16)		1,382,051		1,090,548
Consulting fees (note 10(d))		481,219		560,199
Rent, office and miscellaneous (notes 11 and 19)		96,733		107,640
Management fees (note 11)		396,000		396,000
Travel, meals and entertainment		271,624		231,615
Advertising and promotion		550,335		520,254
Legal, accounting and audit		112,212		173,289
Regulatory and transfer agent fees		235,246		164,581
Foreign exchange loss (gain)		(203,301)		405,979
Amortization (notes 7, 8, 9 and 16)		911,456		906,718
		5,840,779		6,048,197
Transaction expense (note 6)		-		-
Gain on debt settlement (notes 12 and 15)		(614,087)		-
Gain on debenture conversion		(12,536)		-
Impairment loss on gaming systems (note 8)		50,842		50,297
Interest and other income		(1,733)		(963)
Impairment loss of investment in 37
Capital Inc. (note 12)		-		81,078
Share of net loss of 37 Capital Inc. (note 12)		2,408		11,366
Impairment loss on Huudl Investment (note 13)		38,000		-
		(537,106)		141,778
Loss and Comprehensive Loss Before Income Tax
Recovery	$	(3,606,378)	$	(5,123,052)
Deferred income tax recovery (note 18)		328,182		-
Net Loss and Comprehensive Loss for the Year		(3,278,196)		(5,123,052)
Basic and Diluted Loss Per Share	$	(0.02)	$	(0.05)
Weighted Average Number of Common Shares
Outstanding		132,262,150		108,254,779

See notes to consolidated financial statements.

7

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, 2021			84,860,716	$		58,980,489	$	1,664,722	$	1,089,399	$	19,957	$	(68,173,900)	$	(6,419,333)
Net loss for the year	-		-		-		-		-		(5,123,052)		(5,123,052)
Private placements, net of issuance costs	47,098,586		3,061,464		58,577		-		-		-		3,120,041
Extinguishment of convertible debentures
conversion	-		-		-		-		(7,421)		7,421		-
Share-based payment	-		-		-		267,149		-		-		267,149
Expiry of warrants	-		-		(229,532)		-		-		229,532		-
Cancellation of options	-		-		-		(23,350)		-		23,350		-
Expiry of options	-		-		-		(51,956)		-		51,956		-
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 year	-		-		-		-		-		(3,278,196)		(3,278,196)
Convertible debenture issued	-		-		-		-		867,574		-		867,574
Convertible debenture conversion/shares for
debt	1,333,425		100,007		-		-		(12,536)		-		87,471
Broker warrants issued	-		-		5,300		-		-		-		5,300
Share-based payment	-		-		-		115,674		-		-		115,674
Exercise of warrants	100,000		14,090		(8,090)		-		-		-		6,000
Expiry of warrants	-		-		(493,141)		-		-		493,141		-
Expiry of options			-			-		-		(333,833)		-		333,833		-
Balance, December 31, 2023	133,392,727	$		62,156,050	$	997,836	$	1,063,083	$	867,574	$	(75,435,915)	$	(10,351,372)

See notes to consolidated financial statements.

8

JACKPOT DIGITAL INC.

Consolidated Statements of Cash Flows

(Expressed in Canadian Dollars)

Years Ended December 31		2023		2022
Operating Activities
Loss and Comprehensive Loss Before Income Tax
Recovery	$	(3,606,378)	$	(5,123,052)
Items not affecting cash
Amortization		911,456		906,718
Interest expense and finance expense		1,311,239		1,000,808
Unrealized foreign exchange loss		(105,253)		497,043
Share-based payment		115,674		267,149
Repairs and maintenance (note 8)		(68,778)		14,489
(Gain)/Loss on sale of gaming systems		(378,813)		17,012
Impairment loss on gaming systems		50,842		50,297
Gain on settlement of debt		(614,087)		-
Gain on debenture conversion		(12,536)		-
Impairment loss on Huudl Investment		38,000		-
Impairment loss on investment in 37 Capital Inc.		-		81,078
Share of net loss of 37 Capital Inc.		2,408		11,366
		(2,356,226)		(2,277,092)
Changes in non-cash working capital (note 21)		(116,449)		376,710
Cash Used in Operating Activities		(2,472,675)		(1,900,382)
Financing Activities
Funds from convertible debentures, net of issuance
cost		4,493,223		-
Funds from loan payable		330,000		330,000
Repayment of loan payable		(330,000)		(330,000)
Exercise of warrants		6,000		-
Private placement, net of issuance costs		-		3,120,041
Payment of lease liability (note 16)		(312,468)		(301,544)
Repayment of promissory note		-		(391,831)
Repayment of convertible debentures		(404,850)		-
Repayment of non-convertible debentures		(538,997)		(4,443)
Repayment of deferred royalty liability		-		(97,583)
Cash Provided by Financing Activities		3,242,908		2,324,640
Investing Activities
Purchase of gaming systems		(219,016)		(199,680)
Purchase of intangible assets		(220,296)		(176,972)
Purchase of equipment and prototypes		(522,942)		(231,296)
Proceeds of sale of gaming systems		192,228		30,000
Cash Used in Investing Activities		(770,026)		(577,948)
Effect of Foreign Currency Translation on Cash		(1,548)		2,122
Net Change in Cash and Cash Equivalents		(1,341)		(151,568)
Cash and Cash Equivalents, Beginning of Year		101,289		252,857
Cash and Cash Equivalents, End of Year	$	99,948	$	101,289

Supplemental Cash Flow Information (note 21)

See notes to consolidated financial statements.

9

JACKPOT DIGITAL INC.

Notes to Consolidated Financial Statements Years Ended December 31, 2023 and 2022

(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.
   Yo Eleven Gaming Inc. ("Yo Eleven") was incorporated under the Business Corporations Act (British Columbia). Effective November 4, 2021, pursuant to a Plan of Arrangement under the British Columbia Corporations Act, the Company transferred certain online gaming software to Yo Eleven in exchange for 16,966,931 Yo Eleven common shares which were then distributed to the Company's registered and beneficial shareholders as of November 1, 2021 on the basis of 1 Yo Eleven common share for every 5 Jackpot common shares held by Jackpot shareholders (the "Spinout"). As of the completion of the Spinout, Yo Eleven is no longer a subsidiary of Jackpot.
   As the shareholders of the Company continued to hold their respective interests in Yo Eleven, there was no resulting change of control in Yo Eleven.
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 significant operating losses over the past several years (2023 - $3,278,196; (2022 - $5,123,052), as at December 31, 2023 has a deficit of $75,435,915 (2022 - $72,984,693) and a working capital deficiency of $7,256,469 (2022 - $10,636,832). Although the Company recognized revenue of $2,062,107 during the year ended December 31, 2022 (2022 - $1,431,220), it has not recognized net income and 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.

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