UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
or
For the transition period from ___________ to ___________
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the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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BRAG HOUSE HOLDINGS, INC.
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”). In particular, statements contained in this Quarterly Report on Form 10-Q, including but not limited to, statements regarding the sufficiency of our cash, our ability to finance our operations and business initiatives and obtain funding for such activities; our future results of operations and financial position, business strategy and plan prospects, or costs and objectives of management for future acquisitions, are forward looking statements. These forward-looking statements relate to our future plans, objectives, expectations and intentions and may be identified by words such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “intends,” “targets,” “projects,” “contemplates,” “believes,” “seeks,” “goals,” “estimates,” “predicts,” “potential” and “continue” or similar words. Readers are cautioned that these forward-looking statements are based on our current beliefs, expectations and assumptions and are subject to risks, uncertainties, and assumptions that are difficult to predict, including those identified below, under Part II, Item lA. “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q and those risks identified under Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the Securities and Exchange Commission on May 7, 2025. Therefore, actual results may differ materially and adversely from those expressed, projected or implied in any forward-looking statements. We undertake no obligation to revise or update any forward-looking statements for any reason.
NOTE REGARDING COMPANY REFERENCES
Throughout this Quarterly Report on Form 10-Q, the terms “Brag House,” “we,” “us,” our,” “our company,” “Company” and “our business” refer to Brag House Holdings, Inc. and its wholly owned subsidiaries, Brag House Inc. and Brag House Ltd.
FORM 10-Q
TABLE OF CONTENTS
i
PART I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (Unaudited)
BRAG HOUSE HOLDINGS, INC.
INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1
BRAG HOUSE HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, 2025 | December 31, 2024 | |||||||
(unaudited) | ||||||||
Assets | ||||||||
Current Assets: | ||||||||
Cash | $ | $ | ||||||
Other Receivables | ||||||||
Prepaid Expenses | ||||||||
Other Current Assets | ||||||||
Total Current Assets | ||||||||
Other Assets: | ||||||||
Deferred Offering Costs | ||||||||
Prepaid Expenses, Noncurrent | — | |||||||
Capitalized Implementation Costs | ||||||||
Total Other Assets | ||||||||
Total Assets | $ | $ | ||||||
Liabilities and Stockholders’ Equity (Deficit) | ||||||||
Liabilities | ||||||||
Current Liabilities: | ||||||||
Accounts Payable | $ | $ | ||||||
Due to Officers – Related Party (Note 3) | ||||||||
Accrued Interest | ||||||||
Accrued Payroll | ||||||||
Accrued Liabilities | ||||||||
Share Payable | ||||||||
Other Current Liabilities | ||||||||
Notes Payable (Note 6) | ||||||||
Convertible Debt – December 2024, Net of Discount | ||||||||
Convertible Debt, Net of Discount and Issuance Costs | ||||||||
Stock-Based Compensation Liability | ||||||||
Total Current Liabilities | ||||||||
Total Liabilities | ||||||||
Commitments and Contingencies (Note 4) | ||||||||
Stockholders’ Equity (Deficit) | ||||||||
Series A Preferred Stock, $ | ||||||||
Preferred Stock, $ | ||||||||
Common Stock, $ | ||||||||
Stock Subscription Receivable | ( | ) | ( | ) | ||||
Additional Paid In Capital | ||||||||
Accumulated Deficit | ( | ) | ( | ) | ||||
Accumulated Other Comprehensive Loss | ( | ) | ( | ) | ||||
Total Stockholders’ Equity (Deficit) | ( | ) | ||||||
Total Liabilities and Stockholders’ Equity (Deficit) | $ | $ |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
2
BRAG HOUSE HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(UNAUDITED)
For the Three Months Ended | ||||||||
March 31, 2025 | March 31, 2024 | |||||||
Revenues: | ||||||||
Tournament Revenues | $ | $ | ||||||
Live-streaming Services | ||||||||
Total Revenues | $ | $ | ||||||
Cost of Sales | ||||||||
Cost of Sales | $ | $ | ||||||
Total Cost of Sales | $ | $ | ||||||
Gross Profit (Loss) | $ | $ | ( | ) | ||||
Operating Expenses: | ||||||||
Advertising and Marketing | $ | $ | ||||||
Legal and Professional | ||||||||
Selling, General and Administrative | ||||||||
Software Expense | ||||||||
Software Development | ||||||||
Stock-Based Compensation - Restricted Stock Agreements | ||||||||
Rent Expense | ||||||||
Total Operating Expenses | $ | $ | ||||||
Other (Income) Expense: | ||||||||
Interest Expense and Amortization of Debt Discount | $ | $ | ||||||
Other Income | ( | ) | ( | ) | ||||
Other Expenses | ||||||||
Foreign Currency (Gain) Loss | ( | ) | ||||||
Total Other Expense, Net | $ | $ | ||||||
Loss from Continuing Operations Before Income Taxes | $ | ( | ) | $ | ( | ) | ||
Provision for Income Taxes | $ | $ | ||||||
Net Loss | $ | ( | ) | $ | ( | ) | ||
Total Comprehensive Loss | $ | ( | ) | $ | ( | ) | ||
Net Loss per Common Share – Basic and Diluted | $ | ( | ) | $ | ( | ) | ||
Weighted Average Shares Outstanding – Basic and Diluted |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
BRAG HOUSE HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT) (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2025 AND 2024
Series A Preferred Stock | Preferred Stock | Common Stock | ||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||
Balance on December 31, 2024 | $ | $ | $ | |||||||||||||||||||||
Stock-Based Compensation - Restricted Stock Agreements | — | — | — | |||||||||||||||||||||
Issuance of Common Stock | ||||||||||||||||||||||||
Offering Costs | — | — | — | |||||||||||||||||||||
Conversion of Preferred Stock to Common Stock | ( | ) | ( | ) | ||||||||||||||||||||
Conversion of Convertible Debt and Accrued Interest (Note 6) | ||||||||||||||||||||||||
Issuance of Common Stock in Connection with IPO and Over-allotment, Net of $1,176,800 of Offering Costs | ||||||||||||||||||||||||
Underwriter Warrants | — | — | — | |||||||||||||||||||||
Issuance of Common Stock for Services | — | — | — | |||||||||||||||||||||
Net Loss | — | — | — | |||||||||||||||||||||
Balance on March 31, 2025 | $ | $ | $ |
Series A Preferred Stock | Preferred Stock | Common Stock | ||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||
Balance on December 31, 2023 | $ | $ | $ | |||||||||||||||||||||
Stock-Based Compensation - Restricted Stock Agreements | — | — | — | |||||||||||||||||||||
Net Loss | — | — | — | |||||||||||||||||||||
Balance on March 31, 2024 | $ | $ | $ |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
BRAG HOUSE HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT) (UNAUDITED) — (CONTINUED)
FOR THE THREE MONTHS ENDED MARCH 31, 2025 AND 2024
Subscription Receivable | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive Loss | Total Stockholders’ Equity (Deficit) | ||||||||||||||||
Balance on December 31, 2024 | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||
Stock-Based Compensation - Restricted Stock Agreements | ||||||||||||||||||||
Issuance of Common Stock | ||||||||||||||||||||
Offering Costs | ( | ) | ( | ) | ||||||||||||||||
Conversion of Preferred Stock to Common Stock | ||||||||||||||||||||
Conversion of Convertible Debt and Accrued Interest (Note 6) | ||||||||||||||||||||
Issuance of Common Stock in Connection with IPO and Over-allotment, Net of $ | ||||||||||||||||||||
Underwriter Warrants | ||||||||||||||||||||
Issuance of Common Stock for Services | ||||||||||||||||||||
Net Loss | ( | ) | ( | ) | ||||||||||||||||
Balance on March 31, 2025 | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ |
Subscription Receivable | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive Loss | Total Stockholders’ Deficit | ||||||||||||||||
Balance on December 31, 2023 | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||
Stock-Based Compensation - Restricted Stock Agreements | ||||||||||||||||||||
Net Loss | ( | ) | ( | ) | ||||||||||||||||
Balance on March 31, 2024 | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5
BRAG HOUSE HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2025 AND 2024
For the Three Months Ended | ||||||||
March 31, 2025 | March 31, 2024 | |||||||
OPERATING ACTIVITIES | ||||||||
Net Loss | $ | ( | ) | $ | ( | ) | ||
Adjustments to reconcile net loss to net cash (used in) provided by operating activities: | ||||||||
Stock-Based Compensation - Restricted Stock Agreements | ||||||||
Amortization of Debt Discount | ||||||||
Loan Extension Fees | ||||||||
Change in Fair Value of Stock-Based Compensation Liability - Software Expense | ||||||||
Issuance of Common Stock for Services - Software Expense | ||||||||
Foreign Currency Gain (Loss) | ( | ) | ||||||
Changes in operating assets and liabilities: | ||||||||
Prepaid Expenses and Other Current Assets | ( | ) | ||||||
Other Receivables | ( | ) | ||||||
Accounts Payable | ( | ) | ||||||
Related Party Payable | ( | ) | ||||||
Accrued Payroll | ( | ) | ||||||
Accrued Liabilities | ( | ) | ||||||
Accrued Interest | ( | ) | ||||||
Share Payable | ||||||||
Other Current Liabilities | ( | ) | ||||||
Net Cash Flows (Used In) Provided By Operating Activities | $ | ( | ) | $ | ||||
FINANCING ACTIVITIES | ||||||||
Proceeds from Notes Payable | $ | $ | ||||||
Repayment of Notes Payable | ( | ) | ||||||
Repayment of Convertible Debt - December 2024, Net | ( | ) | ||||||
Proceeds from Convertible Debt - December 2024, Net | ||||||||
Proceeds from the Sale of Common Stock in IPO | ||||||||
Offering Costs Paid and Netted with IPO Proceeds | ( | ) | ||||||
Offering Costs Paid | ( | ) | ||||||
Net Cash Flows Provided By Financing Activities | $ | $ | ||||||
Net change in cash | $ | $ | ||||||
Cash at the beginning of the period | ||||||||
Cash at the end of the period | $ | $ | ||||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | ||||||||
Cash paid for interest | $ | $ | ||||||
NONCASH INVESTING AND FINANCING ACTIVITIES | ||||||||
Conversion of Convertible Debt and Accrued Interest into Common Stock | $ | $ | ||||||
Issuance of Underwriter Warrants included as Offering Costs | ||||||||
Change in Stock-Based Compensation Liability Capitalized to Implementation Costs | ||||||||
Prepaid Expenses Reclassified to Issuance of Common Stock for Services - Software Expense | ||||||||
Prepaid Expenses Reclassified to Capitalized Implementation Costs | ||||||||
Issuance of Common Stock for Capitalized Implementation Costs | ||||||||
Deferred Offering Costs at December 31, 2024 Reclassified to Offering Costs | ||||||||
Other Current Assets Reclassified to Other Receivables | ||||||||
Other Current Assets Reclassified to Prepaid Expenses | ||||||||
Reversal of Deferred Offering Costs Accrued at December 31, 2024 | ||||||||
Offering costs in Accounts Payable | ||||||||
Conversion of Series A Preferred Stock to Common Stock |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6
BRAG HOUSE HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 — NATURE OF THE ORGANIZATION AND BUSINESS
Corporate History
Brag House Holdings, Inc. (“Brag House” or “BHHI” or the “Company”) was formed as a Delaware corporation on December 3, 2021. The Company’s principal executive offices are located at 45 Park Street, Montclair, NJ 07042.
Brag House, Inc. (“BHI”), the Company’s wholly owned indirect subsidiary, was formed as a Delaware corporation in February 2018. Their principal offices are located at 45 Park Street, Montclair, NJ 07042.
On June 11, 2021, Brag House, Ltd. (“BHL”) was registered in the United Kingdom. Their principal offices are located at 7 – 9 Swallow Street, London W1B 4DE, United Kingdom.
On August 16, 2021, BHL acquired all of the
Following the UK Reorganization, the board of directors of BHL determined that it was in the best interests of BHL and its shareholders that an initial public offering (“IPO”) in the United States and concurrent listing on Nasdaq be pursued. To effect that proposed IPO and listing on Nasdaq, in December 2021, the Company was formed. In connection with this IPO, prior to the effectiveness of the registration statement, on February 8, 2022, the Company approved a reorganization, in which the shareholders of BHL would exchange their ordinary shares and preference shares of BHL for a proportionate number of common and preferred shares in the Company on a 21 to 1 basis (“U.S. Reorganization”). Immediately following the U.S. Reorganization, BHL became the wholly-owned subsidiary of the Company, and BHI became the indirect wholly-owned subsidiary of the Company. Management anticipates that BHL will be wound down and dissolved as soon as reasonably practicable following the consummation of the IPO.
On June 11, 2024, the Company’s board of
directors approved, and on June 13, 2024, the Company’s stockholders approved the original reverse stock split (“Original
Reverse Stock Split”). On June 14, 2024, the Company filed the Second Certificate of Amendment to its Certificate of Incorporation
to effect the Original Reverse Stock Split, such that every holder of Common Stock and Series A Preferred Stock of the Company received
On February 14, 2025, the Company received its
notice of effectiveness from the U.S. Securities and Exchange Commission (“SEC”) and became a public company. On March 5,
2025, the Company entered into a material definitive agreement in the form of an underwriting agreement with Kingswood Capital Partners,
LLC (“Kingswood”) as representative of the underwriters named therein, for the offer and sale of
On March 6, 2025, the Company’s shares began trading on Nasdaq under the symbol “TBH” and on March 7, 2025, the Company filed its prospectus with the SEC and completed its IPO.
7
BRAG HOUSE HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 — NATURE OF THE ORGANIZATION AND BUSINESS (cont.)
Pursuant to the underwriting agreement, as partial
compensation for their services, the Company issued to the underwriters on the closing date of the IPO (the “Closing Date”),
warrants (the “Underwriter Warrants”) to purchase an aggregate of
On March 10, 2025, Kingswood, as representative
of the underwriters, exercised in full its option to purchase an additional
Nature of the Business
Brag House is a vertically integrated social network for college esports. The Company’s mission is to create a community which empowers gamers, streamers, and fans to interact with one another. The Company’s platform, which focuses on building a centralized esports experience for non-professional college gamers and their fans, achieves this by allowing college students to compete against one another, support their favorite gamers and teams, and win prizes.
Liquidity and Going Concern
The accompanying condensed consolidated financial
statements have been prepared on the basis that the Company will continue as a going concern, which contemplates realization of assets
and the satisfaction of liabilities in the normal course of business. As of March 31, 2025, the Company had an accumulated deficit of
$
The Company also secured a strategic partnership for tournament and promotional events in 2025 with Learfield Communications, LLC, formerly Learfield IMG College, a billion dollar media company that holds the media rights to hundreds of colleges in the US, including collegiate properties such as the NCAA and its 89 championships and NCAA Football. The partnership’s first activation was held online on May 17, 2025 for students and alumni of the University of Florida, one of Learfield’s media rights properties. The Company believes this partnership positions it to leverage Learfield’s college network to generate sponsorship revenue and brand engagement opportunities, while giving the Company access to extensive datasets from diverse college campuses as the Company evolves into a scalable data insight revenue model, where the Company aims to enable brands to gain data insights to create enhanced, personalized and effective marketing campaigns. The Company further believes this partnership will contribute directly to its model through shared sponsorship earnings, while validating its marketing and data strategy for reaching college-aged Gen Z gamers. Through this, the Company plans to scale across Learfield’s properties, expanding brand partnerships in the gaming and esports spaces.
8
BRAG HOUSE HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 — NATURE OF THE ORGANIZATION AND BUSINESS (cont.)
Management believes this is a strong indicator of continued growth in the coming years for tournament revenue. Until revenue from such tournaments provides sufficient and steady cash flow, management intends to raise funds through equity and debt offerings, and believes that the actions presently being taken to further implement its business plan will enable the Company to continue as a going concern. While the Company believes in its ability to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan and raise additional funds as described.
Although no assurances can be given as to the Company’s ability to deliver on its revenue plans or that unforeseen expenses will not arise, management believes that the revenue to be generated from operations, together with equity and debt financing, will provide the necessary funding for the Company to continue as a going concern. However, the Company has earned minimal revenue through the quarter ended March 31, 2025, and management cannot guarantee that any potential debt or equity financing will be available or, if available, will be available on favorable terms. As such, these matters raise substantial doubt about the Company’s ability to continue as a going concern for the next twelve months from the issuance of the accompanying condensed consolidated financial statements. If adequate funds are not available on acceptable terms, or at all, the Company will need to curtail operations or cease operations completely.
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a)(19) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a non binding advisory vote on executive compensation and approval of any golden parachute payments not previously approved. Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s condensed consolidated financial statements with another public company, which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period, difficult or impossible because of the potential differences in accounting standards used.
9
BRAG HOUSE HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and applicable rules and regulations of the SEC regarding interim financial reporting. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting of normal recurring adjustments) and disclosures necessary for a fair statement of the Company’s financial position as of March 31, 2025 and the results of its operations for the three months then ended. The results of operations for the three months ended March 31, 2025 are not necessarily indicative of the results to be expected for the year ending December 31, 2025 or for any other interim period or for any other future year. These interim unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Company’s Annual Report within its Form 10-K filing. Interim disclosures generally do not repeat those in the annual statements. The Company and its subsidiaries operate as a single operating segment.
Principles of Consolidation
The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets, liabilities, equity-based transactions and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
The Company bases its estimates and assumptions on an ongoing basis using historical experience and other factors, known or expected trends and various other assumptions that it believes to be reasonable. As future events and their effects cannot be determined with precision, actual results could differ from these estimates, which may cause the Company’s future results to be affected.
Cash and Cash Equivalents
The Company considers all highly liquid investments
with maturities of three months or less at the time of purchase to be cash equivalents. As of March 31, 2025, the Company had $
Allowance for Credit Losses
Trade accounts receivable are stated net of an allowance for credit losses. The Company estimates the credit losses using historical information, current economic conditions and reasonable and supportable forecast information for a reasonable period of time. The Company starts by determining expected credit losses by using historical loss information based on the aging of receivables. An analysis of the current economic conditions along with forecast information is then used to determine any adjustment to the historical loss rates to determine the appropriate rates for future losses and the Company’s current expected credit losses for trade receivables. As of March 31, 2025 and December 31, 2024, there were no accounts receivable balances. As such, an allowance was not necessary.
10
BRAG HOUSE HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Offering Costs
Offering costs represent legal, accounting and
other direct costs related to the IPO, which closed on March 7, 2025. Prior to the close of the IPO, these costs were recognized as deferred
offering costs. These offering costs were reclassified to additional paid-in capital from deferred offering costs. These amounts are shown,
along with underwriters’ fees paid, net against IPO proceeds received. The Company recorded $
Further, during the three months ended March 31,
2025, additional offering costs of $
Subscription Receivable
The Company records share issuances at the effective date. If the subscription is not funded upon issuance, the Company records a subscription receivable as an asset on a balance sheet. When subscription receivables are not received prior to the issuance of financial statements at a reporting date in satisfaction of the requirements under Financial Accounting Standards Board (the “FASB”) Accounting Standards Codification (“ASC”) 505-10-45-2, “Equity” — Other Presentation Matters, the subscription receivable is reclassified as a contra account to stockholders’ equity (deficit) on the condensed consolidated balance sheet.
Employee Retention Tax Credit
The Coronavirus Aid, Relief, and Economic Security
Act (the “CARES Act”) provided an employee retention credit which was a refundable tax credit against certain employment taxes.
The Consolidated Appropriations Act (the “Appropriations Act”) extended and expanded the availability of the employee retention
credit through December 31, 2021. The Appropriations Act amended the employee retention credit to be equal to
The Company has a tax credit receivable of $
Concentration of Credit Risk
Financial
instruments that potentially subject the Company to concentrations of credit risk consist of cash and cash equivalents in financial institutions,
which, at times, may exceed the Federal Depository Insurance Coverage of $
Advertising and Marketing
The Company expenses advertising and marketing
costs as they are incurred. Advertising and marketing expenses were $
11
BRAG HOUSE HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Fair Value Measurements
As defined in ASC 820, “Fair Value Measurements and Disclosures”, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. ASC 820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). This fair value measurement framework applies at both initial and subsequent measurement.
Level 1: | Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. | ||
Level 2: | Pricing inputs are other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reported date. Level 2 includes those financial instruments that are valued using models or other valuation methodologies. | ||
Level 3: | Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value. The significant unobservable inputs used in the fair value measurement for nonrecurring fair value measurements of long-lived assets include pricing models, discounted cash flow methodologies and similar techniques. |
The carrying value of the Company’s financial instruments: cash and cash equivalents, other receivables, accounts payable and accrued liabilities, and borrowings, approximate their fair values because of the short-term nature of these financial instruments.
The Company measures its stock-based compensation liability at fair value on a recurring basis. Please refer to Note 9 for a discussion on fair value measurements.
Equity Awards with a Guaranteed Minimum-Value Cash Settlement - Technology Purchase Agreements
The
Company evaluates its stock-based compensation arrangements within the scope of ASC 718, “Compensation - Stock Compensation”.
The Company has issued an equity award with a guaranteed minimum-value cash settlement in accordance with the terms that were agreed upon
by the Company in the Master Services Agreement (“MSA”) with Artemis Ave LLC (“Artemis”) and the Software as a
Service Agreement (the “SaaS” Agreement) with EVEMeta, LLC (“EVEMeta”). Subsection ASC 718-10-20 defines these
equity awards as combination awards. Under this classification, the share grant is accounted for as an equity-classified award measured
at grant-date fair value, and the cash-settled written put option is liability classified and marked to fair value at each reporting period.
Compensation costs for the share grant is measured and fixed on the date of grant and recognized over the vesting period, which is consistent
with the delivery of goods and services. Compensation costs associated with the cash-settled written put option should be recognized over
the vesting period based on the remeasured fair value at each reporting period, which is consistent with the delivery of goods and services
from the vendor, until settlement. To value the cash-settled written put option, the Company remeasures the fair market value of the written
put option via an appropriate option pricing model in accordance with ASC 718, and records the appropriate liability as of each reporting
period with a corresponding adjustment to software expense. The Company determines the fair value of the liability using a Monte Carlo
simulation model at each reporting period. As of March 31, 2025, the fair value measurement of the cash-settled written put option for
services provided thus far resulted in a stock-based compensation liability of $
12
BRAG HOUSE HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Cloud Computing Arrangements - Technology Purchase Agreements
The Company applies the guidance under ASC 350-40,
“Intangibles – Goodwill and Other-Internal-Use Software”, when evaluating the applicable accounting treatment
for the purchase of technological products and services.
The Company capitalizes implementation costs associated
with its CCA consistent with costs capitalized for internal-use software. The stock-based payments provided in advance for implementation
costs are recorded as capitalized implementation costs as the services are rendered. Capitalized implementation costs related to the CCA
are included on the condensed consolidated balance sheets. The CCA implementation costs are amortized over the term of the related hosting
agreement, including renewal periods that are reasonably certain to be exercised. Amortization will begin only when the software is placed
into use and the amortization expense will be recorded as an operating expense. As of December 31, 2024, $
The
Convertible Debt
The Company accounts for convertible debt instruments in accordance with the provisions of ASC 470-20, “Debt with Conversion and Other Options”. Under this guidance, convertible debt instruments that do not meet the criteria for separation of embedded conversion features from the host contract are accounted for as a single liability. If a convertible debt instrument contains embedded features (e.g., conversion options, redemption rights) that require separate accounting under ASC 815, the Company evaluates such features and bifurcates them as derivative liabilities when applicable. Issuance costs related to convertible debt are presented as a direct deduction from the carrying amount of the liability and are amortized to interest expense over the term of the debt using the effective interest method.
Shares Payable
The Company has incurred obligations that are
payable in shares of the Company’s equity. If shares are not issued to satisfy those obligations, a short-term liability is recognized
as a share payable. The Company has a share payable balance of $
13
BRAG HOUSE HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Revenue Recognition
The Company recognizes revenue from the sale of products and services in accordance with ASC 606, “Revenue Recognition” following the five step procedure:
Step 1: Identify the contract(s) with customers
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to performance obligations
Step 5: Recognize revenue when or as performance obligations are satisfied
The Company generates revenues mainly from advertising, sponsorship and league tournaments. An insignificant amount of revenue is generated through the operation of its live streaming platform using a revenue model whereby gamers and creators can get free access to certain live streaming of amateur tournaments, and gamers and creators pay fees or subscriptions to compete in league competitions. Streaming revenue amounts are recognized as live-streaming services on the condensed consolidated statements of operations and comprehensive loss.
Foreign Currency Translation
For the Company’s non-U.S. operations where the functional currency is the local currency, the Company translates assets and liabilities at exchange rates in effect at the balance sheet date and record translation adjustments in stockholders’ equity. The Company translates income statement amounts at average rates for the period. Transaction gains and losses are recorded in other (income) expense, net in the Condensed Consolidated Statement of Operations and Comprehensive Loss.
Comprehensive Loss
The Company reports comprehensive loss and its components in its condensed consolidated financial statements. Comprehensive loss consists of net loss and foreign currency translation adjustments, affecting stockholders’ equity (deficit) that, under U.S, GAAP, is excluded from net loss.
Net Loss per Common Share
The computation of earnings per share (“EPS”) includes basic and diluted EPS in accordance with ASC 260, “Earnings per Share”. Basic EPS is measured as the income (loss) available to common stockholders divided by the weighted average common shares outstanding for the period. Diluted income (loss) per share reflects the potential dilution, using the if-converted and treasury stock methods, that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the income (loss) of the Company as if they had been converted at the beginning of the periods presented, or issuance date, if later. In computing diluted income (loss) per share, the treasury stock method assumes that outstanding options and warrants have been exercised, and the proceeds have been used to purchase common stock at the average market price during the period. Options and warrants may have a dilutive effect under the treasury stock method only when the average market price of the common stock during the period exceeds the exercise price of the options and warrants. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS. All outstanding convertible promissory notes are considered common stock at the beginning of the period or at the time of issuance, if later, pursuant to the if-converted method. Since the effect of common stock equivalents is anti-dilutive with respect to losses, the shares issuable upon conversion have been excluded from the Company’s computation of net loss per common share for the three months ended March 31, 2025 and 2024.
14
BRAG HOUSE HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
The following table summarizes the securities
that are excluded from the diluted per share calculation because the effect of including these potential shares is anti-dilutive due to
the Company’s net loss.
As of March 31, | ||||||||
2025 | 2024 | |||||||
Convertible Debt | ||||||||
Unvested Restricted Stock | ||||||||
Shares Payable | ||||||||
Convertible Preferred Stock | ||||||||
Warrants | ||||||||
Total |
As of March 31, 2025, no dividends have been declared since inception and all classes of BHHI’s stock do not have cumulative dividend features. As such, the Company did not include any adjustment to the net loss for dividends. Ultimately, there was no adjustment needed to determine dilutive loss per share and only basic loss per share was calculated.
The table below represents the calculation for both basic and diluted net loss per share (as adjusted for the Reverse Stock Split):
Three Months Ended March 31, | ||||||||
2025 | 2024 | |||||||
Net loss | $ | ( | ) | $ | ( | ) | ||
Weighted-average shares outstanding – Basic and Diluted | ||||||||
Loss per share – Basic and Diluted | $ | ( | ) | $ | ( | ) |
Income Taxes
The Company follows the asset and liability method of accounting for income taxes under ASC 740, Income Taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The Company’s temporary differences result primarily from capitalization of certain qualifying research and development expenses, stock-based compensation, and net operating loss carryovers. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recorded for deferred tax assets if it is more likely than not that some portion or all of the deferred tax assets will not be realized.
The Company recognizes the effect of income tax
positions only if those positions are more likely than not to be sustained. Recognized income tax positions are measured at the largest
amount that is greater than
The Company records interest related to unrecognized tax benefits in interest expense and penalties in selling, general and administrative expenses.
15
BRAG HOUSE HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
The
Company, with stockholder’s consent, elected to be taxed as an “S-Corporation” during the years prior to 2021 under
the provisions of the Internal Revenue Code under Section 1362(a) and comparable state income tax law. As an S-Corporation, the Company
is generally not subject to corporate income taxes and the Company’s net income or loss is reported on the individual tax return
of the stockholders of the Company. As a result of the UK Reorganization, the Company was no longer eligible to elect an S-Corporation
status for tax purposes and was subject to tax filings as a C-Corporation for the years ending 2021 through 2023. The Company is in the
process of filing all necessary Federal and State tax returns as a C-Corporation for the years ending 2021 through 2024, and has accrued
$
The Company identified its federal, New York state, and United Kingdom tax returns as its “major” tax jurisdictions. The period for income tax returns that are subject to examination for the United Kingdom jurisdiction is 2021. All other periods for income tax returns are subject to examination for the federal and New York state jurisdictions. The Company believes its income tax filing positions and deductions will be sustained on audit, and management does not anticipate any adjustments that would result in a material change to its financial position. Therefore, no liabilities for uncertain tax positions have been recorded.
At March 31, 2025, the Company had approximately
$
The Company recorded a valuation allowance in
the full amount of its net deferred tax assets since realization of such tax benefits has been determined by the Company’s management
to be less likely than not. The valuation allowance increased $
The Company’s effective tax rate is
Stock-Based Compensation - Restricted Stock Agreements
The Company measures and records the expense related
to stock-based payment awards based on the fair value of those awards as determined on the date of grant. The Company recognizes stock-based
compensation expense over the requisite service period of the grant, generally equal to the vesting period, and uses the straight-line
method to recognize stock-based compensation. For stock options with performance conditions, the Company records compensation expense
when it is deemed probable that the performance condition will be met. Companies typically use the Black-Scholes-Merton (“Black-Scholes”)
option-pricing model to determine the fair value of stock awards. The Black-Scholes option-pricing model requires the use of highly subjective
and complex assumptions, which determine the fair value of stock- based awards, including the option’s expected term and the price
volatility of the underlying stock. No stock options have been issued by the Company through March 31, 2025. The Company issued
16
BRAG HOUSE HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Recently Issued but not yet Adopted Accounting Pronouncements
On December 14, 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740). This ASU requires the use of consistent categories and greater disaggregation in tax rate reconciliations and income taxes paid disclosures. These amendments are effective for fiscal years beginning after December 15, 2024 and for interim periods in fiscal years beginning after December 31, 2025. These income tax disclosure requirements can be applied either prospectively or retrospectively to all periods presented in the financial statements. Management is currently evaluating the impact of adopting this standard, and do not expect it to have a material impact on the financial statements.
In March 2024, the SEC issued its final climate disclosure rules, which require the disclosure of climate-related information in annual reports and registration statements. The rules require disclosure in the audited financial statements of certain effects of severe weather events and other natural conditions above certain financial thresholds, as well as amounts related to carbon offsets and renewable energy credits or certificates, if material. Under the rules as originally issued, disclosure requirements begin phasing in for fiscal years beginning on or after January 1, 2027. However, on April 4, 2024, the SEC determined to voluntarily stay the final rules pending certain legal challenges. The Company is currently evaluating the impact of new rules and continues to monitor the status of the related legal challenges.
In November 2024, the FASB issued ASU 2024-03, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses.” The standard requires that public business entities disclose additional information about specific expense categories in the notes to financial statements for interim and annual reporting periods. The standard will become effective for the Company for its fiscal year 2027 annual financial statements and interim financial statements thereafter and may be applied prospectively to periods after the adoption date or retrospectively for all prior periods presented in the financial statements, with early adoption permitted. The Company plans to adopt the standard beginning with the fiscal year 2027 annual financial statements, and management is currently evaluating the impact this standard will have on the disclosures included in the notes to the financial statements.
NOTE 3 — RELATED PARTY TRANSACTIONS
The Company follows ASC 850, “Related Party Disclosures,” for the identification of related parties and disclosure of related party transactions.
As of March 31, 2025 and December 31, 2024, the
Company had payables to the Company’s co-founder and Chief Executive Officer, the Company’s co-founder and Chief Operating
Officer and an employee, for reimbursable expenses totaling $
17
BRAG HOUSE HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 4 — COMMITMENTS AND CONTINGENCIES
The Company evaluates its business transactions and agreements during the course of business to identify whether any contingencies or commitments exist which would give rise to the recognition of a loss or liability. The Company is currently not involved with or knows of any pending or threatening litigation against the Company or any of its officers. Further, the Company is currently complying with all relevant laws and regulations and does not have any long-term commitments or guarantees.
Marketing Agreement
In March of 2024, the Company entered into a marketing
agreement with Outside the Box Capital, Inc. (“OTB Capital”) for marketing services to be provided for the six-month period
from May 1, 2024 to October 31, 2024. Compensation for these services will be $
Broncos Sponsorship Agreement
During 2023, the Company entered into a sponsorship
agreement with Stadium Management Company and the Denver Broncos. This resulted in marketing expenses totaling $
Technology Purchase Agreements
On November 13, 2024 (the “Artemis Effective
Date”), the Company entered into a MSA with Artemis, a skilled technology company, whereby Artemis agreed to develop a proprietary
machine learning solution for the Company’s platform (the “Software”) and provide certain services. In exchange, the
Company agreed to issue
18
BRAG HOUSE HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 4 — COMMITMENTS AND CONTINGENCIES (cont.)
The issuances of the Stock Consideration are accounted for as a combination award in accordance with the accounting provisions under ASC 718, “Compensation - Stock Compensation” and ASC 350-40, “Intangibles – Goodwill and Other-Internal-Use Software” as noted in Note 2, regarding the technology purchase agreements.
The Stock Consideration is classified as a combination of equity awards (referred to herein as Issuance of Common Stock for Services) or liability awards (referred to herein as Stock-Based Compensation Liability) in accordance with GAAP. The fair value of an equity-classified award is determined at the grant date and is either recognized as an expense to software expense, an operating expense, on a straight-line basis over the service period, or is capitalized as an implementation cost and amortized to software expense over the useful life of the cloud computing arrangement once the software is placed in use. Whether the amount is expensed or capitalized is based on the respective statement of work in each agreement, the value attributed to each and the realization of those services. The fair value of a liability-classified award is determined on a quarterly basis beginning at the grant date until final vesting. Changes in the fair value of liability-classified awards are either recorded to software expense, an operating expense, on a straight-line basis over the service period, or capitalized as an implementation cost and amortized to software expense over the useful life of the cloud computing arrangement once the software is placed in use. Changes in the fair value of liability-classified awards do not result in an impact to the Company’s stockholders’ equity balance.
As of December 31, 2024, the Company only recognized
the par value of the shares that were issued and has recorded $
The Company recognized the following amounts in total non-employee stock-based compensation costs in relation to the Stock Consideration issued for the technology purchase agreements for the three months ended March 31, 2025 and 2024:
Three Months Ended March 31, | ||||||||
2025 | 2024 | |||||||
Stock Consideration - Total Expensed | $ | $ | ||||||
Stock Consideration - Total Capitalized | $ | $ |
Equity-Classified Awards
The Company recognized the following amounts in non-employee equity-classified stock-based compensation costs for the three months ended March 31, 2025 and 2024:
Three Months Ended March 31, | ||||||||
2025 | 2024 | |||||||
Equity-Classified Awards - Expensed | $ | $ | ||||||
Equity-Classified Awards - Capitalized | $ | $ |
As
of March 31, 2025, there was $
Liability-Classified Awards
The Company recognized the following amounts in non-employee liability-classified stock-based compensation costs for the three months ended March 31, 2025 and 2024:
Three Months Ended March 31, | ||||||||
2025 | 2024 | |||||||
Liability-Classified Awards - Expensed | $ | $ | ||||||
Liability-Classified Awards - Capitalized | $ | $ |
19
BRAG HOUSE HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 4 — COMMITMENTS AND CONTINGENCIES (cont.)
Further,
as of March 31, 2025, the Company completed a fair value measurement for the cash settlement provision of its agreements with
Artemis and EVEMeta, the liability classified award, using a Monte Carlo simulation model and determined a total fair value
measurement of $
As
of March 31, 2025, there was $
On
May 12, 2025, the Company executed an amendment to the MSA with Artemis. The amendment eliminated the guarantee of the sale price delta
making the Company no longer subject to guaranteeing a minimum return of $
On
the same day, the Company executed an amendment to the SaaS Agreement with EVEMeta. The amendment eliminated the guarantee of the sale
price delta making the Company no longer subject to guaranteeing a minimum return of $
NOTE 5 — STOCKHOLDERS’ EQUITY
Capital Structure
On December 3, 2021, BHHI was incorporated
and the Company authorized
In October of 2024, the Company authorized and
filed an amendment to the Articles of Incorporation to authorize a
20
BRAG HOUSE HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 5 — STOCKHOLDERS’ EQUITY (cont.)
Initial Public Offering
On February 14, 2025, the Company received its
notice of effectiveness from the SEC and became a public company. On March 5, 2025, the Company entered into a material definitive agreement
in the form of an underwriting agreement with Kingswood as representative of the underwriters named therein, for the offer and sale of
On March 6, 2025, the Company’s shares began trading on Nasdaq under the symbol “TBH” and on March 7, 2025, the Company filed its prospectus with the SEC and completed its IPO.
On March 10, 2025, Kingswood, as representative
of the underwriters, exercised in full its option to purchase an additional
Offering costs represent legal, accounting and
other direct costs related to the IPO, which closed on March 7, 2025. Prior to the close of the IPO, these costs were recognized as deferred
offering costs. These direct offering costs were reclassified to additional paid-in capital from deferred offering costs. As of March
31, 2025, a total of $
Underwriter Warrants
Pursuant to the underwriting agreement, the Company
issued to the underwriters on the closing date of the IPO (the “Closing Date”), warrants (the “Underwriter Warrants”)
to purchase an aggregate of
The underwriter warrants are classified as equity instruments in accordance with ASC 815-40, “Derivatives and Hedging – Contracts in Entity’s Own Equity”. The warrants are considered indexed to the Company’s own stock and meet the equity classification criteria under GAAP.
The fair value of the underwriter warrants was estimated using the Black-Scholes option pricing model, a Level 3 measurement, with the following assumptions:
● | Fair Market Value: | $ | |
● | Risk-free interest rate: | ||
● | Expected term: | ||
● | Expected volatility: | ||
● | Dividend yield: |
The estimated fair value of the Underwriter Warrants
on the grant date was approximately $
The Company does not have liability classified warrants.
21
BRAG HOUSE HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 5 — STOCKHOLDERS’ EQUITY (cont.)
Incentive Award Plan
On June 11, 2024, the Company’s Board of Directors adopted the 2024 Omnibus Incentive Plan (“Stock Incentive Plan”), which was approved by its stockholders on June 13, 2024. On December 31, 2024 the Company’s Board of Directors adopted the Stock Incentive Plan, which was approved by the Company’s stockholders on January 30, 2025. The Stock Incentive Plan became effective on February 13, 2025. The Stock Incentive Plan will provide for the grant of incentive stock options, within the meaning of Section 422 of the Internal Revenue Code (“Code”) to the Company’s employees, and for the grant of stock options (including incentive stock options (“ISOs”) and non-qualified stock options (“NSOs”)), SARs, restricted stock, restricted stock units (“RSUs”), and other stock-based and cash-based incentive awards, and other stock-based performance awards to the Company’s employees, directors, and consultants (collectively, “Awards”).
A total of
Shares with respect to which options or SARs are not exercised prior to termination of the option or SAR, shares that are subject to restricted stock units which expire without converting to Common Stock, and shares of restricted stock which are forfeited before the restrictions lapse, shall be available for grants of new Awards under the Stock Incentive Plan. Notwithstanding the foregoing, neither (i) shares accepted by the Company in payment of the exercise price of any option, if permitted under the terms of such option, nor (ii) any shares withheld from a participant, or delivered to the Company in satisfaction of required withholding taxes arising from Awards, nor (iii) the difference between the total number of shares with respect to SAR, shall be available for reissuance under the Stock Incentive Plan.
Awards granted under the Stock Incentive Plan upon the assumption of, or in substitution for, awards authorized or outstanding under a qualifying equity plan maintained by an entity directly or indirectly acquired by the Company will not reduce the shares available for grant under the Stock Incentive Plan. However, any such shares issued in connection with the assumption of, or in substitution for, outstanding options intended to qualify as incentive stock options shall be counted against the aggregate number of shares of Common Stock available for Awards of incentive stock options under the Plan. Subject to applicable stock exchange requirements, available shares under a stockholder-approved plan of an entity directly or indirectly acquired by the Company may be used for Awards under the Stock Incentive Plan and shall not reduce the number of shares of Common Stock available for issuance under the Stock Incentive Plan.
The Compensation Committee of the Company’s Board of Directors will administer the Stock Incentive Plan (the “Administrator”). Each Award will be set forth in a separate agreement and will indicate the type and terms and conditions of the Award.
As of March 31, 2025, no awards have been granted and, thus, no compensation has been incurred in connection with the Stock Incentive Plan. Compensation for grants of awards will be determined in accordance with the Company’s stock-based compensation policy.
In June of 2025, the Company issued stock
options to Executives, an employee and a contractor of the Company with options reserved in the Stock Incentive Plan to purchase a
total of
Stock Issuances
In March of 2024, the Company sold
On
November 13, 2024, the Company entered into a MSA with Artemis to develop software for the Company and provide certain services. In exchange,
the Company agreed to issue
22
BRAG HOUSE HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 5 — STOCKHOLDERS’ EQUITY (cont.)
During the three months ended March 31, 2025, $
Please refer to Note 2 and Note 4 for further detail on these technology purchase agreements.
In December of 2024, the Company sold
In March of 2025, the Company’s Board of
Directors issued their unanimous consent to issue shares in connection with several transactions and the Company issued those shares.
The Company authorized and issued
In March of 2025, the Company authorized and issued
Restricted Stock Agreements
BHI, and therefore the Company, entered into Restricted Stock Purchase Agreements (“RSPA”) with various employees and advisors. The share exchanges that occurred during 2021 and 2022 have an effect on the number of restricted shares that are vested and unvested as of the end of each respective reporting period.
During the year ended December 31, 2020,
BHI also entered into various RSPAs with an employee and
On February 10, 2022, the Company issued
a restricted stock award to its outside legal counsel for
The following is an analysis of BHI and BHHI shares of Common Stock issued as compensation subsequent to the US Reorganization (21:1 exchange rate) and presented entirely as BHHI Common Stock (as adjusted for the Reverse Stock Split):
Nonvested Shares | Weighted Average Fair Value | |||||||
Nonvested shares, December 31, 2024 | $ | |||||||
Granted | $ | |||||||
Vested | ( | ) | $ | |||||
Forfeited | $ | |||||||
Nonvested shares, March 31, 2025 | $ |
23
BRAG HOUSE HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 6 — DEBT
Convertible Debt
The Company issued convertible debt during 2022
through May of 2024 under its initial round of convertible debt. The balance of convertible debt as of December 31, 2024 was $
During 2024, the Company issued convertible debt
in the form of original issue discount convertible promissory notes. These notes provide investors with a
During the three months ended March 31, 2024,
the Company extended the maturity date of the debt and incurred an additional $
In connection with the completion of the IPO on
March 7, 2025, which was deemed a qualifying financing event, the Company converted the total balance due to all holders of the original
issue discount convertible promissory notes. The actual date of conversion of the notes was completed on March 6, 2025. The total amount
that was converted was $
Notes Payable
In June of 2024, the Company received a loan in
the amount of $
24
BRAG HOUSE HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 6 — DEBT (cont.)
During August and September of 2024, the Company
raised $
In November of 2024, the Company raised $
The Company entered into a loan agreement with
one of its shareholders on February 5, 2025 for an amount totaling $
Confidential Release and Final Agreement
From January through March of 2025, the Company
borrowed money from shareholders of the Company to pay for expenses in connection with the IPO. Total proceeds of $
In March of 2025, the Company entered into a confidential
release and final agreement to settle all loan amounts and interest payable to these shareholders with a total payment of $
25
BRAG HOUSE HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 6 — DEBT (cont.)
Convertible Debt - December 2024
In December of 2024, the Company raised $
Loan repayment options included the proceeds of
the Company’s IPO, which occurred on March 6, 2025 and was the earliest of all other options. The lender had the option to convert
the debt into shares of the Company’s common stock but, instead, the repayment of the loan principal of $
In March of 2025, the Company raised an additional
$
26
BRAG HOUSE HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 7 — REVENUE RECOGNITION
The Company recognizes revenue from the sale of products and services in accordance with ASC 606, “Revenue from contracts with Customers”. Under this guidance, the Company contemplates and accounts for the five different steps that are necessary to analyze and account for revenue. Those are the following:
Step 1: Identify the contract(s) with customers
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to performance obligations
Step 5: Recognize revenue when or as performance obligations are satisfied
The Company generates revenues from advertising, sponsorship and league tournaments, and through the operation of its live streaming platform using a revenue model whereby gamers and creators can get free access to certain live streaming of amateur tournaments, and gamers and creators pay fees or subscriptions to compete in league competitions. The Company enters into contracts which may include combinations of products, support and professional services, which may be accounted for as separate performance obligations with differing revenue recognition patterns.
At the end of March 31, 2025 and December 31, 2024, the Company did not have any contract assets or liabilities arising from contracts with customers. This was due to the fact that all service agreements for tournaments were entered into and completed in the same period.
Performance Obligations
The Company earns the majority of its revenue from hosting esports tournaments. The main performance obligation has been organizing and executing these tournaments. There are many different deliverables that are noted or implied in these contracts with customers including but not limited to, planning the event, identifying vendors and locations, completing administrative tasks, managing the event staff, coordinating the tournaments, and executing sponsorship advertisement. Contracts vary in length and extent of deliverables. Some tournaments are single events, while others require the Company to have qualifiers leading up to a championship event. In the case of contracts for longer tournament deliverables, the Company has identified each qualifier and each championship event as performance obligations. For single event contracts, the performance obligation is the execution of the event. These performance obligations are met once the tournaments are hosted and completed.
In the case of revenue earned from the Twitch Affiliate Program, the Company’s performance obligations is to create content and maintain a channel to which (i) customers can subscribe, (ii) ads can be played to viewers by Twitch to generate revenue and (iii) customers can use bits. These performance obligations are monitored by Twitch and the Company receives the revenue from those obligations. On a monthly basis, the Company receives from Twitch its respective portion of the revenue generated by its content. This source of revenue is insignificant and not a main source of income for the Company.
Judgments and Estimates
The Company’s contracts include commitments to transfer tournament hosting and a gaming community platform service that customers can subscribe to. Judgment is required to allocate the transaction price to each performance obligation. The Company has carefully evaluated the timing of when the completion of performance obligations occurs for tournament hosting revenue and has determined that it occurs at the point in time in which the event has been completed. For single event tournaments, the Company determines the transaction price to be the contracted amount and allocates that price to the single performance obligation. In the case of tournaments with multiple events and performance obligations, the Company evaluates the magnitude of the performance obligations to make an estimate of the allocation of the transaction price (total contract amount) to the multiple performance obligations. It is the Company’s judgment that the transaction price for multiple event tournaments is allocated evenly throughout each of the total qualifier and championship match events. The reasoning is because at each event, there is no distinguishable difference in the amount of advertising and/or other obligations that are performed and thus, service that is provided for the customer.
27
BRAG HOUSE HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 7 — REVENUE RECOGNITION (cont.)
In the case of subscription revenue, which is recognized over time, the Company has determined that the revenue is earned ratably over the period of the subscription. Revenue is recognized evenly over the subscription period because there is no discernable difference in the amount of service that is provided in each of the days within the subscription period.
Costs to Obtain or Fulfill a Contract
The new revenue recognition standard requires the capitalization of certain incremental costs of obtaining a contract. These typically are represented by commission expenses. Prior to the Company’s adoption of the new revenue standard, commission expenses would be recognized in the period incurred. Under the new revenue recognition standard, the Company is required to recognize these expenses over the period of benefit associated with these costs. This results in a deferral of certain commission expenses each period. There were no deferred commissions related to contracts that were or were not completed prior to March 31, 2025 and December 31, 2024. The Company recognizes an asset for the incremental costs of obtaining a contract with a customer if the benefit of those costs is expected to be longer than one year.
NOTE 8 — SEGMENT REPORTING
The Company and its subsidiaries manage its business activities on a consolidated basis and operate as a single operating segment (the “gaming” segment). The Company is a vertically integrated social network for college gaming and its mission is to create a community which empowers gamers, streamers, and fans to interact with one another. The Company’s platform, which focuses on building a centralized gaming experience for non-professional college gamers and their fans, achieves this by allowing college students to compete against one another, support their favorite gamers and teams, and win prizes. The accounting policies of the gaming segment are the same as those described in Note 2 – Summary of Significant Accounting Policies of our Annual Report on Form 10-K for the year ended December 31, 2024.
The Company’s CODM is our Chief Executive Officer, Lavell Juan Malloy, II. The CODM uses net loss, as reported on our condensed consolidated statements of operations and comprehensive loss, in evaluating performance of the gaming segment and determining how to allocate resources of the Company as a whole. The CODM does not review assets in evaluating the results of the gaming segment, and therefore, such information is not presented.
The following table provides the operating financial results of our gaming segment:
Three Months Ended March 31, | ||||||||
2025 | 2024 | |||||||
Total Revenue | $ | $ | ||||||
Less: Significant and Other Segment Expenses | ||||||||
Cost of Sales | ||||||||
Advertising and Marketing | ||||||||
Legal and Professional | ||||||||
Selling, General and Administrative | ||||||||
Software Development | ||||||||
Stock-Based Compensation - Restricted Stock Agreements | ||||||||
Rent Expense | ||||||||
Interest Expense and Amortization of Debt Discount | ||||||||
Other Income | ( | ) | ( | ) | ||||
Other Expenses | ||||||||
Foreign Currency Loss | ( | ) | ||||||
Segment Net Loss | $ | ( | ) | $ | ( | ) |
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BRAG HOUSE HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 9 — FAIR VALUE MEASUREMENTS
In accordance with ASC 820, “Fair Value Measurements and Disclosures”, the Company uses various inputs to measure the fair value of its stock-based compensation liability resulting from the cash-settled written put options related to the MSA with Artemis and the SaaS with EVEMeta on a recurring basis to determine the fair value of these liabilities. The Company determines the fair value of the stock-based compensation liability using a Monte Carlo simulation.
Further,
as of March 31, 2025, the Company completed a fair value measurement for the cash settlement provision of its agreements with Artemis
and EVEMeta, the liability classified award, using a Monte Carlo simulation model and determined a total fair value measurement of $
The following table classifies the Company’s liabilities measured at fair value on a recurring basis into the fair value hierarchy as of March 31, 2025 and December 31, 2024:
March 31, 2025 | ||||||||||||||||
Fair Value | Level 1 | Level 2 | Level 3 | |||||||||||||
Stock-Based Compensation Liability | $ | $ | $ | $ |
December 31, 2024 | ||||||||||||||||
Fair Value | Level 1 | Level 2 | Level 3 | |||||||||||||
Stock-Based Compensation Liability | $ | $ | $ | $ |
The following table presents changes in Level 3 liabilities measured at fair value for the three months ended March 31, 2025. Both observable and unobservable inputs were used to determine the fair value of positions that the Company has classified within the Level 3 category.
Stock-Based Compensation Liability | ||||
Balance as of December 31, 2024 | $ | |||
Change in fair value - Capitalized Implementation Costs | ||||
Change in fair value - Software Expense | ||||
Balance as of March 31, 2025 | $ |
The key inputs for the Monte Carlo simulation for the stock-based compensation liability as of March 31, 2025 were as follows:
Stock-based compensation liability key valuation inputs* | ||||
Valuation Date Stock Price | $ | |||
Volatility | % | |||
Risk-Free Rate | % | |||
Credit Risk Adjusted Rate | % | |||
Time period (years) |
* |
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BRAG HOUSE HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 10 — SUBSEQUENT EVENTS
The Company has evaluated events and transactions subsequent to March 31, 2025 through the date these condensed consolidated financial statements were included on Form 10-Q and filed with the SEC. Other than the matters described below, there are no additional subsequent events identified that would require disclosure in the condensed consolidated financial statements.
Convertible Debt
In April of 2025, the Company issued
Notes Payable
In April of 2025, the Company repaid a bridge
loan which was received in November of 2024 with a principal amount of $
On April 2, 2025, a shareholder and the Company
agreed on repayment terms for various loans including accrued interest. The total principal amount includes the loans from February 2025
and an $
Convertible Debt - December 2024
In March of 2025, the Company repaid the total
loan principal of $
In April of 2025, the Company issued
Marketing Agreement
In April of 2025, the first payment of $
Stock Issuances
In April of 2025, the Company issued
Technology Purchase Agreements
On May 12, 2025, the Company executed an amendment
to the MSA with Artemis. The amendment eliminated the guarantee of the sale price delta making the Company no longer subject to guaranteeing
a minimum return of $
On the same day, the Company executed an amendment
to the SaaS Agreement with EVEMeta. The amendment eliminated the guarantee of the sale price delta making the Company no longer subject
to guaranteeing a minimum return of $
Stock Options
In June of 2025, the Company issued stock options
to Executives, an employee and a contractor of the Company with options to purchase a total of
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following management’s discussion and analysis is intended as a review of significant factors affecting our financial condition and results of operations for the periods indicated. The discussion should be read in conjunction with our condensed unaudited financial statements and the notes presented herein included in this Form 10-Q and the audited financial statements and the other information set forth in the 2024 Form 10-K. When used, the words “believe,” “plan,” “intend,” “anticipate,” “target,” “estimate,” “expect” and the like, and/or future tense or conditional constructions (“will,” “may,” “could,” “should,” etc.), or similar expressions, identify certain of these forward-looking statements. In addition to historical information, the following Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve risks and uncertainties including, but not limited to, those set forth below under “Risk Factors” and elsewhere herein, and those identified under Part I, Item 1A of our 2024 Form 10-K. Our actual results could differ significantly from those anticipated in these forward-looking statements as a result of certain factors discussed herein and any other periodic reports filed and to be filed with the Securities and Exchange Commission.
Business Overview
Brag House is a mission-driven organization that utilizes a diversified business strategy to operate a vertically integrated platform designed for casual college gamers to drive community-driven gaming experiences anchored in the college sports culture, while creating authentic pathway for brands to connect with our Gen Z audience.
Brag House is a Delaware corporation formed in December 2021. Our founders developed the idea for the Brag House platform in 2018, when our Chief Executive Officer Lavell Juan Malloy, II and his co-founder, Chief Operating Officer Daniel Leibovich, recognized a need in the gaming industry for an esports platform focused specifically on the casual college gamer, and formed our indirect wholly-owned subsidiary, BHI. At that time, our co-founders believed that a significant amount of industry resources were focused predominantly on competitive and professional gamers, much to the detriment of casual gamers, generally, and casual college gamers, specifically. In the years ensuing, we have maintained our focus on the casual college gaming segment and believe we are developing a first-of-its-kind digital platform for casual college gamers to compete, support their team, banter in a safe environment and win prizes. Our vertically integrated approach combines gamer recruitment, facilitation of community engagement and content creation, live-stream production and tournament host activities.
We believe we are creating a new sports medium for Gen Z to engage through gaming by merging gameplay with school spirit in Brag House and student-led activations and tournaments tied to college rivalries with Brag House features and capabilities such as our Bragging Functionality, Loyalty Tokens reward system, and brand-sponsored content and prizes. The growth of our platform since our inception is encouraging, and we believe we are strongly positioned to capitalize on a large portion of the available gaming market. We experienced strong community growth since we launched through March 31, 2025, reaching nearly 1,400,000 video views of our Brag House content on video platforms including X (formerly known as Twitter), TikTok, Meta, Twitch and YouTube, which represent a 148% increase in views year-over-year from 2020 to 2024. We have also generated nearly 8 million impressions and video views since inception, which represents approximately a 57% increase year-over-year from 2020 to 2024. Additionally, since 2022, Brag House spectators who viewed live streams remained on the platform for 19 minutes per stream across over 290,000 live views, which represents nearly a 1.75X increase compared to the industry benchmark of 11 minutes.
We are focused on creating an organic and inclusive community which facilitates personalized experiences. We believe our experiential framework offers a more authentic and differentiated channel for advertisers to utilize, making the otherwise elusive demographic of gamers and streamers accessible at scale to ourselves and our partners. We do this by offering brand sponsors and advertisers an exclusive marketing channel to reach elusive Gen Z and Millennial gamers and creators, while offering players ways to access exclusive tournaments and programming.
In fiscal year 2024, we remained focused on refining our core technology platform, expanding sponsor relationships, and preparing for our IPO, which closed in March 2025.
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In May 2025, we launched the first activation under our strategic partnership with Learfield, beginning with the University of Florida. This effort includes event planning, brand asset integration, student athlete involvement, and cross-channel marketing. We believe these activations represent a cornerstone of our digital advertising growth strategy.
Additionally, Post-IPO, we began execution of our development plan with our technology partners, Artemis and EVEMeta. These developments include a focus on building a scalable data insights monetization SaaS model, with a beta version expected in Q1 2026. Once market-ready, we believe this SaaS model will provide a recurring revenue stream by offering anonymized behavioral insights to brand clients seeking better Gen Z engagement.
We continue to manage costs associated with our platform and obligations as a public company while investing in revenue-generating infrastructure. We are also exploring cost-efficient marketing methods to optimize awareness while maintaining efficient customer acquisition costs with a focus on high ROI.
Key near-term objectives include:
● | Scaling Learfield-based activations across additional universities under Learfield’s media rights. |
● | Launching digital activations with rewards through Loyalty Tokens and Bragging Functionality. |
● | Advancing technological development modules to operational beta. |
Organization
We were formed as a Delaware corporation in December 2021.
Brag House, Inc. (“BHI”), the Company’s wholly owned indirect subsidiary and the entity through which our operations are primarily conducted, was formed as a Delaware corporation in February 2018.
On June 11, 2021, Brag House, Ltd. (“BHL”) was registered in the United Kingdom. Their principal offices are located at 7 – 9 Swallow Street, London W1B 4DE, United Kingdom.
On August 16, 2021, BHL acquired all of the 10,000,000 issued and outstanding BHI shares held by BHI shareholders on a one for 14.07 basis (rounded to the nearest whole number) in exchange for 140,700,000 ordinary shares of £0.0001 in BHL, making BHI a wholly owned subsidiary of BHL (“UK Reorganization”).
Following the UK Reorganization, the board of directors of BHL determined that it was in the best interests of BHL and its shareholders that an initial public offering in the United States and concurrent listing on The Nasdaq Stock Market (“Nasdaq”) be pursued. To effect that proposed initial public offering and listing on Nasdaq, in December 2021, the Company was formed. On February 8, 2022, the Company approved a reorganization, in which the shareholders of BHL would exchange their ordinary shares and preference shares of BHL for a proportionate number of common and preferred shares in the Company on a 21 to 1 basis (“U.S. Reorganization”). Immediately following the U.S. Reorganization, BHL became the wholly-owned subsidiary of the Company, and BHI became the indirect wholly-owned subsidiary of the Company.
We anticipate that BHL will be wound down and dissolved as soon as reasonably practicable.
We effected a 1 for 5.1287 consolidation of our issued and outstanding Common Stock and Preferred Stock on June 14, 2024, (the “Original Reverse Split”). On October 11, 2024, we canceled the Original Reverse Split and filed an amendment to our certificate of incorporation, as amended, with the Secretary of State of the State of Delaware to effect a 1 for 2.43615 consolidation of our issued and outstanding Common Stock and Preferred Stock (the “Reverse Split”). Any future redemption of stock options or warrants for options or warrants that were granted prior to October 11, 2024 will also reflect the Reverse Split. The Company began the process to pay for the Fractional Shares, which total $85.81, to its shareholders that were affected by the Reverse Split. This Quarterly Report gives effect to the cancellation of the Original Reverse Split and the effectiveness of the Reverse Split. Except where otherwise indicated, all share and per share data in this Annual Report have been retroactively restated to reflect the Reverse Split.
Our principal executive offices are located at 45 Park Street, Montclair, NJ 07042 and our telephone number is 413-398-2845. Our website address is www.braghouse.com. The investor relations portion of our website is available at corp.braghouse.com. The references to our website addresses do not constitute incorporation by reference of the information contained at or available through our websites, and you should not consider it to be a part of this Quarterly Report. We have included our website addresses in this Quarterly Report solely as inactive textual references.
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Emerging Growth Company Status
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act, and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Results of Operations
Three Months Ended March 31, 2025 as Compared to the Three Months Ended March 31, 2024
Revenue
Revenue for the three months ended March 31, 2025 and 2024 was $0 and $55, respectively. Revenues for the periods presented consisted of the following: live-streaming services. This decrease in revenue was mainly attributable to no revenue-generating tournament activity or live streaming services in the three months ended March 31, 2025. The Company had no tournament revenue for the three months ended March 31, 2025 and 2024. The live streaming revenue referenced above represents an insignificant source of revenue for the Company.
Tournament revenue consists of money earned from tournament sponsors. The Company’s other revenue comes from revenue earned on the Twitch streaming platform through the Company’s enrollment in the Twitch Affiliate Program. The affiliate program allows the Company to earn revenue from advertising provided to viewers on the channel. The Company streams live events, and their channel may also include past tournaments that can be watched as a Video on Demand (“VOD”). Additionally, the Company generates subscription revenue for users who subscribe to Brag House’s Twitch live-streaming channel. Live-streaming service revenue is not considered tournament revenue since it is not directly attributed to money earned from tournament sponsors and is not received from such sources. This revenue is tracked, determined, and disbursed to the Company directly by Twitch.
Operating Expenses
Operating expenses for the three months ended March 31, 2025 and 2024 were $584,470 and $232,014, respectively, and in the three months ended March 31, 2025, consisted mainly of selling, general and administrative expenses of $257,159, legal and professional fees of $138,324, stock-based compensation on restricted stock agreements of $42,500 and advertising and marketing costs of $81,450. In the three months ended March 31, 2024, the Company’s operating expenses consisted mainly of selling, general and administrative expenses of $122,561, legal and professional fees of $52,458, stock-based compensation on restricted stock agreements of $46,016 and advertising and marketing costs of $0. This represents an increase of $134,598 in selling, general and administrative expenses, an increase of $85,866 in legal and professional fees, a decrease of $3,516 in stock-based compensation on restricted stock agreements and an increase of $81,450 in advertising and marketing costs. The increase in operating expenses during the three months ended March 31, 2025 was mainly attributed to increased spending in operations with the recent completion of the IPO in March of 2025.
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Liquidity and Capital Resources
As of March 31, 2025 and December 31, 2024 the Company had $3,458,017 and $29,228 in cash, respectively, and a working capital surplus of $1,446,355 and deficit of $9,675,586, respectively. The Company’s liquidity needs up to March 31, 2025 were satisfied through proceeds from the sale of equity in the Company’s IPO, convertible debt, notes payable and bridge loans.
The accompanying financial statements have been prepared on the basis that the Company will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business. At March 31, 2025 and December 31, 2024 the Company had an accumulated deficit of $15,715,375 and $14,647,702, respectively. For the three months ended March 31, 2025 and March 31, 2024 the Company had a net loss of $1,067,673 and $1,034,161, respectively, and negative cash flows from operations of $1,767,013 and positive cash flows from operations of $56,348, respectively. The Company’s operating activities consume the majority of its cash resources. The Company will continue to promote its services to existing and potential customers, but it anticipates that it will continue to incur operating losses as it executes its development plans through 2025, as well as other potential strategic and business development initiatives. In addition, the Company has had and expects to have negative cash flows from operations, at least into the near future. The Company previously funded and plans to continue funding these losses primarily through the sale of equity and loans. The accompanying financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.
Pursuant to our agreement with Moroch, we held the “Texas Loyalty Cup”, a Brag House tournament, in 2021 in collaboration with McDonald’s and Coca-Cola. The success of the tournament led to a continued and stronger relationship with McDonald’s and Coca-Cola as we had held two tournaments in 2022: “SoCal FIFA 23 Tournament” which was a direct contract with Coca-Cola and collaborated with McDonald’s through their marketing agency of the Southern California Region, DE, and “Black and Positively Golden Gamers HBCU Tournament Featuring Fortnite” which was a contract with McDonald’s through their agency, WI, in collaboration with Coca-Cola. Due to the success Brag House was able to achieve, the partnership with McDonald’s and Coca-Cola grew stronger as Brag House was contracted by Coca-Cola, in collaboration with McDonald’s, for the third consecutive year to host a nationwide Fortnite tournament with student gamers from five states (Washington, Oregon, California, Oklahoma and Kansas). The tournament is known as the Golden Royale Cup, and took place over the course of three weeks in November, with three qualifying matches, followed by a grand finale match. The Golden Royale Cup amassed nearly 20,000 total hours of aggregate live-streaming content watched, and garnered nearly 300,000 views from gamers watching the tournament in real-time. Furthermore, the event received nearly 1 million impressions across Brag House’s social media platforms.
In addition to the Golden Royale Cup from November 2023, Brag House has finalized three major partnerships agreements; the first with the FWSC, a division of The City of Fort Worth, where we hosted an in-person esports and scholars event on September 21, 2024 at the FWCC focused on college students for the State of Texas. This event showcased not only competitive gaming for the casual gamers but also educational and career opportunities related to gaming and esports for Texas college students while giving the students opportunities to earn and win scholarships. This event featured speakers and panelists from diverse industries, including media agencies, universities, and the movie and entertainment sectors; the second with the Denver Broncos, a world-renowned American Football franchise that competes in the NFL to be a gaming partner for in-person and digital gaming activations (i.e. gaming events) for, at minimum, the 2023-2024 NFL seasons. This partnership concluded in September 2024.
Brag House also secured a strategic partnership for tournament and promotional events in 2025 with Learfield Communications, LLC, formerly Learfield IMG College, a billion dollar media company that holds the media rights to hundreds of colleges in the US, including collegiate properties as the NCAA and its 89 championships and NCAA Football. However, it is important to note that the current agreement does not guarantee revenue, nor does it obligate Learfield or its affiliates to provide data access or support beyond the sales representation scope. The partnership’s first activation was held online on May 17, 2025 (originally scheduled for March 5, 2025) for students and alumni of the University of Florida, one of Learfield’s media rights properties. The execution of this initial activation will serve as a test case for future expansion and data-driven initiatives.
This partnership positions Brag House to leverage Learfield’s college network to generate sponsorship revenue, ensuring brand engagement opportunities, and gives Brag House access to extensive datasets from diverse college campuses as we evolve into a scalable data insight revenue model, where we aim to enable brands to gain data insights to create enhanced, personalized and effective marketing campaigns.
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We believe this partnership will contribute directly to Brag House’s revenue model through shared sponsorship earnings, while validating Brag House’s marketing and data strategy for reaching college-aged Gen Z gamers. Through this, the Company plans to scale across Learfield’s properties, expanding brand partnerships in the gaming and esports spaces.
Management believes this is a strong indicator of continued growth in the coming years for tournament revenue. While the Company believes in its viability to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan.
However, the Company has earned minimal revenue through the three months ended March 31, 2025. As such, these matters raise substantial doubt about the Company’s ability to continue as a going concern for the next twelve months from the issuance of the accompanying consolidated financial statements. If adequate funds are not available on acceptable terms, or at all, the Company will need to curtail operations or cease operations completely.
March 31, 2025 | March 31, 2024 | |||||||
Cash Flows (Used In) Provided By Operating Activities | $ | (1,767,013 | ) | $ | 56,348 | |||
Cash Flows Provided By Financing Activities | 5,195,802 | 72,844 | ||||||
Net increase (decrease) in cash and cash equivalents | $ | 3,428,789 | $ | 129,192 |
Cash Flows Used In Operating Activities
For the three months ended March 31, 2025, we used $1,767,013 of cash in our operating activities, which was mainly attributable to the payment of accounts payable, accrued payroll, accrued liabilities, and deferred offering costs. For the three months ended March 31, 2024, we received $56,348 of cash from our operating activities, which was mainly attributable to increases in accounts payable, accrued payroll, loan extension fees, share payable, and accrued interest.
Cash Flows Provided By Financing Activities
For the three months ended March 31, 2025, we received $6,991,650 from the issuance of notes payable, original issue discount convertible loans, and the sale of Common Stock. We reduced our cash position by repaying notes payable and original issue discount convertible loans, net of debt discounts and debt issuance costs for $501,126. Also, we reduced our cash position with the payment of offering costs in connection with the sale of Common Stock totaling $1,294,722. For the three months ended March 31, 2024, we received $72,844 from the issuance of original issue discount convertible loans, net of debt discounts and debt issuance costs.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K promulgated under the Exchange Act.
Contractual Obligations and Commitments
We did not have any contractual obligations or commitments which would have an impact on our financial statements for the three months ending March 31, 2025 and 2024.
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Internal Control Over Financial Reporting
Prior to our IPO, we had been a private company with limited accounting and financial reporting personnel and other resources to address our internal controls and procedures. In connection with the audits of our consolidated financial statements as of December 31, 2024 and 2023, we identified control deficiencies in our financial reporting process that constitute material weaknesses for the years then ended. We have a material weakness related to the review and approval of cash disbursements and related journal entries for operating and payroll-related expenses incurred, including the failure to maintain readily accessible executed versions of significant agreements entered into by the Company. Due to the lack of formal documentation maintained around the review and approval of these types of transactions, it was determined that we did not adhere to established controls around our cash disbursement process, nor the review and approval of related journal entries recorded. Additionally, we have a material weakness related to the lack of controls over our income tax related accounts and disclosures. In the absence of such formal documentation related to our management’s review and approval of such processes, potential material misstatements may go undetected. Additionally, the Company has a material weakness related to the lack of cybersecurity policies and procedures in place. In the absence of cybersecurity controls, Company operations may be negatively impacted, as all Company activities take place online.
As defined in the standards established by the Public Company Accounting Oversight Board, or the PCAOB, of the United States, a “material weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.
We have already taken a number of measures to address the internal control deficiencies that have been identified including, hiring a full-time chief financial office with extensive public-company reporting and technical accounting experience to provide additional financial reporting oversight and review, expanding our existing accounting and financial reporting personnel, as well as establishing effective monitoring and oversight controls. We believe these measures will assist us with meeting the Sarbanes-Oxley compliance requirements and improving our overall internal controls. However, we cannot assure you that these measures may fully address the material weaknesses in our internal control over financial reporting or that we may conclude that they have been fully remediated.
We expect to implement our remediation plan within the next 12 months. However, we have not tested the effectiveness of our internal control over financial reporting and cannot assure you that we will be able to successfully remediate these material weaknesses and, even if we do, we cannot assure you that we will not suffer from other material weaknesses in the future. Except for additional personnel costs, we do not expect to incur any material costs related to our remediation plan.
The process of designing and implementing an effective financial reporting system is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain a financial reporting system that is adequate to satisfy our reporting obligation.
As a company with less than US $1.235 billion in revenue for our last fiscal year, we qualify as an “emerging growth company” pursuant to the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other requirements that are otherwise applicable generally to public companies. These provisions include exemption from the auditor attestation requirement under Section 404 of the Sarbanes-Oxley Act of 2002, in the assessment of the emerging growth company’s internal control over financial reporting.
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Recent Accounting Pronouncements
See Note 2 of the notes to our consolidated financial statements for a comprehensive list of new accounting pronouncements.
Critical Accounting Estimates
We prepare our consolidated financial statements in accordance with U.S. generally accepted accounting principles, which require our management to make estimates that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the balance sheet dates, as well as the reported amounts of revenues and expenses during the reporting periods. To the extent that there are material differences between these estimates and actual results, our financial condition or results of operations would be affected. We base our estimates on our own historical experience and other assumptions that we believe are reasonable after taking account of our circumstances and expectations for the future based on available information. We evaluate these estimates on an ongoing basis.
We consider an accounting estimate to be critical if: (i) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (ii) changes in the estimate that are reasonably likely to occur from period to period or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations. There are items within our financial statement that require estimation but are not deemed critical, as defined above.
For a detailed discussion of our significant accounting policies and related judgments, see Note 2 of the Notes to Consolidated Financial Statements in this report.
Going Concern and Management’s Liquidity Plans
The independent auditors’ report accompanying our December 31, 2024 financial statements contain an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern. As of March 31, 2025, we have incurred recurring losses from operations and have not generated net income since our inception. We have funded our operations primarily through debt and equity financings, including the proceeds received in connection with our public offering on March 6, 2025, upon which we became a publicly traded company subsequent to the date of these financial statements. While this recent capital raise has provided us with the resources necessary to begin executing our business plan, we anticipate that we will continue to incur operating losses and negative cash flows from operations for the foreseeable future.
We are in the development stage of our platform and related software, and we do not expect to generate sufficient revenue to achieve net income during the next twelve months. Our business plan includes the ongoing development of our software platform, strategic marketing initiatives, and the organization of several gaming activations during the upcoming fiscal year to increase user engagement and brand visibility.
Although we believe that our current cash and cash equivalents, together with the funds raised in our recent public offering, will be sufficient to fund our operations through at least the next twelve months, our operating plan anticipates continued investment in product development, infrastructure, and customer acquisition to realize sufficient revenue to cover operating expenses. These conditions raise substantial doubt about our ability to continue as a going concern within one year after the date that the financial statements are issued.
Accordingly, the accompanying financial statements have been prepared in conformity with U.S. GAAP, which contemplates continuation of the Company as a going concern and the realization of assets and the satisfaction of liabilities in the normal course of business. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
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Item 3. Quantitative and Qualitative Disclosures about Market Risk.
We do not hold any derivative instruments and do not engage in any hedging activities.
Item 4. Controls and Procedures.
Disclosure Controls and Procedures
We maintain “disclosure controls and procedures,” as that term is defined in Rule 13a-15(e), promulgated by the SEC pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our Company’s reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer to allow timely decisions regarding required disclosure. Our management, with the participation of our principal executive officer and principal financial officer, evaluated our Company’s disclosure controls and procedures as of the end of the period covered by this Form 10-Q. Based on this evaluation, our principal executive officer and principal financial officer concluded that as of March 31, 2025, our disclosure controls and procedures were not effective. The ineffectiveness of our disclosure controls and procedures was due to material weaknesses related to the review and approval of cash disbursements and related journal entries for operating and payroll-related expenses incurred, including the failure to maintain readily accessible executed versions of significant agreements entered into by the Company and the lack of controls over our income tax related accounts and disclosures. In the absence of such formal documentation related to our management’s review and approval of such processes, potential material misstatements may go undetected. Additionally, the Company has a material weakness related to its ability to record and disclose complex transactions with debt and/or equity features. Lastly, the Company has a material weakness related to the lack of cybersecurity policies and procedures in place. In the absence of cybersecurity controls, Company operations may be negatively impacted, as all Company activities take place online.
Management’s Quarterly Report on Internal Control Over Financial Reporting
This Quarterly Report on Form 10-Q does not include a report of management’s assessment regarding internal control over financial reporting due to a transition period established by the rules of the SEC for newly public companies.
Changes in Internal Control Over Financial Reporting
There were no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the fiscal quarter ended March 31, 2025, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
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PART II-OTHER INFORMATION
Item 1. Legal Proceedings.
There are no actions, suits, proceedings, inquiries or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our Company or any of our subsidiaries, threatened against or affecting our Company, our common stock, any of our officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.
Item 1A. Risk Factors.
Deficiency - Minimum Bid Requirement
On May 15, 2025, the Company received a deficiency letter from the Listing Qualifications Department of The Nasdaq Stock Market LLC (“Nasdaq”) notifying the Company that, based upon the closing bid price of the Company’s common stock, par value $0.0001 per share, for the last 30 consecutive business days, the Company is not currently in compliance with the requirement to maintain a minimum bid price of $1.00 per share for continued listing on The Nasdaq Capital Market, as set forth in Nasdaq Listing Rule 5550(a)(2).
While the notice has no immediate effect on the listing or trading of the Company’s common stock, and the Company’s listing remains fully effective, there is a risk of delisting if the Company does not regain compliance within the prescribed timeframe.
Pursuant to Nasdaq Listing Rule 5810(c)(3)(A), the Company has been provided a 180 calendar day grace period, or until November 11, 2025, to regain compliance. To do so, the closing bid price of the Company’s common stock must meet or exceed $1.00 per share for at least ten consecutive business days prior to that date. If the Company fails to regain compliance by that deadline, it may be eligible for an additional 180-day compliance period, provided it satisfies all other initial listing criteria for The Nasdaq Capital Market, except for the minimum bid price requirement.
The Company is actively monitoring the situation and exploring options to regain compliance. However, there can be no assurance that the Company will meet the minimum bid price requirement within the allotted timeframe, qualify for an additional compliance period, or maintain compliance with other Nasdaq continued listing standards. Failure to regain compliance could result in the delisting of the Company’s common stock from Nasdaq, which could adversely affect the trading market, liquidity, and market price of the common stock, and limit the Company’s ability to access capital markets.
As of the date of this filing, the deficiency has not been cured.
Deficiency - Late Filing
On May 27, 2025, the Company received a deficiency letter from the Listing Qualifications Department of the Nasdaq Stock Market LLC notifying the Company that it is not not in compliance with periodic requirements for continued listing set forth in Nasdaq Listing Rule 5250(c)(1) because the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2025 was not filed with the Securities and Exchange Commission by the required due date of May 15, 2025. The Company was given 60 calendar days or until July 28, 2025 to submit a plan to Nasdaq to regain compliance. The financial statements were filed prior to the deadline and this resolved the deficiency.
Naked Short Selling Investigation
On May 14, 2025, the Company issued a press release announcing that the Company had sent letters to the U.S. Securities and Exchange Commission, Financial Industry Regulatory Authority, and The Nasdaq Stock Market LLC requesting an immediate investigation into any potential illegal naked short selling of Brag House stock. The outcome of the investigation is still pending.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
(A) Unregistered Sales of Equity Securities
There were no sales of equity securities sold during the period covered by this Quarterly Report that were not registered under the Securities Act and were not previously reported in a Current Report on Form 8-K filed by the Company.
(B) Use of Proceeds
Not applicable.
(C) Issuer Purchases of Equity Securities
Not applicable.
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Item 3. Defaults Upon Senior Securities.
Not applicable
Item 4. Mine Safety Disclosures (Removed and Reserved)
Not applicable.
Item 5. Other Information.
Item 6. Exhibits
The exhibit index set forth below is incorporated by reference in response to this Item 6.
# | This certification is being furnished and shall not be deemed “filed” with the SEC for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference. |
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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.
BRAG HOUSE HOLDINGS, INC. | ||
By: | /s/ Lavell Juan Malloy, II | |
Name: | Lavell Juan Malloy, II | |
Title: | Chief Executive Officer | |
Dated: July 18, 2025 | (Principal Executive Officer) |
By: | /s/ Chetan Jindal | |
Name: | Chetan Jindal | |
Title: | Chief Financial Officer | |
Dated: July 18, 2025 | (Principal Financial and Accounting Officer) |
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