Out the Gate - Case Summary

Business Description

Headquartered in Cherry Hill, New Jersey, the Debtor is a privately held gaming and entertainment company founded in February 2021 that focuses on electronic sports betting.

• The Company owns and operates an online Sportsbook in three states: Kentucky, New Jersey, and Ohio.

As of the Petition Date, the Company has approximately 18 employees, all based in New Jersey, and is led by a management team with extensive experience in the sports gaming industry.

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Corporate History

The Company was incorporated on February 8, 2021, with 100 shares of common stock issued to its sole shareholder. In October 2021, the Company amended its articles of incorporation to authorize a 500,000-to-1 stock split, resulting in 50 million issued and outstanding shares, and authorized an additional 30 million common and 20 million preferred shares.

• In 2022, all outstanding common shares were transferred from the sole individual shareholder to Kape Holding, Inc.

SportAD Asset Acquisition

• In April 2023, the Company acquired certain intangible assets from SportAD in exchange for 2,195,390 shares of common stock (valued at $109,770) and $113,420 in cash.
• The acquisition included an online/mobile fantasy platform, an online/mobile sportsbook platform, an account management platform, a virtual sports engine, and various databases, domain names, and trade names.
• As part of the transaction, the Company also assumed a contract from SportAD, which required a payment of $93,407 to fulfill the remaining obligation.

Operational Launch Timeline

• The Company commenced its operations in a phased rollout, beginning with Ohio in September 2023, followed by New Jersey in March 2024, and Kentucky in July 2025.

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Operations Overview

The Company operates its online Sportsbook by securing market access through multi-year agreements with licensed proprietors in Kentucky, New Jersey, and Ohio. The Company does not own any real property and leases its corporate headquarters in Cherry Hill, New Jersey.

Market Access and Licensing

• These "Sportsbook License" agreements provide the Company with the opportunity to operate in jurisdictions where the number of online gaming licenses is finite.
• Under the terms of these agreements, the Company has revenue-sharing arrangements with each licensor that include minimum annual guaranteed payments ("MAGs"), in addition to reimbursing the licensors for certain licensing and regulatory fees. The MAGs are as follows:
  • Kentucky: $250,000
  • New Jersey: $1,750,000
  • Ohio: $1,500,000

Regulatory Compliance

• The Company's operations are subject to applicable gaming regulations in each state, which require operators to hold appropriate licenses and may require suitability reviews for entities or individuals with ownership or control.
• For regulatory purposes and to protect user funds from creditor claims, the Company maintains separate bank accounts and credit reserves to segregate users' funds from its operational funds, referred to as the "Player Reserves."

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Prepetition Obligations

As of the Petition Date, the Debtor has approximately $50.9 million in total outstanding secured debt. The Company is a closely held Delaware C-Corporation, with 96% of its shares held by Kape Holdings, Inc. and approximately 4% held by Sport Analytics and Data Corp (d/b/a SportAD).

Secured Debt

• Plannatech First Lien Debt: Approximately $3.98 million is outstanding to Plannatech (USA) Corporation.
  • This debt originated from a series of short-term loans and bridge financing provided between July and October 2025 to fund operations.
  • In connection with this financing, Neapeg Investment LP agreed to subordinate its existing secured debt, giving Plannatech a first-priority security interest in substantially all of the Company's assets.
  • The financing included $1.48 million that was transferred directly to the Ohio Player Account to fund player refunds.
• Neapeg Second Lien Debt: Approximately $47 million is outstanding to Neapeg Investment LP across four secured debenture agreements. The Neapeg debt is junior and subordinate to the Company's obligations to Plannatech.
  • Series 1 Debenture (Dec. 2022): ~$19 million outstanding on a $15.1 million note bearing 8% annual interest and maturing in December 2027.
  • Series 2 Debenture (June 2023): ~$12.1 million outstanding on a $10 million note bearing 8% annual interest and maturing in June 2028.
  • Series 3 Debenture (Feb. 2024): ~$6.1 million outstanding on a $5 million note bearing 12% annual interest and maturing in February 2029.
  • Series 4 Debenture (July 2024): ~$9.7 million outstanding on $9.1 million drawn from a $10 million facility bearing 8% annual interest and maturing in July 2029.
• All four Neapeg debentures are payable on an interest-only basis, and the Company has elected to defer cash interest payments, adding accrued interest to the principal balance. The Series 1 and 2 debentures also included the issuance of unexercised warrants to Neapeg to purchase the Company's common stock.

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Events Leading to Bankruptcy

The Debtor's financial distress stems from a combination of significant competition, burdensome gaming license fees, and general industry headwinds. High upfront capital outlays for customer acquisition and platform development resulted in net losses, which were compounded by increased taxes in its states of operation. The Company noted that its minimum annual guaranteed payment ("MAG") agreements, particularly in New Jersey and Ohio, have been a significant hindrance to achieving profitability.

Prepetition Financing Efforts

• In July 2025, facing financial challenges, the Debtor and its primary secured lender, Neapeg Investment LP, began discussions with Plannatech (USA) Corporation to obtain additional operational funding.
• Previous attempts by Neapeg to find other lenders willing to provide subordinate debt were unsuccessful, as potential financiers required a first-priority security interest.
• To facilitate the new financing, Neapeg agreed to subordinate its security interest to Plannatech. Despite these cash infusions, the Company's underlying business issues and liquidity pressures continued.

Chapter 11 Filing and DIP Financing

• After evaluating strategic alternatives, the Company determined that a Chapter 11 filing was the only viable path to restructure its debts, shed costly contractual obligations, and explore a potential sale of the business.
• The Debtor commenced its Chapter 11 case to stabilize operations and access critical postpetition financing. The Company has negotiated a debtor-in-possession ("DIP") financing facility with Plannatech, which includes:
  • Approximately $6.5 million in new money term loans to fund operations and administrative expenses for a 13-week period.
  • The DIP facility will be secured by a priming lien on all of the Debtor's assets.
• The Debtor asserts that without immediate access to the DIP facility and use of cash collateral, it would lack sufficient liquidity to meet its obligations, including upcoming payroll, and would be forced to cease operations immediately.