Company Quick10K Filing
Quick10K
Good Gaming
10-Q 2019-06-30 Quarter: 2019-06-30
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-05-09 Quarter: 2014-05-09
10-K 2013-12-31 Annual: 2013-12-31
8-K 2018-10-16 Enter Agreement, Exhibits
8-K 2018-09-25 Enter Agreement, Exhibits
8-K 2018-05-04 Amend Bylaw, Shareholder Vote, Other Events, Exhibits
8-K 2018-02-02 Enter Agreement, Sale of Shares, Exhibits
8-K 2018-01-12 Enter Agreement, Sale of Shares, Exhibits
PINS Pinterest 4,427
NYRT New York REIT 302
LWLG Lightwave Logic 61
SMGI SMG Industries 10
CHNG Change Healthcare 0
WYTC Wytec 0
SVDN Savden Group 0
CNNA Cannamed Enterprises 0
INTV Intervoice 0
WDNT Worldnet of Nevada 0
GMER 2019-06-30
Part 1 - Financial Information
Item 1. Financial Statements
Note 1. Nature of Operations and Continuance of Business
Note 2. Summary of Significant Accounting Policies
Note 3. Other Assets
Note 4. Debt
Note 5. Derivative Liabilities
Note 6. Common Stock
Note 7. Preferred Stock
Note 8. Warrant
Note 9. Related Party Transactions
Note 10. Income Taxes
Note 11. Commitments and Contingencies
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1-A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 ex31-1.htm
EX-31.2 ex31-2.htm
EX-32.1 ex32-1.htm
EX-32.2 ex32-2.htm

Good Gaming Earnings 2019-06-30

GMER 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 form10-q.htm

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

 

Form 10-Q

 

[X] QUARTERLY REPORT UNDER TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2019

 

or

 

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

 

For the transition period from _____ to _____

 

Commission File Number: 000-53949

 

Good Gaming, Inc.

(Exact name of registrant as specified in its charter)

 

Nevada   46-3917807

(State or other jurisdiction

of incorporation)

 

(IRS Employer

Identification Number)

 

415 McFarlan Road, Suite 108

Kennett Square, PA 19348

(Address of principal executive offices and Zip Code)

 

(888) 295-7279

Registrant’s telephone number, including area code

 

 

(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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 filing requirements for the last 90 days.

YES [X] NO [  ]

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

YES [X] NO [  ]

 

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. :

 

Large Accelerated Filer [  ] Accelerated Filer [  ]
       
Non-accelerated Filer [X]

Smaller Reporting Company

[X]

       
    Emerging Growth Company [  ]

 

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

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES [  ] NO [X]

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
None   None   None

 

As of August 8, 2019, there were 53,988,755 issued and outstanding shares of common stock of the registrant, par value $0.001.

 

 

 

   
 

 

TABLE OF CONTENTS

 

    Page
Part I FINANCIAL INFORMATION  
     
Item 1 Financial Statements F-1
Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations 4
Item 3 Quantitative and Qualitative Disclosures About Market Risk 11
Item 4 Controls and Procedures 11
     
Part II OTHER INFORMATION  
     
Item 1 Legal Proceedings 12
Item 1A Risk Factors 12
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds 12
Item 3 Defaults Upon Senior Securities 12
Item 4 Mine Safety Disclosures 12
Item 5 Other Information 12
Item 6 Exhibits 12
  Signatures 13

 

 2 
 

 

FORWARD LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q contains “forward-looking statements,” within the meaning of the Private Securities Litigation Reform Act of 1995, all of which are subject to risks and uncertainties. Forward-looking statements can be identified by the use of words such as “expects,” “plans,” “will,” “forecasts,” “projects,” “intends,” “estimates,” and other words of similar meaning. One can identify them by the fact that they do not relate strictly to historical or current facts. These statements are likely to address our growth strategy, financial results and product and development programs. One must carefully consider any such statement and should understand that many factors could cause actual results to differ from our forward looking statements. These factors may include inaccurate assumptions and a broad variety of other risks and uncertainties, including some that are known and some that are not. No forward looking statement can be guaranteed and actual future results may vary materially.

 

These risks and uncertainties, many of which are beyond our control, include, and are not limited to:

 

our growth strategies;
   
our anticipated future operations and profitability;
   
our future financing capabilities and anticipated need for working capital;
   
the anticipated trends in our industry;
   
acquisitions of other companies or assets that we might undertake in the future; and
   
current and future competition.

 

In addition, factors that could cause or contribute to such differences include, but are not limited to, those discussed in this Quarterly Report on Form 10-Q, and in particular, the risks discussed under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as well as those discussed in other documents we file with the SEC. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.

 

 3 
 

 

PART 1 – FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

Good Gaming, Inc.

Consolidated Balance Sheets

(Expressed in U.S. Dollars)

(Unaudited)

 

   June 30, 2019   December 31, 2018 
ASSETS        
Current Assets          
Cash and Cash Equivalents  $2,044   $12,449 
Prepaid expenses   26,250    10,000 
Total Current Assets   28,294    22,449 
           
Property and Equipment, Net   10,515    28,853 
Gaming Software, Net   210,000    450,000 
TOTAL ASSETS  $248,809   $501,302 
LIABILITIES & STOCKHOLDERS’ DEFICIT          
Current Liabilities          
Accounts Payable and Accrued Expenses  $117,556   $111,973 
Derivative Liability   528,337    574,797 
Notes Payable   13,440    13,440 
Convertible Debentures, current   100,260    100,260 
Notes Payable - ViaOne Services   1,551,221    1,316,484 
Total Current Liabilities   2,310,814    2,116,954 
           
Total Liabilities   2,310,814    2,116,954 
           
Stockholders’ Deficit          
Series A Preferred Stock          
Authorized: 2,000,000 Preferred Shares, With a Par Value of $0.001 Per Share; Issued and Outstanding: 7,500 Shares   8    8 
Series B Preferred Stock          
Authorized: 249,999 Preferred Shares, With a Par Value of $0.001 Per Share; Issued and Outstanding: 68,997 Shares   69    69 
Series C Preferred Stock          
Authorized: 1 Preferred Shares, With a Par Value of $0.001 Per Share; Issued and Outstanding: 1 Share   1    1 
Series D Preferred Stock          
Authorized: 350 Preferred Shares, With a Par Value of $0.001 Per Share; Issued and Outstanding: 0 Share at June 30, 2019 and 350 Shares at December 31, 2018   -    1 
Common Stock          
Authorized: 100,000,000 Common Shares, With a Par Value of $0.001 Per Share; Issued and Outstanding: 53,988,755 Shares at June 30, 2019 and 49,717,922 Shares at December 31, 2018   53,988    49,718 
Additional Paid-In Capital   4,210,995    4,215,264 
Accumulated Deficit   (6,327,066)   (5,880,713)
Total Stockholders’ Deficit   (2,062,005)   (5,880,713)
TOTAL LIABILITIES & STOCKHOLDERS DEFICIT  $248,809   $501,302 

 

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

 

 F-1 
 

 

Good Gaming, Inc

Consolidated Statement of Operations

(Expressed in U.S Dollars)

(Unaudited)

 

  

For the three months ended

June 30,

 
   2019   2018 
Revenues  $7,047   $22,974 
Cost of Revenues   2,801    5,965 
Gross Profit   4,246    17,009 
           
Operating Expenses          
General & Administrative   12,936    20,722 
Contract Labor   4,500    27,470 
Payroll Expense   -    15,655 
Depreciation and Amortization Expense   121,013    68,038 
Professional Fees   90,035    116,270 
Total Operating Expenses   228,484    248,155 
Operating Loss   (224,238)   (231.146)
Other Income (Expense)          
Loss on Stock Conversion   -    (75,395)
Interest Income   -    - 
Interest Expense   (7,931)   (1,813)
Loss on disposal of fixed assets   -    - 
Gain (Loss) on Change in Fair Value of Derivative Liability   (18,974)   38,288 
Total Other Income (Loss)   (26,905)   (38,920)
           
Net Income (Loss)  $(251,143)  $(270,066)
           
Net Income (Loss) Per Share, Basic and Diluted  $-   $(0.01)
           
Weighted Average Shares Outstanding   53,988,755    27,824,950 

 

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

 

 F-2 
 

 

Good Gaming, Inc

Consolidated Statement of Operations

(Expressed in U.S Dollars)

(Unaudited)

 

  

For the Six months ended

June 30,

 
   2019   2018 
Revenues  $27,828   $57,706 
Cost of Revenues   9,362    10,362 
Gross Profit   18,466    47,344 
           
Operating Expenses          
General & Administrative   24,656    35,928 
Contract Labor   27,328    59,896 
Payroll Expense   -    41,986 
Depreciation and Amortization Expense   243,127    129,255 
Professional Fees   183,073    219,367 
Total Operating Expenses   478,184    486,432 
Operating Loss   (459,718)   (439,088)
Other Income (Expense)          
Loss on Stock Conversion   -    (75,395)
Interest Income   -    - 
Interest Expense   (15,863)   (8,408)
Loss on disposal of fixed assets   (17,233)   - 
Gain (Loss) on Change in Fair Value of Derivative Liability   46,461    283,238 
Total Other Income (Loss)   13,365    199,435 
           
Net Income (Loss)  $(446,353)  $(239,653)
           
Net Income (Loss) Per Share, Basic and Diluted  $(0.01)  $(0.01)
           
Weighted Average Shares Outstanding   53,921,421    24,158,309 

 

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

 

 F-3 
 

 

Good Gaming, Inc

Consolidated Statements of Cash Flows

(Expressed in U.S Dollars)

(Unaudited)

 

  

For the Six Months Ended

June 30,

 
   2019   2018 
Operating Activities          
           
Net Income (Loss)  $(446,353)  $(239,653)
           
Adjustments To Reconcile Net Loss to Net Cash Used In Operating Activities          
Depreciation and amortization   243,127    129,255 
Loss on disposal of fixed assets   17,233    - 
Change In Fair Value Of Derivative Liability   (46,460)   (283,238)
Changes in operating assets and liabilities          
Due from Affiliate   -    700 
Prepaid expenses   (16,250)   (26,329)
Accounts Payable and Accrued Liabilities   5,583    2,546 
           
Net Cash Provided By (Used in) Operating Activities   (243,120)   (416,719)
           
Investing Activities          
           
Purchase of Property and Equipment   (2,022)   (26,250)
           
Net Cash Provided By (Used in) Investing Activities   (2,022)   (26,250)
           
Financing Activities          
           
Proceeds From Sale Of Preferred Stock Series D   -    105,000 
Due To ViaOne Services   234,737    299,358 
           
Net Cash Provided By (Used In) Financing Activities   234,737    404,358 
           
Change in Cash and Cash Equivalents   (10,405)   (38,611)
           
Cash and Cash Equivalents, Beginning Of Period   12,449    61,037 
           
Cash and Cash Equivalents, End Of Period  $2,044   $22,426 
           
Supplemental disclosure of cash flow information          
Cash paid for interest  $-   $- 
Cash paid for taxes  $-   $- 
           
Non-Cash Investing And Financing Activities          
Unpaid Property and Equipment Acquired  $-   $118,500 
Common Shares Issued for Conversion Of Debt  $-   $293,229 
Shares Issued For Acquisition Of Software  $-   $- 

 

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

 

 F-4 
 

 

Good Gaming, Inc.

Stockholders’ Equity (Deficit)

(Expressed in U.S Dollars)

 

   Preferred Stock      Additional         
   Series A   Series B   Series C   Series D   Common Stock   Paid-in   Accumulated     
   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Capital   Deficit   Total 
Balance, December 31, 2017   7,500   $8    164,781   $165    1   $1    105   $1    2,881,424   $2,881   $3,996,373   $(4,889,020)  $(889,591)
                                                                  
Conversion of Series B Preferred Shares to common shares   -    -    (58,270)   (58)   -    -    -    -    11,654,000    11,654    (11,596)   -    - 
Conversion of Via One Loan to Common Stock   -    -    -    -    -    -    -    -    8,333,333    8,333    191,667    -    200,000 
Conversion of Convertible Notes   -    -    -    -    -    -    -    -    814,438    815    64,340    -    65,155 
Issuance of Series D Preferred Stock   -    -    -    -    -    -    105    -    -    -    105,000    -    105,000 
Net income   -    -    -    -    -    -    -    -    -    -    -    30,415    30,415 
                                                                  
Balance, March 31, 2018   7,500   $8    106,511   $107    1   $1    210   $1    23,683,195   $23,683   $4,345,784   $(4,858,605)  $(489,021)
                                                                  
Conversion of Convertible Notes   -    -    -    -    -    -    -    -    1,892,828    1,893    26,181    -    28,074 
Conversion of Series D Preferred Stock   -    -    -    -    -    -    (32)   -    4,884,823    4,885    (4,885)   -    - 
Net loss   -    -    -    -    -    -    -    -    -    -    -    (270,068)   (270,068)
                                                                  
Balance, June 30, 2018   7,500   $8    106,511   $107    1   $1    178   $1   $30,460,846   $30,461   $4,367,080   $(5,128,673)  $(731,015)

 

The accompanying notes are an integral part of these financial statements

 

 F-5 
 

 

Good Gaming, Inc.

Stockholders’ Equity (Deficit)

(Expressed in U.S Dollars)

 

 

   Preferred Stock      Additional         
   Series A   Series B   Series C   Series D   Common Stock   Paid-in   Accumulated     
   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Capital   Deficit   Total 
Balance, December 31, 2018   7,500   $8    69,197   $69    1   $1    6   $1    49,717,922   $49,718   $4,215,264   $(5,880,713)  $(1,615,652)
Conversion of Series B Preferred Shares to common shares   -    -    (200)   -    -    -    -    -    3,750,000    3,750    (3,750)   -    - 
Conversion of Series D Preferred to Common Shares   -    -    -    -    -    -    (6)   (1)   520,833    520    (519)   -    - 
Net loss   -    -    -    -    -    -    -    -    -    -    -    (195,210)   (195,210)
Balance, March 31, 2019   7,500    8    68,997    69    1    1    -    -    53,988,755    53,988    4,210,995    (6,075,923)   (1,810,862)
Net loss   -    -    -    -    -    -    -    -    -    -    -    (251,143)   (251,143)
Balance, June 30, 2019   7,500   $8    68,997   $69    1   $1    -   $-    53,988,755   $53,988   $4,210,995   $(6,327,066)  $(2,062,005)

 

The accompanying notes are an integral part of these financial statements

 

 F-6 
 

 

Good Gaming, Inc.

Notes to the Consolidated Financial Statements

(expressed in U.S. dollars)

(Unaudited)

 

Note 1. Nature of Operations and Continuance of Business

 

Good Gaming, Inc. (formerly “HDS International Corp.”) (the “Company”) was incorporated on November 3, 2008 under the laws of the State of Nevada. The Company is a leading tournament gaming platform and online destination targeting over 250 million e-sports players and participants worldwide that want to compete at the high school or college level. A substantial portion of the Company’s activities has involved developing a business plan and establishing contacts and visibility in the marketplace and the Company has not generated any substantial revenue to date. Beginning in 2018, the Company began deriving revenue by providing transaction verification services within the digital currency networks of cryptocurrencies. However, on December 12, 2018, the Company discontinued such transaction verification services by dissolving Crypto Strategies Group, Inc., its wholly-owned subsidiary.

 

Going Concern

 

These consolidated financial statements have been prepared on a going concern basis, which implies that the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has generated minimal revenues to date and has never paid any dividends and is unlikely to pay dividends or generate significant earnings in the immediate or foreseeable future. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability to raise equity or debt financing, and the attainment of profitable operations from the Company’s future business. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern for a period of one year from the date of these financial statements. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

 F-7 
 

 

Note 2. Summary of Significant Accounting Policies

 

Basis of Presentation

 

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete consolidated financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.

 

Use of Estimates

 

The preparation of condensed financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and the disclosure of contingent assets and liabilities. The Company regularly evaluates estimates and assumptions related to the fair values of convertible debentures, derivative liability, stock-based compensation, and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

 

Certain reclassifications have been made to prior-year amounts to conform to the current period presentation.

 

Cash Equivalents

 

The Company considers all highly liquid instruments with maturities of three months or less at the time of issuance to be cash equivalents. Amounts receivable from credit card processors are also considered cash equivalents because they are both short-term and highly liquid in nature.

 

Intangible Assets

 

Intangible assets are carried at the purchased cost less accumulated amortization. Amortization is computed over the estimated useful lives of the respective assets, generally five years.

 

Impairment of Long-Lived Assets

 

Long-lived assets and certain identifiable intangible assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition. Measurement of an impairment loss for long-lived assets and certain identifiable intangible assets that management expects to hold and use is based on the fair value of the asset. Long-lived assets and certain identifiable intangible assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

 

 F-8 
 

 

Beneficial Conversion Features

 

From time to time, the Company may issue convertible notes that may contain an embedded beneficial conversion feature. A beneficial conversion feature exists on the date a convertible note is issued when the fair value of the underlying common stock to which the note is convertible into is in excess of the remaining unallocated proceeds of the note after first considering the allocation of a portion of the note proceeds to the fair value of the warrants, if related warrants have been granted. The intrinsic value of the beneficial conversion feature is recorded as a debt discount with a corresponding amount to additional paid in capital. The debt discount is amortized to interest expense over the life of the note using the effective interest method.

 

Derivative Liability

 

From time to time, the Company may issue equity instruments that may contain an embedded derivative instrument which may result in a derivative liability. A derivative liability exists on the date the equity instrument is issued when there is a contingent exercise provision. The derivative liability is recorded at its fair value calculated by using an option pricing model. The fair value of the derivative liability is then calculated on each balance sheet date with the corresponding gains and losses recorded in the statement of operations.

 

Basic and Diluted Net Loss Per Share

 

The Company computes net loss per share in accordance with ASC 260, Earnings Per Share, which requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net loss available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing Diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. On July 30, 2019 and December 31, 2018, the Company had 13,949,401 and 9,607,460 potentially dilutive shares from outstanding convertible debentures, respectively.

 

Income Taxes

 

Potential benefits of income tax losses are not recognized in the accounts until realization is more likely than not. Pursuant to ASC 740, the Company is required to compute tax asset benefits for net operating losses carried forward. The potential benefits of net operating losses have not been recognized in these consolidated financial statements because the Company cannot be assured it is more likely than not it will utilize the net operating losses carried forward in future years. Unrecognized tax positions, if ever recognized in the consolidated financial statements, are recorded in the statement of operations as part of the income tax provision. Our policy is to recognize interest and penalties accrued on uncertain tax positions, if any, as part of the income tax provision. The Company has no liability for uncertain tax positions. Unrecognized tax positions, if ever recognized in the consolidated financial statements, are recorded in the statement of operations as part of the income tax provision. The Company’s policy is to recognize interest and penalties accrued on uncertain tax positions, if any, as part of the income tax provision. The Company has no liability for uncertain tax positions.

 

On March 22, 2017, tax reform legislation known as the Tax Cuts and Jobs Act (the “U.S. Tax Reform Act”) was enacted in the United States. The U.S. Tax Reform Act, among other things, reduced the U.S. corporate income tax rate from 35% to 21% beginning in 2018. On March 22, 2017, the SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”), which provides guidance on how to account for the effects of the U.S. Tax Reform Act under ASC 740.

 

 F-9 
 

 

Financial Instruments

 

ASC 820, “Fair Value Measurements” and ASC 825, Financial Instruments, requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. It establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument is categorized within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. It prioritizes the inputs into three levels that may be used to measure fair value:

 

Level 1

 

Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

 

Level 2

 

Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

 

Level 3

 

Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

 

Assets and liabilities measured at fair value on a recurring basis were presented on the Company’s consolidated balance sheet as at June 30, 2019 and 2018 as follows:

 

Description  Fair Value Measurements at June 30, 2019 Using Fair Value Hierarchy 
   Total   Level 1   Level 2   Level 3 
Derivative liability  $528,337   $-   $-   $528,337 
Total  $528,337   $-   $-   $528,337 

 

Description  Fair Value Measurements at June 30, 2018 Using Fair Value Hierarchy 
   Total   Level 1   Level 2   Level 3 
Derivative liability  $268,031   $-   $-   $268,031 
Total  $268,031   $-   $-   $268,031 

 

 F-10 
 

 

The carrying values of all of our other financial instruments, which include accounts payable and accrued liabilities, and amounts due to related parties approximate their current fair values because of their nature and respective maturity dates or durations.

 

Advertising Expenses

 

Advertising expenses are included in general and administrative expenses in the consolidated Statements of Operations and are expensed as incurred. The Company incurred $1,050 in advertising and promotion expenses in the three months ended June 30, 2019.

 

Revenue Recognition

 

The Company recognizes revenues when there is persuasive evidence of an arrangement, the product or service has been provided to the customer, the collection of our fees is reasonably assured and the amount of fees to be paid by the customer is fixed or determinable. Revenues primarily include revenues from microtransactions. Microtransaction revenues are derived from the sale of virtual goods to the Company’s players. Proceeds from the sales of virtual goods directly are recognized as revenues when a player uses the virtual goods.

 

Recent Accounting Pronouncements

 

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842), which amends the existing accounting standards for leases. The new standard requires lessees to record a right-of-use (“ROU”) asset and a corresponding lease liability on the balance sheet (with the exception of short-term leases). This new standard is effective for annual reporting periods beginning after December 15, 2018, and interim reporting periods within those annual reporting periods, with early adoption permitted. We adopted this new standard effective January 1, 2019. Adoption did not have any effect on the Company as it does not have any leases.

 

The Company has implemented all other new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the consolidated financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

 

 F-11 
 

 

Note 3. Other Assets

 

Property and Equipment consisted of the following:

 

   June 30, 
   2019   2018 
Computers and servers  $19,248   $39,226 
           
Bitmining machines   -    118,500 
           
Property & Equipment, pre-Accumulated Depreciation  $19,248   $157,726 
           
Accumulated Depreciation   (8,733)   (12,071)
           
Property & Equipment, net   $10,515   $145,655 

 

Depreciation expense for the six months ended June 30, 2019 and 2018 was $3,127 and $3,330, respectively.

 

In March of 2019, the Company discontinued Minecade and Olimpo servers and decided to focus on Minecraft servers. The Company recognized a loss of $17,233 on the disposal of these servers.

 

On February 17, 2016, the Company acquired Good Gaming’s assets including intellectual property, trademarks, software code, equipment and other from CMG Holdings Group, Inc. The Company valued the software purchased at $1,200,000. The software has a useful life of 5 years. By March 31, 2018, the Company acquired two additional software servers for $26,250. During the 4th Quarter of 2018, the Company assessed the useful life of the software and determined that remaining useful life was 1.25 years. As such, the Company prospectively is amortizing the software through December 31, 2019. Amortization for the six months ended June 30, 2019 and 2018 was $240,000 and $120,000, respectively.

 

 F-12 
 

 

The software consisted of the following:

 

   June 30, 
   2019   2018 
Gaming Software  $1,200,000   $1,200,000 
           
Accumulated Amortization   (990,000)   (570,000)
           
 Gaming Software, net  $210,000   $630,000 

 

Note 4. Debt

 

Convertible Debentures

 

On April 1, 2015, we entered into a transaction with Iconic Holdings (“Iconic”) whereby Iconic agreed to provide up to $600,000 through a structured convertible promissory note (the “2015 Iconic Note”), with funds to be received in tranches. The note bears interest of 10% and was due April 1, 2016. The initial proceeds of $40,000 was received on April 9, 2015, with $30,000 remitted and delivered to us, $4,000 retained by Iconic as an original issue discount, and $6,000 retained by Iconic for legal expenses. On February 17, 2016 as part of a settlement between Iconic and the Company, the 2015 Iconic Note along with a remaining balance of $8,300 from former JABRO-Asher notes were restructured to a principal amount of $25,000 with a due date of June 18, 2017 and an interest rate of 0%. Iconic is subject to strict lock-up and leak-out provisions. Additionally, as part of the February 2016 settlement with Iconic, Iconic funded $100,000 new debentures (the “$100,000 Convertible Promissory Note”) due August 2018 bearing 0% interest with the lender subject to strict lock-up and leak-out provisions. On June 27, 2017, Iconic’s $100,000 Convertible Promissory Note issued on February 18, 2016 was amended to reflect an amendment of the conversion price from $.10 cents to $.08 cents per share of common stock. On July 5, 2017, Iconic converted $15,895 of its $100,000 Convertible Promissory Note. On July 25, 2017, Iconic converted $18,950 of its $100,000 Convertible Promissory Note. On January 23, 2018, Iconic converted $65,155 of its $100,000 Convertible Promissory Note. Accordingly, the $100,000 Convertible Promissory Note issued on February 18, 2016 was fully converted into 1,250,001 shares of the Company’s common stock.

 

On April 15, 2015, the Company issued a convertible debenture with the principal amount of $100,000 to HGT Capital, LLC (“HGT”), a non-related party. During the quarter ended June 30, 2015, the Company received the first $50,000 in payment. The remaining $50,000 payment would be made at the request of the borrower. No additional payments were made as of September 30, 2018. Under the terms of the debentures, the amount was unsecured and was due on October 16, 2016. It was convertible into shares of common stock any time after the maturity date at a conversion rate of 50% of the average of the five lowest closing bid prices of the Company’s common stock for the thirty trading days ending one trading day prior to the date the conversion notice was sent by the holder to the Company. On September 21, 2018, the Company entered into a modification agreement with HGT with respect to the convertible promissory note which had had a balance of $107,238. Pursuant to such modification agreement, all defaults were waived and it was agreed that such note will convert at a 25% discount to the market rather than the default rate. HGT also agreed to certain sale restrictions which limit the amount of shares that they can sell in any month for the next three months. HGT also agreed to dismiss, with prejudice, the lawsuit that it had filed against the Company.

 

On June 29, 2017, the Company issued to Iconic a 10% Convertible Promissory Note in the principal amount of $27,000 (the “2017 Iconic Note”). Upon the execution of such Note, the sum of $9,000 was remitted and delivered to the Company. On August 14, 2017, Iconic remitted and delivered to the Company another $9,000. The Company was only required to repay the amount funded and the Company was not required to repay any unfunded portion of the 2017 Iconic Note. As of March 31, 2018, the Company had received a total $18,000 of the $27,000 principal amount. On April 16, 2018, the note was fully converted.

 

 F-13 
 

 

As part of the asset purchase agreement between CMG Holdings Group, Inc. (“CMG Holdings”) and the Company, the Company issued SirenGPS a 0% convertible debenture of $60,000 that matured in August 2018. The debenture was convertible into the Company’s common stock at a 20% discount to the 20-day moving average of the Company’s common stock after a period of seven months. The debt was subject to strict lock-up and leak-out provisions. Recently, ViaOne Services, LLC, a Texas Limited Liability Corporation (“ViaOne”) purchased this debenture from SirenGPS at face value.

 

The Company entered into a line of credit agreement (“Line Of Credit”) with ViaOne on September 27, 2018 (the “Effective Date”). This Line of Credit dated as of, was entered into by and between the Company and ViaOne. The Company had an immediate need for additional capital and asked ViaOne to make a new loan(s) in an initial amount of $25,000 on the Effective Date (the “New Loan”). The Company may need additional capital and ViaOne has agreed pursuant to this Line of Credit to provide for additional advances, although ViaOne shall have no obligation to make any additional loans. Any further New Loans shall be memorialized in a promissory note with substantially the same terms as the New Loan and shall be secured by all of the assets of the Company. On or before the Effective Date, the Company may request in writing to ViaOne that it loan the Company additional sums of up to $250,000 and within five days of such request(s), ViaOne shall have the right, but not an obligation, to make additional loans to the Company and the Company shall in turn immediately issue a note in the amount of such loan. In consideration for making the New Loan, the Company entered into a security agreement whereby ViaOne received a senior security interest in all of the assets of the Company. As of June 30, 2019, the outstanding balance of the Line of Credit was $206,155.

 

Note 5. Derivative Liabilities

 

The following inputs and assumptions were used to value the convertible debentures outstanding during the years ended June 30, 2019 and June 30, 2018:

 

The projected annual volatility for each valuation period was based on the historic volatility of the Company of 231.1% and 329.9% at June 30, 2019 and 2018, respectively. The risk free rate was 2.18% and 2.12% at June 30, 2019 and 2018, respectively. The expected life was one year and the dividend yield was 0% for each year.

 

A summary of the activity of the derivative liability is shown below:

 

Balance, June 30, 2017  $452,521 
Change in value   (184,490)
Balance, June 30, 2018   268,031 
Change in value   260,306 
Balance, June 30, 2019   528,337 

 

 F-14 
 

 

Note 6. Common Stock

 

Equity Transactions for the Year Ended December 31, 2018 through June 30, 2019:

 

On January 8, 2018, Silver Linings Management converted 15,000 shares of the Company’s Series B Preferred Shares into 3,000,000 common shares of the Company.

 

On January 8, 2018, Britton & Associates converted 5,000 the Company’s Series B Preferred Shares in 1,000,000 common shares of the Company.

 

On January 9, 2018, ViaOne Services converted $200,000 its convertible note into 8,333,333 common shares of the Company.

 

On January 12, 2018, SSB Trading converted 10,000 the Company’s Series B Preferred Shares into 2,000,000 common shares of the Company.

 

On January 12, 2018, CMG Holdings converted 5,605 the Company’s Series B Preferred Shares into 1,211,000 common shares of the Company.

 

On January 18, 2018, CMG Holdings converted 9,000 the Company’s Series B Preferred Shares into 1,800,000 common shares of the Company.

 

On January 23, 2018, Iconic Holdings converted $65,155 of its convertible note into 814,438 common shares of the Company.

 

On January 26, 2018, Michael Tadin converted 5,000 the Company’s Series B Preferred Shares into 1,000,000 common shares of the Company.

 

On February 9, 2018, Vik Grover converted 8,665 the Company’s Series B Preferred Shares into 1,733,000 common shares of the Company.

 

On April 16, 2018, Iconic converted $18,000 of a convertible note into 1,892,828 shares of the Company’s common stock.

 

On April 13, 2018, RedDiamond Partners, Inc. (“RedDiamond”) converted 5 shares of Series D Preferred Stock into 555,556 shares of the Company’s common stock.

 

On April 17, 2018, RedDiamond converted 5 shares of Series D Preferred Stock into 609,756 shares of the Company’s common stock.

 

On April 23, 2018, RedDiamond converted 5 shares of Series D Preferred Stock into 806,452 of the Company’s common stock.

 

On May 9, 2018, RedDiamond converted 5 shares of Series D Preferred Stock into 1,020,408 of the Company’s common stock.

 

 F-15 
 

 

On May 23, 2018, RedDiamond converted 5 shares of Series D Preferred Stock into 657,895 of the Company’s common stock.

 

On June 19, 2018, RedDiamond converted 5 shares of Series D Preferred Stock into 1,234,756 of the Company’s common stock.

 

On July 9, 2018, RedDiamond converted 5 shares of Series D Preferred Stock into 1,250,000 of the Company’s common stock.

 

On July 24, 2018, RedDiamond converted 5 shares of Series D Preferred Stock into 1,467,391 of the Company’s common stock.

 

On September 25, 2018, RedDiamond converted 6.50 shares of Series D Preferred Stock into 1,450,893 of the Company’s common stock.

 

On October 16, 2018, RedDiamond converted 6.50 shares of Series D Preferred Stock into 1,377,119 of the Company’s common stock.

 

On November 1, 2018, RedDiamond converted 6.34 shares of Series D Preferred Stock into 792,750 of the Company’s common stock.

 

On November 6, 2018, Lincoln Acquisition converted 17,314 shares of Preferred B Stock into 3,462,800 of the Company’s common stock.

 

On November 13, 2018, RedDiamond converted 6 shares of Series D Preferred Stock into 1,027,397 of the Company’s common stock.

 

On November 29, 2018, RedDiamond converted 5 shares of Series D Preferred Stock into 961,538 of the Company’s common stock.

 

On November 29, 2018, HGT converted $6,978 of a convertible note into 1,655,594 shares of the Company’s common stock.

 

On December 14, 2018, Lincoln Acquisition converted 20,000 shares of Preferred B Stock into 4,000,000 of the Company’s common stock.

 

On December 21, 2018, RedDiamond converted 10 shares of Series D Preferred Stock into 1,811,594 of the Company’s common stock.

 

Share Transactions for the Quarter Ended June 30, 2019:

 

On January 02, 2019, Lincoln Acquisition converted 200 shares of Preferred B Stock into 3,750,000 of the Company’s common stock

 

On January 10, 2019, RedDiamond converted 6 shares of Series D Preferred Stock into 520,833 of the Company’s common stock.

 

 F-16 
 

 

Note 7. Preferred Stock

 

Our Articles of Incorporation authorize us to issue up to 2,250,350 shares of preferred stock, $0.001 par value. Of the 2,250,000 authorized shares of preferred stock, the total number of shares of Series A Preferred Shares the Corporation shall have the authority to issue is Two Hundred Forty Nine thousand Nine Hundred Ninety Nine (249,999), with a stated par value of $0.001 per share, the total number of shares of Series B Preferred Shares the Corporation shall have the authority to issue is Two Million (2,000,000), with a stated par value of $0.001 per share and the total number of shares of Series C Preferred Shares the Corporation shall have the authority to issue is One (1), with a stated par value of $0.001 per share. Our Board of Directors is authorized, without further action by the shareholders, to issue shares of preferred stock and to fix the designations, number, rights, preferences, privileges and restrictions thereof, including dividend rights, conversion rights, voting rights, terms of redemption, liquidation preferences and sinking fund terms. We believe that the Board of Directors’ power to set the terms of, and our ability to issue preferred stock, will provide flexibility in connection with possible financing or acquisition transactions in the future. The issuance of preferred stock, however, could adversely affect the voting power of holders of common stock and decrease the amount of any liquidation distribution to such holders. The presence of outstanding preferred stock could also have the effect of delaying, deterring or preventing a change in control of our company.

 

As of June 30, 2019, we had 7,500 shares of our Series A preferred stock, 68,997 shares of Series B preferred stock, 1 shares of Series C Preferred Stock, and 0 shares of Series D Preferred Stock issued and outstanding.

 

The 7,500 issued and outstanding shares of Series A Preferred Stock are convertible into shares of common stock at a rate of 20 common shares for each Series A Preferred Share. The 68,997 issued and outstanding shares of Series B Preferred Stock are convertible into shares of common stock at a rate of 200 common shares for each Series B Preferred Share. If all of our Series A Preferred Stock and Series B Preferred Stock are converted into shares of common stock, the number of issued and outstanding shares of our common stock will increase by 13,949,400 shares.

 

The 1 issued and outstanding shares of Series C Preferred Stock has voting rights equivalent to 51% of all shares entitled to vote and is held by ViaOne Services LLC, a Company controlled by our CEO.

 

The 6 issued and outstanding shares of Series D Preferred Stock as of December 31, 2018 were convertible into shares of common stock at a rate of 125% of the conversion amount at a price that was the lower of 110% of the volume weighted average price (“VWAP”) of the common stock on the closing date, the VWAP of the common stock on the conversion date or the VWAP of the common stock on the date prior to the conversion date. Series D Preferred Stock was convertible beginning 6 months from the issue date. On September 21, 2018, RedDiamond modified the agreement with the Company. RedDiamond and the Company agreed that the Preferred Shares were convertible into Common Stock (the “Conversion Shares”) at the lower of the Fixed Conversion Price ($.06 per share) or at the VWAP which shall be defined as the average of the five (5) lowest closing prices during the 20 days prior to conversion; for the avoidance of doubt, RedDiamond had not waived its right to the 25% Conversion Premium as defined in the COD. The Company had the obligation to redeem 46.531 of the Preferred Shares (which represents 50% of the Preferred Shares owned by RedDiamond) at 110% of the Stated Value of $46,531 by making three equal payments of $17,061 on October 15, 2018, November 15, 2018 and December 15, 2018. On January 10, 2019, The RedDiamond converted last 6 shares of Series D Preferred Stock into the Company’s common stock.

 

The holders of Series A, Series B, Series C and Series D have a liquidation preference to the holders of common stock.

 

 F-17 
 

 

Note 8. Warrant

 

In connection with the $100,000 convertible debenture issued to HGT Capital, LLC (“HGT”), the Company issued HGT a warrant to purchase 100,000 shares of the Company’s common stock at $1.00 per share. This warrant was not exercised as of June 30, 2019, is exercisable through April 15, 2020 and had a remaining life of 0.79 years as of June 30, 2019. The intrinsic value of the warrant at June 30, 2019 was zero as the exercise price exceeded the closing stock price on June 30, 2019.

 

Note 9. Related Party Transactions

 

On or around April 7, 2016, Silver Linings Management, LLC funded the Company $13,440 in the form of convertible debentures secured by certain high-powered gaming machines purchased from XIDAX. Such note bore interest at a rate of 10% per annum, payable in cash or kind at the option of the Company, matured on April 1, 2018, and was convertible into Series B Preferred shares at the option of the holder at any time. On January 08, 2019, Silver Linings Management converted its Series B Preferred shares into shares of the Company’s Common Stock.

 

On November 30, 2016, ViaOne purchased a Secured Promissory Note equal to a maximum initial principal amount of $150,000 issued by the Company to ViaOne. As additional advances were made by ViaOne to the Company, the principal amount of the Note was increased to $225,000 and $363,000 by amendments dated January 31, 2017 and March 1, 2017, respectively.

 

On May 5, 2017, ViaOne delivered a default notice to the Company pursuant to Section 6 of the Note Purchase Agreement but has subsequently extended the due date and has increased the funding up to One Million ($1,000,000) dollars. After giving the Company a fifteen (15) day notice period to cure the default under the Stock Pledge Agreement, dated November 30, 2016, entered by and among the Company, CMG and ViaOne (“Pledge Agreement”), ViaOne took possession of the Series C Stock, which was subject of the Pledge Agreement.

 

The Secured Promissory Note as amended increased from time to time due to additional advances provided to the Company by ViaOne.

 

On September 1, 2017, the Company executed an amended Employee Services Agreement with ViaOne which stipulated that ViaOne would continue providing to the Company services relating to the Company’s human resources, marketing, advertising, accounting and financing for a monthly management fee of $25,000. This agreement was amended on January 1, 2018. The accrued monthly management fees, $100,000 at December 31, 2017, are convertible by ViaOne into the Company’s common stock at a rate of 125% of the accrued fees at a conversion price of (i) $0.05 per share; or (ii) the volume weighted adjusted price (“VWAP”) of the common stock on the 14th day of each month if the 14th of that month is a trading day. In the event the 14th day of a month falls on a Saturday, Sunday, or a trading holiday, the VWAP of the Common Stock will be valued on the last trading day before the 14th day of the month.

 

On September 27, 2018, the Company and ViaOne, entered into a Line of Credit Agreement (the “LOC Agreement”), pursuant to which the Company issued a secured promissory note with the initial principal amount of $25,000 to ViaOne in exchange for a loan of $25,000 (the “Initial Loan Amount”). In accordance with this Agreement, the Company may request ViaOne to provide loans of up to $250,000, including the Initial Loan Amount, and ViaOne has the right to decide whether it will honor such request. The Initial Loan Amount shall become due on September 30, 2019 (the “Maturity Date”) and bears an interest rate of 8.0% per annum. The unpaid principal and interest of the Promissory Note after the Maturity Date shall accrue interest at a rate of 18.0% per annum. The principal amount of the Promissory Note may increase from time to time up to $250,000 in accordance with the terms and conditions of the Agreement. In connection with the Agreement and Promissory Note, the Company and ViaOne executed a security agreement dated September 27, 2018 whereby the Company granted ViaOne a security interest in all of its assets, including without limitation, cash, inventory, account receivables, real property and intellectual properties, to secure the repayment of the loans made pursuant to the LOC Agreement and Promissory Note.

 

 F-18 
 

 

At June 30, 2019, the total amount owed to ViaOne Services, was $1,551,221.

 

The Company’s Chairman and Chief Executive Officer is the Chief Executive Officer of ViaOne Services.

 

Note 10. Income Taxes

 

The Company has a net operating loss carried forward of approximately $2,891,000 available to offset taxable income in future years until the end of the fiscal year of 2030.

 

The significant components of deferred income tax assets and liabilities at June 30, 2019 and 2018 are as follows:

 

   2019   2018 
Net Operating Loss Carryforward  $607,178   $387,825 
           
Valuation allowance   (607,178)  $(387,825)
           
Net Deferred Tax Asset  $-   $- 

 

The income tax benefit has been computed by applying the weighted average income tax rates of the United States (federal and state rates) of 21% and 35%, respectively, to a net loss before income taxes calculated for each jurisdiction. The tax effects of significant temporary differences, which comprise future tax assets and liabilities, are as follows:

 

   2019   2018 
Income tax recovery at statutory rate  $(93,734)  $(50,327)
           
Valuation allowance change   93,734   $50,327 
           
Provision for income taxes  $-   $- 

 

 F-19 
 

 

Note 11. Commitments and Contingencies

 

HGT filed a lawsuit against the Company, claiming breach of contract due to a default on a $50,000 junior loan made by HGT to HDS International Corp., our predecessor, in 2015. The Company retained counsel to represent it on this matter and responded with affirmative defenses in the Supreme Court of New York. On September 21, 2018, the Company entered into a modification agreement with HGT with respect to the convertible promissory note which has a balance of $107,238. Pursuant to such modification agreement, all defaults were waived and it was agreed that such note will convert at a 25% discount to the market rather than the default rate. HGT also agreed to certain sale prohibitions which limit the amount of shares that they can sell in any month for the next three months. As a result of the modification agreement, HGT withdrew, with prejudice, the lawsuit that it had filed against the Company.

 

Note 12. Acquisition and Discontinued Operations

 

On March 21, 2018, the Company announced the acquisition of Crypto Strategies Group, Inc. for consideration of $500. The Company intended to diversify its business and enter into the cryptocurrency market through such acquisition. As the acquisition was between entities under common control with the Company, the assets and liabilities were recorded at their carrying amount on the date of transfer. On the date of transfer, Crypto Strategies Group, Inc. had no assets or liabilities.

 

On December 12, 2018, the Company dissolved Crypto Strategies Group, Inc. and the net liabilities were assumed by a related party.

 

13. Subsequent Events

 

None

 

 F-20 
 

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

 

Cautionary Statements

 

This Quarterly Report on Form 10-Q (“Form 10-Q”) may contain “forward-looking statements,” as that term is used in federal securities laws, about Good Gaming, Inc. (“GMER,” “we,” “our,” “us,” the “Company,” “management”) and its financial condition, results of operations and business. These statements include, among others:

 

statements concerning the potential benefits that we may experience from our business activities and certain transactions we contemplate or have completed; and
   
statements of GMER’s expectations, beliefs, future plans and strategies, anticipated developments and other matters that are not historical facts. These statements may be made expressly in this Form 10-Q. You can find many of these statements by looking for words such as “believes,” “expects,” “anticipates,” “estimates,” “opines,” or similar expressions used in this Form 10-Q. These forward-looking statements are subject to numerous assumptions, risks and uncertainties that may cause GMER’s actual results to be materially different from any future results expressed or implied by GMER in those statements. The most important facts that could prevent GMER from achieving its stated goals include, but are not limited to, the following:

 

(a) volatility or decline of our stock price;
   
(b) potential fluctuation of quarterly results;
   
(c) failure of GMER to achieve revenues or profits;
   
(d) inadequate capital to continue or expand our business, and inability to raise additional capital or financing to implement our business plans;
   
(e) decline in demand for GMER’s products and services;
   
(f) rapid adverse changes in markets;
   
(g) litigation with or legal claims and allegations by outside parties against us, including but not limited to challenges to our intellectual property rights; and
   
(h) insufficient revenues to cover operating costs.

 

There is no assurance that GMER will be profitable, able to successfully develop, manage or market its products and services, be able to attract or retain qualified executives and personnel, able to obtain customers for its products or services, additional dilution in outstanding stock ownership may be incurred due to the issuance of more shares, warrants and stock options, the exercise of outstanding warrants and stock options, or the conversion of convertible promissory notes, and other risks inherent in GMER’s businesses.

 

Because the statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by the forward-looking statements. GMER cautions you not to place undue reliance on the statements, which speak only as of the date of this Form 10-Q. The cautionary statements contained or referred to in this section should be considered in connection with any subsequent written or oral forward-looking statements that GMER or persons acting on its behalf may issue. GMER does not undertake any obligation to review or confirm analysts’ expectations or estimates or to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date of this Form 10-Q, or to reflect the occurrence of unanticipated events.

 

 4 
 

 

Overview

 

The Company was incorporated on November 3, 2008 under the laws of the State of Nevada, to engage in certain business services. Our goal is to become a leading tournament gaming provider as well as an online destination, targeting over 250 million esports players and participants worldwide that want to compete at the high school or college level. We are a developmental stage business, have generated limited revenues to date and have a history of operating losses.

 

The Good Gaming platform was established in early 2014 by its founding members who recognized the need that millions of gamers worldwide desired to play games at competitive levels. The founders recognized that there was no structure or organization on a large scale for amateur gamers while professional esports was quickly establishing itself.

 

Good Gaming is effectively building the business infrastructure for the rapidly growing esports industry, similar to the high school and college athletic industry. Good Gaming is designed to be the gateway for amateur esports athletes to compete at the semi-professional level, improve their gaming skills, and interact with veteran gamers globally in a destination site and social networking framework.

 

Good Gaming differs from the professional level of the esports industry by focusing on more than approximately 250 million gamers that fall below the professional level but are above the casual level, classified as “amateurs.” Good Gaming distinguishes itself from its direct and indirect competitors by being the first company to offer multi-game, multi-console services at the amateur esports level. The Company is not exclusive to any particular hardware or software vendor.

 

On May 4, 2016, the Company announced that it had completed its first closed public beta testing of their 2.0 tournament platform to determine the functionality, speed, ease of use, and accuracy of the system and are preparing to enter into full-blown production.

 

On February 18, 2016, the Company, formerly HDS International Corp., acquired the assets of Good Gaming, Inc. from CMG Holdings Group, Inc. (OTCQB: CMGO). On that date, the Company’s former CEO, Paul Rauner, resigned. The Company appointed Vikram Grover to the positions of CEO and Director of the board of directors (the “Board”). Vikram Grover is a former Wall Street analyst and investment banker with more than 20 years of experience in telecommunications, media and technology. In addition, David Dorwart was elected by the majority shareholders to the Company’s Board. Mr. Dorwart is the Co-Founder and Chairman of Assist Wireless, Inc., a provider of lifeline wireless services to tens of thousands of subscribers primarily in the Midwest.

 

On June 27, 2017 the Board of Directors of the Company appointed David B. Dorwart as the Company’s Chief Executive Officer. On June 21, 2017, Mr. Dorwart was appointed to serve as the Chairman of the Board of Directors. David B. Dorwart, Chairman and CEO of Good Gaming, Inc., brings over 31 years of start-up entrepreneurism and executive level management to the Company. Mr. Dorwart was a CoFounder and CEO of dPi Teleconnect, a prepaid wireless provider, for 10 years. During his tenure, he grew the company from a start-up to $75 million in revenues before selling the company. Over the last 9 years, he has been involved with several other successful projects including Assist Wireless, Brooklet Energy Distribution, PayGo Distributors and Britton & Associates. He is currently the Chairman and CoFounder of ViaOne Services, a company which specializes in wireless communications and provides intricate multi-faceted services for start-up companies utilizing industry experts. By virtue of the ownership of this Series C Preferred Stock, ViaOne owns the majority voting power of the Company.

 

On June 27, 2017, the Company also bolstered its Board of Directors with executive level professionals by adding two seasoned individuals who specialize in organization and finance as well as the branding and marketing of established and emerging organizations which are poised to show significant growth.

 

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Domenic Fontana is currently Sr. Vice President of ViaOne Services and a new board member of the Company. He is an experienced CPA and financial executive who has worked in progressively more advanced executive roles throughout his career. Having worked at Verizon, Ebay and now ViaOne Services over the last 13 years, he has developed intimate and extensive knowledge of executive level management and the telecommunications industry. He has worked in all aspects of Finance, Accounting, Treasury, and Operations.

 

Jordan Majkszak Axt, a new board member, is a results-producing marketing professional with over 14 years of experience successfully developing marketing and branding strategies. He has been consistently noted by executives, colleagues, and journalists for his specific expertise in bringing products and services online with a comprehensive digital go-to-market strategy. He has previously held executive level positions as Director of Marketing for ProfitPoint Inc. and Clutch Holdings LLC. He is currently Sr. Director of Marketing of ViaOne Services where he develops all marketing and customer acquisition strategies for 14 consumer facing brands.

 

On July 10, 2017, the Company’s Board of Directors elected David Dorwart its CEO. Additionally, the Board of Directors approved to elect Domenic Fontana and Jordan Axt to the Company’s Board of Directors.

 

On August 8, 2017, the board of directors of the Company accepted Vikram Grover’s resignation as the Treasurer of the Company and as a member of the Board, effective immediately.

 

On August 8, 2017, the Board of the Company accepted Barbara Laken’s resignation as the Secretary of the Company and as a member on the Board, effective immediately.

 

On August 9, 2017, the Company announced a strategic review of its business, which prompted improvements to its business model and a reduction in expenses designed to accelerate its move to free cash flow generation.

 

On August 29, 2017, Eric Brown became the Chief Operating Officer.

 

In September of 2017, the Company began focusing on its Minecraft server by enhancing the development staff and launched an offering of microtransactions after it saw the opportunity to generate revenue without adding a great deal of overhead. The initial offering of microtransactions exceeded revenue expectations and the Company has continued to expand the Minecraft server offerings. The Company also began pursuing the acquisition of additional Minecraft servers that were already established to begin scaling this effort.

 

In March of 2017, the Company began exploring potential partnerships with various franchise opportunities related to both LAN centers and Virtual Reality centers. Financial analysis and research on these opportunities is ongoing.

 

On March 21, 2018, the Company acquired Crypto Strategies Group, Inc. for consideration of $500. The Company intends to diversify its business and enter into the cryptocurrency market through such acquisition.

 

On December 12, 2018, the Company dissolved Crypto Strategies Group, Inc.

 

In March of 2019, the Company discontinued Minecade and Olimpo servers and decided to focus on Minecraft servers.

 

In March of 2019, Eric Brown resigned from the Chief Operating Officer’s position.

 

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Technology

 

In 2016, the Company completed its 2.0 tournament platform, thereafter ran dozens of robotic internal test tournaments and held numerous free-to-play tournaments on large scales with its partner The Syndicate, the owner of the world’s longest running online gaming guild that had 1,200 members worldwide. Good Gaming conducted two closed public beta tournaments of hundreds of participants in May 2016 in order to fully vet the system. After making roughly 100 fixes and changes to the system, it now runs smoothly. The system is designed to scale to 512,000 concurrent competitors. The Company has updated the system to handle team tournaments, which will further expand its opportunity to popular titles that have tens of millions of active players and has recently launched titles that have the potential for cross-platform play among Gaming PC, Microsoft Xbox and Sony PlayStation.

 

In 2017, the Company ran hundreds of tournaments on a regular basis with a dedicated customer base of over 30,000 members. Additionally, the Company expanded its website by offering content relevant to the member base with information relating to game play strategy and game news. This generated nearly 100,000 unique visits per month. In an effort to monetize that traffic, the Company employed the use of Google display advertising and tested a subscription model. After careful evaluation of the Company’s strategy, management decided to move away from free tournaments and custom content and focus on growing and monetizing our Minecraft server, which has grown substantially in popularity. This decision was a result of comprehensive competitive analysis and evaluations made in how the esports industry was shifting in its space. Tournaments and custom content are currently suspended while the Company grows revenue and focuses on expanding its efforts with Minecraft. The Company is also aggressively evaluating several business models and acquisition opportunities to resume its previous success as it is related to tournaments.

 

Business Strategy

 

In the past, our management team’s strategy was to be a full-service company endeavoring to provide best in class tournaments, the best platform on which they are played, and content that is all about the esports world. We have looked at this strategy and have changed the way we view our business.

 

As tournaments and investment in servers were not profitable to the company, we have decided to focus on Minecraft. We have a well-established server and will continue to devote resources to developing and acquiring other Minecraft assets. We feel that we have learned how to monetize this and will be able to continue to grow and have it as a meaningful part of our business strategy.

 

Offices

 

Our executive offices are located at 415 McFarlan Rd, Suite 108, Kennett Square, PA 19501. Our telephone number is (888) 295-7279.

 

Recently Issued Accounting Pronouncements

 

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842), which amends the existing accounting standards for leases. The new standard requires lessees to record a right-of-use (“ROU”) asset and a corresponding lease liability on the balance sheet (with the exception of short-term leases). This new standard is effective for annual reporting periods beginning after December 15, 2018, and interim reporting periods within those annual reporting periods, with early adoption permitted. We adopted this new standard effective January 1, 2019. Adoption did not have any effect on the Company as it does not have any leases.

 

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The Company has implemented all other new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the consolidated financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

 

RESULTS OF OPERATIONS

 

Our auditors have issued a going concern opinion on the financial statements for the year ended December 31, 2018. This means that our auditors believed there was substantial doubt that we can continue as an ongoing business for the next twelve months from the date of issuance of this going concern opinion unless we obtain additional capital. We generated little revenue in the past. We have completed the development of our website, sourced out suppliers for products to sell and sourced out customers to buy our products. Accordingly, we need to raise cash from sources other than operations. Our other source for cash at this time is investments by others in our company and the revenue we generate from the sales of our products. We need to raise cash to continue our project and build our operations.

 

Plan of Operation – Milestones

 

We are at an early stage of our new business operations. Over the next twelve months, our primary target milestones include:

 

1

Continue to achieve substantial growth within our Minecraft division. This is a profitable center for us and we expect the continued growth of our existing server, good-gaming.com as well. Additionally, we will look to expand this division into other avenues.

   
2. Continue to evaluate opportunities which have synergies to our existing business line.
   
3 Anticipate sustainable financial profitability in fiscal year of 2019.

 

Limited operating history and need for additional capital

 

There is limited historical financial information about us upon which to base an evaluation of our performance relating to our new business direction. We have generated little revenue. We cannot guarantee we will be successful in our business operations. Our business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources and possible cost overruns due to price and cost increases in services and products.

 

Results of Operations

 

The three months ended June 30, 2019 as compared to June 30, 2018

 

Operating Revenues

 

We have generated $7,047 in revenue in the three months ended June 30, 2019 and $22,974 in revenue in the three months ended June 30, 2018, which reflects a decrease of $15,927 or 69%. Such decrease in revenues in the compared periods was primarily caused by discontinuation of Minecraft and Olimpo servers.

 

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Operating Expenses and Net Loss

 

Operating expenses for the three months ended June 30, 2019 were $228,484 compared with $248,157 for the three months ended June 30, 2018. The decrease in operating expenses in the amount of $19,673 or 8% was attributed to decrease in professional fees for day to day operations.

 

During the three months ended June 30, 2019, the Company recorded a net loss of $251,143 compared with a net loss of $270,068 for the three months ended June 30, 2018. The decrease in net loss in the amount of $18,925 or 7% was attributed to the decrease in revenues and the change in value of the Company’s derivative liabilities.

 

The six months ended June 30, 2019 as compared to June 30, 2018

 

Working Capital

 

   June 30, 2019   June 30, 2018 
Current Assets  $28,294   $48,755 
           
Current Liabilities   2,310,814    1,555,425 
           
Working Capital (Deficit)  $(2,282,520)  $(1,506,670)

 

Operating Revenues

 

We have generated $27,828 in revenue in the six months ended June 30, 2019 and $57,706 in revenue in the six months ended June 30, 2018, which reflects a decrease of $29,878 or 52%. Such decrease in revenues in the compared periods was primarily caused by the discontinuation of Minecraft and Olimpo servers.

 

Operating Expenses and Net Loss

 

Operating expenses for the six months ended June 30, 2019 were $478,184 compared with $486,432 for the six months ended June 30, 2018. The decrease in operating expenses in the amount of $8,248 or 2% was attributed to a decrease in professional fees for day to day operations.

 

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During the six months ended June 30, 2019, the Company recorded a net loss of $446,353 compared with a net loss of $239,653 for the six months ended June 30, 2018. The increase in net loss in the amount of $206,700 or 46% was attributed to the decrease in revenues and the decrease in the change in value of the Company’s derivative liabilities.

 

Liquidity and Capital Resources

 

As of June 30, 2019, the Company’s cash balance consisted of $2,044 compared to cash balance of $22,426 as of June 30, 2018. The decrease in the cash balance was attributed to the decrease in financing that we received for day-to-day activities. As of June 30, 2019, the Company had $248,809 in total assets compared to total assets of $710,834 as at June 30, 2018. The decrease in total assets was attributable to the amortization of the assets purchased during the acquisition of Good Gaming, Inc.

 

As of June 30, 2019, the Company had total liabilities of $2,310,814 compared with total liabilities of $1,435,926 as of June 30, 2018. The increase in liabilities was attributable to increase in financing and in derivative liabilities.

 

As of June 30, 2019, the Company has a working capital deficit of $2,282,520 compared with a working capital deficit of $1,368,264 as of June 30, 2018 with the increase in the working capital deficit attributed to an increase in financing the Company received for general working capital purposes.

 

Cash flow from Operating Activities

 

During the six months ended June 30, 2019, the Company used $243,120 of cash for operating activities compared to the use of cash in an amount of $416,719 for operating activities during the six months ended June 30, 2018. The decrease in the use of cash for operating activities in the amount of $173,599 or 41% was attributed to the net decrease in derivative liabilities.

 

Cash flow from Investing Activities

 

During the quarter ended June 30, 2019, the Company had $2,022 in cash used in investing activities compared to $26,250 for the quarter ended June 30, 2018. The decrease in cash used in investing activities in the amount of $24,228 was due to the Company’s decision to use the limited servers.

 

Cash flow from Financing Activities

 

During the year ended June 30, 2019, the Company received $234,737 of proceeds from financing activities compared to $404,358 during the year ended June 30, 2018. The decrease in proceeds from financing activities was due to the decline in proceeds from the sale of preferred stock and convertible debentures.

 

Going Concern

 

We have not attained profitable operations and are dependent upon obtaining financing to pursue any extensive acquisitions and activities. As such, there is substantial doubt about our ability to continue as a going concern for a period of one year from the issuance of these financial statements without further financing.

 

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Off-Balance Sheet Arrangements

 

As of June 30, 2019, we had no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.

 

Future Financings

 

We will continue to rely on equity sales of our preferred shares in order to continue to fund our business operations. Issuance of additional shares will result in dilution to existing stockholders.

 

There is no assurance that we will achieve any additional sales of the equity securities or arrange for debt or other financing to fund our operations and other activities.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

Not required for smaller reporting companies.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

Based on the evaluation of our disclosure controls and procedures (as defined in Rule 13a-15e under the Securities Exchange Act of 1934 the “Exchange Act”), our principal executive officer and principal financial officer have concluded that as of the end of the three-month period ended June 30, 2019 covered by this quarterly report on Form 10-Q, such disclosure controls and procedures were not effective due to the lack of segregation of duties and lack of a formal review process that includes multiple levels of review to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms because of the identification of a material weakness in our internal control over financial reporting which we view as an integral part of our disclosure controls and procedures. The material weakness relates to the lack of segregation of duties in financial reporting, as our financial reporting and accounting functions were performed by an external consultant with no oversight by a professional with accounting expertise. Our Chief Executive Officer and Chief Financial Officer did not possess accounting expertise and our company does not have an audit committee. This weakness was due to the Company’s lack of working capital to hire additional staff. Subsequently, with the completion of transition in the management and Board, the financial management will be led by a certified public accountant with extensive accounting experience who follows the standards of U.S. generally accepted accounting principles and internal controls procedures to ensure the faithful representation of the financial statements, including the results of operations, financial position, and cash flows of the reporting entity.

 

Changes in Internal Control over Financial Reporting

 

Except as noted above, there have been no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during our second quarter of 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

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PART II - OTHER INFORMATION

 

Item 1. Legal proceedings

 

None

 

Item 1–A. Risk factors

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

 

Item 2. Unregistered sales of equity securities and use of proceeds

 

None during the three months ended June 30, 2019.

 

Item 3. Defaults upon senior securities

 

None.

 

Item 4. Mine safety disclosures

 

Not Applicable.

 

Item 5. Other information

 

Not Applicable.

 

Item 6. Exhibits

 

31.1   Certification pursuant to Section 302 of the Sarbanes–Oxley Act of 2002
     
31.2   Certification pursuant to Section 302 of the Sarbanes–Oxley Act of 2002
     
32.1   Certification pursuant to Section 906 of the Sarbanes–Oxley Act of 2002
     
32.2   Certification pursuant to Section 906 of the Sarbanes–Oxley Act of 2002

 

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SIGNATURES

 

In accordance with 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.

 

  Good Gaming, Inc.
  (the “Registrant”)
     
August 14, 2019    
     
  BY: /s/ David B. Dorwart
    David B. Dorwart
    Principal Executive Officer

 

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