10-Q 1 form10-q.htm
false Q2 --07-31 0000924396 P3Y 0000924396 2023-08-01 2024-01-31 0000924396 2024-03-15 0000924396 2024-01-31 0000924396 2023-07-31 0000924396 us-gaap:NonrelatedPartyMember 2024-01-31 0000924396 us-gaap:NonrelatedPartyMember 2023-07-31 0000924396 us-gaap:RelatedPartyMember 2024-01-31 0000924396 us-gaap:RelatedPartyMember 2023-07-31 0000924396 us-gaap:SeriesAPreferredStockMember 2024-01-31 0000924396 us-gaap:SeriesAPreferredStockMember 2023-07-31 0000924396 2023-11-01 2024-01-31 0000924396 2022-11-01 2023-01-31 0000924396 2022-08-01 2023-01-31 0000924396 OLKR:CollectiblesMember 2023-11-01 2024-01-31 0000924396 OLKR:CollectiblesMember 2022-11-01 2023-01-31 0000924396 OLKR:CollectiblesMember 2023-08-01 2024-01-31 0000924396 OLKR:CollectiblesMember 2022-08-01 2023-01-31 0000924396 OLKR:SponsorshipMember 2023-11-01 2024-01-31 0000924396 OLKR:SponsorshipMember 2022-11-01 2023-01-31 0000924396 OLKR:SponsorshipMember 2023-08-01 2024-01-31 0000924396 OLKR:SponsorshipMember 2022-08-01 2023-01-31 0000924396 us-gaap:PreferredStockMember us-gaap:SeriesAPreferredStockMember 2023-07-31 0000924396 us-gaap:CommonStockMember 2023-07-31 0000924396 us-gaap:AdditionalPaidInCapitalMember 2023-07-31 0000924396 us-gaap:RetainedEarningsMember 2023-07-31 0000924396 us-gaap:PreferredStockMember us-gaap:SeriesAPreferredStockMember 2023-10-31 0000924396 us-gaap:CommonStockMember 2023-10-31 0000924396 us-gaap:AdditionalPaidInCapitalMember 2023-10-31 0000924396 us-gaap:RetainedEarningsMember 2023-10-31 0000924396 2023-10-31 0000924396 us-gaap:PreferredStockMember us-gaap:SeriesAPreferredStockMember 2022-07-31 0000924396 us-gaap:CommonStockMember 2022-07-31 0000924396 us-gaap:AdditionalPaidInCapitalMember 2022-07-31 0000924396 us-gaap:RetainedEarningsMember 2022-07-31 0000924396 2022-07-31 0000924396 us-gaap:PreferredStockMember us-gaap:SeriesAPreferredStockMember 2022-10-31 0000924396 us-gaap:CommonStockMember 2022-10-31 0000924396 us-gaap:AdditionalPaidInCapitalMember 2022-10-31 0000924396 us-gaap:RetainedEarningsMember 2022-10-31 0000924396 2022-10-31 0000924396 us-gaap:PreferredStockMember us-gaap:SeriesAPreferredStockMember 2023-08-01 2023-10-31 0000924396 us-gaap:CommonStockMember 2023-08-01 2023-10-31 0000924396 us-gaap:AdditionalPaidInCapitalMember 2023-08-01 2023-10-31 0000924396 us-gaap:RetainedEarningsMember 2023-08-01 2023-10-31 0000924396 2023-08-01 2023-10-31 0000924396 us-gaap:PreferredStockMember us-gaap:SeriesAPreferredStockMember 2023-11-01 2024-01-31 0000924396 us-gaap:CommonStockMember 2023-11-01 2024-01-31 0000924396 us-gaap:AdditionalPaidInCapitalMember 2023-11-01 2024-01-31 0000924396 us-gaap:RetainedEarningsMember 2023-11-01 2024-01-31 0000924396 us-gaap:PreferredStockMember us-gaap:SeriesAPreferredStockMember 2022-08-01 2022-10-31 0000924396 us-gaap:CommonStockMember 2022-08-01 2022-10-31 0000924396 us-gaap:AdditionalPaidInCapitalMember 2022-08-01 2022-10-31 0000924396 us-gaap:RetainedEarningsMember 2022-08-01 2022-10-31 0000924396 2022-08-01 2022-10-31 0000924396 us-gaap:PreferredStockMember us-gaap:SeriesAPreferredStockMember 2022-11-01 2023-01-31 0000924396 us-gaap:CommonStockMember 2022-11-01 2023-01-31 0000924396 us-gaap:AdditionalPaidInCapitalMember 2022-11-01 2023-01-31 0000924396 us-gaap:RetainedEarningsMember 2022-11-01 2023-01-31 0000924396 us-gaap:PreferredStockMember us-gaap:SeriesAPreferredStockMember 2024-01-31 0000924396 us-gaap:CommonStockMember 2024-01-31 0000924396 us-gaap:AdditionalPaidInCapitalMember 2024-01-31 0000924396 us-gaap:RetainedEarningsMember 2024-01-31 0000924396 us-gaap:PreferredStockMember us-gaap:SeriesAPreferredStockMember 2023-01-31 0000924396 us-gaap:CommonStockMember 2023-01-31 0000924396 us-gaap:AdditionalPaidInCapitalMember 2023-01-31 0000924396 us-gaap:RetainedEarningsMember 2023-01-31 0000924396 2023-01-31 0000924396 srt:SubsidiariesMember 2023-08-01 2024-01-31 0000924396 OLKR:SubsidiariesOneMember 2023-08-01 2024-01-31 0000924396 OLKR:SubsidiariesTwoMember 2023-08-01 2024-01-31 0000924396 2022-08-01 2023-07-31 0000924396 us-gaap:SoftwareDevelopmentMember srt:MinimumMember 2024-01-31 0000924396 us-gaap:SoftwareDevelopmentMember srt:MaximumMember 2024-01-31 0000924396 us-gaap:SeriesAPreferredStockMember 2023-08-01 2024-01-31 0000924396 us-gaap:CommonStockMember 2023-08-01 2024-01-31 0000924396 srt:MinimumMember us-gaap:EmployeeStockOptionMember 2023-08-01 2024-01-31 0000924396 srt:MaximumMember us-gaap:EmployeeStockOptionMember 2023-08-01 2024-01-31 0000924396 us-gaap:WarrantMember 2024-01-31 0000924396 us-gaap:SeriesAPreferredStockMember 2023-08-01 2024-01-31 0000924396 us-gaap:SeriesAPreferredStockMember 2022-08-01 2023-01-31 0000924396 us-gaap:EmployeeStockOptionMember 2023-08-01 2024-01-31 0000924396 us-gaap:EmployeeStockOptionMember 2022-08-01 2023-01-31 0000924396 us-gaap:WarrantMember 2023-08-01 2024-01-31 0000924396 us-gaap:WarrantMember 2022-08-01 2023-01-31 0000924396 us-gaap:NonrelatedPartyMember OLKR:AugustTwentyTwentyThreeMember 2023-08-01 2024-01-31 0000924396 us-gaap:NonrelatedPartyMember OLKR:AugustTwentyTwentyThreeMember 2024-01-31 0000924396 us-gaap:NonrelatedPartyMember OLKR:AugustTwentyTwentyThreeMember 2023-07-31 0000924396 us-gaap:NonrelatedPartyMember OLKR:NovemberTwentyTwentyThreeMember 2023-08-01 2024-01-31 0000924396 us-gaap:NonrelatedPartyMember OLKR:NovemberTwentyTwentyThreeMember 2024-01-31 0000924396 us-gaap:NonrelatedPartyMember OLKR:NovemberTwentyTwentyThreeMember 2023-07-31 0000924396 us-gaap:NonrelatedPartyMember OLKR:DecemberTwentyTwentyThreeMember 2023-08-01 2024-01-31 0000924396 us-gaap:NonrelatedPartyMember OLKR:DecemberTwentyTwentyThreeMember 2024-01-31 0000924396 us-gaap:NonrelatedPartyMember OLKR:DecemberTwentyTwentyThreeMember 2023-07-31 0000924396 us-gaap:NonrelatedPartyMember 2023-08-01 2024-01-31 0000924396 OLKR:ChiefExecutiveOfficerAndDirectorMember 2023-08-01 2024-01-31 0000924396 OLKR:ChiefExecutiveOfficerAndDirectorMember 2024-01-31 0000924396 OLKR:ChiefExecutiveOfficerAndDirectorMember 2023-07-31 0000924396 OLKR:PresidentAndDirectorMember 2023-08-01 2024-01-31 0000924396 OLKR:PresidentAndDirectorMember 2024-01-31 0000924396 OLKR:PresidentAndDirectorMember 2023-07-31 0000924396 us-gaap:RelatedPartyMember 2023-08-01 2024-01-31 0000924396 us-gaap:CommonClassAMember 2024-01-31 0000924396 us-gaap:CommonClassAMember 2023-07-31 0000924396 us-gaap:CommonClassAMember 2023-08-01 2024-01-31 0000924396 us-gaap:CommonClassAMember 2022-08-01 2023-07-31 0000924396 us-gaap:SeriesAPreferredStockMember 2022-08-01 2023-07-31 0000924396 us-gaap:CommonStockMember 2023-08-01 2024-01-31 0000924396 us-gaap:CommonStockMember 2022-08-01 2023-07-31 0000924396 us-gaap:SeriesAPreferredStockMember 2022-08-01 2023-07-31 0000924396 OLKR:ThirdPartiesMember 2023-08-01 2024-01-31 0000924396 OLKR:ThirdPartiesMember srt:MinimumMember 2024-01-31 0000924396 OLKR:ThirdPartiesMember srt:MaximumMember 2024-01-31 0000924396 OLKR:OfficersAndDirectorsMember 2022-08-01 2023-07-31 0000924396 OLKR:OfficersAndDirectorsMember 2023-07-31 0000924396 us-gaap:CommonStockMember 2022-08-01 2023-07-31 0000924396 us-gaap:CommonStockMember srt:MinimumMember 2023-07-31 0000924396 us-gaap:CommonStockMember srt:MaximumMember 2023-07-31 0000924396 us-gaap:WarrantMember 2022-08-01 2023-07-31 0000924396 OLKR:ThirdPartiesMember 2022-08-01 2023-07-31 0000924396 OLKR:ThirdPartiesMember srt:MinimumMember 2023-07-31 0000924396 OLKR:ThirdPartiesMember srt:MaximumMember 2023-07-31 0000924396 2021-08-01 2022-07-31 0000924396 2022-09-01 2022-09-30 0000924396 2022-09-30 0000924396 us-gaap:EmployeeStockOptionMember 2024-01-31 0000924396 us-gaap:EmployeeStockOptionMember 2023-08-01 2024-01-31 0000924396 us-gaap:WarrantMember 2023-07-31 0000924396 2022-05-31 0000924396 2022-05-30 2022-05-31 0000924396 2022-06-01 2023-08-31 iso4217:USD xbrli:shares iso4217:USD xbrli:shares xbrli:pure

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

 

FORM 10-Q

 

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended January 31, 2024

 

☐ 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 000-24520

 

OpenLocker Holdings, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware   04-3021770

(State or other jurisdiction

of incorporation or organization)

  

(I.R.S. Employer

Identification No.)

 

1700 Palm Beach Lakes Blvd., Suite 820

West Palm Beach, FL

   33401
(Address of principal executive offices)   (Zip Code)

 

(305) 351-9195

(Registrant’s telephone number, including area code)

 

N/A

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

 

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

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
N/A   N/A   N/A

 

Indicate by check mark whether 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 filing requirements for the past 90 days. Yes ☒ 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 such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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 ☒ Smaller reporting company ☒
    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 ☒

 

As of March 15, 2024, there were 41,604,650 shares of common stock, par value $0.0001, issued and outstanding.

 

 

 

 
 

 

Table of Contents

 

    Page
Part I—Financial Information  
     
Item 1. Financial Statements 4
  Consolidated Balance Sheets at January 31, 2024 and July 31, 2023 (Unaudited) 4
  Consolidated Statements of Operations for the Three and Six Months Ended January 31, 2024 and 2023 (Unaudited) 5
  Consolidated Statements of Changes in Stockholders’ Deficit for the Three and Six Months Ended January 31, 2024 and 2023 (Unaudited) 6
  Consolidated Statements of Cash Flows for the Three and Six Months Ended January 31, 2024 and 2023 (Unaudited) 8
  Notes to Unaudited Consolidated Financial Statements 9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 24
Item 3. Quantitative and Qualitative Disclosures About Market Risk 31
Item 4. Controls and Procedures 31
     
Part II—Other Information  
     
Item 1. Legal Proceedings 31
Item 1A. Risk Factors 31
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 32
Item 3. Defaults Upon Senior Securities 32
Item 4. Mine Safety Disclosures 32
Item 5. Other Information 32
Item 6. Exhibits 32
     
  Signatures 33

 

2
 

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This Quarterly Report includes “forward-looking statements” within the meaning of the federal securities laws that involve risks and uncertainties. Forward-looking statements include statements we make concerning our plans, objectives, goals, strategies, future events, future revenues or performance, capital expenditures, financing needs and other information that is not historical information. When used in this quarterly report, the words “estimates,” “expects,” “anticipates,” “projects,” “forecasts,” “plans,” “intends,” “believes,” “foresees,” “seeks,” “likely,” “may,” “might,” “will,” “should,” “goal,” “target” or “intends” and variations of these words or similar expressions (or the negative versions of any such words) are intended to identify forward-looking statements. All forward-looking statements are based upon information available to us on the date of this Quarterly Report.

 

These forward-looking statements are subject to risks, uncertainties and other factors, many of which are outside of our control, that could cause actual results to differ materially from the results discussed in the forward-looking statements. These risks and uncertainties are discussed in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended July 31, 2023, filed with the Securities and Exchange Commission on November 1, 2023, as the same may be updated from time to time.

 

All forward-looking statements attributable to us in this Quarterly Report apply only as of the date of this Quarterly Report and are expressly qualified in their entirety by the cautionary statements included in this Quarterly Report. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We undertake no obligation to publicly update or revise forward-looking statements to reflect events or circumstances after the date made or to reflect the occurrence of unanticipated events, except as required by law.

 

3
 

 

PART I—FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

OpenLocker Holdings, Inc. and Subsidiaries

Consolidated Balance Sheets

 

   January 31, 2024   July 31, 2023 
   (Unaudited)     
         
Assets          
           
Current Assets          
Cash  $22,424   $15,539 
Accounts receivable   5,000    8,000 
Total Current Assets   27,424    23,539 
           
Website - net   1,317    2,901 
           
Operating lease - right-of-use asset - related party   -    278 
           
Total Assets  $28,741   $26,718 
           
Liabilities and Stockholders’ Deficit          
           
Current Liabilities          
Accounts payable and accrued expenses  $131,505   $113,846 
Accounts payable and accrued expenses - related parties   6,155    - 
Deferred revenue   5,000    10,050 
Operating lease liability - related party   -    498 
Note payable - net   183,583    - 
Notes payable - related parties   80,000    - 
Total Current Liabilities   406,243    124,394 
           
Total Liabilities   406,243    124,394 
           
Commitments and Contingencies   -    - 
           
Stockholders’ Deficit          
Series A, convertible preferred stock - $0.0001 par value, 200,000 shares authorized; 58,415 and 35,520 shares issued and outstanding, respectively   5    5 
Common stock - $0.0001 par value, 10,000,000,000 shares authorized; 41,604,650 and 40,675,006 shares issued and outstanding, respectively   4,160    4,071 
Additional paid-in capital   10,365,398    10,032,335 
Accumulated deficit   (10,747,065)   (10,134,087)
Total Stockholders’ Deficit   (377,502)   (97,676)
           
Total Liabilities and Stockholders’ Deficit  $28,741   $26,718 

 

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

 

4
 

 

OpenLocker Holdings, Inc. and Subsidiaries

Consolidated Statements of Operations

(Unaudited)

 

   2024   2023   2024   2023 
  

For the Three Months Ended

January 31,

  

For the Six Months Ended

January 31,

 
   2024   2023   2024   2023 
                 
Revenues                    
Collectibles  $3,679   $5,949   $6,260   $11,089 
Sponsorships   4050    -    10,050    - 
Total revenues   7,729    5,949    16,310    11,089 
                     
Cost of goods sold   592    -    1,508    - 
                     
Gross profit   7,137    5,949    14,802    11,089 
                     
Operating expenses                    
Software development   2,941    57,602    17,190    130,124 
General and administrative expenses   126,031    709,444    584,945    1,207,768 
Total operating expenses   128,972    767,046    602,135    1,337,892 
                     
Loss from operations   (121,835)   (761,097)   (587,333)   (1,326,803)
                     
Other expense                    
Amortization of debt discount   (5,473)   -    (5,473)   - 
Interest expense   13,697    -    20,172    - 
Total other expense   (19,170)   -    (25,645)   - 
                     
Net loss  $(141,005)  $(761,097)  $(612,978)  $(1,326,803)
                     
Loss per share - basic and diluted  $(0.00)  $(0.02)  $(0.01)  $(0.03)
                     
Weighted average number of shares outstanding - basic and diluted   41,534,270    38,719,136    41,455,308    38,910,468 

 

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

 

5
 

 

OpenLocker Holdings, Inc. and Subsidiaries

Consolidated Statements of Changes in Stockholders’ Deficit

For the Three and Six Months Ended January 31, 2024

(Unaudited)

 

   Shares   Amount   Shares   Amount   Capital   Deficit   Deficit 
  

Series A,

Preferred Stock

   Common Stock  

Additional

Paid-in

   Accumulated  

Total

Stockholders’

 
   Shares   Amount   Shares   Amount   Capital   Deficit   Deficit 
                             
July 31, 2023   58,415   $5    40,675,006   $4,071   $10,032,335   $(10,134,087)  $(97,676)
                                    
Stock issued for services   -    -    704,644    71    202,608    -    202,679 
                                    
Recognition of stock-based compensation   -    -    -    -    83,583    -    83,583 
                                    
Net loss   -    -    -    -    -    (471,973)   (471,973)
                                    
October 31, 2023   58,415   $5    41,379,650   $4,142   $10,318,526   $(10,606,060)  $(283,387)
                                    
Prior period true up   -    -    -    (5)   5    -    - 
                                    
Stock issued as debt discount   -    -    225,000    23    46,867    -    46,890 
                                    
Net loss   -    -    -    -    -    (141,005)   (141,005)
                                    
January 31, 2024   58,415   $5    41,604,650   $4,160    10,365,398   $(10,747,065)  $(377,502)

 

6
 

 

OpenLocker Holdings, Inc. and Subsidiaries

Consolidated Statements of Changes in Stockholders’ Deficit

For the Three and Six Months Ended January 31, 2023

(Unaudited)

 

  

Series A,

Preferred Stock

   Common Stock  

Additional

Paid-in

   Accumulated  

Total

Stockholders’ Equity

 
   Shares   Amount   Shares   Amount   Capital   Deficit   (Deficit) 
                             
July 31, 2022   35,520   $4    38,382,506   $3,839   $8,423,421   $(2,708,155)  $5,719,109 
                                    
Recognition of stock-based compensation   -    -    -    -    167,167    -    167,167 
                                    
Stock issued for cash   -    -    125,000    12    49,988    -    50,000 
                                    
Stock issued for services   -    -    130,000    13    51,987    -    52,000 
                                    
Series A preferred stock issued for common stock - related parties   9,000    -    -    -    6,000    -    6,000 
                                    
Contributed capital   -    -    -    -    2,116    -         2,116 
                                    
Net loss   -    -    -    -    -    (565,706)   (565,706)
                                    
October 31, 2022   44,520   $4    38,637,506   $3,864   $8,700,679   $(3,273,861)  $5,430,686 
                                    
Recognition of stock-based compensation   -    -    -    -    250,750    -    250,750 
                                    
Stock issued for cash   -    -    62,500    6    24,994    -    25,000 
                                    
Stock issued for services   -    -    450,000    45    224,055    -    224,100 
                                    
Net loss   -    -    -    -    -    (761,097)   (761,097)
                                    
January 31, 2023   44,520   $4    39,150,006   $3,915   $9,200,478   $(4,034,958)  $5,169,439 

 

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

 

7
 

 

OpenLocker Holdings, Inc. and Subsidiary

Consolidated Statements of Cash Flows

(Unaudited)

 

   2024   2023 
   For the Six Months Ended January 31, 
   2024   2023 
Operating activities          
Net loss  $(612,978)  $(1,326,803)
Adjustments to reconcile net loss to net cash used in operations          
Amortization - intangible asset (intellectual property)   -    164,252 
Amortization - website   1,584    1,584 
Amortization of operating lease right-of-use asset - related party   278    1,676 
Amortization of debt discount   5,473    - 
Recognition of stock-based compensation   83,583    417,917 
Stock issued for services   202,679    276,100 
Changes in operating assets and liabilities          
Decrease in          
Accounts receivable   3,000    - 
Increase (decrease) in          
Accounts payable and accrued expenses   17,659    (41,737)
Accounts payable and accrued expenses - related parties   6,155    - 
Deferred revenue   (5,050)   - 
Operating lease liability - related party   (498)   (2,798)
Net cash used in operating activities   (298,115)   (509,809)
           
Financing activities          
Proceeds from issuance of notes payable   225,000    - 
Proceeds from issuance of notes payable - related parties   80,000    - 
Stock issued for cash - preferred stock - related parties   -    6,000 
Stock issued for cash - common stock   -    75,000 
Contributed capital - related parties   -    2,116 
Net cash provided by financing activities   305,000    83,116 
           
Net increase (decrease) in cash   6,885    (426,693)
           
Cash - beginning of period   15,539    607,135 
           
Cash - end of period  $22,424   $180,442 
           
Supplemental disclosure of cash flow information          
Cash paid for interest  $2,777   $- 
Cash paid for income tax  $-   $- 
           
Supplemental disclosure of non-cash investing and financing activities          
Stock issued as debt discount   46,890    - 

 

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

 

8
 

 

OpenLocker Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

January 31, 2024

(Unaudited)

 

Note 1 – Organization, Nature of Operations and Going Concern

 

Organization and Nature of Operations

 

OpenLocker Holdings, Inc. and its subsidiaries OpenLocker, Inc. (collectively “OpenLocker,” “OL”, “we,” “us,” “our” or the “Company”) is dedicated to offering marketing solutions for collegiate and professional sports organizations and athletes to deepen fan engagement through innovative collectibles, membership rewards, exclusive events and experiences. The OpenLocker mission is to empower athletes by monetizing their Name, Image and Likeness (“NIL”) with autographed collectibles, meaningful fan experiences and partnerships with local merchants, regional and national brands. OpenLocker has active fan communities at the University of Florida (Gataverse), Florida Atlantic University (PowerOwls Club) and Radford University (RowdyRedz) and is focusing on building club membership rewards programs . By partnering with local businesses, as well as regional and national brands, who can offer perks and rewards to community members, OpenLocker is able to create demand and further engage fans and the local community.

 

OpenLocker is also in discussions with NIL collectives, communities focused on raising funds for school-specific NIL fundraising efforts, that are interested in offering membership rewards programs to their target audiences. The Company is also in discussions with national brands who are interested in leveraging their relationships with student-athletes to create social media influencer campaigns and build customer loyalty programs. OpenLocker’s current revenue model includes (i) sales on the OpenLocker platform, (ii) sponsorship and advertising, and (iii) service fees for creative design work, development and product fulfillment services.

 

OpenLocker is a registered trademark, and LOCKERMANIA, BONE YARD HUSKYZ CLUB, ROWDY REDZ, PROWLERZ CLUB, GATAVERSE, LIONZ CLUB, OPENSTABLE and MADDY BADDYZ are trademarks of OpenLocker Holdings, Inc. 

 

The parent (OpenLocker Holdings, Inc.) and its subsidiaries are organized as follows:

 

 

Company Name   Incorporation Date   State of Incorporation
OpenLocker Holdings, Inc.*   1996   Delaware
Descrypto, Inc.   2017   Delaware
Descrypto Studio, LLC   2022   Wyoming
Open Locker, Inc. (“OL”)   2021   Delaware

 

* Formerly known as Descrypto Holdings, Inc., entity changed name on December 5, 2022.

 

Going Concern and Management’s Plans

 

These unaudited consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business.

 

As reflected in the accompanying unaudited consolidated financial statements, for the six months ended January 31, 2024, the Company had:

 

●Net loss of $612,978; and
● Net cash used in operations of $298,115.

 

Additionally, at January 31, 2024, the Company had:

 

●Accumulated deficit of $10,747,065;
●Stockholders’ deficit of $377,502; and
●Working capital deficit of $378,819.

 

We manage liquidity risk by reviewing, on an ongoing basis, our sources of liquidity and capital requirements. The Company had cash on hand of $22,424 at January 31, 2024. Although the Company intends to raise additional debt or equity capital, the Company expects to continue to incur significant losses from operations and have negative cash flows from operating activities for the near-term. These losses could be significant as operations ramp up along with continuing expenses related to compensation, professional fees, and regulatory are incurred.

 

9
 

 

OpenLocker Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

January 31, 2024

(Unaudited)

 

The Company has incurred significant losses since its inception and has not demonstrated an ability to generate sufficient revenues to achieve profitable operations. There can be no assurance that profitable operations will ever be achieved, or if achieved, could be sustained on a continuing basis. In making this assessment, we performed a comprehensive analysis of our current circumstances including our financial position, our cash flows and cash usage forecasts for the twelve months ending January 31, 2025, and our current capital structure, including equity-based instruments and our obligations and debts.

 

The Company has satisfied its obligations from the issuance of common stock and notes payable; however, there is no assurance that such successful efforts will continue during the twelve months subsequent to the date these consolidated financial statements are issued.

 

If the Company does not obtain additional capital, the Company will be required to reduce the scope of its business development activities or cease operations. The Company continues to explore obtaining additional capital financing and the Company is closely monitoring its cash balances, cash needs, and expense levels.

 

These factors create substantial doubt about the Company’s ability to continue as a going concern within the twelve-month period subsequent to the date that these unaudited consolidated financial statements are issued. The unaudited consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. Accordingly, the unaudited consolidated financial statements have been prepared on a basis that assumes the Company will continue as a going concern and which contemplates the realization of assets and satisfaction of liabilities and commitments in the ordinary course of business.

 

Management’s strategic plans include the following:

 

●Pursuing additional capital raising opportunities;
●Continuing to explore and execute prospective partnering or distribution opportunities;
●Identifying strategic acquisitions; and
●Identifying unique market opportunities that represent potential positive short-term cash flow.

 

Note 2 - Summary of Significant Accounting Policies

 

Basis of Presentation

 

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial statements (“U.S. GAAP”) and with the instructions to Form 10-Q and Article 8 of Regulation S-X of the United States Securities and Exchange Commission (“SEC”). Accordingly, they do not contain all information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements.

 

In the opinion of the Company’s management, the accompanying unaudited consolidated financial statements contain all of the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of the Company as of January 31, 2024 and the results of operations and cash flows for the periods presented. The results of operations for the six months ended January 31, 2024 are not necessarily indicative of the operating results for the full fiscal year or any future period.

 

These unaudited consolidated financial statements should be read in conjunction with the financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the period ended July 31, 2023 filed with the SEC on November 1, 2023.

 

Management acknowledges its responsibility for the preparation of the accompanying unaudited consolidated financial statements which reflect all adjustments, consisting of normal recurring adjustments, considered necessary in its opinion for a fair statement of its consolidated financial position and the consolidated results of its operations for the periods presented.

 

10
 

 

OpenLocker Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

January 31, 2024

(Unaudited)

 

Principles of Consolidation

 

These unaudited consolidated financial statements have been prepared in accordance with U.S. GAAP and include the accounts of the Company and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated.

 

Business Combinations

 

The Company accounts for business combinations using the acquisition method in accordance with the Financial Accounting Standards Board’s (the “FASB”) Accounting Standards Codification (“ASC”) 805, Business Combinations, which requires recognition of assets acquired and liabilities assumed, including contingent assets and liabilities, at their respective fair values on the date of acquisition.

 

Business Segments and Concentrations

 

The Company uses the “management approach” to identify its reportable segments. The management approach requires companies to report segment financial information consistent with information used by management for making operating decisions and assessing performance as the basis for identifying the Company’s reportable segments. The Company manages its business as a single operating segment.

 

Use of Estimates

 

Preparing financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period. Actual results could differ from those estimates, and those estimates may be material.

 

Fair Value of Financial Instruments

 

The Company accounts for financial instruments under ASC 820, Fair Value Measurements. ASC 820 provides a framework for measuring fair value and requires disclosures regarding fair value measurements. Fair value is defined as 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, based on the Company’s principal or, in absence of a principal, most advantageous market for the specific asset or liability.

 

The Company uses a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement. The hierarchy requires the Company to use observable inputs when available, and to minimize the use of unobservable inputs, when determining fair value.

 

The three tiers are defined as follows:

 

●Level 1 —Observable inputs that reflect quoted market prices (unadjusted) for identical assets or liabilities in active markets;
●Level 2—Observable inputs other than quoted prices in active markets that are observable either directly or indirectly in the marketplace for identical or similar assets and liabilities; and
●Level 3—Unobservable inputs that are supported by little or no market data, which require the Company to develop its own assumptions.

 

The determination of fair value and the assessment of a measurement’s placement within the hierarchy requires judgment. Level 3 valuations often involve a higher degree of judgment and complexity. Level 3 valuations may require the use of various cost, market, or income valuation methodologies applied to unobservable management estimates and assumptions. Management’s assumptions could vary depending on the asset or liability valued and the valuation method used. Such assumptions could include estimates of prices, earnings, costs, actions of market participants, market factors, or the weighting of various valuation methods. The Company may also engage external advisors to assist us in determining fair value, as appropriate.

 

11
 

 

OpenLocker Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

January 31, 2024

(Unaudited)

 

Although the Company believes that the recorded fair value of our financial instruments is appropriate, these fair values may not be indicative of net realizable value or reflective of future fair values.

 

The Company’s financial instruments, including cash, accounts payable and accrued expenses, accounts payable and accrued expenses – related parties, notes payable and notes payable – related parties are carried at historical cost. At January 31, 2024 and July 31, 2023, respectively, the carrying amounts of these instruments approximated their fair values because of the short-term nature of these instruments.

 

ASC 825-10 “Financial Instruments” allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (“fair value option”). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable unless a new election date occurs. If the fair value option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings at each subsequent reporting date. The Company did not elect to apply the fair value option to any outstanding financial instruments.

 

Cash and Cash Equivalents

 

For purposes of the consolidated statements of cash flows, the Company considers all highly liquid instruments with a maturity of three months or less at the purchase date and money market accounts to be cash equivalents.

 

At January 31, 2024 and July 31, 2023, respectively, the Company did not have any cash equivalents.

 

The Company is exposed to credit risk on its cash and cash equivalents in the event of default by the financial institutions to the extent account balances exceed the amount insured by the FDIC, which is $250,000. At January 31, 2024 and July 31, 2023, the Company did not experience any losses on cash balances in excess of FDIC insured limits.

 

Goodwill and Impairment

 

In financial reporting, goodwill is not amortized, but is tested for impairment annually (each July 31) or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Events that result in an impairment review include significant changes in the business climate, declines in our operating results, or an expectation that the carrying amount may not be recoverable. We assess potential impairment by considering present economic conditions as well as future expectations. All assessments of goodwill impairment are conducted at the individual reporting unit level.

 

The Company uses qualitative factors according to ASC 350-20-35-3 to determine whether it is more likely than not that the fair value of goodwill is less than its carrying amount.

 

Six Months Ended January 31, 2024 (Fiscal Year Ending July 31, 2024)

 

There were no impairment losses recorded during the three and six months ended January 31, 2024.

 

Fiscal Year Ended July 31, 2023

 

During the year ended July 31, 2023, the Company determined that given various negative financial indicators (quantitative and qualitative), goodwill of $2,943,874 was fully impaired and recorded as a component of other income (expense) in the consolidated statements of operations.

 

Intangible Assets and Impairment

 

Definite-lived intangible assets are amortized on a straight-line basis over their estimated useful lives. Indefinite-lived intangible assets are reviewed for impairment annually. The Company reviews definite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

 

Six Months Ended January 31, 2024 (Fiscal Year Ending July 31, 2024)

 

There were no impairment losses recorded during the three and six months ended January 31, 2024.

 

12
 

 

OpenLocker Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

January 31, 2024

(Unaudited)

 

Fiscal Year Ended July 31, 2023

 

During the year ended July 31, 2023, the Company determined that given various negative financial indicators (quantitative and qualitative), intangible assets (net of amortization) of $1,916,270 was fully impaired and recorded as a component of other income (expense) in the consolidated statements of operations. See Note 7.

 

Impairment of Long-lived Assets

 

Management evaluates the recoverability of the Company’s identifiable intangible assets and other long-lived assets when events or circumstances indicate a potential impairment exists, in accordance with the provisions of ASC 360-10-35-15 “Impairment or Disposal of Long-Lived Assets.”

 

If impairment is indicated based on a comparison of the assets’ carrying values and the undiscounted cash flows, the impairment to be recognized is measured as the amount by which the carrying amount of the assets exceeds the fair value of the assets.

 

There were no impairments recorded during the three and six months ended January 31, 2024 and 2023, respectively.

 

Property and Equipment

 

Property and equipment is stated at cost less accumulated depreciation. Depreciation is provided on the straight-line basis over the estimated useful lives of the assets.

 

Expenditures for repair and maintenance which do not materially extend the useful lives of property and equipment are charged to operations. When property or equipment is sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the respective accounts with the resulting gain or loss reflected in operations.

 

Management reviews the carrying value of its property and equipment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable.

 

There were no impairments recorded during the three and six months ended January 31, 2024 and 2023, respectively.

 

Operating Lease

 

From time to time, we may enter into operating lease or sub-lease agreements, including our corporate headquarters. We account for leases in accordance with ASC Topic 842: Leases, which requires a lessee to utilize the right-of-use model and to record a right-of-use asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases are classified as either financing or operating, with classification affecting the pattern of expense recognition in the statement of operations. In addition, a lessor is required to classify leases as either sales-type, financing or operating. A lease will be treated as a sale if it transfers all of the risks and rewards, as well as control of the underlying asset, to the lessee. If risks and rewards are conveyed without the transfer of control, the lease is treated as financing. If the lessor does not convey risk and rewards or control, the lease is treated as operating. We determine if an arrangement is a lease, or contains a lease, at inception and record the lease in our financial statements upon lease commencement, which is the date when the underlying asset is made available for use by the lessor.

 

Right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments over the lease term. Lease right-of-use assets and liabilities at commencement are initially measured at the present value of lease payments over the lease term. We generally use our incremental borrowing rate based on the information available at commencement to determine the present value of lease payments except when an implicit interest rate is readily determinable. We determine our incremental borrowing rate based on market sources including relevant industry data.

 

We may have lease agreements with lease and non-lease components and have elected to utilize the practical expedient to account for lease and non-lease components together as a single combined lease component, from both a lessee and lessor perspective with the exception of direct sales-type leases and production equipment classes embedded in supply agreements. From a lessor perspective, the timing and pattern of transfer are the same for the non-lease components and associated lease component and, the lease component, if accounted for separately, would be classified as an operating lease.

 

13
 

 

OpenLocker Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

January 31, 2024

(Unaudited)

 

We have elected not to present short-term leases on the balance sheet as these leases have a lease term of 12 months or less at lease inception and do not contain purchase options or renewal terms that we are reasonably certain to exercise. All other lease assets and lease liabilities are recognized based on the present value of lease payments over the lease term at commencement date. Because most of our leases do not provide an implicit rate of return, we used our incremental borrowing rate based on the information available at lease commencement date in determining the present value of lease payments.

 

Our leases, where we are the lessee, do not include an option to extend the lease term. Our lease does not include an option to terminate the lease prior to the end of the agreed upon lease term. For purposes of calculating lease liabilities, lease term would include options to extend or terminate the lease when it is reasonably certain that we will exercise such options.

 

Lease expense for operating leases is recognized on a straight-line basis over the lease term as an operating expense, included as a component of general and administrative expenses, in the accompanying consolidated statements of operations.

 

Certain operating leases provide for annual increases to lease payments based on an index or rate, our lease has no stated increase, payments were fixed at lease inception. We calculate the present value of future lease payments based on the index or rate at the lease commencement date. Differences between the calculated lease payment and actual payment are expensed as incurred.

 

See Note 10.

 

Revenue Recognition

 

OpenLocker generates revenue from two main sources: our collectibles and sponsorship revenues.

 

Revenue is recognized in accordance with ASC No. 606, “Revenue from Contracts with Customers”. The Company recognizes revenue when its performance obligations are complete, which occurs at a point in time related to the transfer of a digital access pass or sale of a sponsorship to its customer (final or ultimate end-user purchaser/collector). Currently, all revenue streams contain a single performance obligation. There are no penalties for contract termination by either party.

 

Collectibles

 

All payments are received from third-party payment processing providers. The Company receives payments from sales on its primary marketplace (Shopify site) as well as two other sources. Each of these sources of payment relate to the completion of a single performance obligation completed at a point in time, which occurs upon the transfer of a digital access pass and where no further performance obligations are required. At the point of sale, the Company grants all rights in the intellectual property to the customer.

 

Payments from customers (all paid in cash) are received as follows:

 

●Shopify payouts from credit/debit cards transactions typically occur 2-3 days after date of sale; and
●PayPal payments are received same day.

 

Shipping fees collected from customers for physical collectibles are included with revenues received from Shopify payouts. Prior to the product shipping, any amounts received in advance are accounted for as contract liabilities (deferred revenue).

 

The Company controls the collectibles via digital access pass prior to a sale and acts as the principal in these transactions.

 

Sponsorships

 

The Company generates revenues from sponsorship arrangements, in which the customer sponsors an athlete, event or sports team. In exchange for the sponsorship, the customer receives specified brand recognition and other benefits over a set period of time and will recognize revenue on a straight-line basis over the time period specified in the contract. Related performance obligations for sponsorship arrangements are recognized ratably over this period of time.

 

14
 

 

OpenLocker Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

January 31, 2024

(Unaudited)

 

The excess of amounts contractually due over the amounts of sponsorship revenue recognized are included on the consolidated balance sheets as contract liabilities (deferred revenues). Contractually due, but unpaid sponsorship revenue is included in accounts receivable on the consolidated balance sheets.

 

At January 31, 2024 and July 31, 2023, the Company had contract liabilities of $5,000 and $10,050, respectively.

 

For the three months ended January 31, 2024 and 2023, the Company recognized $4,050 and $0, respectively, of sponsorship revenues from one and zero customers, respectively.

 

For the six months ended January 31, 2024 and 2023, the Company recognized $10,050 and $0, respectively, of sponsorship revenues from one and zero customers, respectively.

 

The following represents the Company’s disaggregation of revenues for the six months ended January 31, 2024 and 2023:

 

   Six Months Ended January 31, 
   2024   2023 
Revenues  Revenue   % of Revenues   Revenue   % of Revenues 
Collectibles  $6,260    38%  $11,089    100%
Sponsorships   10,050    62%   -    0%
Total Revenues  $16,310    100%  $11,089    100%

 

Cost of Goods Sold

 

Cost of goods sold primarily includes web development and graphic design costs.

 

Software Development Costs

 

Internal-use software development costs are accounted for in accordance with ASC 350-40, “Internal-Use Software”. The costs incurred in the preliminary stages of development are expensed as research and development costs as incurred.

 

Once an application has reached the development stage, internal and external costs incurred to develop internal-use software are capitalized and amortized on a straight-line basis over the estimated useful life of the software (typically three to five years).

 

Maintenance and enhancement costs, including those costs in the post-implementation stages, are typically expensed as incurred, unless such costs relate to substantial upgrades and enhancements to the software that result in added functionality, in which case the costs are capitalized and amortized on a straight-line basis over the estimated useful life of the software.

 

The Company reviews the carrying value for impairment whenever facts and circumstances exist that would suggest that assets might be impaired or that the useful lives should be modified. Amortization expense related to capitalized internal-use software development costs will be included in cost of goods sold in the statements of operations.

 

For the three months ended January 31, 2024 and 2023, the Company expensed $2,941 and $57,602, respectively, in software development costs.

 

For the six months ended January 31, 2024 and 2023, the Company expensed $17,190 and $130,124, respectively, in software development costs.

 

15
 

 

OpenLocker Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

January 31, 2024

(Unaudited)

Income Taxes

 

The Company accounts for income tax using the asset and liability method prescribed by ASC 740, “Income Taxes”. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the year in which the differences are expected to reverse. The Company records a valuation allowance to offset deferred tax assets if based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rates is recognized as income or loss in the period that includes the enactment date.

 

The Company follows the accounting guidance for uncertainty in income taxes using the provisions of ASC 740. Using that guidance, tax positions initially need to be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. As of January 31, 2024 and July 31, 2023, respectively, the Company had no uncertain tax positions that qualify for either recognition or disclosure in the financial statements.

 

The Company recognizes interest and penalties related to uncertain income tax positions in other expense. No interest and penalties related to uncertain income tax positions were recorded for the six months ended January 31, 2024 and the year ended July 31, 2023, respectively.

 

Advertising Costs

 

Advertising costs are expensed as incurred. Advertising costs are included as a component of general and administrative expense in the consolidated statements of operations.

 

For the three months ended January 31, 2024 and 2023, the Company expensed $26,074 and $9,146, respectively, in marketing and advertising costs.

 

For the six months ended January 31, 2024 and 2023, the Company expensed $58,078 and $53,194, respectively, in marketing and advertising costs.

 

Stock-Based Compensation

 

The Company accounts for our stock-based compensation under ASC 718 “Compensation – Stock Compensation” using the fair value-based method. Under this method, compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. This guidance establishes standards for the accounting for transactions in which an entity exchanges it equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments.

 

When determining fair value of stock options, the Company considers the following assumptions in the Black-Scholes model:

 

●Exercise price;
●Expected dividends;
●Expected volatility;
●Risk-free interest rate; and
●Expected life of option.

 

Stock Warrants

 

In connection with certain financing (debt or equity), consulting and collaboration arrangements, the Company may issue warrants to purchase shares of its common stock. The outstanding warrants are standalone instruments that are not puttable or mandatorily redeemable by the holder and are classified as equity awards.

 

The Company measures the fair value of warrants issued for compensation using the Black-Scholes option pricing model as of the measurement date. However, for warrants issued that meet the definition of a derivative liability, fair value is determined based upon the use of a binomial pricing model.

 

16
 

 

OpenLocker Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

January 31, 2024

(Unaudited)

 

Warrants issued in conjunction with the issuance of common stock are initially recorded at fair value as a reduction in additional paid-in capital of the common stock issued. All other warrants (for services) are recorded at fair value and expensed over the requisite service period or at the date of issuance if there is not a service period.

 

Basic and Diluted Earnings (Loss) per Share

 

Pursuant to ASC 260-10-45, basic earnings (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding for the periods presented.

 

Diluted earnings per share is computed by dividing net income by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during the period. Potentially dilutive common shares may consist of common stock issuable for stock options and warrants (using the treasury stock method), convertible notes and common stock issuable. These common stock equivalents may be dilutive in the future. In the event of a net loss, diluted loss per share is the same as basic loss per share since the effect of the potential common stock equivalents upon conversion would be anti-dilutive.

 

For the six months ended January 31, 2024 and 2023, the Company had the following potentially dilutive equity securities:

 

   January 31, 2024   January 31, 2023 
Series A, convertible preferred stock (1 to 1,000 into common stock)   58,415,000    44,520,000 
Stock options (exercise prices $0.12 - $0.70/share)   2,342,539    1,110,830 
Warrants (exercise price $1/share)   1,425,000    - 
Total common stock equivalents   62,182,539    45,630,830 

 

Related Parties

 

Parties are considered to be related to the Company if the parties, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal with if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests.

 

See Note 5.

 

Recent Accounting Standards

 

Changes to accounting principles are established by the FASB in the form of Accounting Standards Updates (“ASUs”) to the ASC. We consider the applicability and impact of all ASUs on our consolidated financial position, results of operations, stockholders’ equity, cash flows, or presentation thereof. Management has evaluated all recent accounting pronouncements issued through the date these financial statements were available to be issued and found no recent accounting pronouncements issued, but not yet effective accounting pronouncements, when adopted, will have a material impact on the consolidated financial statements of the Company.

 

In March 2022, the FASB issued ASU 2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures (“ASU 2022-02”), which eliminates the accounting guidance on troubled debt restructurings (“TDRs”) for creditors in ASC 310, Receivables (Topic 310), and requires entities to provide disclosures about current period gross write-offs by year of origination. Also, ASU 2022-02 updates the requirements related to accounting for credit losses under ASC 326, Financial Instruments – Credit Losses (Topic 326), and adds enhanced disclosures for creditors with respect to loan refinancings and restructurings for borrowers experiencing financial difficulty. ASU 2022-02 was effective for the Company on January 1, 2023. The adoption of ASU 2022-02 did not have a material impact on the Company’s consolidated financial statements.

 

17
 

 

OpenLocker Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

January 31, 2024

(Unaudited)

 

Reclassifications

 

Certain prior period amounts have been reclassified for consistency with the current period presentation. These reclassifications had no material effect on the unaudited consolidated results of operations, stockholders’ deficit, or cash flows.

 

Note 3 – Website

 

The Company’s website consisted of the following:

 

                
   January 31, 2024   July 31, 2023   Estimated Useful Lives (Years) 
Website  $10,836   $10,836    3 
Accumulated amortization   9,519    7,935      
Website - net  $1,317   $2,901              

 

Amortization expense for the three months ended January 31, 2024 and 2023 was $792 and $792, respectively.

 

Amortization expense for the six months ended January 31, 2024 and 2023 was $1,584 and $1,584, respectively.

 

These amounts are included as a component of general and administrative expenses in the accompanying consolidated statements of operations.

 

Note 4 – Notes Payable

 

The following represents a summary of the Company’s notes payable at January 31, 2024 and July 31, 2023:

 

Issue Date  Maturity Date  Interest Rate   Default Interest Rate   Collateral  January 31, 2024   July 31, 2023 
August 2023  August 2024   10%   20%  Unsecured  $150,000   $- 
November 2023  November 2024   10%   20%  Unsecured   50,000    -(1)
December 2023  December 2024   10%   20%  Unsecured   25,000    -(2)
                    225,000        - 
                           
                Less: unamortized debt discount   (16,417)   - 
                           
                Notes payable - net  $208,583   $- 

 

(1)In connection with the issuance of this $50,000 note, the Company also issued 100,000 shares of common stock. The issuance of the common stock was considered a debt discount. The fair value of the common stock was $21,890, based upon the quoted trading price ($0.2189/share) and is being amortized over the life of the note.
  
(2) In connection with the issuance of this $25,000 note, the Company also issued 125,000 shares of common stock. The issuance of the common stock was considered a debt discount. The fair value of the common stock was $25,000, based upon the quoted trading price ($0.2000/share) and is being amortized over the life of the note.

 

18
 

 

OpenLocker Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

January 31, 2024

(Unaudited)

 

The Company had the following activity related to its notes payable during the six months ended January 31, 2024:

 

Balance - July 31, 2023  $- 
Proceeds   225,000 
Stock issued as debt discount   (46,890)
Amortization of debt discount   5,473 
Balance - January 31, 2024  $183,583 

 

Note 5 – Notes Payable – Related Parties

 

The following represents a summary of the Company’s notes payable – related parties at January 31, 2024 and July 31, 2023:

Schedule of Notes Payable Related Parties 

Issue Date  Maturity Date  Interest Rate   Default Interest Rate   Collateral   Related Party  January 31, 2024    July 31, 2023 
August 2023  August 2024   10%   20%  Unsecured  Chief Executive Officer/Director  $40,000   $     - 
August 2023  August 2024   10%   20%  Unsecured  President/Director   40,000    - 
                      $80,000   $- 

 

The Company had the following activity related to its note payable – related parties during the six months ended January 31, 2024:

 

Balance - July 31, 2023  $- 
Proceeds   80,000 
Balance - January 31, 2024  $80,000 

 

Note 6 – Stockholders’ Deficit

 

The Company has two classes of stock at January 31, 2024 and July 31, 2023:

 

Class A Common Stock

 

-10,000,000,000 shares authorized
-41,604,650 and 40,675,006 shares issued and outstanding, respectively
-Par value - $0.0001
-Voting at 1 vote per share

 

Series A Preferred Stock

 

-200,000 shares authorized
-58,415 and 58,415 issued and outstanding, respectively
-Par value - $0.0001
-Conversion ratio – 1 share of Series A converts into 1,000 shares of common stock (58,415,000 and 58,415,000 shares, respectively)

 

19
 

 

OpenLocker Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

January 31, 2024

(Unaudited)

 

-Voting on an if converted basis of 1,000 votes per share
-Eligible for dividends/distributions if declared by the Board of Directors
-Liquidation preference - none

 

Equity Transactions for the Six Months Ended January 31, 2024 (Fiscal Year Ending July 31, 2024)

 

Stock Issued for Cash

 

The Company issued 225,000 shares of common stock in connection with the notes issued during the period ended January 31, 2024. The shares were valued at the closing stock price on the date of grant for a total value of $46,890 (see Note 4).

 

Stock Issued for Services

 

The Company issued 704,644 shares of common stock for services rendered, having a fair value of $202,679 ($0.2479 - $0.44/share), based upon the quoted closing trading price.

 

Equity Transactions for the Year Ended July 31, 2023

 

Stock Issued for Cash – Related Parties

 

The Company issued 22,895 shares of preferred stock to certain officers and directors for $15,264 ($0.6667/share).

 

Stock Issued for Cash

 

The Company issued 1,637,500 shares of common stock for $370,000 ($0.20 - $0.40/share).

 

Also see Note 10 for warrants issued in connection with the sale of certain common stock units, which consisted of 1,425,000 shares of common stock and 1,425,000 warrants.

 

Stock Issued for Services

 

The Company issued 655,000 shares of common stock for services rendered, having a fair value of $302,350 ($0.35 - $0.498/share), based upon the quoted closing trading price.

 

Contributed Capital – Related Parties

 

Certain officers and directors contributed $2,116 on behalf of the Company for operating expenses.

 

Note 7 – Intangible Asset

 

In connection with the acquisition of OL during the fiscal year ended July 31, 2022, the Company recognized an intangible asset related to intellectual property. The Company believed the intellectual property was critical to the success of the business going forward.

 

However, during the year ended July 31, 2023, the Company determined that given various negative financial indicators (quantitative and qualitative), intangible assets (net of amortization) of $1,916,270 was fully impaired and recorded as a component of other income (expense) in the consolidated statements of operations (see Note 2).

 

Amortization expense for the three months ended January 31, 2024 and 2023 was $0 and $82,126, respectively.

 

Amortization expense for the six months ended January 31, 2024 and 2023 was $0 and $164,252, respectively.

 

20
 

 

OpenLocker Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

January 31, 2024

(Unaudited)

 

Note 8 – Stock Options

 

Stock option transactions for the six months ended January 31, 2024 and the year ended July 31, 2023 are summarized as follows:

 

 

       Weighted   Weighted Average        Weighted Average  
   Number    Average   Remaining   Aggregate   Grant  
Stock Options 

of

Options

  

Exercise

Price

   Contractual Term (Years)  

Intrinsic

Value

  

Date

Fair Value

 
Outstanding - July 31, 2022   864,489   $0.14    9.84   $479,539   $- 
Exercisable - July 31, 2022   864,489   $0.14    9.84   $479,539   $- 
Granted   1,478,050   $0.14         -   $0.68 
Exercised   -   $-    -    -   $- 
Cancelled/Forfeited   -   $-    -    -   $- 
Outstanding - July 31, 2023   2,342,539   $0.49    8.98   $142,029   $- 
Exercisable - July 31, 2023   2,219,368   $0.48    8.98   $142,029   $- 
Granted   -   $-    -    -   $- 
Exercised   -   $-    -    -   $- 
Cancelled/Forfeited   -   $-    -    -   $- 
Outstanding - January 31, 2024   2,342,539   $0.49    8.48   $69,396   $- 
Exercisable - January 31, 2024   2,342,539   $0.49    8.48   $69,396   $- 
Unvested - January 31, 2024   -   $-    -   $-   $- 

 

Fiscal Year Ended July 31, 2023

 

In September 2022, the Company granted 1,478,050, ten-year options to an employee for services to be rendered during the period September 2022 - August 2023. These options vested ratably over a twelve-month period. These options had an exercise price of $0.40/share.

 

Using the Black-Scholes option pricing model, the Company determined that the fair value of these options granted was $1,003,002.

 

Fair value was based upon the following management estimates:

 

Expected term (years)   5
Expected volatility   274%
Expected dividends   0%
Risk free interest rate   2.98%

 

Compensation expense recorded for stock-based compensation for the three months ended January 31, 2024 and 2023 was $0 and $250,750, respectively.

 

Compensation expense recorded for stock-based compensation for the six months ended January 31, 2024 and 2023 was $83,583 and $417,917, respectively.

 

These amounts are included as a component of general and administrative expenses.

 

Six Months Ended January 31, 2024 (Fiscal Year Ending July 31, 2024)

 

During the six months ended January 31, 2024, the remaining 123,171 of a total 1,478,050 options vested.

 

21
 

 

OpenLocker Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

January 31, 2024

(Unaudited)

 

Note 9 – Warrants

 

Warrant activity for the six months ended January 31, 2024 and the year ended July 31, 2023 is summarized as follows:

 

       Weighted   Weighted Average Remaining   Aggregate 
   Number of   Average   Contractual   Intrinsic 
Warrants  Warrants   Exercise Price   Term (Years)   Value 
Outstanding - July 31, 2022   -   $-    -   $        - 
Exercisable - July 31, 2022   -   $-    -   $- 
Granted   1,425,000   $1.00    -    - 
Exercised   -   $-    -    - 
Cancelled/Forfeited   -   $-    -    - 
Outstanding - July 31, 2023   1,425,000   $1.00    4.66   $- 
Exercisable - July 31, 2023   1,425,000   $1.00    4.66   $- 
Granted   -   $-    -    - 
Exercised   -   $-    -    - 
Cancelled/Forfeited   -   $-    -    - 
Outstanding - January 31, 2024   1,425,000   $1.00    4.16   $- 
Exercisable - January 31, 2024   1,425,000   $1.00    4.16   $- 
Unvested - January 31, 2024   -   $-    -   $- 

 

Warrant Transactions for the Fiscal Year Ended July 31, 2023

 

Warrants Issued with Common Stock

 

During 2023, the Company sold 1,425,000 units of common stock and warrants for $285,000 ($0.20/share).

 

In connection with the sale of these units, the investors also received 1,425,000, five year warrants, exercisable at $1/share. All warrants were fully vested on the issuance date.

 

Note 10 – Commitments and Contingencies

 

Right-of-Use Operating Lease – Related Party

 

In connection with the acquisition of OL on May 31, 2022, the Company acquired an existing right-of-use operating lease for office space. The lease had an initial term of two years at $500 per month. The lease does not contain any renewal options.

 

During the period September 1, 2021 through May 31, 2022 no rent was due. The Company was required to pay a total of $7,500 over a fifteen-month period from June 1, 2022 through August 31, 2023.

 

Beginning September 1, 2023, the lease was renewed under the same terms on a month-to-month basis.

 

The Company is leasing the office space from a family member of OL’s Chief Executive Officer.

 

At January 31, 2024 and July 31, 2023, the Company had no financing leases as defined in ASC 842, “Leases.”

 

22
 

 

OpenLocker Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

January 31, 2024

(Unaudited)

 

The tables below present information regarding the Company’s operating lease assets and liabilities at January 31, 2024 and July 31, 2023:

 

   January 31, 2024   July 31, 2023 
Assets        
Operating lease - right-of-use asset - non-current  $       -   $278 
Liabilities          
Operating lease liability  $-   $498 
Weighted-average remaining lease term (years)   -    0.08 
Weighted-average discount rate   -    8%

 

The Company had the following operating lease costs for the six months ended January 31, 2024 and 2023, respectively.

 

Operating lease costs  January 31, 2024   January 31, 2023 
Amortization of right-of-use operating lease asset  $278   $1,676 
Lease liability expense in connection with obligation repayment   3    202 
Total operating lease costs  $281   $1,878 
Supplemental cash flow information related to operating leases was as follows:          
Operating cash outflows from operating lease (obligation payment)  $498   $2,798 
Right-of-use asset obtained in exchange for new operating lease liability  $-   $- 

 

Student-Athlete Licensing Agreements

 

The Company has entered into several agreements with student-athletes related to the sale of NFTs and related collectibles.

 

There may be initial sales as well as resales of these products. The Company and the student-athlete have agreed to split the revenue from the initial sale. Additionally, the Company will pay the student-athlete a commission for any resales.

 

At January 31, 2024 and July 31, 2023, respectively, the Company owed a nominal amount to various student-athletes, which has been included as a component of accounts payable and accrued expenses in the consolidated balance sheets.

 

23
 

 

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

 

The following discussion and analysis of the financial condition and results of operations of OpenLocker Holdings, Inc. and its subsidiaries (together, the “Company” or “OpenLocker”) should be read in conjunction with our unaudited consolidated financial statements and the accompanying notes thereto included elsewhere in this Quarterly Report on Form 10-Q. References in this Management’s Discussion and Analysis of Financial Condition and Results of Operations to “us,” “we,” “our,” and similar terms refer to the Company. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under the Risk Factors section of our Annual Report on Form 10-K for the year ended July 31, 2023, filed with the Securities and Exchange Commission (the “SEC”) on November 1, 2023, as the same may be updated from time to time. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements.

 

Overview

 

Established on August 25, 2021, OpenLocker Inc. (the “Company” or “OpenLocker”) is dedicated to offering marketing solutions for collegiate and professional sports organizations and athletes to deepen fan engagement through innovative collectibles, membership rewards, exclusive events and experiences.

 

The OpenLocker mission is to empower athletes by monetizing their Name, Image and Likeness (“NIL”) with autographed collectibles, meaningful fan experiences and partnerships with local merchants, regional and national brands.

 

OpenLocker launched its first fan community at the University of Connecticut in February 2022, during the first season following the National Collegiate Athletic Association (“NCAA”) policy change allowing student-athletes to receive compensation for their NIL. The Company deliberately included all 14 eligible members of the men’s basketball team to galvanize the fan base and name the fan community the Bone Yard Huskyz Club (BYHC). The OpenLocker design team created the BYHC logo and Huskyz avatar to play off of the university’s Huskies mascot and to have an edgy feel. A Huskyz avatar was created in the likeness of each of the athletes and selected super fans for branding and awareness campaigns. A website with a project roadmap outlining the perks and rewards of club membership was activated two weeks prior to the release date, which was strategically timed around the basketball team’s season schedule. A comprehensive marketing campaign included digital programmatic advertising, organic and paid social media strategy (including pre- and post-drop Twitter spaces conversations with fans, blockchain experts, athletes and parents of athletes), podcasts, email blasts and gorilla marketing at several home basketball games. The OpenLocker athlete liaison also provided the athletes with graphics and talking points they could use to leverage their social media followings and promote sales of their collectibles by word-of-mouth.

 

OpenLocker initially sold digital collectibles, also known as non-fungible tokens (“NFTs”), due to the popularity at the time and advantages that blockchain technology offered for authenticating collectibles and providing utility and rewards to UConn fans. OpenLocker minted the NFTs on the FLOW blockchain and sold them on its e-commerce platform for fiat currency to appeal to an audience unfamiliar with cryptocurrency. A majority of the revenue from the BYHC project was generated on the first day of sales. The first two hours were the busiest as fans were incentivized by the free autographed “Platinum card” that was included with purchase for the first 25 digital collectibles sold per athlete. This unique collectible is a metal, wallet-sized card hand-signed by the athlete with the digital art printed on the front and quick response (QR) code that directs to the boneyardhuskyzclub.com. Customer behavior and feedback confirmed that the physical collectible was deemed to be of greater value to the majority of fans, who had little to no experience with blockchain technology. Since then, OpenLocker has directed its efforts to marketing and selling autographed physical collectibles along with community membership rewards programs, events and experiences.

 

Following the success of its college fan community model, OpenLocker launched the OpenStable marketplace in April 2022 to engage the next generation of thoroughbred racing enthusiasts. Through its relationships with owners, trainers and influencers in the racing industry, OpenStable aimed to give fans access to exclusive information, real life experiences, and memorabilia so that they could engage in a truly immersive journey covering a racehorse’s career. By offering both autographed physical collectibles and ownership of digital collectibles which unlocked rewards and experiences, both in the virtual and physical realms, OpenStable was intended to attract a younger audience with a goal to develop the next generation of thoroughbred racing fans.

 

24
 

 

The Company continued to include digital collectibles with the purchase of a physical collectible featuring student-athlete NIL in the following NCAA athletic season so it would have the option to use blockchain technology to verify ownership for its fan loyalty programs. However, the Company has discontinued sale and distribution of digital collectibles, including NFTs, as there was little interest evidenced by the fact that so few customers actually completed the steps required to view and claim them to a personal digital wallet. The OpenLocker NFT viewer remains accessible so that existing owners may continue to have access to their digital collectibles while the Company focuses on delivering physical collectibles and enhancing the fan experience by removing barriers to fan engagement.

 

In addition, from April 2022 through September 2022, OpenLocker offered a secondary marketplace for peer-to-peer transactions of digital collectibles, however, no secondary sales were effectuated or attempted and as of September 2022 this secondary marketplace was discontinued. Although OpenLocker no longer operates a trading platform, owners of issued digital collectibles may transfer their digital collectible to their personal digital wallet and thereafter transfer such digital collectible to the wallet of their choice.

 

As of March 15, 2024, OpenLocker has active fan communities at University of Florida (Gataverse), Florida Atlantic University (PowerOwls Club) and Radford University (RowdyRedz) and is focusing on building club membership rewards programs.  While OpenLocker pays athletes a majority of revenue generated from sales of collectibles containing their NIL and compensating them for social media activities and appearances, the Company retains all revenue from sales of community-branded collectibles which do not use athlete NIL nor the marks and logos of any institution. By partnering with local businesses, as well as regional and national brands who can offer perks and rewards to community members, OpenLocker is able to create demand and further engage fans and the local community.

 

In addition to supporting the athletes, for each fan community, holders of issued digital collectibles and/or authenticated physical collectibles are entitled to participate in any club membership activities, perks or benefits which the Company may offer or arrange from time to time. Such perks or benefits may include, for example, access to community events (such as meet and greet with athletes), giveaways, and rewards based on an athlete’s performance.

 

OpenLocker is also in discussions with NIL collectives, communities focused on raising funds for school-specific NIL fundraising efforts, that are interested in offering membership rewards programs to their target audiences.

 

The Company is also in discussions with national brands who are interested in leveraging their relationships with student-athletes to create social media influencer campaigns and build customer loyalty programs. 

 

OpenLocker’s current revenue model includes (i) sales on the OpenLocker platform, (ii) sponsorship and advertising, and (iii) service fees for creative design work, development and product fulfillment services.

 

OpenLocker believes that it has found a unique and attractive market for autographed collectibles and community rewards programs by focusing on the college athlete market, as we believe that interest in college sports is growing.

 

Principal Products and Services

 

OpenLocker aims to provide a comprehensive suite of collectibles, products and services, adopting a hybrid flexible model creating products both licensed and non-licensed with colleges, professional sports teams, leagues, brands, etc.

 

Autographed Physical Collectibles (Authenticated Physical Collectibles)

 

The Platinum Card by OpenLocker is a metal, wallet-sized card that has the digital art print sublimated on one side and a QR code printed on the other side which directs to the fan community online portal. The serial number is laser engraved on the card and there is space reserved for the athlete to hand-sign.

 

The Company also offers autographed collectibles made of PVC plastic that is even more durable, making it a preferable material to carry around.

 

25
 

 

The Platinum Card entitles the holder to receive any perks or benefits that may be offered by OpenLocker and its brand partners.

 

Gear

 

OpenLocker also sells exclusive gear, including t-shirts, sweatshirts, hats and pins, in its exclusive gear shops.

 

OpenLocker Marketplace

 

The OpenLocker Marketplace provides a user-friendly shopping experience for sports fans to purchase membership cards, gear and collectibles featuring their favorite athletes for access to exclusive perks and rewards.

 

Sports Branding Services

 

OpenLocker also provides branding services for individual athletes, university collectives, horse owners/trainers, and other entities interested in creating a distinctive identity, building their fan base, and maximizing revenue. From logo creation and styling to social media messaging and activation campaigns, OpenLocker’s team can provide enhanced support to collaborating colleges and athletes.

 

Plan of Operations

 

Over the next 12 months, we expect to require approximately $1,000,000 in operating funds to carry out our intended plan of operations. 

 

We are planning to obtain the funds necessary to execute our plan of operations from various capital raises, including potentially through private placements or our common stock or the issuance and sales of convertible notes, as well as potentially through a registration statement or an offering statement filed with the SEC.

 

There can be no assurance that we will be able to obtain the necessary funds for our foregoing operations on terms that are acceptable to us or at all, and there can be no assurance that our plan of operations can be executed as planned, or at all.

 

There is significant uncertainty projecting future profitability or revenues due to our history of losses and early stage of our business operations.

 

RESULTS OF OPERATIONS  

 

Revenues

 

During the three months ended January 31, 2024 and 2023, we generated revenues of $7,729 and $5,949, respectively. The increase in revenues was due to OpenLocker’s product sales and event attendance. The Company’s prior year operations did not include OpenLocker, Inc., which was acquired on May 31, 2022.

 

During the six months ended January 31, 2024 and 2023, we generated revenues of $16,310 and $11,089, respectively. The increase in revenues was due to OpenLocker’s product sales and event attendance. The Company’s prior year operations did not include OpenLocker, Inc., which was acquired on May 31, 2022.

 

Operating Expenses

 

Operating expenses during the three months ended January 31, 2024 and 2023 were $128,972 and $767,046, respectively. The decrease in operating expenses was primarily due to OpenLocker’s streamlining of its operations during the current period.

 

Operating expenses during the six months ended January 31, 2024 and 2023 were $602,135 and $1,337,892, respectively. The decrease in operating expenses was primarily due to OpenLocker’s streamlining of its operations during the current period.

 

Net Loss

 

For the three months ended January 31, 2024 and 2023, we had a net loss of $141,005 and $761,097, respectively. The decrease in net loss was primarily due to less expenses associated with developing our clubs as they were already established during the current period.

 

26
 

 

For the six months ended January 31, 2024 and 2023, we had a net loss of $612,978 and $1,326,803, respectively. The decrease in net loss was primarily due to less expenses associated with developing our clubs as they were already established during the current period. 

 

Other Expense

 

Other expense for the three months ended January 31, 2024 and 2023 was $13,697 and $0, respectively. The increase in other expense was primarily due to amortization of debt discount of $5,473 and interest expense of $13,697.

 

Other expense for the six months ended January 31, 2024 and 2023 was $20,172 and $0, respectively. The increase in other expense was primarily due to amortization of debt discount of $5,473 and interest expense of $20,172.

 

LIQUIDITY AND CAPITAL RESOURCES

 

As of January 31, 2024, we had $22,424 in cash and did not have any other cash equivalents. The following table provides detailed information about our net cash flow for all financial statement periods presented in this Quarterly Report on Form 10-Q. To date, we have financed our operations primarily through the issuance of stock and borrowings.

 

The following table sets forth a summary of our cash flows for the six months ended January 31, 2024 and 2023:

 

  

Six Months Ended

January 31,

 
   2024   2023 
Net cash used in operating activities  $(298,115)  $(509,809)
Net cash provided by financing activities   305,000    83,116 
Net increase (decrease) in cash   6,885    (426,693)
Cash, beginning of period   15,539    607,135 
Cash, end of period  $22,424   $180,442 

 

Since inception, we have financed our cash flow requirements primarily through issuance of common stock and debt financing. As we expand our activities, we may continue to experience net negative cash flows from operations. We anticipate obtaining additional financings to fund operations through additional common stock offerings, to the extent available, or to obtain additional financings to the extent necessary to augment our working capital.

 

We anticipate that we will incur operating losses in the next twelve months. Our lack of operating history makes predictions of future operating results difficult to ascertain. Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in their early stage of development, particularly companies in new and rapidly evolving markets. Such risks for us include, but are not limited to, an evolving and unpredictable business model and the management of growth. To address these risks, we must, among other things, obtain a customer base, implement and successfully execute our business and marketing strategy, continually develop and upgrade our website, provide national and regional industry participants with an effective, efficient and accessible website on which to promote their products and services through the Internet, respond to competitive developments, and attract, retain and motivate qualified personnel. There can be no assurance that we will be successful in addressing such risks, and the failure to do so can have a material adverse effect on our business, results of operations or financial condition.

 

Critical Accounting Policies and Estimates

 

Our management’s discussion and analysis of our financial condition and results of operations is based on our unaudited consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). The preparation of our unaudited consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reported period. In accordance with GAAP, we base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.

 

27
 

 

Going Concern and Management’s Plans

The unaudited consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business.

 

As reflected in the accompanying unaudited consolidated financial statements for the six months ended January 31, 2024, the Company had:

 

● Net loss of $612,978; and
● Net cash used in operations of $298,115.

 

Additionally, at January 31, 2024, the Company had:

 

● Accumulated deficit of $10,747,065;
● Stockholders’ deficit of $377,502; and
● Working capital deficit of $378,819.

 

We manage liquidity risk by reviewing, on an ongoing basis, our sources of liquidity and capital requirements. The Company had cash on hand of $22,424 at January 31, 2024. Although the Company intends to raise additional debt or equity capital, the Company expects to continue to incur significant losses from operations and have negative cash flows from operating activities for the near-term. These losses could be significant as operations ramp up along with continuing expenses related to compensation, professional fees, and regulatory are incurred.

 

The Company has incurred significant losses since its inception and has not demonstrated an ability to generate sufficient revenues to achieve profitable operations. There can be no assurance that profitable operations will ever be achieved, or if achieved, could be sustained on a continuing basis. In making this assessment we performed a comprehensive analysis of our current circumstances including: our financial position, our cash flows and cash usage forecasts for the twelve months ended January 31, 2025, and our current capital structure including equity-based instruments and our obligations and debts.

 

The Company has satisfied its obligations from the issuance of common stock and notes payable; however, there is no assurance that such successful efforts will continue during the twelve months subsequent to the date these consolidated financial statements are issued.

 

If the Company does not obtain additional capital, the Company will be required to reduce the scope of its business development activities or cease operations. The Company continues to explore obtaining additional capital financing and the Company is closely monitoring its cash balances, cash needs, and expense levels.

 

These factors create substantial doubt about the Company’s ability to continue as a going concern within the twelve-month period subsequent to the date that the unaudited consolidated financial statements are issued. The unaudited consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. Accordingly, the unaudited consolidated financial statements have been prepared on a basis that assumes the Company will continue as a going concern and which contemplates the realization of assets and satisfaction of liabilities and commitments in the ordinary course of business.

 

Management’s strategic plans include the following:

 

●Pursuing additional capital raising opportunities;
●Continuing to explore and execute prospective partnering or distribution opportunities;
●Identifying strategic acquisitions; and
●Identifying unique market opportunities that represent potential positive short- term cash flow.

 

Principles of Consolidation

 

The unaudited consolidated financial statements have been prepared in accordance with GAAP and include the accounts of the Company and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated.

 

28
 

 

Use of Estimates

 

Preparing financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period. Actual results could differ from those estimates, and those estimates may be material.

 

Goodwill and Impairment

 

In financial reporting, goodwill is not amortized, but is tested for impairment annually (each July 31) or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Events that result in an impairment review include significant changes in the business climate, declines in our operating results, or an expectation that the carrying amount may not be recoverable. We assess potential impairment by considering present economic conditions as well as future expectations. All assessments of goodwill impairment are conducted at the individual reporting unit level.

 

The Company uses qualitative factors according to the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) 350-20-35-3 to determine whether it is more likely than not that the fair value of goodwill is less than its carrying amount.

 

Three and Six Months Ended January 31, 2024

 

There were no impairment losses recorded during the three and six months ended January 31, 2024.

 

Fiscal Year Ended July 31, 2023

 

During the year ended July 31, 2023, the Company determined that given various negative financial indicators (quantitative and qualitative), goodwill of $2,943,874 was fully impaired and recorded as a component of other income (expense) in the consolidated statements of operations.

 

Revenue Recognition

 

OpenLocker generates revenue from two main sources: our collectibles and sponsorship revenues.

 

Revenue is recognized in accordance with ASC No. 606, “Revenue from Contracts with Customers”. The Company recognizes revenue when its performance obligations are complete, which occurs at a point in time related to the transfer of a digital access pass or sale of a sponsorship to its customer (final or ultimate end-user purchaser/collector). Currently, all revenue streams contain a single performance obligation. There are no penalties for contract termination by either party.

 

Collectibles

 

All payments are received from third-party payment processing providers. The Company receives payments from sales on its primary marketplace (Shopify site) as well as two other sources. Each of these sources of payment relate to the completion of a single performance obligation completed at a point in time, which occurs upon the transfer of a digital access pass and where no further performance obligations are required. At the point of sale, the Company grants all rights in the intellectual property to the customer.

 

Payments from customers (all paid in cash) are received as follows:

 

●Shopify payouts from credit/debit cards transactions typically occur 2-3 days after date of sale; and
●PayPal payments are received same day

 

Shipping fees collected from customers for physical collectibles are included with revenues received from Shopify payouts. Prior to the product shipping, any amounts received in advance are accounted for as contract liabilities (deferred revenue).

 

The Company controls the collectibles via digital access pass prior to a sale and acts as the principal in these transactions.

 

29
 

 

Sponsorships

 

The Company generates revenues from sponsorship arrangements, in which the customer sponsors an athlete, event or sports team. In exchange for the sponsorship, the customer receives specified brand recognition and other benefits over a set period of time and will recognize revenue on a straight-line basis over the time period specified in the contract. Related performance obligations for sponsorship arrangements are recognized ratably over this period of time.

 

The excess of amounts contractually due over the amounts of sponsorship revenue recognized are included on the consolidated balance sheets as contract liabilities (deferred revenues). Contractually due, but unpaid sponsorship revenue is included in accounts receivable on the consolidated balance sheets.

 

At January 31, 2024 and July 31, 2023, the Company had contract liabilities of $5,000 and $10,050, respectively.

 

For the three months ended January 31, 2024 and 2023, the Company recognized $4,050 and $0, respectively, of sponsorship revenues from one and zero customers, respectively.

 

For the six months ended January 31, 2024 and 2023, the Company recognized $10,050 and $0, respectively, of sponsorship revenues from one and zero customers, respectively.

 

The following represents the Company’s disaggregation of revenues for the six months ended January 31, 2024 and 2023:

 

   Six Months Ended January 31, 
   2024   2023 
Revenues  Revenue   % of Revenues   Revenue   % of Revenues 
Collectibles  $6,260    38%  $11,089    100%
Sponsorships   10,050    62%   -    0%
Total Revenues  $16,310    100%  $11,089    100%

 

Software Development Costs

 

Internal-use software development costs are accounted for in accordance with ASC 350-40, “Internal-Use Software”. The costs incurred in the preliminary stages of development are expensed as research and development costs as incurred.

 

Once an application has reached the development stage, internal and external costs incurred to develop internal-use software are capitalized and amortized on a straight-line basis over the estimated useful life of the software (typically three to five years).

 

Maintenance and enhancement costs, including those costs in the post- implementation stages, are typically expensed as incurred, unless such costs relate to substantial upgrades and enhancements to the software that result in added functionality, in which case the costs are capitalized and amortized on a straight-line basis over the estimated useful life of the software.

 

The Company reviews the carrying value for impairment whenever facts and circumstances exist that would suggest that assets might be impaired or that the useful lives should be modified. Amortization expense related to capitalized internal-use software development costs will be included in cost of goods sold in the statements of operations.

 

For the three months ended January 31, 2024 and 2023, the Company expensed $2,941 and $17,190, respectively, in software development costs.

 

For the six months ended January 31, 2024 and 2023, the Company expensed $57,602 and $130,124, respectively, in software development costs.

 

30
 

 

Off-Balance Sheet Arrangements

 

We do not have any 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 is material to investors. 

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

As a smaller reporting company, the Company is not required to provide the information required by this Item.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in company reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Principal Financial Officer, to allow timely decisions regarding required disclosure.

 

As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Principal Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of January 31, 2024. Based upon their evaluation, our Chief Executive Officer and Principal Financial Officer concluded that, as of January 31, 2024, our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were effective .

 

We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

 

Changes in Internal Control over Financial Reporting

 

During the three months ended January 31, 2024, there has been no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting .

 

PART II—OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

From time to time, we are involved in ordinary routine litigation typical for companies engaged in our line of business. As of the date of this Quarterly Report on Form 10-Q, except as set forth below, we are not involved in any pending legal proceedings that we believe would be likely, individually or in the aggregate, to have a material adverse effect on our financial condition or results of operations.

 

On June 5, 2023, Sarkis Sarkisian and Frank Andrianakos filed a complaint in the Supreme Court of New York, County of New York (Index No. 652710/2023), claiming that in December 2021, the Company had defaulted on certain promissory notes originally issued in September 2006. Plaintiffs claimed that they were owed approximately $688,540, additional interest and attorneys’ fees. The Company subsequently removed the case to the United States District Court for the Southern District of New York (the “Court”) on the basis of diversity jurisdiction (Case 1:23-cv-06154-JSR). On September 1, 2023, the Company filed a Motion to Dismiss for Lack of Personal Jurisdiction and Improper Venue or, in the Alternative, to Transfer. On October 27, 2023, the Court dismissed the action without prejudice. Plaintiffs subsequently appealed the dismissal. The Company believes that it has substantial defenses against the claim and intends to continue to defend against the claim.

 

ITEM 1A. RISK FACTORS

 

There have been no material changes to our risk factors as disclosed in our Annual Report on Form 10-K for the year ended July 31, 2023, as filed with the SEC on November 1, 2023. 

 

31
 

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

During the six months ended January 31, 2024, the Company issued unregistered equity securities as follows:

 

  ● The Company issued 125,000 shares of common stock in exchange for payment of a purchase price of $23 ($0.001 per share).
  ● The Company issued 100,000 shares of common stock as a debt discount in connection with the issuance of a $50,000 note payable, having a fair value of $21,890, which is being amortized over the life of the note.
  ● The Company issued 704,644 shares of common stock in exchange for services rendered. Such shares had a fair value of $202,679 ($0.2479 to $0.44 per share), based upon the quoted closing trading price on the issuance date.

 

The above securities issuances were exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), in reliance on the exemptions provided by Regulation D and Section 4(a)(2), as applicable under the Securities Act.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

ITEM 5. OTHER INFORMATION

 

(a) None.

 

(b) There have been no material changes to the procedures by which security holders may recommend nominees to our Board of Directors since we last provided disclosure in response to the requirements of Item 407(c)(3) of Regulation S-K promulgated under the Exchange Act.

 

(c) During the quarter ended January 31, 2024, no director or officer of the Company adopted or terminated a contract, instruction or written plan for the purchase or sale of securities of the Company intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) and/or a non-Rule 10b5-1 trading arrangement.

 

ITEM 6. EXHIBITS

 

Exhibit No.   Description
     
31.1*   Certification of Chief Executive Officer pursuant to Exchange Act Rule 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*   Certification of Principal Financial Officer pursuant to Exchange Act Rule 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**   Certification by the Chief Executive Officer and principal financial officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*   Inline XBRL Instance Document.
101.SCH*   Inline XBRL Taxonomy Extension Schema.
101.CAL*   Inline XBRL Taxonomy Extension Calculation Linkbase.
101.LAB*   Inline XBRL Taxonomy Extension Label Linkbase.
101.PRE*   Inline XBRL Taxonomy Extension Presentation Linkbase.
101.DEF*   Inline XBRL Taxonomy Extension Definition Document.
104*   Cover Page Interactive Data File (embedded within the Inline XBRL document).

 

* Filed herewith.
** Furnished herewith.

 

32
 

 

SIGNATURES

 

Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.

 

  OPENLOCKER HOLDINGS, INC.
     
Date: March 15, 2024 By: /s/ Howard Gostfrand
    Howard Gostfrand
    Chief Executive Officer (principal executive officer, principal financial officer and principal accounting officer)

 

33