GAMG TECH The following discussion and analysis of the Company's financial condition and results of operations should be read in conjunction with the Company's condensed unaudited consolidated financial statements and related notes appearing elsewhere in this Form 10-Q. In addition to historical information, this discussion and analysis here and throughout this Form 10-Q contains forward-looking statements that involve risks, uncertainties and assumptions. The Company's actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including, but not limited to, those set forth under Item 1A ("Risk Factors") in the Form 10-K and elsewhere in this Form 10-Q.
Overview
We are a software company specializing in online gaming. Our cloud-based Player Account Management (PAM) platform enables us to rapidly deploy branded online gambling presences for land-based casinos, consumer brands and media companies. Depending on each geographical region and the restrictions/requirements of its gambling-related legislation, we form "access deals" that offer a faster and easier route to market by enabling us to operate under a gambling license already held by a local partner.
We integrate best-in-class third-party games to provide the ultimate gaming
platform, and we help our international partners in regulated markets leverage
online gambling presences while putting players first. We also form business
partnerships with established brands such as
In addition, the Company operates an online gaming operation in
The Company's activities are subject to significant risks and uncertainties,
including the need for additional capital, as described below. The Company
commenced revenue-generating operations in
Background and Basis of Presentation
For financial reporting purposes, the Exchange Agreement was accounted for as a
combination of entities under common control (the "Combination"), as
Our Board of Directors and our shareholders have approved a potential reverse split of our common stock in a range between 1-for-2 and 1-for-8. The Board of Directors will make the final determination whether to effect the reverse split, and if so determined, of the actual ratio within that range. There is no assurance that any reverse stock split will occur. The share and per share information in this Report does not reflect any reverse stock split.
Going Concern
The Company's condensed consolidated financial statements have been presented on
the basis that the Company is a going concern, which contemplates the
realization of assets and satisfaction of liabilities in the normal course of
business. As reflected in the accompanying condensed consolidated financial
statements, the Company has had limited operating revenues to date, and has
experienced recurring net losses from operations and negative operating cash
flows. During the three months ended
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At
As a result, management has concluded that there is substantial doubt about the
Company's ability to continue as a going concern within one year of the date
that the accompanying condensed consolidated financial statements are issued. In
addition, the Company's independent registered public accounting firm, in their
report on the Company's condensed consolidated financial statements for the year
ended
The development and expansion of the Company's business in 2022 and thereafter will be dependent on many factors, including the capital resources available to the Company. No assurances can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company or adequate to fund the development and expansion of the Company's business to a level that is commercially viable and self-sustaining. There is also significant uncertainty as to the affect that the coronavirus pandemic may have on the availability, amount and type of financing in the future.
If cash resources are insufficient to satisfy the Company's ongoing cash requirements, the Company would be required to scale back or discontinue its operations, obtain funds, if available, although there can be no certainty, through strategic alliances that may require the Company to relinquish rights to its technology, or to discontinue its operations entirely.
Critical Accounting Policies and Estimates
The following discussion and analysis of financial condition and results of
operations is based upon the Company's condensed consolidated financial
statements for the three months ended
Revenue Recognition
The Company recognizes revenue in accordance with ASC Topic 606, Revenue From Contracts With Customers. ASC Topic 606 requires companies to recognize revenue in a manner that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, the standard requires disclosures of the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. Revenue is recognized based on the following five step model:
· Identification of the contract with a customer
· Identification of the performance obligations in the contract
· Determination of the transaction price
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· Allocation of the transaction price to the performance obligations in the
contract
· Recognition of revenue when, or as, the Company satisfies a performance
obligation
Performance Obligations
The Company operates an online betting platform allowing users to place wagers on casino and other games. Each wager placed by users create a single performance obligation for the Company to administer each event wagered. Net gaming revenue is the aggregate of gaming wins and losses based on results of each event that customers wager bets on. Gross gaming revenue is split with our partners, whose share of gross gaming revenue is recorded as a reduction to net gaming revenue.
Stock-Based Compensation
The Company issues Common Stock and intends to issue stock options to officers, directors and consultants for services rendered. Options will vest and expire according to terms established at the issuance date of each grant. Stock grants, which are generally time vested, will be measured at the grant date fair value and charged to operations ratably over the vesting period.
The fair value of stock options granted as stock-based compensation will be
determined utilizing the Black-Scholes option-pricing model, and can be affected
by several variables, the most significant of which are the life of the equity
award, the exercise price of the stock option as compared to the fair market
value of the Common Stock on the grant date, and the estimated volatility of the
Common Stock. Estimated volatility will be based on the historical volatility of
the Company's Common Stock over an appropriate calculation period, or, if not
available, by reference to the volatility of a representative sample of
comparable public companies. The risk-free interest rate will be based on the
The Company will recognize the fair value of stock-based compensation awards in general and administrative costs or in software development costs, as appropriate, in the Company's consolidated statements of operations. The Company will issue new shares of Common Stock to satisfy stock option exercises.
As of
Recent Accounting Pronouncements
See Note 2 to the condensed consolidated financial statements for discussion of Recent Accounting Policies.
Development of Our Business
Our activities are subject to significant risks and uncertainties, including the
need for additional capital, as described below. We do not have positive cash
flows from operations, and we expect to continue to be dependent on periodic
infusions of equity capital to fund our operating requirements. We have financed
our working capital requirements since inception primarily through the sale of
its equity securities in private placement transactions, as well as from
borrowings. In private placements to "accredited investors" (as defined in
Regulation D under the Securities Act of 1933, as amended (the "Securities
Act")) or to non-
23 Big Bola/vale.mx
On
Playboy License Agreement
On
Ortiz Gaming Partnership
On
Key Performance Indicators Registered Players
A registered player is a customer who has registered on our app or website and
met our Know Your Customer identification requirements. During the three months
ended
Monthly Unique Payers
Monthly Unique Payers ("MUPs"). MUPs is the average number of unique paid users ("unique payers") that use our online platform on a monthly basis.
MUPs is a key indicator of the scale of our user base and awareness of our brand and/or the third-party brands we partner with. We believe that year-over-year MUPs will also generally be indicative of the long-term revenue growth potential of the online gaming brands we hold directly and/or those we establish around our B2B brand partners, although MUPs in individual periods may be less indicative of our longer-term expectations. We expect the number of MUPs to grow as we attract, retain and re-engage users in new and existing jurisdictions and expand the online gambling brands we operate to appeal to a wider audience.
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We define MUPs as the average number of unique payers per month who had a paid engagement (e.g., participated in a casino game) across one or more of our product offerings via our platform technology. For reported periods longer than one month, we average the MUPs for the months in the reported period.
A "unique paid user" or "unique payer" is any person who had one or more paid engagements via our B2C technology during the period (i.e., a user that participates in a paid engagement with one of our B2C product offerings counts as a single unique paid user or unique payer for the period). We exclude users who have made a deposit but have not yet had a paid engagement. Unique payers or unique paid users include users who have participated in a paid engagement with promotional incentives, which are fungible with other funds deposited in their wallets on our technology. The number of these users included in MUPs has not been material to date and a substantial majority of such users are repeat users who have had paid engagements both prior to and after receiving incentives.
During the three months ended
Average Revenue per MUP ("ARPMUP"). ARPMUP is the average online casino revenue per MUP, and this key metric represents our ability to drive usage and monetization of our online casino offering.
During the three months ended
We define and calculate ARPMUP as the average monthly online casino revenue for a reporting period, divided by MUPs (i.e., the average number of unique payers) for the same period.
Handle
Handle is a casino or sports betting term referring to the total amount of money bet. We will report the handle or cash wagering which is the total amount of money bet excluding all bonuses.
During the three months ended
Hold
Hold is essentially the amount of cash that our platform instances keep after
paying out winning bets. The industry also refers to hold as win or revenue.
During the three months ended
Online games are characterized by an element of chance. Our revenue is impacted by variations in the hold percentage (the ratio of net win to total amount wagered) on bets placed on, or the actual outcome of, games or events on which users bet. Although our product offerings generally perform within a defined statistical range of outcomes, actual outcomes may vary for any given period, and a single large bet can have a sizeable impact on our short-term financial performance. Our hold is also affected by factors that are beyond our control, such as a user's skill, experience and behavior, the mix of games played, the financial resources of users and the volume of bets placed. As a result of variability in these factors, actual hold rates on our products may differ from the theoretical win rates we have estimated and could result in the winnings of our gaming users exceeding those anticipated. We seek to mitigate these risks through data science and analytics and rules built into our technology, as well as active management of our amounts at risk at a point in time, but may not always be able to do so successfully, particularly over short periods, which can result in financial losses as well as revenue volatility.
During the three months ended
25 Plan of Operation
Our next phase of growth is focused on scaling our customer and player base and geographies, and utilizing the existing technical capacity and investment in infrastructure which has taken place since 2017. The company intends to invest in further software development, specifically the recruitment of a further 10 developers to add sportsbook functionality to the existing PAM platform. As our platform is hosted in AWS, we do not anticipate investing further in any equipment.
In line with the Company's strategy of creating lean and flexible operations, we
are outsourcing a number of departments including Customer Service to
TelePerformance in
Results of Operations
In
Revenues
The Company began generating revenue in
Cost of Revenues
The Company began generating costs of revenues in
Operating Expenses
The Company generally recognizes operating costs and expenses as they are incurred in two general categories, software development costs and expenses and general and administrative costs and expenses. The Company's operating costs and expenses also include non-cash components related to depreciation and amortization of property and equipment, and intellectual property, which are allocated, as appropriate, to software development costs and expenses and general and administrative costs and expenses.
Software development costs and expenses consist primarily of fees paid to consultants and amortization of intellectual property. Management expects software costs and expenses to increase in the future as the Company increases its efforts to develop technology for potential future products based on its technology and research.
General and administrative costs and expenses consist of fees for directors and officers, and their affiliates, as well as legal and other professional fees, depreciation and amortization of property and equipment, lease and rent expense, and other general corporate expenses. Management expects general and administrative costs and expenses to increase in future periods as the Company adds personnel and incurs additional costs related to its operation as a public company, including higher legal, accounting, insurance, compliance, compensation and other costs.
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Three Months Ended
The Company's condensed consolidated statements of operations for the three
months ended
Three Months Ended
March 31,
2022 2021
Revenue $ 44,016 $ 2,089
Costs and expenses:
Cost of revenues 49,990 182,263
Software development 14,473 18,403
General and administrative
Officers, directors, affiliates and other related
parties 164,763 291,855
Advertising and marketing - 269,967
Other 810,684 1,620,424
Total costs and expenses 1,039,910 2,382,912
Loss from operations (995,894 ) (2,380,823 )
Other income (expense)
Interest expense (442,596 ) -
Foreign currency loss (643 ) -
Total other expense, net (443,239 ) -
Net loss (1,439,133 ) (2,380,823 )
Foreign currency translation adjustment 6,418 (13,173 )
Comprehensive loss $ (1,432,715 ) $ (2,393,996 ) Net loss per common share - basic and diluted
31,351,953 29,522,424
Revenue. The Company began generating revenue in
Cost of Revenues: The Company began generating costs of revenues in
Software Development Costs and Expenses. For three months ended
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For the three months ended
Software development costs and expenses decreased by
General and Administrative Costs and Expenses. For the three months ended
For the three months ended
General and administrative costs decreased by
Interest Expense. For the three months ended
Foreign Currency Gain (Loss). For the three months ended
Net Loss. For the three months ended
Foreign Currency Translation Adjustment. For the three months ended
Comprehensive Loss. For the three months ended
Liquidity and Capital Resources -
The Company's condensed consolidated financial statements have been presented on the basis that the Company is a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has had no significant operating revenues to date, and has experienced recurring net losses from operations and negative operating cash flows. The Company has financed its working capital requirements since inception through the sale of its equity securities and from borrowings.
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As a result, management has concluded that there is substantial doubt about the
Company's ability to continue as a going concern within one year of the date
that the condensed consolidated financial statements are being issued. In
addition, the Company's independent registered public accounting firm, in their
report on the Company's condensed consolidated financial statements for the year
ended
The ability of the Company to continue as a going concern is dependent upon the Company's ability to raise additional funds and implement its business plan, and to ultimately achieve sustainable operating revenues and profitability. The accompanying condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
As of
As of
In
The Company estimates that its working capital requirements for the next twelve
months to be approximately
The working capital budget will enable the Company to support the existing
monthly operating costs of the Company of approximately
During the year ended
Since acquiring the software platform, the Company has successfully carried out development to port the software platform from its former physical server dependencies and reliance on third parties for hardware management and deployment to a cloud-based platform where deployment is automated through the use of infrastructure as code. To make the Company's software platform work for business-to-business (B2B) licensees, the Company has modified the software to enable remote management by system administrators of prospective licensees. Previously, the platform was business to consumer (B2C) focused, with outsourced management and deployment. As a result of this software development, the Company expects to be able to monetize its software platform by selling licenses to third parties.
The Company's ability to raise additional funds through equity or debt financings or other sources may depend on the stage of development of the software platform, the commercial success of the software, and financial, economic and market conditions and other factors, some of which are beyond the Company's control. No assurance can be given that the Company will be successful in raising the required capital at reasonable cost and at the required times, or at all. Further equity financings may have a dilutive effect on shareholders and any debt financing, if available, may require restrictions to be placed on the Company's future financing and operating activities. If the Company requires additional capital and is unsuccessful in raising that capital, the Company may not be able to continue the development of its software platform and continue to advance its growth initiatives, or ultimately to be able to continue its business operations, which could adversely impact the Company's business, financial condition and results of operations.
29 Operating Activities
For the three months ended
Investing Activities
For the three months ended
For the three months ended
Financing Activities
For the three months ended
For the three months ended
Off-Balance Sheet Arrangements
As of
Trends, Events and Uncertainties
Development of new software is, by its nature, unpredictable. Although the Company will undertake development efforts with commercially reasonable diligence, there can be no assurance that the Company's efforts to raise funds in the future will be sufficient to enable the Company to develop its technology to the extent needed to create future revenues to sustain operations as contemplated herein.
There can be no assurances that the Company's technology will be adopted or that the Company will ever achieve sustainable revenues sufficient to support its operations. Even if the Company is able to generate revenues, there can be no assurances that the Company will be able to achieve profitability or positive operating cash flows. There can be no assurances that the Company will be able to secure additional financing on acceptable terms or at all. If cash resources are insufficient to satisfy the Company's ongoing cash requirements, the Company would be required to scale back or discontinue its software development programs, or obtain funds, if available (although there can be no certainty), through strategic alliances that may require the Company to relinquish rights to certain of its potential products, or to curtail or discontinue its operations entirely.
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Other than as discussed above and elsewhere in this Form 10-Q, the Company is not currently aware of any trends, events or uncertainties that are likely to have a material effect on the Company's financial condition in the near term, although it is possible that new trends or events may develop in the future that could have a material effect on the Company's financial condition.
Impact of COVID-19 on the Company
The global outbreak of COVID-19 has led to severe disruptions in general economic activities, as businesses and governments have taken broad actions to mitigate this public health crisis. Although the Company has not experienced any significant disruption to its business to date, these conditions could significantly negatively impact the Company's business in the future.
The extent to which the COVID-19 outbreak ultimately impacts the Company's business, future revenues, results of operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to, the duration and spread of the outbreak, its severity and longevity, the actions to curtail the virus and treat its impact (including an effective vaccine), and how quickly and to what extent normal economic and operating conditions can resume. Even after the COVID-19 outbreak has subsided, the Company may be at risk of experiencing a significant impact to its business as a result of the global economic impact, including any economic downturn or recession that has occurred or may occur in the future.
Currently, capital markets have been disrupted by the crisis, as a result of which the availability, amount and type of financing available to the Company in the near future is uncertain and cannot be assured and is largely dependent upon evolving market conditions and other factors.
The Company intends to continue to monitor the situation and may adjust its current business plans as more information and guidance become available.
Other than as discussed above and elsewhere in this Form 10-Q, the Company is not currently aware of any trends, events or uncertainties that are likely to have a material effect on the Company's financial condition in the near term, although it is possible that new trends or events may develop in the future that could have a material effect on the Company's financial condition.
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