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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

 

Form 10-K/A

(Amendment No. 2

 

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

 

For the fiscal year ended December 31, 2022

 

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

 

Commission File Number: 000-53949

 

Good Gaming, Inc.

 

(Exact name of registrant as specified in its charter)

 

Nevada   37-1902603

(State or other jurisdiction

of incorporation)

 

(IRS Employer

Identification Number)

 

415 McFarlan Road, Suite 108

Kennett Square, PA 19348

(Address of principal executive offices and Zip Code)

 

(844) 419-7445

Registrant’s telephone number, including area code

 

 

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

 

Securities registered pursuant to Section 12(b) of the Act:   Securities registered pursuant to section 12(g) of the Act:
NONE   COMMON STOCK

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ☐ NO

 

Indicate by check mark if the registrant is required to file reports pursuant to Section 13 or Section 15(d) of the Act: YES ☒ NO ☐

 

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES ☒ NO ☐

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

 

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statement of the registrant included in the filing reflect the correction of an error to previously issued financial statements.

 

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

 

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

 

State the aggregate market value of voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked price of such common equity, as of June 30, 2022: $4,536,775.

 

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: 113,142,559 as of April 7, 2023.

 

 

 

 

 

 

Explanatory Note

 

Good Gaming, Inc. (together with its subsidiary, the “Company” sometimes referred to as “we”, “us” or “our”) is filing this Amendment No. 2 (“Amendment No. 2” or “Form 10K/A”) to its Annual Report on Form 10-K for the period ended December 31, 2022, originally filed on April 7, 2023 (the “Original Form 10-K”), solely to include the audit opinion for the period ended December 31, 2021 with the audit opinion for the period ended December 31, 2022. No other changes have been made to the Form 10K.

 

Except as described above, no attempt has been made in this Amendment No. 2 to modify or update the other disclosures in the Original Form 10-K. Amendment No. 2 continues to speak as of the date of the Original Form 10-K, and the Company has not updated the disclosures contained therein to reflect any events which occurred at a date subsequent to the filing of the Original Form 10-K. Accordingly, Amendment No. 2 should be read in conjunction with the Original Form 10-K.

 

 
 

 

FORWARD LOOKING STATEMENTS

 

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

 

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

 

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

 

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

 

2

 

 

PART I

 

ITEM 1. BUSINESS

 

General

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

3

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

In March 2019, the Company discontinued Minecade and Olimpo servers and decided to focus on the core Good Gaming servers.

 

On March 11, 2019, Eric Brown resigned from the Chief Operating Officer’s position.

 

On March 19, 2021, the Company formulated a new plan to create a new game called “MicroBuddies™” that combines Ethereum ERC721 NFTs (Non-fungible tokens), non-standard ERC20 tokens (GOO™), and strategic gameplay to replicate and create unique and rare NFTs. The game will be played online via the MicroBuddies website and blockchain transactions take place on the Polygon Network.

 

On May 25th, 2021, Good Gaming, Inc. filed for a trademark on MicroBuddies™ and other related game terms.

 

On May 28th, 2021, the initial launch of MicroBuddies™ began with the “Genesis Event”, which is the sale of Nano Factory Tokens at a discounted rate of 0.05 Ethereum. We expect to raise the prices of Nano Factory Token prices to 0.15 Ethereum prior to the full game launch in Q3 2021. Nano Factory Tokens obtained during the Genesis Event will be used to synthesize a Generation 0 Microbuddy™ when the game fully launches in the 4th Quarter of 2021. Nano Factory Tokens are limited to 3 purchases per wallet. Unsold Nano Factory Tokens will be destroyed and no Nano Factory Tokens will be made available ever again.

 

On September 14, 2021, Good Gaming, Inc. met all qualifications and have been accepted by OTC Markets to uplist from Pink Sheet Current to the OTCQB tier for trading.

 

On September 23, 2021, the Company announced that MicroBuddies™ will be launched on the mainnet using Polygon, which is an Ethereum compatible blockchain building platform that provides a secure and lower-cost alternative to Ethereum’s escalating gas fees and wait times. The Company also announced October 5, 2021, as it’s the official launch date for beta testing to begin.

 

4

 

 

On November 11, 2021, the Company entered into a securities purchase agreement with several institutional and accredited investors pursuant to which the Company will sell to the Investors in a private placement an aggregate of (i) 15,922,156 shares of common stock, (ii) pre-funded warrants to purchase up to an aggregate of 4,811,181 shares of common stock and (iii) warrants to purchase up to an aggregate of 20,733,337 shares of common stock for gross proceeds to the Company of approximately $3,100,000. The combined purchase price for one share of common stock and a warrant to purchase one share of common stock is $0.15 and the combined purchase price for one pre-funded warrant to purchase one share of common stock and a warrant to purchase one share of common stock is 0.1499.

 

On December 13, 2021, the Company announced that the mainnet launch of the “MicroBuddies™” NFT game will be on Friday, December 17, 2021 at 7:00 PM EST. This announcement comes after more than 95% of players involved in Beta I and Beta II testing programs voted to launch the game at this time, based on gameplay and user experience.

 

On December 21, 2021, the Company filed Amended and Restated Articles of Incorporation with the Secretary of State of the State of Nevada in order to increase the total number of authorized shares of the Company from two hundred two million two hundred fifty thousand (202,250,000) authorized shares to two hundred five million (205,000,000) authorized shares. Addition to that, the Company filed a Certificate of Designation with the Secretary of State of the State of Nevada, which established two million seven hundred fifty thousand (2,750,000) shares of the Company’s Series E Convertible Preferred Stock. Each of the Series E Shares are convertible at the option of the holder at any time into 1,000 shares of the Company’s common stock. The holders of the Series E Shares will vote together with the common stock on an as-converted basis. The Series E Shares are not entitled to any dividend except that in the event that the Board of Directors of the Company declares a dividend to any other class of stock, Series E Shares are entitled to a dividend equal to what they would receive on an as converted to common stock basis.

 

On January 10, 2022, David Sterling was appointed as Chief Operating Officer of the Company.

 

Technology

 

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

 

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

 

In 2018, the Company acquired the Minecade and Olimpo Minecraft servers in order to deliver on expansion efforts. This move, coupled with continued advancement of the core Good Gaming Minecraft server substantially increased revenues and traffic. By the end of the year, the Company struck a deal with a prominent Minecraft influencer, which resulted in the single highest monthly earnings achieved within the Minecraft division, to date.

 

In 2019, following a severe downturn of business in the Minecraft sector, the Company decided to temporarily suspend the Minecade and Olimpo networks and refocus its efforts back on the core Good Gaming server. Much of the year was spent upgrading and overhauling the server’s existing infrastructure, which had grown stale over prior years. The Company adapted its strategy to target long term success and consistency through major innovations in the SkyBlock and Prison game modes, and began work towards an ambitious full recode of the Minecade server.

 

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In 2020, the Company finalized its infrastructure overhaul for use in upcoming releases. A new, experimental version of Prison, Prison MMO, was launched as an early access game mode in February 2020. Prison MMO is designed to be a self-sustaining Minecraft game mode which incorporates elements of the Massively Multiplayer Online video game genre. The Company expects steady growth from this mode as it continues developing Prison MMO. On April 1st, 2020, the company released its first iteration of a new SkyBlock gamemode, SkyBlock Spring, to some strong success. During the third quarter of 2020, the Company implemented a new workflow management style and released its summer edition of SkyBlock. The release of the summer edition signified a renewed focus on consistent growth through regular, player focused updates. The Company’s fall release of Prison in October 2020 resulted in its single highest revenue producing month of the year, to date.

 

In 2021, the Company kicked off the first quarter with major upgrades to its Winter edition of SkyBlock along with the release of its Winter edition of Prison. The Company used this period to experiment with new release schedules and game mechanics with the goal of identifying how to further strengthen future releases. Additionally, the Company formulated a new plan to create a new game called “MicroBuddies™” that combines Ethereum ERC721 NFTs (Non-fungible tokens), non-standard ERC20 tokens (GOO™), and strategic gameplay to replicate and create unique and rare NFTs. The game will be played online via the MicroBuddies website and blockchain transactions take place on the Polygon Network.The game was launched on December 17, 2021 after more than 95% of players involved in Beta 1 and 2 testing programs voted to launch the game based on gameplay and user experience.

 

In 2022, the Company expanded its development portfolio to include the Roblox gaming platform. Towards the end of 2022, the Company released a Roblox™” version of the popular Minecraft™” title “Super Craft Brothers Brawl™” and “Treasure Island” featuring the “MicroBuddies™”. The Company was able to gather important player feedback to help continue development to include player feedback regarding the titles’ feature set and functionality. In 2023, the Company plans to continue development of both of these titles and release final versions on the Roblox™” platform. In addition to the Super Craft Brothers Brawl™” and “Treasure Island” titles, the Company signed the first game publishing deal with a well known Roblox™” creator Joshua Mckittrick to bring his horror themed creations to the Roblox™” platform. Joshua has created Roblox™” titles which have garnered over 100 million visits and tens of thousands of views on YouTube from creators making fan videos and reviews of his titles. The Company also announced the establishment of a Family themed brand for the Roblox™” platform called “Family Games presented by Good Gaming” This brand will develop and publish a series of titles targeting the “All Ages’ category on the Roblox™” platform.

 

The Company also signed a development partnership agreement with Meraki Studios B.V., a leader in the development of high end Minecraft gaming experiences, to produce new gaming experiences around their Prison™”, SkyBlock™” and Super Craft Brothers Brawl™” properties. Each of these brands will have multiple releases during 2023. The releases will feature an update to the Minecraft 1.19 software version which will bring improved graphics, functionality and revenue generating opportunities.

 

Business Strategy

 

In the past, our management team’s business strategy was to be a full-service company providing best in class Esports gaming tournaments and Minecraft experiences. With the onset of the pandemic, the Esports industry has suffered a considerable amount of lost business opportunities. We were not immune to the effects of the pandemic on our Esports business. In addition, the size of the PC-based Minecraft gaming community has shrunk considerably. We have taken a hard look at both the Esports and Minecraft business verticals and determined that both strategies are no longer in the best interest of the company and our shareholders. We feel that both the Esports and Minecraft verticals do not have significant upside in the future. As so, the Esports and Minecraft business verticals will not comprise a meaningful segment of our ongoing business strategy. We will not designate any future investment in either of these verticals for the foreseeable future.

 

With the rise in the popularity of the crypto-currency and blockchain technologies, the Company has decided to invest in the creation of its new game, “MicroBuddies™” which combines Ethereum ERC721 NFTs (Non-fungible tokens), non-standard ERC20 tokens (GOO™), and strategic, long-tail web browser gameplay to replicate and create unique and collectible NFTs. ERC20 “GOO™” tokens are limited to use as an in-game currency only. This strategy will allow us to enter the emerging NFT and blockchain gaming space. Initial revenues from “MicroBuddies™” will come from the sale of Nano Factory Tokens that will be used to synthesize generation 0 of “MicroBuddies™”. Ongoing “MicroBuddies™” revenues will be generated from a 5% royalty on all of the sales of “MicroBuddy™” NFTs in third-party marketplaces and a.0.01 MATIC per “MicroBuddy™” replication Microbuddies In 2022, we will introduce additional initiatives around the “MicroBuddies™ intellectual property. We expect the ancillary”MicroBuddies™” initiatives to create consistent, recurring revenue over the life of the project.

 

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Moving forward, we are going to expand the “MicroBuddies™” intellectual property to metaverse/virtual world social gaming experiences. There are many current and emerging metaverse/virtual world platforms. Some existing platforms already have greater than one hundred million users while other platforms are slated to launch later in 2022 or in 2023. We see building “MicroBuddies™” themed gaming experiences in these types of metaverses/virtual worlds as a solid strategy to create long tail revenue engines while exposing the “MicroBuddies™” franchise to large, diverse audiences. In 2023, the Company will complete multiple gaming experiences featuring the Microbuddies for the Roblox platform. In the near future, other gaming platforms will be considered for gaming experiences in order to broaden the audience reach and recognizability of the “MicroBuddies™” IP. Also in 2023, the Company will build cross-platform gaming experiences around the “Super Craft Brothers Brawl™” (“SCBB”) IP. The SCBB franchise features a host of distinct characters and personalities that have resonated with Minecraft players for many years. The Company will develop multi-platform gaming experiences featuring these characters with the intent of introducing these characters to new audiences in an effort to grow their popularity and create new revenue opportunities for the brand.

 

2023 will be a year of multi-faceted business development for the Company. In addition to continuing to expand its footprint on the Minecraft™ and Roblox™ gaming platforms, the Company is targeting new platforms for its character properties and themed gaming experiences. The Company will also continue to build its publishing business by signing agreements with well-established creators to bring their properties to multiple platforms. The Company is planning to execute numerous business agreements to expand the total addressable market for its products which will create new avenues for revenue and profit generation.

 

Insurance Policies

 

We do not currently maintain any insurance but are in the process of obtaining the appropriate insurance to support our business operations.

 

Employees

 

We have three full-time consultants, and four part-time contractors working on various Good Gaming initiatives. The full-time consultants consist of one Chief Operating Officer, one Gaming Director and one Operations Manager. The part-time consultant team consists of two QA staff, one Video Engineer and a Marketing Coordinator. Pursuant to our Management Services Agreement with ViaOne Services LLC, certain employees of ViaOne are deemed to be consultants of the Company.

 

Offices

 

Our executive offices are located at 415 McFarlan Rd, Suite 108, Kennett Square, PA 19501. Our telephone number is (844) 419-7445.

 

Additional Information

 

The Company is subject to the information requirements of the Exchange Act, and, in accordance therewith, file annual, quarterly, and special reports, proxy statements and other information with the Commission. The Commission maintains an internet website at http://www.sec.gov that contains reports, proxy and information statements and other information regarding issuers that file electronically with the Commission. The periodic reports, proxy statements and other information that the Company files with the Commission are available for inspection on the Commission’s website free of charge as soon as reasonably practicable after they are electronically filed with or furnished to the Commission.

 

The Company maintains a website at www.good-gaming.com where you may also access these materials free of charge. We have included our website address as an inactive textual reference only and the information contained in, and that can be accessed through, our website is not incorporated into and is not part of this report on Form 10-K.

 

ITEM 1A. RISK FACTORS

 

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

 

ITEM 1B. UNRESOLVED STAFF COMMENTS

 

Not applicable.

 

ITEM 2. PROPERTIES

 

We do not currently rent or lease any real property.

 

ITEM 3. LEGAL PROCEEDINGS

 

We are currently not aware of any such legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or operating results. From time to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not Applicable.

 

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PART II

 

ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

 

Our common stock commenced trading on the over-the-counter Bulletin Board on October 7, 2009. It currently trades under the symbol “GMER”. Over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions. There is no public trading market for our securities.

 

Following is a table of the high bid price and the low bid price for each quarter during the last two fiscal years.

 

2021  High Bid   Low Bid 
First Quarter, Ending March 31  $0.1400   $0.0333 
Second Quarter, Ending June 30  $0.2495   $0.0163 
Third Quarter, Ending September 30  $0.7500   $0.1736 
Fourth Quarter, Ending December 31  $0.3780   $0.0502 

 

2022  High Bid   Low Bid 
First Quarter, Ending March 31  $0.1000   $0.0200 
Second Quarter, Ending June 30  $0.0855   $0.0356 
Third Quarter, Ending September 30  $0.0820   $0.0206 
Fourth Quarter, Ending December 31  $0.0895   $0.0259 

 

Holders

 

As of March 31, 2023, we have 113,142,559 shares of our common stock issued and outstanding held by 93 stockholders of record.

 

As of March 31, 2023, we had 7,500 shares of Series A Preferred Stock issued and outstanding, 19,296 shares of Series B Preferred Stock issued and outstanding, 1 share of Series C Preferred Stock issued and outstanding, 0 share of Series D Preferred Stock issued and outstanding, and 57,663 shares of Series E Preferred Stock issued and outstanding.

 

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Dividends

 

We have never declared or paid cash dividends. We currently intend to retain all future earnings for the operation and expansion of our business and do not anticipate paying cash dividends on the common stock in the foreseeable future. Any payment of cash dividends in the future will be at the discretion of our Board of Directors and will depend upon our results of operations, earnings, capital requirements, contractual restrictions and other factors deemed relevant by our directors. In addition, our Series D shares have cumulative dividend preference.

 

Securities Authorized for Issuance Under Equity Compensation Plans

 

On July 18, 2012, a Registration Statement on Form S-8 (the “Registration Statement”) was filed by us together with our 2012 Non-Qualified Stock Option Plan (the “Plan”) relating to 30,000,000 shares of our common stock, par value $0.001 per share, to be offered and sold to accounts of eligible persons. The original plan filed on July 18, 2012 is still valid but the Company will not issue any more securities under the Plan as we have adopted a new plan.

 

On April 30, 2018, the holder of one (1) share of Series C Preferred Stock of the Company that entitles such holder to vote a majority of the issued and outstanding voting securities of the Company’s approved by written consent that the Company adopts the 2018 Stock Incentive Plan (the “2018 Plan”) under which the Board may decide at its sole discretion to grant equity awards to certain employees and consultants as set forth in the 2018 Plan. The description of the 2018 Plan does not purport to be complete and is incorporated herein by reference to a current report on form 8-K filed with the Securities and Exchange Commission on May 4, 2018.

 

On March 7, 2022, the holder of one (1) share of Series C Preferred Stock of the Company that entitles such holder to vote a majority of the issued and outstanding voting securities of the Company’s approved by written consent that the Company adopt 2022 Stock Incentive Plan (the “2022 Plan”), which replaced the 2018 Stock Incentive Plan. There are 30,000,000 shares authorized under the 2022 Plan, which is an increase from 10,000,000 authorized under the 2018 Plan. Under the 2022 Plan, the board of directors of the Company (the “Board”) may decide at its sole discretion to grant equity awards to certain employees and consultants, including employees and consultants of ViaOne Services, Inc., who are also deemed consultants of the Company.

 

Penny Stock Regulations and Restrictions on Marketability

 

The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a market price of less than $5. Securities are registered on certain national securities exchanges or quoted on the OTC Markets which provides the current price and volume information. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the SEC, that: (a) contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading, (b) contains a description of the broker’s or dealer’s duties to the customer and of the rights and remedies available to the customer with respect to a violation of such duties or other requirements of the securities laws, (c) contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and the significance of the spread between the bid and ask price, (d) contains a toll-free telephone number for inquiries on disciplinary actions, (e) defines significant terms in the disclosure document or in the conduct of trading in penny stocks, and (f) contains such other information and is in such form, including language, type size and format, as the SEC shall require by rule or regulation.

 

The broker-dealer must also provide, prior to effecting any transaction in a penny stock, the customer with (a) bid and offer quotations for the penny stock, (b) the compensation of the broker-dealer and its salesperson in the transaction, (c) the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock, and (d) a monthly account statement showing the market value of each penny stock held in the customer’s account.

 

In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written acknowledgment of the receipt of a risk disclosure statement, a written agreement as to transactions involving penny stocks, and a signed and dated copy of a written suitability statement.

 

These disclosure requirements may have the effect of reducing the trading activity for our common stock. Therefore, stockholders may have difficulty selling their shares of our common stock.

 

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Common Stock

 

Our Articles of Incorporation authorize the Company to issue up to 100,000,000 shares of common stock, $0.001 par value. On May 3, 2018, the Company increased its authorized shares of common stock from 100,000,000 to 200,000,000. Each holder of our common stock is entitled to one (1) vote for each share held on record on all voting matters we present for a vote of stockholders, including the election of directors. Holders of common stock have no cumulative voting rights or preemptive rights to purchase or subscribe for any stock or other securities, and there are no conversion rights or redemption or sinking fund provisions with respect to our common stock. All shares of the Company’s common stock are entitled to share equally in dividends from sources legally available when, and if, declared by the Company’s Board of Directors.

 

Our Board of Directors is authorized to issue additional shares of common stock not to exceed the amount authorized by the Articles of Incorporation, on such terms and conditions and for such consideration as the Board may deem appropriate without further stockholder action.

 

In the event of our liquidation or dissolution, all shares of the Company’s common stock are entitled to share equally in our assets available for distribution to stockholders. However, the rights, preferences and privileges of the holders of our common stock are subject to, and may be adversely affected by, the rights of the holders of shares of preferred stock that have been issued or shares of preferred stock that our Board of Directors may decide to issue in the future.

 

Preferred Stock

 

Our Articles of Incorporation initially authorized us to issue up to 2,250,350 shares of preferred stock, $0.001 par value. On December 21, 2021, the Company filed the amendment to increase the authorized shares of preferred stock to 5,000,000 shares. Of the 5,000,000 authorized shares of preferred stock, the total number of shares of Series A Preferred Stock the Corporation shall have the authority to issue is 2,000,000, with a stated par value of $0.001 per share, the total number of shares of Series B Preferred Stock the Corporation shall have the authority to issue is 249,999, with a stated par value of $0.001 per share, the total number of shares of Series C Preferred Stock the Corporation shall have the authority to issue is 1, with a stated par value of $0.001 per share, the total number of shares of Series D Preferred Stock the Corporation shall have the authority to issue is 350, with a stated par value of $0.001 per share, and the total number of shares of Series E Preferred Stock the Corporation shall have the authority to issue is 2,750,000, with a stated par value of $0.001 per share. Our Board of Directors is authorized, without further action by the shareholders, to issue shares of preferred stock and to fix the designations, number, rights, preferences, privileges and restrictions thereof, including dividend rights, conversion rights, voting rights, terms of redemption, liquidation preferences and sinking fund terms. We believe that the Board of Directors’ power to set the terms of, and our ability to issue preferred stock, will provide flexibility in connection with possible financing or acquisition transactions in the future. The issuance of preferred stock, however, could adversely affect the voting power of holders of common stock and decrease the amount of any liquidation distribution to such holders. The presence of outstanding preferred stock could also have the effect of delaying, deterring or preventing a change in control of our company.

 

As of March 31, 2023, we had 7,500 shares of our Series A preferred stock, 19,296 shares of Series B preferred stock, 1 share of Series C preferred stock, 0 share of Series D preferred stock, and 57,663 shares of Series E preferred stock issued and outstanding.

 

The 7,500 issued and outstanding shares of Series A Preferred Stock are convertible into shares of common stock at a rate of 20 common shares for each Series A Preferred Share. The 19,296 issued and outstanding shares of Series B Preferred Stock are convertible into shares of common stock at a rate of 200 common shares for each Series B Preferred Share. The 57,663 issued and outstanding shares of Series E Preferred Stock are convertible into shares of common stock at a rate of 1,000 common shares for each Series E Preferred Share. If all of our Series A, B and E Preferred Stock are converted into shares of common stock, the number of issued and outstanding shares of our common stock will increase by 61,672,201 shares.

 

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

 

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The Series D Preferred Stock can be convertible into shares of common stock at the lower of the Fixed Conversion Price ($.06 per share) or at the VWAP which shall be defined as the average of the five (5) lowest closing prices during the 20 days prior to conversion. We did not have any shares of Series D preferred stock issued and outstanding as of March 31, 2023.

 

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

 

Options

 

We have not issued and do not have any outstanding options to purchase shares of our common stock.

 

Registration Rights

 

As of December 31, 2022, there are no other outstanding registration rights or similar agreements.

 

Convertible Securities

 

On April 15, 2015, the Company issued a convertible debenture with the principal amount of $100,000 to HGT Capital, LLC (“HGT”), a non-related party. During the quarter ended June 30, 2015, the Company received the first $50,000 in payment. The remaining $50,000 payment would be made at the request of the borrower. No additional payments have been made as of September 30, 2018. Under the terms of the debentures, the amount was unsecured and was due on October 16, 2016. The note is currently in default and bears interest of 22% per annum. It was convertible into shares of common stock any time after the maturity date at a conversion rate of 50% of the average of the five lowest closing bid prices of the Company’s common stock for the thirty trading days ending one trading day prior to the date the conversion notice was sent by the holder to the Company. On September 21, 2018, the Company entered into a modification agreement with HGT with respect to the convertible promissory note which has a balance of $107,238. Pursuant to such modification agreement, all defaults were waived and it was agreed that such note will convert at a 25% discount to the market rather than the default rate. HGT also agreed to certain sale restrictions which limit the number of shares that they can sell in any month for the next three months. HGT also agreed to dismiss, with prejudice, the lawsuit that it had filed against the Company. On November 29, 2018, HGT converted $6,978 of a convertible note into 1,655,594 shares of the Company’s common stock. On August 17, 2020, HGT converted $5,833 of notes into 2,645,449 shares of the Company’s common stock. On September 9, 2020, HGT converted $11,822 of notes into 2,775,076 shares of the Company’s common stock. On November 11, 2020, HGT converted $25,239 of notes into 2,911,055 shares of the Company’s common stock. On December 18, 2020, HGT converted $40,126 of notes into 3,053,696 shares of the Company’s common stock. On June 25, 2021, HGT converted the remaining note balance of $17,240 into 1,257,476 shares of the Company’s common stock.

 

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

 

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On September 30, 2021, the Company and ViaOne Services, LLC entered into a revolving convertible promissory note (the “Revolving Note”). The Company agrees to pay ViaOne the principal sum of $1,000,000 or such a smaller amount as ViaOne may advance to the Company from time to time under the Revolving Note, which is subject to a simple interest rate of 8% per annum and will expire earlier on demand or the third anniversary of the Original Issue Date. The Revolving Note (and any unpaid interest or liquidated damages amount) may be converted into shares of Common Stock at a conversion price of eighty-five percent (85%) of the VWAP for the five (5) trading days immediately prior to the date of the notice of conversion. On December 31, 2021, the Company amended the note to allow for the conversion of the Note into shares of the Company’s Series E Preferred Stocks. Effective December 31, 2021, ViaOne Services, LLC converted the Revolving Note into 6,730 shares of the Company’s Series E Convertible Preferred Stock, terminating the Revolving Note.

 

On September 30, 2021, the Company entered into a new Employee Services Agreement with ViaOne effective as of September 1, 2021 (the “Effective Date”). For a monthly management fee of $42,000 (the “Monthly Management Fee”), ViaOne shall provide to the Company services related to Company’s human resources, payroll, marketing, advertising, accounting, and financial services for a period of one year beginning on the Effective Date and automatically renewing for successive terms of one year each unless either party provides 90 days’ notice. ViaOne has the right to convert part or all of the Monthly Management Fee into shares of the Company’s common stock, par value $0.001 per share at a Conversion Rate equal to 125% of the Conversion Amount, divided by the Conversion Price. The Conversion Price means, with respect to Management Fee, 85% of the volume weighted average price (“VWAP”) for the 5 trading days immediately prior to the date of the notice of conversion. On December 31, 2021, the Company amended the note to allow for the conversion of the Note into shares of the Company’s Series E Preferred Stocks. Effective December 31, 2021, ViaOne Services, LLC converted the new Employee Services Agreement Note into 1,557 shares of the Company’s Series E Convertible Preferred Stock.

 

Related Party Transactions

 

On or around April 7, 2016, Silver Linings Management, LLC funded the Company $13,440 in the form of convertible debentures secured by certain high-powered gaming machines purchased from XIDAX. Such note bore interest at a rate of 10% per annum, payable in cash or kind at the option of the Company, matured on April 1, 2018, and was convertible into Series B Preferred shares at the option of the holder at any time. Effective December 31, 2021, the Note was converted into 1,680 shares of Series B preferred stock.

 

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

 

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

 

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

 

On September 1, 2017, the Company executed an amended Employee Services Agreement with ViaOne which stipulated that ViaOne would continue providing to the Company services relating to the Company’s human resources, marketing, advertising, accounting, and financing for a monthly management fee of $25,000. This agreement was amended on January 1, 2018. The accrued monthly management fees, $100,000 at December 31, 2017, are convertible by ViaOne into the Company’s common stock at a rate of 125% of the accrued fees at a conversion price of (i) $0.05 per share; or (ii) the volume-weighted adjusted price (“VWAP”) of the common stock on the 14th day of each month if the 14th of that month is a trading day. In the event the 14th day of a month falls on a Saturday, Sunday, or a trading holiday, the VWAP of the Common Stock will be valued on the last trading day before the 14th day of the month. The agreement was terminated on August 31, 2021.

 

12

 

 

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

 

On September 30, 2021, the Company entered into a new Employee Services Agreement with ViaOne effective as of September 1, 2021 (the “Effective Date”). For a monthly management fee of $42,000 (the “Monthly Management Fee”), ViaOne shall provide to the Company services related to Company’s human resources, payroll, marketing, advertising, accounting, and financial services for a period of one year beginning on the Effective Date and automatically renewing for successive terms of one year each unless either party provides 90 days’ notice. ViaOne has the right to convert part or all of the Monthly Management Fee into shares of the Company’s common stock, par value $0.001 per share at a Conversion Rate equal to 125% of the Conversion Amount, divided by the Conversion Price. The Conversion Price means, with respect to Management Fee, 85% of the volume weighted average price (“VWAP”) for the 5 trading days immediately prior to the date of the notice of conversion.

 

On September 30, 2021, the Company and ViaOne entered into a revolving convertible promissory note (the “Revolving Note”). The Company agrees to pay ViaOne the principal sum of $1,000,000 or such a smaller amount as ViaOne may advance to the Company from time to time under the Revolving Note, which is subject to a simple interest rate of 8% per annum and will expire earlier on demand or the third anniversary of the Original Issue Date. The Company granted ViaOne warrants to purchase the 1,000,000 shares of Common Stocks at an exercise price of $0.42, a premium of 20% to the closing bid price of the Common Stock the trading day prior to the execution of the Revolving Note. Payment of all obligations under the Revolving Note is secured by a security interest granted to ViaOne by the Company in all of the right, title and interest of the Company in all of the assets of the Company currently owned or acquired hereafter. The Revolving Note (and any unpaid interest or liquidated damages amount) may be converted into shares of Common Stock at a conversion price of eighty-five percent (85%) of the VWAP for the five (5) trading days immediately prior to the date of the notice of conversion. The Revolving Note contains customary events of default, including, among others, the failure by the Company to make a payment of principal or interest when due. Following an event of default, ViaOne is entitled to accelerate the entire indebtedness under the Revolving Note. The restrictions are also subject to certain additional qualifications and carve outs, as set forth in the Revolving Note.

 

On December 31, 2021, the Company amended the both original and new Employee Service Agreements, Secured Promissory Note, and Revolving Convertible Promissory Note to allow for the conversion of Notes into shares of the Company’s Series E Preferred Stocks. Effective December 31, 2021, the original Employee Service Agreement was converted into 24,540 shares of the Company’s Series E Preferred Stocks and the new Employee Service Agreement was converted into 1,557 shares of the Company’s Series E Preferred Stocks. Additionally, Secured Promissory Note and Revolving Convertible Note were converted into 24,836 and 6,730 shares of the Company’s Series E Preferred Stocks, respectively.

 

13

 

 

As of December 31, 2022, the Company owed nothing to ViaOne Services.

 

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

 

Shares Eligible for Future Sale

 

As of March 31, 2023, we had 113,142,559 shares of our common stock issued and outstanding, a breakdown of which follows:

 

96,294,840 shares are freely tradable without restrictions (commonly referred to as the “public float”)
   
16,847,719 shares are currently subject to the restrictions and sale limitations imposed by Rule 144.

 

From time to time, certain of our stockholders may be eligible to sell some or all of their restricted shares of our common stock by means of ordinary brokerage transactions in the open market pursuant to Rule 144, promulgated under the Securities Act, subject to certain volume restrictions and restrictions on the manner of sale. In general, pursuant to Rule 144, non-affiliate stockholders may sell freely after six months subject only to the current public information requirement. Affiliates may sell after six months subject to the Rule 144 volume, manner of sale, current public information and notice requirements.

 

The eventual availability for sale of substantial amounts of our common stock under Rule 144 could adversely affect prevailing market prices for our securities and cause you to lose most, if not all, of your investment in our business.

 

Transfer Agent

 

Our transfer agent is Securities Transfer Corporation with its principal address at 2901 N Dallas Parkway, Suite 380, Plano, TX 75093. Its telephone number is (469) 633-0101. Investors may reach our transfer agent at info@stctransfer.com.

 

Recent Sales of Unregistered Securities

 

On March 8, 2021, Lincoln Acquisition converted 18,000 shares of Class B Preferred Stock into 3,600,000 of the Company’s common stock.

 

On May 18, 2021, Lincoln Acquisition converted 29,881 shares of Class B Preferred Stock into 5,976,200 of the Company’s common stock.

 

On June 25, 2021, HGT converted $17,240 of a convertible note into 1,257,476 shares of the Company’s common stock.

 

On July 21, 2021, William Schultz converted 2,500 shares of Class B Preferred Stock into 500,000 of the Company’s common stock.

 

On December 31, 2021, ViaOne Services converted $1,241,783 of a Secured Promissory Note into 24,836 shares of Company’s Class E Preferred Stock.

 

14

 

 

On December 31, 2021, ViaOne Services converted $1,227,000 of a Original Employee Service Agreement Note into 24,540 shares of Company’s Class E Preferred Stock.

 

On December 31, 2021, ViaOne Services converted $84,000 of a New Employee Service Agreement Note into 1,557 shares of Company’s Class E Preferred Stock.

 

On December 31, 2021, ViaOne Services converted $362,967 of a Revolving Convertible Promissory Note into 6,730 shares of Company’s Class E Preferred Stock.

 

On December 31, 2021, Silver Lining converted $13,440 of a convertible note into 1,680 shares of Company’s Class B Preferred Stock.

 

On July 26, 2022, William Crusoe converted 1,000 Class B Preferred Stock into common stock.

 

Purchases of Equity Securities by the Issuer and Affiliated Purchases

 

During each month within the fourth quarter of the fiscal year ended December 31, 2022, neither we nor any “affiliated purchaser”, as that term is defined in Rule 10b-18(a)(3) under the Exchange Act, repurchased any of our common stock or other securities.

 

Use of Proceeds

 

None.

 

ITEM 6. Selected Financial Data

 

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

 

ITEM 7. Management’s Discussion and Analysis

 

This Form 10-K contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. For this purpose, any statements contained in this Form 10-K that are not statements of historical fact including, without limitation, statements under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, may be deemed to be forward-looking statements. Such forward-looking statements are based on the beliefs of management, as well as assumptions made by, and information currently available to, the Company’s management. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors detailed in our filings with the SEC.

 

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

 

Our auditors have issued a going concern opinion on the financial statements for the year ended December 31, 2022. This means that our auditors believe there is substantial doubt that we can continue as an ongoing business for the next twelve months from the date of issuance of these financial statements unless we obtain additional capital to pay our bills. This is because we have generated little revenue although revenue is anticipated to grow as we have completed the development of our website, sourced out suppliers for products to sell and sourced out customers to buy our products. Accordingly, we must raise cash from sources other than operations. Our only other source for cash at this time is investments by others in our company and the revenue we generate from the sales of our products. We must raise cash to continue our project and build our operations.

 

Plan of Operation – Milestones

 

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

 

1

Continue to achieve growth within our MicroBuddies™ vertical via ancillary gaming initiatives across a variety of interactive platforms initiative.

   
2 Continue to promote and increase players of the NFT Breeding game MicroBuddies™ to expand revenue generated by the various aspects of game play. In 2023, the Company has plans to expand the capabilities of the game to add value to the current player base and bring new players to the experience.

 

15

 

 

3 Launch the metaverse/virtual world gaming initiative within a well-established third party experience that has a large, already established, global reach. Continue to evaluate opportunities that have synergies to our existing business line and create continuing revenue streams. In 2023, the Company has plans to expand on the Minecraft™ and Roblox™ experiences and introduce new platforms for their branded games. In the future, the Company is planning to tie these experiences together creating comprehensive branded gaming experiences for the intellectual properties.

 

Limited operating history and need for additional capital

 

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

 

Results of Operations

 

December 31, 2022 as compared to December 31, 2021

 

  Working Capital

 

   December 31, 2022   December 31, 2021 
Current Assets  $941,348   $2,417,300 
Current Liabilities   426,385    305,645 
Working Capital (Deficit)  $514,963   $2,111,655 

 

  Operating Revenues

 

We have generated $9,609 in revenue in 2022 and $374,881 in revenue in the fiscal year of 2021, which reflects an decrease of $365,272 or 97.44%. The decrease in revenue was attributed to the decrease in activity on the Microbuddies game.

 

  Operating Expenses and Net Loss

 

Operating expenses for the year ended December 31, 2022 were $1,657,407 compared with $1,310,441 for the year ended December 31, 2021. The increase in operating expenses in the amount of $346,966 or 26.5% was attributable to a change in professional fees for advertising and promotion, increase in Viaone monthly management fee, and charge for employee stock compensation program.

 

During the year ended December 31, 2022, the Company recorded a net loss of $2,107,901 compared with a net income of $ $338,408 for the year ended December 31, 2021. The increase in net loss in the amount of $2,446,309 or 723% was attributed to the decrease in revenues, the recognition of impairment to the fair value of derivative liability in 2021, and the impairment cost of the Digital Assets in 2022.

 

16

 

 

  Liquidity and Capital Resources

 

As of December 31, 2022, the Company’s cash balance consisted of $931,868 compared to cash balance of $2,407,966 as of December 31, 2021. The decrease in the cash balance was attributed to the operating expenses paid for day-to-day activities. As of December 31, 2022, the Company had $,1,055,996 in assets compared to total assets of $2,727,396 as at December 31, 2021. The decrease in total assets was attributed to the sale of digital assets along with impairment costs associated with it.

 

As of December 31, 2022, the Company had total liabilities of $426,385 compared with total liabilities of $305,645 as of December 31, 2021. The increase in liabilities was attributed to operating expenses to be paid to run day-to-day activities.

 

As of December 31, 2022, the Company has a working capital of $514,963 compared with a working capital of $2,111,655 as of December 31, 2021. The decrease in the working capital attributed to additional investor capital payments used for general working capital purposes.

 

Cash flow from Operating Activities

 

During the year ended December 31, 2022, the Company used $1,513,675 of cash for operating activities compared to the use of cash in an amount of $755,200 for operating activities during the year ended December 31, 2021. The increase of $758,475 was attributed to the company’s increase in advertising and promotions and management fees

 

Cash flow from Investing Activities

 

During the years ended December 31, 2022, the Company had $ 36,807 in cash used in investing activities compared to $248,999 in cash provided for the year ended December 31, 2021. The decrease of $285,806 or 115% in cash used in investing activities and the sale of digital assets related to the creation of NFTs for MicroBuddies.

 

Cash flow from Financing Activities

 

During the year ended December 31, 2022, the Company received $769 of proceeds from financing activities compared to $3,409,860 during the year ended December 31, 2021. The decrease of $3,409,091 or 100% in proceeds from financing activities was attributed to the decrease in financing that we received for day-to-day activities.

 

Going Concern

 

We have not attained profitable operations and are dependent upon obtaining financing to pursue any extensive acquisitions and activities. For these reasons, our auditors stated in their report on our audited financial statements that they have substantial doubt that we will be able to continue as a going concern for a period of one year from the issuance of these financial statements without further financing.

 

Off-Balance Sheet Arrangements

 

As of December 31, 2022, we have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.

 

Future Financings

 

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

 

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

 

17

 

 

Critical Accounting Estimates

 

Our financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

 

We regularly evaluate the accounting policies and estimates that we use to prepare our consolidated financial statements. Management’s estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.

 

Recently Issued Accounting Pronouncements

 

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

 

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

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

 

18

 

 

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

Index to Financial Statements   Page
     
Report of Independent Registered Public Accounting Firm   20
     
Balance Sheets as of December 31, 2022 and December 31, 2021   21
     
Statement of Operations for the years ended December 31, 2022 and December 31, 2021   22
     
Statement of Cash Flows for the years ended December 31, 2022 and December 31, 2021   23
     
Statement of Stockholders’ Deficit for the years ended December 31, 2022 and December 31, 2021   24
     
Notes to Financial Statements   25


 

19

 

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Shareholders and Board of Directors of Good Gaming, Inc.

 

Opinion on the Financial Statements

 

We have audited the accompanying consolidated balance sheets of Good Gaming, Inc. (the “Company”) as of December 31, 2022 and December 31, 2021, the related consolidated statements of operations, stockholders’ deficit, and cash flows for the years ended December 31, 2022 and December 31, 2021, and the related notes (collectively referred to as the “financial statements”).  In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and December 31, 2021, and the results of its operations and its cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America.

 

Substantial Doubt About the Company’s Ability to Continue as a Going Concern

 

As discussed in Note 1 to the financial statements, the Company’s continuing operating losses, working capital deficiency and accumulated deficit raise substantial doubt about its ability to continue as a going concern for a period of one year from the issuance of the financial statements. Management’s plans are also described in Note 1. The financial statements do not include adjustments that might result from the outcome of this uncertainty.

 

Basis of Opinion

 

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to fraud or error. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion.

 

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

Critical Audit Matters

 

Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.

 

/s/ Victor Mokuolu, CPA PLLC

We have served as the Company’s auditor since 2022.

 

Houston, Texas

April 7, 2023

PCAOB Firm ID: 6771

 

20

 

 

Good Gaming, Inc.

Balance Sheets

(Expressed in U.S. Dollars)

 

   December 31, 2022   December 31, 2021 
ASSETS          
Current Assets          
Cash and Cash Equivalents  $931,868   $2,407,966 
Prepaid expenses- related party   9,480    9,334 
Total Current Assets   941,348    2,417,300 
Digital Assets   113,091    304,427 
Property and Equipment, Net   1,557    5,669 
Gaming Software, Net   -    - 
TOTAL ASSETS  $1,055,996   $2,727,396 
LIABILITIES & STOCKHOLDERS’ DEFICIT          
Current Liabilities          
Accounts Payable and Accrued Expenses  $426,385   $299,017 
Derivative Liability   -    - 
Notes Payable   -    6,628 
Convertible Debentures, current   -    - 
Notes Payable - ViaOne Services   -    - 
Total Current Liabilities   426,385    305,645 
           
Total Liabilities   426,385    305,645 
           
Stockholders’ Deficit          
Class A Preferred Stock          
Authorized: 2,000,000 Preferred Shares, With a Par Value of $0.001 Per Share Issued and Outstanding: 7,500 Shares   8    8 
           
Class B Preferred Stock          
Authorized: 249,999 Preferred Shares, With a Par Value of $0.001 Per Share Issued and Outstanding: 19,296 and 20,296 Shares, respectively   19    20 
           
Class C Preferred Stock          
Authorized: 1 Preferred Shares, With a Par Value of $0.001 Per Share Issued and Outstanding: 1 Shares   1    1 
           
Class D Preferred Stock          
Authorized: Authorized: 350 Preferred Shares, With a Par Value of $0.001 Per Share Issued and Outstanding: 0 Shares   -    - 
Class E Preferred Stock          
Authorized: Authorized: 2,750,000 Preferred Shares, With a Par Value of $0.001 Per Share Issued and Outstanding: 57,663 Shares   58    58 
Common Stock Authorized: 200,000,000 Common Shares, With a Par Value of $0.001 Per Share Issued and Outstanding: 110,923,594 and 103,526,044 Shares, respectively   110,924    103,526 
           
Warrant   333    333 
Additional Paid-In Capital   10,265,127    9,956,764 
Accumulated Deficit   (9,746,860)   (7,638,959)
Total Stockholders’ Deficit   629,610    2,421,751 
TOTAL LIABILITIES & DEFICIT  $1,055,996   $2,727,396 

 

The accompanying notes are an integral part of these financial statements

 

21

 

 


Good Gaming, Inc.

Statement of Operations

(Expressed in U.S Dollars)

 

   2022   2021 
   For the Years Ended December 31, 
   2022   2021 
Revenues  $9,609   $374,881 
Cost of Revenues   305,574    37,687 
Gross Profit   (295,965)   337,194 
Operating Expenses          
General & Administrative   588,469    571,894 
Contract Labor   51,800    63,050 
Depreciation and Amortization Expense   4,111    2,159 
Professional Fees   1,013,027    673,338 
Total Operating Expenses   1,657,407    1,310,441 
Operating Loss   (1,953,372)   (973,247)
Other Income (Expense)          
Gain on Digital Assets   13,498   57,381 
Loss on Stock Conversion   -    - 
Impairment Cost   (168,027)   - 
Gain in Debt Settlement   -    - 
Loss on disposal of Fixed Assets   -    - 
Interest Income   -    - 
Interest Expense   -    (49,183)
Gain (Loss) on Change in Fair Value of Derivative Liability   -    1,303,456 
Total Other Income (Loss)   (154,529)   1,311,655 
Net Income (Loss)   (2,107,901)   338,408 
Net Income (Loss) Per Share, Basic and Diluted  $0.02   $- 
Weighted Average Shares Outstanding   110,923,594    103,526,044 

 

The accompanying notes are an integral part of these financial statements

 

22

 

 

Good Gaming, Inc.

Statements of Cash Flows

(Expressed in U.S Dollars)

 

   2022   2021 
  

For the Years Ended

December 31,

 
   2022   2021 
Operating Activities          
           
Net Income (Loss)  $(2,107,901)  $338,408 
           
Adjustments To Reconcile Net Loss to          
Net Cash Used In Operating Activities          
Depreciation and Amortization   4,111    2,159 
Change In Fair Value Of Derivative Liability   -    (1,303,456)
Stock based compensation   308,364    132,250 
Gain on debt settlement   -    - 
Gain on Digital Assets   (13,498)   (57,381)
Impairment Cost   168,027    - 
Changes in operating assets and liabilities          
Prepaid Expenses   (147)   (1,209)
Accounts Payable   127,369    134,029 
           
Net Cash Provided By (Used in) Operating Activities   (1,513,675)   (755,200)
           
Investing Activities          
Purchase of Digital Assets   (5,004)   (378,436)
Selling Digital Assets   39,400    131,390 
Reclass Digital Assets   2,411    - 
Selling Property and Equipment   -    - 
Purchase Property and Equipment   -    (1,953)
          
Net Cash Provided By (Used in) Investing Activities   36,807    (248,999)
           
Financing Activities          
Conversion of Preferred Stock CL B to Common   (1)   - 
Conversion of Debt to Common Shares   7,398    - 
Proceeds from issuance of warrants   -    721,825 
Proceeds from investments   -    1,912,125 
Payment on Note Interest   (6,628)   - 
Due To ViaOne Services   -    775,910 
Net Cash Provided By (Used In) Financing Activities   769    3,409,860 
           
Change in Cash and Cash Equivalents   (1,476,098)   2,405,661 
           
Cash and Cash Equivalents, Beginning Of Period   2,407,966    2,305 
           
Cash and Cash Equivalents, End Of Period  $931,868   $2,407,966 
           
Supplemental disclosure of cash flow information:          
Cash paid for interest  $-   $- 
Cash paid for taxes  $-   $- 
           
Non-Cash Investing And Financing Activities          
Conversion of Preferred Stock CL B to Common  $-   $(10,076)
Conversion of Debt to Common Shares  $-   $(17,240)
Conversion of Debt to Preferred Stock CL E shares  $-   $2,915,749 
Conversion of Debt to Preferred Stock CL B shares  $-   $13,440 

 

The accompanying notes are an integral part of these financial statements

 

23

 

 

Good Gaming, Inc.

Statements of Stockholders’ Equity (Deficit)

(Expressed in U. S. Dollars)

 

   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Capital   Deficit   Total 
   Preferred Stock   Common Stock   Warrants   Additional         
   Class A   Class B   Class C   Class D   Class E                   Paid-in   Accumulated     
   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Capital   Deficit   Total 
Balance, December 31, 2020   7,500        8    68,997    69    1    1    -    -    -    -    65,374,031    65,374    -    -    4,282,629    (7,977,367)   (3,629,286)
Conversion of preferred shares B to common shares   -    -    (50,381)   (51)   -    -    -           -    -    -    10,076,200    10,076    -    -    (10,025)   -    - 
Stock Based Compensation   -    -    -    -    -    -    -    -    -    -    5,085,000    5,085    -    -    127,165    -    132,250 
Conversion of Debt to Preferred Stock CL E shares   -    -    -    -    -    -    -    -    57,663    58    -    -    -    -    2,915,691    -    2,915,749 
Conversion of Debt to Preferred Stock CL B shares   -    -    1,680    2    -    -    -    -    -    -    -    -    -    -    13,438    -    13,440 
Conversion of Debt to Common shares   -    -    -    -    -    -    -    -    -    -    1,257,476    1,258    -    -    15,982    -    17,240 
Proceeds from issuance of warrants   -    -    -    -    -    -    -    -    -    -    -    -    4,811,181    481    721,344    -    721,825 
Proceeds issuance of common stock   -    -    -    -    -    -    -    -    -    -    15,922,156    15,922    -    -    2,372,401    -    2,388,323 
Conversion of warrants to common stock   -    -    -    -    -    -    -    -    -    -    5,811,181    5,811    (1,477,848)   (148)   (5,663)        - 
Equity issuance costs   -    -    -    -    -    -    -    -    -    -    -    -    -    -    (476,198)   -    (476,198)
Net income   -    -    -    -         -    -    -    -    -    -    -    -    -    -    -    338,408    338,408 
                                                                                      
Balance, December 31, 2021   7,500    8    20,296    20    1         1    -    -    57,663        58    103,526,044    103,526    3,333,333    333    9,956,764    (7,638,959)   2,421,751 
Stock Based Compensation converted to common stock   -     -     -     -     -     -     -     -     -     -     7,396,549    7,396    -     -     308,364    -     315,760 
Conversion of preferred shares B to common shares   -     -     (1,000)   (1)   -                              1,000    1                        - 
Net Income (Loss)   -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    (2,107,901)   (2,107,901)
                                                                                      
Balance, December 31, 2022   7,500    8    19,296    19    1    1         -    -    57,663    58    110,923,593    110,923    3,333,333    333    10,265,128    (9,746,860)   629,610 

 

The accompanying notes are an integral part of these financial statements

 

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Good Gaming, Inc.

Notes to the Financial Statements

(expressed in U.S. dollars)

 

1. Nature of Operations and Continuance of Business

 

Good Gaming, Inc. (Formerly HDS International Corp.) (the “Company”) was incorporated on November 3, 2008, under the laws of the State of Nevada. The Company is a leading tournament gaming platform and online destination targeting over 250 million E-sports players and participants worldwide that want to compete at the high school or college level. A substantial portion of the Company’s activities has involved developing a business plan and establishing contacts and visibility in the marketplace and the Company has not generated any substantial revenue to date. Beginning in 2018, the Company began deriving revenue by providing transaction verification services within the digital currency networks of cryptocurrencies. However, on December 12, 2018, the Company discontinued such transaction verification services by dissolving Crypto Strategies Group, Inc., its wholly-owned subsidiary. In 2021, the Company formulated a new plan to create a new game called “MicroBuddies™” that combines Ethereum ERC721 NFTs (Non-fungible tokens), non-standard ERC20 tokens (GOO™), and strategic gameplay to replicate and create unique and rare NFTs. The game is played online via the MicroBuddies website and blockchain transactions take place on the Polygon Network. The game was launched after beta testing in December of 2021. 2022 was a year of growth for our Company. In response to the crypto winter that began in early 2022 and continues today, the Company launched a series of new business development strategies. In mid-2022, the Company launched beta versions of its Minecraft Super Craft Brothers Brawl (“SCBB”) franchise on the Roblox platform. In 2023, the Company plans to launch the full game version of SCBB on Roblox after a great deal of feedback from the community. In late 2022, the Company also launched the beta version of “Treasure Island”; a Microbuddies themed Simulator game on Roblox. In 2023, the Company will also launch a full game version of Treasure Island after receiving a substantial amount of community feedback from the beta version launch. The company has announced two initiatives for the Roblox™ platform for 2023. The “Family Games by Good Gaming” will focus on publishing games for the “All Ages” segment on Roblox. The Company also announced the “Extreme” themed game segment. These titles will focus on offering a great deal of challenge to more advanced Roblox™ players. In 2023, the Company will return to its roots by hosting on-platform gaming tournaments on the Roblox™ platforms. Our gaming tournaments will usher in the beginning of our advertising and sponsorship efforts on the platform. More to come on this initiative in the near future. 

 

For the Minecraft™ vertical, the Company has all new and updated versions of their SCBB titles and Prison games in production with our development partnership with Meraki Studios.. Meraki Studios is considered one of the top Minecraft™ design studios in the world. Our new releases will feature the most up to date versions of the Minecraft™ software (v1.19) which will enable new and exciting gameplay and revenue generating opportunities. 

 

As mentioned above, 2023 will be a year of multi-faceted business development for the Company. In 2023, the Company signed its first publishing agreement with a popular Roblox™ creator to develop and publish Roblox™ titles based on their intellectual properties. The Company plans to continue signing agreements with well established creators to bring their properties to Roblox™ and other platforms as part of the publishing effort. In addition to Roblox™, Minecraft™ and WEB3, the Company is researching other platforms for our gaming products. The Company plans to announce new initiatives throughout 2023.

 

Going Concern

 

These financial statements have been prepared on a going concern basis, which implies that the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has generated minimal revenues to date and has never paid any dividends and is unlikely to pay dividends or generate significant earnings in the immediate or foreseeable future. As of December 31, 2022, the Company had a working capital of $514,963 compared to $2,111,655 during the year ended December 31, 2021. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability to raise equity or debt financing, and the attainment of profitable operations from the Company’s future business. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern for a period of one year from the issuance of these financial statements. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

2. Summary of Significant Accounting Policies

 

Use of Estimates

 

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

 

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

 

Cash Equivalents

 

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

 

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Intangible Assets

 

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

 

Impairment of Long-Lived Assets

 

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

 

Beneficial Conversion Features

 

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

 

Derivative Liability

 

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

 

Basic and Diluted Net Loss Per Share

 

The Company computes net loss per share in accordance with ASC 260, Earnings Per Share, which requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net loss available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing Diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. On December 31, 2022 and December 31, 2021, the Company had 10,000,000 and 10,000,000 potentially dilutive shares from outstanding convertible debentures, respectively.

 

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Income Taxes

 

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

 

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

 

Financial Instruments

 

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

 

Level 1

 

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

 

Level 2

 

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

 

Level 3

 

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

 

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Assets and liabilities measured at fair value on a recurring basis were presented on the Company’s balance sheet as at December 31, 2022 and 2021 as follows:

 

    Total     Level 1     Level 2     Level 3 
Description   Fair Value Measurements at December 31, 2022 Using Fair Value Hierarchy 
    Total     Level 1     Level 2     Level 3 
Derivative liability  $-   $-   $-   $- 
Total  $-   $-   $-   $- 

 

    Total     Level 1     Level 2     Level 3 
Description   Fair Value Measurements at December 31, 2021 Using Fair Value Hierarchy  
    Total     Level 1     Level 2     Level 3 
Derivative liability  $-   $-   $-   $- 
Total  $-   $-   $-   $- 

 

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

 

Advertising Expenses

 

Advertising expenses are included in general and administrative expenses in the Statements of Operations and are expensed as incurred. The Company incurred $362,390 and $452,365 in advertising and promotion expenses in the years ended December 31, 2022 and 2021, respectively.

 

Revenue Recognition

 

Revenue is recognized in accordance with ASC 606. The Company performs the following five steps: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company applies the five-step model to arrangements that meet the definition of a contract under Topic 606, including when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of Topic 606, the Company evaluates the goods or services promised within each contract related performance obligation and assesses whether each promised good or service is distinct. The Company recognizes as revenue, the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.. Revenues primarily include revenues from microtransactions. Microtransaction revenues are derived from the sale of virtual goods to the Company’s players. Proceeds from the sales of virtual goods directly are recognized as revenues when a player uses the virtual goods.

 

Recent Accounting Pronouncements

 

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

 

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

 

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3. Other Assets

 

Furniture and fixtures consisted of the following:

 

   2022   2021 
   December 31, 
   2022   2021 
Computers  $22,285   $22,285 
Accumulated Depreciation   (20,727)   (16,616)
Property and equipment, net   $1,557   $5,669 

 

Depreciation expense for the years ended December 31, 2022 and 2021 was $4,111 and $2,159, respectively.

 

4. Digital Assets

 

In 2021, the Company has been working to create a new game called MicroBuddies™ that will be played online and will use blockchain technology. Digital Asset prices have been volatile in the past and may continue to be so in the future, owing to a variety of risks and uncertainties. Under current accounting rules, digital assets are considered indefinite-lived intangible assets. The Company needs to recognize impairment charges if any decrease in their fair values, whereas the Company may not make any upward revisions for market price increases until a sale. Thus, the carrying value represents the lowest fair value of the digital assets.

 

As of December 31, 2022, the carrying value of the Company’s digital assets was $113,091, which reflected $168,027 impairment charges compared to the carrying value of $304,427 as of December 31, 2021, which reflected $0 impairment charges.

 

5. Debt

 

Convertible Debentures

 

On April 15, 2015, the Company issued a convertible debenture with the principal amount of $100,000 to HGT Capital, LLC (“HGT”), a non-related party. During the quarter ended June 30, 2015, the Company received the first $50,000 in payment. The remaining $50,000 payment would be made at the request of the borrower. No additional payments have been made as of September 30, 2018. Under the terms of the debentures, the amount was unsecured and was due on October 16, 2016. The note is currently in default and bears interest of 22% per annum. It was convertible into shares of common stock any time after the maturity date at a conversion rate of 50% of the average of the five lowest closing bid prices of the Company’s common stock for the thirty trading days ending one trading day prior to the date the conversion notice was sent by the holder to the Company. On September 21, 2018, the Company entered into a modification agreement with HGT with respect to the convertible promissory note which has a balance of $107,238. Pursuant to such modification agreement, all defaults were waived and it was agreed that such note will convert at a 25% discount to the market rather than the default rate. HGT also agreed to certain sale restrictions which limit the number of shares that they can sell in any month for the next three months. HGT also agreed to dismiss, with prejudice, the lawsuit that it had filed against the Company. On November 29, 2018, HGT converted $6,978 of a convertible note into 1,655,594 shares of the Company’s common stock. On August 17, 2020, HGT converted $5,833 of notes into 2,645,449 shares of the Company’s common stock. On September 9, 2020, HGT converted $11,822 of notes into 2,775,076 shares of the Company’s common stock. On November 11, 2020, HGT converted $25,239 of notes into 2,911,055 shares of the Company’s common stock. On December 18, 2020, HGT converted $40,126 of notes into 3,053,696 shares of the Company’s common stock. On June 25, 2021, HGT converted the remaining note balance of $17,240 into 1,257,476 shares of the Company’s common stock.

 

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On September 30, 2021, the Company and ViaOne Services, LLC entered into a revolving convertible promissory note (the “Revolving Note”). The Company agrees to pay ViaOne the principal sum of $1,000,000 or such a smaller amount as ViaOne may advance to the Company from time to time under the Revolving Note, which is subject to a simple interest rate of 8% per annum and will expire earlier on demand or the third anniversary of the Original Issue Date. The Revolving Note (and any unpaid interest or liquidated damages amount) may be converted into shares of Common Stock at a conversion price of eighty-five percent (85%) of the VWAP for the five (5) trading days immediately prior to the date of the notice of conversion. On December 31, 2021, the Company amended the note to allow for the conversion of the Note into shares of the Company’s Series E Preferred Stocks. Effective December 31, 2021, ViaOne Services, LLC converted the Revolving Note into 6,730 shares of the Company’s Series E Convertible Preferred Stock, terminating the Revolving Note.

 

On September 30, 2021, the Company entered into a new Employee Services Agreement with ViaOne effective as of September 1, 2021 (the “Effective Date”). For a monthly management fee of $42,000 (the “Monthly Management Fee”), ViaOne shall provide to the Company services related to Company’s human resources, payroll, marketing, advertising, accounting, and financial services for a period of one year beginning on the Effective Date and automatically renewing for successive terms of one year each unless either party provides 90 days’ notice. ViaOne has the right to convert part or all of the Monthly Management Fee into shares of the Company’s common stock, par value $0.001 per share at a Conversion Rate equal to 125% of the Conversion Amount, divided by the Conversion Price. The Conversion Price means, with respect to Management Fee, 85% of the volume weighted average price (“VWAP”) for the 5 trading days immediately prior to the date of the notice of conversion. On December 31, 2021, the Company amended the note to allow for the conversion of the Note into shares of the Company’s Series E Preferred Stocks. Effective December 31, 2021, ViaOne Services, LLC converted the new Employee Services Agreement Note into 1,557 shares of the Company’s Series E Convertible Preferred Stock.

 

6. Derivative Liabilities

 

As of December 31, 2022, the Company does not have any outstanding convertible promissory notes.

 

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

 

Balance, December 31, 2020  $1,303,456 
Change in value   (1,303,456)
Balance, December 31, 2021   - 
Change in value   - 
Balance, December 31, 2022  $- 

 

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7. Common Stock

 

Equity Transactions for the Year Ended December 31, 2021:

 

On March 8, 2021, Lincoln Acquisition converted 18,000 shares of Preferred B Stock into 3,600,000 of the Company’s common stock.

 

On May 18, 2021, Lincoln Acquisition converted 29,881 shares of Preferred B Stock into 5,976,200 of the Company’s common stock.

 

On June 25, 2021, HGT converted $17,240 of a convertible note into 1,257,476 shares of the Company’s common stock.

 

On July 21, 2021, William Schultz converted 2,500 shares of Preferred B Stock into 500,000 of the Company’s common stock.

 

On August 24, 2021, the Company issued 1,000,000 Company’s common stock to David B. Dorwart for accrued compensation.

 

On August 24, 2021, the Company issued 1,000,000 Company’s common stock to Eric Brown for accrued compensation.

 

On August 24, 2021, the Company issued 500,000 Company’s common stock to Jordan Axt for accrued compensation.

 

On August 24, 2021, the Company issued 500,000 Company’s common stock to Domenic Edward Fontana for accrued compensation.

 

On August 24, 2021, the Company issued 500,000 Company’s common stock to John D Hilzendager for accrued compensation.

 

On August 24, 2021, the Company issued 300,000 Company’s common stock to Alexandra M Dorwart for accrued compensation.

 

On August 24, 2021, the Company issued 200,000 Company’s common stock to Marjorie Greenhalgh for accrued compensation.

 

On August 24, 2021, the Company issued 150,000 Company’s common stock to Frances Lynn Martin for accrued compensation.

 

On August 24, 2021, the Company issued 50,000 Company’s common stock to Kaitlyn Kazanjian as accrued compensation.

 

On August 24, 2021, the Company issued 50,000 Company’s common stock to Elizabeth Van Fossen as accrued compensation.

 

On August 24, 2021, the Company issued 400,000 Company’s common stock to Douglas Wathen as accrued compensation.

 

On August 24, 2021, the Company issued 100,000 Company’s common stock to Tim Bergman as accrued compensation.

 

On August 24, 2021, the Company issued 25,000 Company’s common stock to Samuel Joseph Schwieters as accrued compensation.

 

On August 24, 2021, the Company issued 50,000 Company’s common stock to Robert Welch as accrued compensation.

 

31

 

 

On August 24, 2021, the Company issued 10,000 Company’s common stock to Nuno Neto as accrued compensation.

 

On August 24, 2021, the Company issued 10,000 Company’s common stock to Maria Iriarte Uriarte accrued compensation.

 

On August 24, 2021, the Company issued 100,000 Company’s common stock to Infinity Global Consulting Group, Inc. as stock based compensation.

 

On September 03, 2021, the Company issued 8,000 Company’s common stock to Netleon Technologies Private Limited as stock based compensation.

 

On September 03, 2021, the Company issued 105,000 Company’s common stock to Whole Plant Systems, LLC as stock based compensation.

 

On September 03, 2021, the Company issued 10,000 Company’s common stock to J Ramsdell Consulting as stock based compensation.

 

On November 16, 2021, the Company issued 9,188,820 Company’s common stock to Armistice Capital LLC as part of closing the Private Placement funding.

 

On November 16, 2021, the Company issued 2,166,668 Company’s common stock to Iroquois Capital Investment Group LLC as part of closing the Private Placement funding.

 

On November 16, 2021, the Company issued 1,166,668 Company’s common stock to Iroquois Master Fund LTD as part of closing the Private Placement funding.

 

On November 16, 2021, the Company issued 1,700,000 Company’s common stock to Bigger Capital Fund LP as part of closing the Private Placement funding.

 

On November 16, 2021, the Company issued 1,700,000 Company’s common stock to District 2 Capital Fund LP as part of closing the Private Placement funding.

 

On December 27, 2021, Armistice Capital LLC converted 1,477,848 warrants into the Company’s common stock.

 

Equity Transactions for the Year Ended December 31, 2022:

 

On August 17, 2022, the Company issued 3,698,274 Company’s common stock to ViaOne employees as stock based compensation.

 

On August 23, 2022, the Company issued 739,655 Company’s common stock to ViaOne employees as stock based compensation.

 

On September 13, 2022, the Company issued 739,655 Company’s common stock to ViaOne employees as stock based compensation.

 

On October 5, 2022, the Company issued 739,655 Company’s common stock to ViaOne employees as stock based compensation.

 

On November 8, 2022, the Company issued 739,655 Company’s common stock to ViaOne employees as stock based compensation.

 

On December 21, 2022, the Company issued 739,655 Company’s common stock to ViaOne employees as stock based compensation.

 

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8. Preferred Stock

 

Our Articles of Incorporation authorize us to issue up to 5,000,350 shares of preferred stock, $0.001 par value. Of the 5,000,000 authorized shares of preferred stock, the total number of shares of Series A Preferred Stock the Corporation shall have the authority to issue is 2,000,000, with a stated par value of $0.001 per share, the total number of shares of Series B Preferred Stock the Corporation shall have the authority to issue is 249,999, with a stated par value of $0.001 per share, the total number of shares of Series C Preferred Stock the Corporation shall have the authority to issue is 1, with a stated par value of $0.001 per share, the total number of shares of Series D Preferred Stock the Corporation shall have the authority to issue is 350, with a stated par value of $0.001 per share, and the total number of shares of Series E Preferred Stock the Corporation shall have the authority to issue is 2,750,000, with a stated par value of $0.001 per share. Our Board of Directors is authorized, without further action by the shareholders, to issue shares of preferred stock and to fix the designations, number, rights, preferences, privileges and restrictions thereof, including dividend rights, conversion rights, voting rights, terms of redemption, liquidation preferences and sinking fund terms. We believe that the Board of Directors’ power to set the terms of, and our ability to issue preferred stock, will provide flexibility in connection with possible financing or acquisition transactions in the future. The issuance of preferred stock, however, could adversely affect the voting power of holders of common stock and decrease the amount of any liquidation distribution to such holders. The presence of outstanding preferred stock could also have the effect of delaying, deterring or preventing a change in control of our company.

 

As of December 31, 2022, we had 7,500 shares of our Series A preferred stock, 19,296 shares of Series B preferred stock, 1 share of Series C preferred stock, 0 share of Series D preferred stock, and 57,663 shares of Series E preferred stock issued and outstanding.

 

The 7,500 issued and outstanding shares of Series A Preferred Stock are convertible into shares of common stock at a rate of 20 common shares for each Series A Preferred Share. The 19,296 issued and outstanding shares of Series B Preferred Stock are convertible into shares of common stock at a rate of 200 common shares for each Series B Preferred Share. The 57,663 issued and outstanding shares of Series E Preferred Stock are convertible into shares of common stock at a rate of 1,000 common shares for each Series E Preferred Share. If all of our Series A, B and E Preferred Stock are converted into shares of common stock, the number of issued and outstanding shares of our common stock will increase by 61,672,201 shares.

 

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

 

The Series D Preferred Stock can be convertible into shares of common stock at the lower of the Fixed Conversion Price ($.06 per share) or at the VWAP which shall be defined as the average of the five (5) lowest closing prices during the 20 days prior to conversion. We did not have any share of Series D preferred stock issued and outstanding as of December 31, 2022.

 

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

 

9. Warrant

 

In connection with the $100,000 convertible debenture issued to HGT Capital, LLC (“HGT”), the Company issued HGT a warrant to purchase 100,000 shares of the Company’s common stock at $1.00 per share. This warrant was not exercised and expired on April 15, 2020.

 

As part of the Private Placement funding, the Company issued two new warrants to Armistice Capital, LLC and Sabby Management to purchase 1,477,848 and 3,333,333 shares of the Company’s common stock at $0.20 per share, respectively. If the warrant is not exercised, it will expire on May 17, 2027.

 

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10. Related Party Transactions

 

On or around April 7, 2016, Silver Linings Management, LLC funded the Company $13,440 in the form of convertible debentures secured by certain high-powered gaming machines purchased from XIDAX. Such note bore interest at a rate of 10% per annum, payable in cash or kind at the option of the Company, matured on April 1, 2018, and was convertible into Series B Preferred shares at the option of the holder at any time. Effective December 31, 2021, the Note was converted into 1,680 shares of Series B preferred stock.

 

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

 

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

 

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

 

On September 1, 2017, the Company executed an amended Employee Services Agreement with ViaOne which stipulated that ViaOne would continue providing to the Company services relating to the Company’s human resources, marketing, advertising, accounting, and financing for a monthly management fee of $25,000. This agreement was amended on January 1, 2018. The accrued monthly management fees, $100,000 at December 31, 2017, are convertible by ViaOne into the Company’s common stock at a rate of 125% of the accrued fees at a conversion price of (i) $0.05 per share; or (ii) the volume-weighted adjusted price (“VWAP”) of the common stock on the 14th day of each month if the 14th of that month is a trading day. In the event the 14th day of a month falls on a Saturday, Sunday, or a trading holiday, the VWAP of the Common Stock will be valued on the last trading day before the 14th day of the month. The agreement was terminated on August 31, 2021.

 

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

 

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On September 30, 2021, the Company entered into a new Employee Services Agreement with ViaOne effective as of September 1, 2021 (the “Effective Date”). For a monthly management fee of $42,000 (the “Monthly Management Fee”), ViaOne shall provide to the Company services related to Company’s human resources, payroll, marketing, advertising, accounting, and financial services for a period of one year beginning on the Effective Date and automatically renewing for successive terms of one year each unless either party provides 90 days’ notice. ViaOne has the right to convert part or all of the Monthly Management Fee into shares of the Company’s common stock, par value $0.001 per share at a Conversion Rate equal to 125% of the Conversion Amount, divided by the Conversion Price. The Conversion Price means, with respect to Management Fee, 85% of the volume weighted average price (“VWAP”) for the 5 trading days immediately prior to the date of the notice of conversion.

 

On September 30, 2021, the Company and ViaOne entered into a revolving convertible promissory note (the “Revolving Note”). The Company agrees to pay ViaOne the principal sum of $1,000,000 or such a smaller amount as ViaOne may advance to the Company from time to time under the Revolving Note, which is subject to a simple interest rate of 8% per annum and will expire earlier on demand or the third anniversary of the Original Issue Date. The Company granted ViaOne warrants to purchase the 1,000,000 shares of Common Stocks at an exercise price of $0.42, a premium of 20% to the closing bid price of the Common Stock the trading day prior to the execution of the Revolving Note. Payment of all obligations under the Revolving Note is secured by a security interest granted to ViaOne by the Company in all of the right, title and interest of the Company in all of the assets of the Company currently owned or acquired hereafter. The Revolving Note (and any unpaid interest or liquidated damages amount) may be converted into shares of Common Stock at a conversion price of eighty-five percent (85%) of the VWAP for the five (5) trading days immediately prior to the date of the notice of conversion. The Revolving Note contains customary events of default, including, among others, the failure by the Company to make a payment of principal or interest when due. Following an event of default, ViaOne is entitled to accelerate the entire indebtedness under the Revolving Note. The restrictions are also subject to certain additional qualifications and carve outs, as set forth in the Revolving Note.

 

On December 31, 2021, the Company amended the both original and new Employee Service Agreements, Secured Promissory Note, and Revolving Convertible Promissory Note to allow for the conversion of Notes into shares of the Company’s Series E Preferred Stocks. Effective December 31, 2021, the original Employee Service Agreement was converted into 24,540 shares of the Company’s Series E Preferred Stocks and the new Employee Service Agreement was converted into 1,557 shares of the Company’s Series E Preferred Stocks. Additionally, Secured Promissory Note and Revolving Convertible Note was converted into 24,836 and 6,730 shares of the Company’s Series E Preferred Stocks, respectively.

 

As of December 31, 2022, the Company doesn’t owe anything to ViaOne Services.

 

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

 

11. Income Taxes

 

The Company has a net operating loss carried forward of approximately $2,155,751 available to offset taxable income in future years which commence expiring in fiscal 2030.

 

The U.S. Tax Reform Act amends the Internal Revenue Code to reduce tax rates and modify policies, credits, and deductions for individuals and business. For businesses, the Act reduces the corporate tax rate from a maximum of 35% to a flat 21% rate. The rate reduction is effective on January 1, 2018. As a result of the rate reduction, the Company has reduced the deferred tax asset balance as of December 31, 2017 by $80,329. As a result of the full valuation allowance on the net deferred tax assets, there was a corresponding adjustment to the valuation allowance for this same amount. Therefore, there is no impact on the Company’s 2017 earnings for the law change.

 

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The significant components of deferred income tax assets and liabilities at December 31, 2022 and 2021 are as follows:

  

   2022   2021 
Net Operating Loss Carryforward  $452,708   $672,173 
Valuation allowance   (452,708)  $(672,173)
Net Deferred Tax Asset  $-   $- 

 

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

 

   2022   2021 
Income tax recovery at statutory rate  $442,659   $202,836 
Valuation allowance change   (442,659)  $(202,836)
Provision for income taxes  $-   $- 

 

12. Commitments and Contingencies

 

None.

 

13. Acquisition and Discontinued Operations

 

None.

 

14. Subsequent Events

 

None.

 

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 

None.

 

ITEM 9A. CONTROLS AND PROCEDURES

 

Disclosure Controls and Procedures

 

We maintain disclosure controls and procedures, as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

 

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We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2022. Based on the evaluation of these disclosure controls and procedures, and in light of the material weaknesses found in our internal controls over financial reporting, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of December 31, 2022.

 

We believe we have applied procedures and processes as necessary to ensure the reliability of our financial reporting regarding this annual report. Accordingly, the Company believes, based on its knowledge, that: (i) this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which they were made, not misleading with respect to the period covered by this report; and (ii) the financial statements, and other financial information included in this annual report, fairly present in all material respects our financial condition, results of operations and cash flows as of and for the periods presented in this annual report.

 

Management’s Annual Report on Internal Control Over Financial Reporting

 

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Exchange Act Rule 13a-15(f). The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

Under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, the Company conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2022 using the criteria established in “Internal Control - Integrated Framework (2013) “ issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

 

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. In its assessment of the effectiveness of internal control over financial reporting as of December 31, 2022, the Company determined that there were control deficiencies that constituted material weaknesses, as described below.

 

  1. We do not have an Audit Committee – While not being legally obligated to have an audit committee, it is the management’s view that such a committee, including a financial expert member, is the important entity-level control over the Company’s financial statements. Currently, the Board of Directors acts in the capacity of the Audit Committee and does not include a member that is considered to be independent of management to provide the necessary oversight over management’s activities.
     
  2. We did not maintain appropriate cash controls – Until June 30, 2017, we did not maintain sufficient internal controls over financial reporting for the cash process, including failure to segregate cash handling and accounting functions, and did not require dual signature on our bank accounts. From June 30, 2017 through December 31, 2018, due to the change in corporate officers and board of directors, we have implemented appropriate cash controls and enforced separation of accounting functions to appropriately maintain cash controls.

 

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  3. We implemented appropriate information technology controls – As of December 31, 2022, we retain copies of all financial data and material agreements. There is a formal procedure or evidence of normal backup of our data or off-site storage of the data in the event of theft, misplacement, or loss due to unmitigated factors.

 

Accordingly, we have concluded that these control deficiencies resulted in a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis by the Company’s internal controls.

 

As a result of the material weaknesses described above, we did not maintain effective internal control over financial reporting as of December 31, 2022 based on criteria established in Internal Control—Integrated Framework (2013) issued by COSO.

 

Continuing Remediation Efforts to address deficiencies in Company’s Internal Control over Financial Reporting

 

The Company has engaged in a business of merit and has sufficient personnel available. Our Board of Directors, in particular, has established the following remediation measures in connection with the aforementioned deficiencies:

 

  1. Our Board of Directors has nominated a financial expert on our Board of Directors.
     
  2. We have appointed additional personnel to assist with the preparation of our monthly financial reporting, which includes preparation of the monthly bank reconciliations.