NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION AND ACCOUNTING POLICIES
Golden Matrix Group, Inc. (“GMGI” or “Company”) was incorporated in the State of Nevada on June 4, 2008, under the name Ibex Resources Corp. The Company business at the time was mining and exploration of mineral properties. On August 31, 2009, the Company changed its name to Source Gold Corp. in order to reflect the focus of the Company. In April 2016, the Company changed its name to Golden Matrix Group, Inc., reflected the changing direction of the Company business to software technology.
The accompanying unaudited interim consolidated financial statements of Golden Matrix Group, Inc. (“GMGI” or the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (“SEC”), and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s annual report for the year ended July 31, 2017 on Form 10-K filed on November 7, 2016.
In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the consolidated financial statements which would substantially duplicate the disclosure contained in the audited consolidated financial statements for the most recent fiscal year ended July 31, 2017 have been omitted.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the balance sheet. Actual results could differ from those estimates.
Cash and Cash Equivalents
For the purpose of the statements of cash flows, all highly liquid investments with an original maturity of three months or less are considered to be cash equivalents. The carrying value of these investments approximates fair value.
Revenues
Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable, and collectability is probable.
Foreign Currency Translation
The Company’s functional currency is the US dollar as a substantial part of the Company’s operations is based in Arizona. IRC’s and NBI’s functional currency is the Canadian dollar. The functional currency of SB and Vulture is the US dollar as its activities are in the USA. The Company uses the United States dollar as its reporting currency for consistency with registrants of the Securities and Exchange Commission (“SEC”).
Assets and liabilities denominated in a foreign currency are translated into US dollar reporting currency at the exchange rate in effect at the balance sheet date and capital accounts are translated at historical rates. Income statement accounts are translated at the average rates of exchange prevailing during the period. Transactions undertaken in currencies other than the functional currency of the entity are translated using the exchange rate in effect as of the transaction date. Any exchange gains and losses are included in other comprehensive loss.
Earnings (Loss) Per Common Share
Basic net earnings (loss) per common share are computed by dividing net earnings (loss) available to common shareholders by the weighted-average number of common shares outstanding during the period. Diluted net earnings (loss) per common share is determined using the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents. In periods when losses are reported, the weighted-average number of common shares outstanding excludes common stock equivalents, because their inclusion would be anti-dilutive.
The dilutive effect of outstanding stock options and warrants is reflected in diluted earnings per share by application of the treasury stock method. The dilutive effect of outstanding convertible securities is reflected in diluted earnings per share by application of the if-converted method.
The following is a reconciliation of basic and diluted earnings (loss) per common share for 2018 and 2017:
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For the Three Months Ended
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For the Six Months Ended
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January 31,
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January 31,
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2018
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2017
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2018
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2017
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Basic earnings (loss) per common share
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Numerator:
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Net income (loss) available to common shareholders
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$
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84,484
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$
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169,891
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$
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(373,559
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)
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$
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1,425,564
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Denominator:
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Weighted average common shares outstanding
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578,931,219
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9,935,555
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423,403,521
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7,472,027
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Basic earnings (loss) per common share
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$
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0.00
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$
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0.02
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$
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(0.00
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)
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$
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0.19
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Diluted earnings (loss) per common share
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Numerator:
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Net income (loss) available to common shareholders
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$
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84,484
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$
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169,891
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$
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(373,559
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)
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$
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1,425,564
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Denominator:
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Weighted average common shares outstanding
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578,931,219
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9,935,555
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423,403,521
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7,472,027
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Preferred shares
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1,000
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1,000
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-
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1,000
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Convertible debt
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1,708,428,397
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242,507,245
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-
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240,937,256
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Adjusted weighted average common shares outstanding
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2,287,360,616
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252,443,800
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423,403,521
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248,410,283
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Diluted earnings (loss) per common share
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$
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0.00
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$
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0.00
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$
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(0.00
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)
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$
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0.01
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For the six months ended January 31, 2017 the weighted-average number of common shares outstanding excludes common stock equivalents, because their inclusion would be anti-dilutive.
Derivative Instruments
We review the terms of the common stock, warrants and convertible debt we issue to determine whether there are embedded derivative instruments, including embedded conversion options, which are required to be bifurcated and accounted for separately as derivative financial instruments. In circumstances where the host instrument contains more than one embedded derivative instrument, including the conversion option, that is required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument.
Bifurcated embedded derivatives are initially recorded at fair value and are then revalued at each reporting date with changes in the fair value reported as non-operating income or expense. When the equity or convertible debt instruments contain embedded derivative instruments that are to be bifurcated and accounted for as liabilities, the total proceeds received are first allocated to the fair value of all the bifurcated derivative instruments. The remaining proceeds, if any are then allocated to the host instruments themselves, usually resulting in those instruments being recorded as a discount from their face value.
Derivatives are measured at their fair value on the balance sheet. Changes in fair value are recorded in the statement of operation.
Income Taxes
The Company uses the asset and liability method of accounting for income taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statements carrying amounts of existing assets and liabilities and loss carry-forwards and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rules on deferred tax assets and liabilities is recognized in operations in the year of change. A valuation allowance is recorded when it is “more likely-than-not” that a deferred tax asset will not be realized.
Comprehensive Loss
The Company is required to report comprehensive loss, which includes net loss as well as changes in equity from non-owner sources.
Fair Value of Financial Instruments
The Company measures its financial assets and liabilities at fair value. Fair value is defined as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date. A three-tier fair value hierarchy prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). These tiers include:
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Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets;
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·
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Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable, such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and
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·
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Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one more significant inputs or significant value drivers are unobservable.
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Our financial instruments include cash, accounts payable and accrued liabilities, notes payable, convertible notes payable, advances from shareholder, and derivative liabilities. The carrying values of these financial instruments approximate their fair value due to their short-term nature. The derivative liabilities are stated at their fair value as a level 3 measurement. The Company used a Black-Scholes model to determine the fair values of these derivative liabilities.
Stock-Based Compensation
The Company records stock based compensation in accordance with the guidance in ASC Topic 718 which requires the Company to recognize expense related to the fair value of its employee stock option awards. This eliminates accounting for share-based compensation transactions using the intrinsic value and requires instead that such transactions be accounted for using a fair-value-based method. The Company recognizes the cost of all share-based awards on a graded vesting basis over the vesting period of the award.
Stock based compensation for non-employees is accounted for using the Stock Based Compensation Topic of the FASB ASC 505. We use the fair value method for equity instruments granted to non-employees and will use the Black-Scholes model for measuring the fair value of options, if issued. The stock based fair value compensation is determined as of the date of the grant or the date at which the performance of the services is completed (measurement date) and is recognized over the vesting periods.
Subsequent Events
The Company evaluated subsequent events through the date these financial statements were issued for disclosure purposes.
Reclassification
Certain prior year amounts have been reclassified for consistency with the current period presentation.
Recent Issued Accounting Pronouncements
In February 2016, a pronouncement was issued that creates new accounting and reporting guidelines for leasing arrangements. The new guidance requires organizations that lease assets to recognize assets and liabilities on the balance sheet related to the rights and obligations created by those leases, regardless of whether they are classified as finance or operating leases. Consistent with current guidance, the recognition, measurement, and presentation of expenses and cash flows arising from a lease primarily will depend on its classification as a finance or operating lease. The guidance also requires new disclosures to help financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. The new standard is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period, with early application permitted. The new standard is to be applied using a modified retrospective approach. The Company is currently evaluating the impact of the new pronouncement on its financial statements.
In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718). The FASB issued this update to improve the accounting for employee share-based payments and affect all organizations that issue share based payment awards to their employees. Several aspects of the accounting for share-based payment award transactions are simplified, including: (a) income tax consequences; (b) classification of awards as either equity or liabilities; and (c) classification on the statement of cash flows. The updated guidance is effective for annual periods beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption of the updates is permitted. Management is currently evaluating the new guidance to determine the impact it will have on our consolidated financial statements.
On November 17, 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, a consensus of the FASB’s Emerging Issues Force (the “Task Force”). The new standard requires that the statement of cash flows explain the change during the period in the total cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Entities will also be required to reconcile such total to amounts on the balance sheet and disclose the nature of the restrictions. AUS No. 2016-18 is effective for public business entities for fiscal years beginning after December 15, 2017. The Company does not believe this ASU will have an impact on our results of operation, cash flows, other than presentation, or financial condition.
The Company does not believe that any other recently issued effective pronouncements, or pronouncements issued but not yet effective, if adopted, would have a material effect on the accompanying financial statements.
NOTE 2 - GOING CONCERN
The accompanying unaudited consolidated financial statements of GMGI have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company had a net working capital deficit of $1,601,256 and $1,996,341 as of January 31, 2018 and 2017, respectively. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. Without realization of additional capital, it would be unlikely for GMGI to continue as a going concern. GMGI's management plans on raising cash from public or private debt or equity financing, on an as needed basis, and in the longer term, revenues from the gambling business. GMGI's ability to continue as a going concern is dependent on these additional cash financings, and, ultimately, upon achieving profitable operations through the development of its gambling business.
NOTE 3 - CONVERTIBLE NOTES PAYABLES
Convertible notes payable at January 31, 2018 and July 31, 2017 consisted of the following:
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January 31,
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July 31,
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2018
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2017
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Promissory Note #2
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30,000
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30,000
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Promissory Note #31- in default
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-
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9,550
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Promissory Note #42 - in default
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-
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430
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Promissory Note #44 - in default
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-
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4,400
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Promissory Note #45 - in default
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28,285
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28,285
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Promissory Note #46 - in default
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14,945
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33,000
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Promissory Note #59 - in default
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10,000
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10,000
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Promissory Note #68-Related party
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795,712
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795,712
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Promissory Note #69
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-
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33,810
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Promissory Note #70
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38,000
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-
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Notes payable, principal
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$
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916,942
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$
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945,187
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Debt discount
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(17,527
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)
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(12,035
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)
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Total notes payable
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$
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899,415
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$
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933,152
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Promissory Note #2
On March 19, 2012, the Company received $30,000 cash from the issuance of a convertible promissory note in the amount of $30,000. The promissory note is unsecured, interest free and repayable upon demand.
The note may be converted at the option of the holder into Common stock of the Company. The fixed conversion price is $0.01 per share. Accordingly the note may be converted into 3,000,000 common shares of the Company.
The Company determined that this Promissory note should be accounted for in accordance with FASB ASC 470-20 which addresses “Accounting for Convertible Securities with Beneficial Conversion Features”. The beneficial conversion feature is calculated at its intrinsic value (that is, the difference between the conversion price $0.01 and the fair value of the common stock into which the debt is convertible at the commitment date (per share being $0.08), multiplied by the number of shares into which the debt is convertible. The valuation of the beneficial conversion feature recorded cannot be greater than the face value of the note issued. As of January 31, 2018, debt discount balance $0 was recorded.
Promissory Note #31
On March 17, 2014, the Company received funding pursuant to a convertible promissory note in the amount of $26,500. The promissory note is unsecured, bears interest at 8% per annum, and matures on March 17, 2015. The holder has the right after a period of 180 days to convert the balance outstanding into the Company’s common stock at a rate equal to 50% of the lowest closing prices during the ten trading days prior to the conversion date.
Upon the holder’s option to convert becoming active the Company recorded a debt discount and derivative liability of $42,329 being the fair value of the conversion feature which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term of the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period. Debt discount of the note was amortized to $0 on May 19, 2015.
During six months ended January 31, 2018, the Company issued 71,464,540 common shares upon the conversion of $9,550 in principal and $6,437 in interest. As of January 31, 2018, this note has been fully converted.
Promissory Note #42
On June 6, 2014, the Company received funding pursuant to a convertible promissory note in the amount of $25,000. The promissory note is unsecured, bears interest at 8% per annum, and matures on June 6, 2015. The holder has the right after a period of 180 days to convert the balance outstanding into the Company’s common stock at a rate equal to 60% of the lowest closing prices during the ten trading days prior to the conversion date.
Upon the holder’s option to convert becoming active the Company recorded a debt discount and derivative liability of $33,550 being the fair value of the conversion feature which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term of the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period. Debt discount of the note was amortized to $0 on June 6, 2015.
On October 24, 2017, the Company agreed to settle a dispute regarding a claim by the note holder that GMGI was liable for damages and penalty interest. In this settlement the Company agreed to issue 19,166,672 shares and remit $5,000 in final settlement of all interest and any damages claimed. The Company recorded a gain on extinguishment of debt $814. This includes the settlement of Promissory Note #44, below.
Promissory Note #44
On July 2, 2014, the Company received funding pursuant to a convertible promissory note in the amount of $25,000. The promissory note is unsecured, bears interest at 8% per annum, and matures on July 2, 2015.
Upon the holder’s option to convert becoming active the Company recorded a debt discount and derivative liability of $40,725 being the fair value of the conversion feature which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term of the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period.
On October 24, 2017, the Company agreed to settle a dispute regarding a claim by the note holder that GMGI was liable for damages and penalty interest. In this settlement the Company reached an agreement to issue 31,257,964 shares and remit $5,000 in final settlement of all interest and any damages claimed. The Company recorded a gain on extinguishment of debt $814.
During the six months ended January 31, 2018, the Company issued 49,667,010 common shares upon the conversion of $10,399 in principal and $2,686 in interest. As of January 31, 2018, this note has been fully converted.
Promissory Note #45
On July 9, 2014, the Company arranged a debt swap for $75,000 which was transferred to LG Capital Funding, LLC. The promissory note is unsecured, bears interest at 8% per annum and matures on July 9, 2015. The holder has the right after a period of 180 days to convert the balance outstanding into the Company’s common stock at a rate equal to 50% of the lowest closing prices during the ten trading days prior to the conversion date.
Upon the holder’s option to convert becoming active the Company recorded a debt discount and derivative liability of $202,937 being the fair value of the conversion feature which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term of the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period. Debt discount of the note was amortized to $0 on July 9, 2015.
As of January 31, 2018, principal balance of this note was $28,285. This note is currently in default and has a default interest rate of 16% per annum.
Promissory Note #46
On July 9, 2014, the Company received funding pursuant to a convertible promissory note in the amount of $33,000. The promissory note is unsecured, bears interest at 8% per annum, and matures on July 9, 2015. The holder has the right after a period of 180 days to convert the balance outstanding into the Company’s common stock at a rate equal to 50% of the lowest closing prices during the ten trading days prior to the conversion date.
Upon the holder’s option to convert becoming active the Company recorded a debt discount and derivative liability of $130,556 being the fair value of the conversion feature which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term of the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period.
As of January 31, 2018, principal balance of this note was $14,945. During the six months ended January 31, 2018, the Company issued 222,963,666 common shares upon the conversion of $18,055 in principal and $8,489 in interest. This note is currently in default and has a default interest rate of 16% per annum.
Promissory Note #59
On July 31, 2015 the Company entered into a Convertible Promissory Note with Direct Capital Group, Inc. in the sum of $240,000. The promissory note is unsecured, bears interest at 8% per annum, and matures on January 31, 2016. Any principal amount not paid by the maturity date bears interest at 22% per annum.
On April 26, 2016, $50,000 was reassigned to Blackbridge Capital, LLC (“Blackbridge”). Blackbridge failed to meet terms of the Assignment and Assumption and were therefore in default of their obligations. The Company took legal advice regarding the breach of Blackbridge Capital LLC’s obligations. On the June 2, 2016, the Company’s legal counsel, wrote to Blackbridge Capital advising them of the breach and also that the Company had cancelled the remaining balance on the note. The Company recorded a gain on extinguishment of debt $47,151.
On July 21, 2016, $25,000 was reassigned to Istvan Elek. At any time the note may be converted at the option of the holder into Common stock of the Company. The conversion price is 50% of the market price, where market price is defined as “the lowest closing price on any day with a fifteen day look back”.
A portion of the proceeds from issuance of the convertible debt, equal to the intrinsic value, is allocated to additional paid-in capital. Because the debt is due on demand and is convertible at the date of issuance, the valuation of the beneficial conversion feature is charged to interest expense at the date of issuance.
On July 31, 2015, interest expense relating to the beneficial conversion feature of this convertible note of $0 was recorded in the financial statements, with a corresponding increase to additional paid in capital.
On September 22, 2016, the Company entered into a Cancellation and Release Agreement with Direct Capital Group, Inc. (“Direct”). In terms of Cancellation and Release Agreement Direct agreed to cancel the convertible promissory note with the Company totaling $183,157. In consideration for the cancellation of the convertible promissory notes and in terms of the Asset Purchase Agreement dated February 22, 2016, the Company has agreed to transfer ownership of mining claims held in the Company’s name. It was also agreed by both the Company and Direct that Direct shall release all future claims to subsequent conversions of the Notes and the Company will have no further obligation to Direct under those Convertible Notes and Direct shall be forever barred from seeking further conversions or claiming obligations of the Company under the Convertible Notes. The Company recorded a gain on extinguishment of debt of $165,000 related to the agreement.
As of January 31, 2018, principal balance of this note was $10,000.
Promissory
Note #68
On March 1, 2016 the Company entered into a convertible promissory note with Luxor Capital, LLC in the amount of $2,374,712. The promissory note is unsecured, bears interest at 6% per annum, and matures on March 1, 2017.
Upon the holder’s option to convert becoming active the Company recorded a debt discount and derivative liability of $2,330,680 being the fair value of the conversion feature which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term of the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period.
As of January 31, 2018, principal balance of this note was $795,712. This note is currently in default. The default had no effect on the note’s interest rate.
Promissory Note #69
On January 11, 2017 the Company entered into a convertible promissory note with Power Up Lending Group Ltd (“Power Up”) in the amount of $38,000. The promissory note bears interest at 8% per annum, and matures on October 28, 2017. Any principal amount not paid by the maturity date bears interest at 22% per annum.
Upon the holder’s option to convert becoming active the Company recorded a debt discount and derivative liability of $61,883 being the fair value of the conversion feature which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term of the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period. During the six months ended January 31, 2018 and 2017, $12,036 and $13,524 amortization expense of debt discount was recorded on this note. As of January 31, 2018 and 2017, debt discount of this note was $0 and $12,036, respectively.
During the six months ended January 31, 2018, the Company issued 138,259,443 common shares upon the conversion of $33,810 in principal, $1,906 in interest and $1,600 in stock payable. As of January 31, 2018, this note has been fully converted.
Promissory Note #70
On September 7, 2017 the Company entered into a convertible promissory note with Power Up Lending Group Ltd (“Power Up”) in the amount of $38,000. The promissory note bears interest at 8% per annum, and matures on June 15, 2018. Any principal amount not paid by the maturity date bears interest at 22% per annum.
Upon the holder’s option to convert becoming active the Company recorded a debt discount and derivative liability of $67,041 being the fair value of the conversion feature which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term of the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period. During the six months ended January 31, 2018, $20,472 amortization expense of debt discount was recorded on this note. As of January 31, 2018, debt discount of this note was $17,528.
As of January 31, 2018, principal balance of this note was $38,000.
NOTE 4 - DERIVATIVE LIABILITIES
Due to the conversion features contained in the convertible notes issued, the actual number of shares of common stock that would be required if a conversion of the notes as further described in Note 6 was made through the issuance of the Company’s common stock cannot be predicted, and the Company could be required to issue an amount of shares that may cause it to exceed its authorized share amount. As a result, the conversion feature requires derivative accounting treatment and will be bifurcated from the notes and “marked to market” each reporting period through the income statement. The fair value of the conversion future of the notes was recognized as a derivative liability instrument and will be measured at fair value at each reporting period.
During the six months ended January 31, 2018 and 2017, the Company recorded derivative liabilities for embedded conversion features related to convertible notes payable of face value $76,252 and $61,883 respectively The Company remeasured the fair value of the instruments as of January 31, 2018 and 2017, and recorded an unrealized loss of $129,888 and a gain of $1,144,313 for the six months ended January 31, 2018 and 2017, respectively. The Company recorded a loss on settlement of derivative liability of $1,660 and $0 as of January 31, 2018 and 2017, respectively. As of January 31, 2018 and 2017, the derivative liability associated with the note conversion features were $131,759 and $ 208,954, respectively.
These derivative liabilities have been measured in accordance with fair value measurements, as defined by ASC 820. The valuation assumptions are classified within Level 1 and Level 2 inputs. The following table represents the Company’s derivative liability activity for the embedded conversion features discussed above. The following table represents the Company’s derivative liability activity for the embedded conversion features discussed above:
|
|
January 31,
|
|
|
July 31,
|
|
|
|
2018
|
|
|
2017
|
|
Balance, beginning of period
|
|
$
|
136,177
|
|
|
$
|
1,939,753
|
|
Initial recognition of derivative liability
|
|
|
76,251
|
|
|
|
61,883
|
|
Conversion of derivative instruments to Common Stock
|
|
|
(131,759
|
)
|
|
|
(254,306
|
)
|
Mark-to-Market adjustment to fair value
|
|
|
129,888
|
|
|
|
(1,611,153
|
)
|
Loss on settlement agreement
|
|
|
(1,660
|
)
|
|
|
-
|
|
Balance, end of period
|
|
$
|
208,898
|
|
|
$
|
136,177
|
|
NOTE 5 – COMMITMENTS AND CONTINGENCIES
Legal Proceedings
From time to time, we may be party to litigation or other legal proceedings that we consider to be a part of the ordinary course of our business. We are not involved currently in legal proceedings other than those detailed below that could reasonably be expected to have a material adverse effect on our business, prospects, financial condition or results of operations. We may become involved in material legal proceedings in the future.
NOTE 6 - RELATED PARTY TRANSACTIONS
All related party transactions have been recorded at the exchange value which was the amount of consideration established and agreed to by the related parties.
On February 22, 2016, the Company entered into an Asset Purchase Agreement with Luxor Capital, LLC, which is wholly owned by Anthony Goodman. The Company purchased a Certain Gaming IP, along with the “know how” of that Gaming IP from Luxor. Pursuant to the Asset Purchase Agreement, 11,112 shares of common stock have been issued to Luxor Capital, LLC and its designed party.
On April 1, 2016, the Company entered into a Back Office / Services Provider Agreement with Articulate Pty Ltd (“Articulate”), which is wholly owned by the director of the Company. Pursuant to the agreement, Articulate would provide accounting, customer supporting, technology, programming and design services, in exchange, the Company would pay $4,500 per month ending for services rendered plus reimbursement of the Company's expenses. On January 1, 2018, the Company amended the Back Office Agreement, in which Articulate discontinued to provided services, however the term of the Back Office Agreement will continue for a further 12 months for with regard to further co-operation. During six months ended January 31, 2018 and 2017, consulting expense related to this service was $45,000 and $54,000, respectively. As of January 31, 2018, the Company has a $241,127 payable to Articulate.
On June 1, 2016, the Company entered a distribution usage rights agreement with Globaltech Software Services LLC. (“Globaltech”), a company owned by the chief executive officer, the Company agreed to provide the rights of usage to its Credit Management system, Social Gaming systems and Technology. During six months ended January 31, 2018 and 2017, revenue from Globaltech was $60,000 and $60,000, respectively. As of January 31, 2018, the Company had a $62,500 accounts receivable to Globaltech.
On February 22, 2016, the Company entered into a Consulting Service Agreement with its Chief Executive Officer, Anthony Goodman. Pursuant to the Agreement, the consulting fee could be settled in shares. On December 12, 2017, the Company issued 77,780,659 shares of common stock to settle account payable of $30,000 to Mr. Goodman.
On February 22, 2016, the Company entered into a Consulting Service Agreement with its Financial Executive Officer, Weiting Feng. Pursuant to the Agreement, the consulting fee could be settled in shares. On December 12, 2017, the Company issued 77,780,659 shares of common stock to settle account payable of $30,000 to Ms.Feng.
NOTE 7 – EQUITY
Preferred Stock
The Company authorized the creation of 20,000,000 shares of it $0.00001 par value preferred stock.
On August 10, 2015, the Company’s Board of Directors authorized the creation of 1,000 shares of Series B Voting Preferred Stock. The holder of the shares of the Series B Voting Preferred Stock has the right to vote those shares of the Series B Voting Preferred Stock regarding any matter or action that is required to be submitted to the shareholders of the Company for approval. The vote of each share of the Series B Voting Preferred Stock is equal to and counted as 4 times the votes of all of the shares of the Company’s (i) common stock, and (ii) other voting preferred stock issued and outstanding on the date of each and every vote or consent of the shareholders of the Company regarding each and every matter submitted to the shareholders of the Company for approval.
On August 10, 2015, the Company filed a Certificate of Designation with the Nevada Secretary of State creating the 1,000 shares of Series B Voting Preferred Stock
On August 14, 2015, the Company issued 1,000 shares of Series B Voting Preferred Stock to Santa Rosa Resources, representing 100% of the total issued and outstanding shares of the Company’s Series B Voting Preferred Stock.
On April 3, 2016, the Company cancelled 1,000 shares of Series B Voting Preferred Stock to Santa Rosa Resources and a new certificate issued in the name of Luxor Capital LLC in the amount of 1,000 Series B shares.
As of January 31, 2018, 19,999,000 Series A preferred shares and 1,000 Series B preferred shares of par value $0.00001 were authorized, of which 0 Series A shares were issued and outstanding, 1,000 Series B shares were issued and outstanding.
Common Stock
The Company authorized the creation of 4,000,000,000 shares of its $0.00001 par value common stock.
On October 15, 2015, the Company effectuated a 1 for 2,000 reverse stock split, thereby reducing the issued and outstanding shares of common stock from 3,472,433,130 prior to the reverse split to 1,736,217 following the reverse split. An additional 1,043 shares were issued due to no fractional shares used as a result of the reverse stock split.
On November 6, 2015, the Company purchased all data and rights to the “We Buy Gold” website from Santa Rosa Resources. The Company issued 223 shares of common stock on November 6, 2015 and 223 shares of common stock on December 7, 2015, with a total value equal to $1,800,000.
On March 9, 2016, the Company’s Board of Directors approved 1 for 1,500 reverse split for the Company’s authorized, issued and outstanding shares of common stock. The reverse stock split was effective on April 7, 2016 upon approval of shareholders holding a majority of the voting stock.
On December 5, 2016, the Company’s Board of Directors approved 1 for 150 reverse split for the Company’s authorized, issued and outstanding shares of common stock, reducing the number of authorized shares to 19,866,667. The reverse stock split was effective on January 9, 2017 upon approval of shareholders holding a majority of the voting stock. On January 17, 2017, the authorized number of shares of common stock was increased to 2,480,000,000.
On September 14, 2017, the Company’s Board of Directors approved to increase the Company’s authorized common shares from 2,480,000,000 to 4,000,000,000 shares with no change to the Company’s class of Preferred Stock.
On December 12, 2017, the Company issued 77,780,659 shares of common stock to settle account payable of $30,000 to Mr. Goodman.
On December 12, 2017, the Company issued 77,780,659 shares of common stock to settle account payable of $30,000 to Ms.Weiting Feng.
During the six months ended January 31, 2018, the Company issued 482,354,660 shares of common stock for the conversion of various convertible notes of $71,754 in principal, $19,518 in interest and $1,600 in stock payable (see Note 4).
During the six months ended January 31, 2018, the Company issued 155,561,318 shares of common stock for settlement of $60,000 accounts payable.
As of January 31, 2018, 4,000,000,000 common shares of par value $0.00001 were authorized, of which 779,012,961 shares were issued and outstanding.
Stock Option Plan
On January 3, 2018, the Company granted a stock option plan: the 2018 Equity Incentive Plan. The stock option was granted at the fair value of the grant date using the Black-Scholes option pricing model, and revalued at each reporting period end and amortized at the greater value of vested or straight-line amortization. The compensation expense will be charged to operations through the vesting period.
The Company granted stock options to 9 external consultants, each of them was granted to purchase 30,000,000 shares of common stock of the Company at exercise price of $0.0004 with exercise period of three years, vesting 33% each anniversary for three years. The fair value of the stock option was $108,000 in total on the grant date.
The Company granted stock options to its Chief Financial Officer to purchase 210,000,000 shares of common stock of the Company at exercise price of $0.00044 with exercise period of one and a half years to an officer, vesting 33% each half year. The fair value of the stock option was $83,808 on the grant date.
The Company granted stock options to its Chief Executive Officer to purchase 810,000,000 shares of common stock of the Company at exercise price of $0.00044 with exercise period of one and a half years to an officer, vesting 1/3 each half year for one and a half years. The fair value of the stock option was $323,225 on the grant date.
As of January 31, 2018, none of the stock options were vested; $23,760 amortization expense was recorded related to the 2018 Equity Incentive Plan.
NOTE 8 – CONCENTRATION
The Company’s revenues for the six months ended January 31, 2018 were from one related party. As of January 31, 2018, the aggregate accounts receivable due from this related party was $62,500.
NOTE 9 – SUBSEQUENT EVENTS
On February 28, 2018, the Company entered an Asset Purchase Agreement with Luxor Capital LLC (“Luxor”), which is wholly owned by the Company’s Chief Executive Officer Anthony Goodman, pursuant to which the Company agree to purchase certain Intellectual Property and Know-how (the “GM2 Asset”). The GM2 Asset purchased is expected to lead to new clients and incremental revenues by allowing the Company to offer unique IP to Social Gaming Clientele.
On March 1 2018, the Company entered into a License Agreement with Articulate Pty Ltd. (“Articulate”), an affiliate of Mr. Goodman. Pursuant to the License Agreement, Articulate will receive a license from the Company to use the GM2 Asset technology. Articulate will pay the Company a usage fee calculated as a certain percentage of the monthly content and software usage within the GM2 Asset system.
On March 2, 2018, the Company reaffirmed its operator service agreement with Game Sparks Technologies Limited (“Gamesparks”), now a wholly owned division of Amazon.com Inc (“Amazon”). Whilst there have been certain delays in fully launching the Social Gaming Platform, GameSparks confirmed that it has long shared Amazon’s passion for helping developers create amazing gaming experiences, so it’s a natural fit. Being part of Amazon means GameSparks will continue to grow the service, as well as explore new ways to unlock the power of Amazon to help build, operate, and monetize our products.