0001683168-21-002188.txt : 20210524 0001683168-21-002188.hdr.sgml : 20210524 20210524155951 ACCESSION NUMBER: 0001683168-21-002188 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 50 CONFORMED PERIOD OF REPORT: 20210331 FILED AS OF DATE: 20210524 DATE AS OF CHANGE: 20210524 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Gaming Technologies, Inc. CENTRAL INDEX KEY: 0001816906 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 352675083 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 333-249998 FILM NUMBER: 21954732 BUSINESS ADDRESS: STREET 1: 413 W. 14TH STREET CITY: NEW YORK STATE: NY ZIP: 10014 BUSINESS PHONE: 347-983-1227 MAIL ADDRESS: STREET 1: 413 W. 14TH STREET CITY: NEW YORK STATE: NY ZIP: 10014 FORMER COMPANY: FORMER CONFORMED NAME: Dito, Inc. DATE OF NAME CHANGE: 20200707 10-Q 1 gamingtech_10q-033121.htm FORM 10-Q

Table of Contents

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

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

For the quarterly period ended March 31, 2021

     

 

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

For the transition period from to

Commission file number: 333-249998

 

 

Gaming Technologies, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware   35-2675083

State or Other Jurisdiction of

Incorporation or Organization

  I.R.S. Employer Identification No.
     

413 West 14th Street

New York, New York, USA

  10014
Address of Principal Executive Offices   Zip Code

 

Registrant’s telephone number, including area code: + 1 (347) 983-1227

 

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

 

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

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes    No 

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  No 

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company
  Emerging growth company

 

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

 

Indicate by check mark whether the registrant 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. Yes  No

 

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

 

As of May 24, 2021, 30,521,059 shares of the registrant’s common stock, par value $0.001 per share, were outstanding.

 

 

   

 

 

TABLE OF CONTENTS

 

 

 

Item Number and Caption   Page
       
Cautionary Note Regarding Forward-Looking Statements   ii
     
PART I FINANCIAL INFORMATION    
       
Item 1. Financial Statements   1
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations   17
Item 3. Quantitative and Qualitative Disclosures About Market Risk   26
Item 4. Controls and Procedures   26
       
PART II OTHER INFORMATION    
       
Item 1. Legal Proceedings   27
Item 1A. Risk Factors   27
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds   27
Item 3 Defaults Upon Senior Securities   27
Item 4 Mine Safety Disclosures   27
Item 5. Other Information   27
Item 6. Exhibits   28
  SIGNATURES   29

  

 

 

 

 

 

 

 

 

 

 

 i 

 

 

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q (this “Form 10-Q”) contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and the provisions of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements give our current expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current facts. You can find many (but not all) of these statements by looking for words such as “approximates,” “believes,” “hopes,” “expects,” “anticipates,” “estimates,” “projects,” “intends,” “plans,” “would,” “should,” “could,” “may” or other similar expressions in this Form 10-Q. In particular, these include statements relating to future actions, future performance, anticipated expenses, or projected financial results. These forward-looking statements are subject to certain risks and uncertainties, including the risks outlined under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020 (the “Form 10-K”) filed with the Securities and Exchange Commission (the “SEC”) and in this Form 10-Q, that could cause actual results to differ materially from our historical experience and our present expectations or projections. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time and it is not possible for us to predict all risk factors, nor can we address the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause our actual results to differ materially from those contained in any forward-looking statements. All forward-looking statements included in this document are based on information available to us on the date hereof, and we assume no obligation to update any such forward-looking statements.

 

We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, or joint ventures we may make or collaborations or strategic partnerships we may enter into.

 

You should read this Form 10-Q and the documents that we have filed as exhibits to this Form 10-Q, as well as the Form 10-K and the other reports, schedules and documents we have filed with the SEC, completely and with the understanding that our actual future results may be materially different from what we expect. We do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

 

Unless the context requires otherwise, references in this report to “Gaming Technologies,” the “Company,” “we,” “us,” and “our” refer to Gaming Technologies, Inc., a Delaware corporation, and its subsidiary. All brand names or trademarks appearing in this report are the property of their respective holders.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 ii 

 

 

PART I FINANCIAL INFORMATION

 

Item 1. FINANCIAL STATEMENTS

 

GAMING TECHNOLOGIES, INC.
AND SUBSIDIARY

 

INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

 

  Page Number
   
Condensed consolidated Balance Sheets – March 31, 2021 and December 31, 2020 2
   
Condensed consolidated Statements of Operations and Comprehensive Loss – Three Months Ended March 31, 2021 and 2020 3
   
Condensed consolidated Statement of Stockholders' Equity (Deficiency) – Three Months Ended March 31, 2021 and 2020 4
   
Condensed consolidated Statements of Cash Flows - Three Months Ended March 31, 2021 and 2020 5
   
Notes to Condensed consolidated Financial Statements - Three Months Ended March 31, 2021 and 2020 7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 1 

 

 

GAMING TECHNOLOGIES, INC.

AND SUBSIDIARY

 

CONDENSED CONSOLIDATED BALANCE SHEETS

 

     
   March 31, 2021   December 31, 2020 
    Unaudited      
ASSETS          
Current assets:          
Cash  $4,542,559   $1,946,232 
Deposits and other current assets   104,950    37,917 
Total current assets   4,647,509    1,984,149 
Property and equipment, net   6,240    8,503 
Operating lease right of use asset, net       11,968 
Intellectual property, net   201,034    50,967 
Total assets  $4,854,783   $2,055,587 
           
LIABILITIES AND STOCKHOLDERS' EQUITY          
Current liabilities:          
Accounts payable and accrued expenses  $374,433   $368,784 
Due to related parties   86,427    14,918 
Current portion of note payable, bank   2,241    2,241 
Current portion of operating lease liability       11,968 
Total current liabilities   463,101    397,911 
Note payable, bank   62,741    62,741 
Total liabilities   525,842    460,652 
           
Commitments and contingencies          
           
Stockholders' equity:          
Preferred stock, $0.001 par value; authorized -5,000,000 shares; issued - none        
Common stock, $0.001 par value; authorized - 45,000,000 shares; issued and outstanding - 30,521,059 shares and 28,367,525 shares at March 31, 2021 and December 31, 2020, respectively   30,521    28,367 
Additional paid-in capital   14,677,355    9,551,507 
Accumulated other comprehensive income   (31,919)   (18,746)
Accumulated deficit   (10,347,016)   (7,966,193)
Total stockholders' equity   4,328,941    1,594,935 
Total liabilities and stockholders' equity  $4,854,783   $2,055,587 

 

See accompanying notes to condensed consolidated financial statements.

 

 

 

 2 

 

 

GAMING TECHNOLOGIES, INC.

AND SUBSIDIARY

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (UNAUDITED)

 

   Three Months Ended 
   March 31, 
   2021   2020 
         
Revenue  $2,089   $ 
           
Costs and Expenses:          
Cost of revenues   182,263     
Software development, including amortization of intellectual property of $18,403 and $15,239 in 2021 and 2020, respectively   18,403    20,105 
General and administrative:          
Officers, directors, affiliates, and other related parties   291,855    85,509 
Other (including stock compensation costs of $1,446,502 in 2021)   1,890,390    127,130 
           
Total Costs and expenses   2,382,911    232,744 
           
Loss from operations   (2,380,822)   (232,744)
Other income (expense):          
Interest expense       (912)
Foreign currency gain       (17,848)
Total other expense, net       (18,760)
Net loss   (2,380,822)   (251,504)
Foreign currency translation adjustment   (13,173)    
           
Comprehensive loss  $(2,393,995)  $(251,504)
           
Net loss per common share - basic and diluted  $(0.08)  $(0.01)
           
Weighted average common shares outstanding - basic and diluted   29,522,424    24,680,765 

 

See accompanying notes to condensed consolidated financial statements.

 

 

 

 3 

 

 

GAMING TECHNOLOGIES, INC.

AND SUBSIDIARY

 

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY) (UNAUDITED)

Three Months Ended March 31, 2021 and 2020

 

   Common
Stock
    Additional
Paid-in
   Accumulated
Other
Comprehensive
   Accumulated   Stockholders'
Equity
 
   Shares   Par Value    Capital   Income   Deficit   (Deficiency) 
Balance, December 31, 2020   28,367,525   $28,367    $9,551,507   $(18,746)  $(7,966,193)  $1,594,935 
Common stock issued in connection with private placement, net   1,616,600    1,617     3,679,883            3,681,500 
Common stock issued as compensation   536,934    537     1,445,965            1,446,502 
Foreign currency translation adjustment                (13,173)       (13,173)
Net loss                    (2,380,823)   (2,380,823)
Balance, March 31, 2021   30,521,059   $30,521    $14,677,355   $(31,919)  $(10,347,016)  $4,328,941 

 

   Common
Stock
    Additional
Paid-in
   Accumulated
Other
Comprehensive
   Accumulated   Stockholders'
Equity
 
   Shares   Par Value    Capital   Income   Deficit   (Deficiency) 
Balance, December 31, 2019   24,614,325   $24,614    $1,040,199   $2,766   $(754,376)  $313,203 
Common stock issued in connection with private placement, net   84,000    84     209,916            210,000 
Acquisition of Game Tech            12,061            12,061 
Foreign currency translation adjustment                7,463        7,463 
Net loss                    (251,504)   (251,504)
Balance, March 31, 2020   24,698,325   $24,698    $1,262,176   $10,229  $(1,005,880)  $291,223 

 

See accompanying notes to condensed consolidated financial statements.

 

 

 

 

 

 

 

 4 

 

 

GAMING TECHNOLOGIES, INC.

AND SUBSIDIARY

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

 

   Three Months Ended
March 31,
 
   2021   2020 
Cash flows from operating activities:          
Net loss  $(2,380,823)  $(251,504)
Adjustments to reconcile net loss to net cash used in operating activities:          
Depreciation   2,663    1,953 
Amortization of intellectual property   18,403    15,239 
Amortization of accrued lending fee       912 
Amortization of operating lease right of use asset   12,086    11,046 
Stock compensation   1,446,502     
Foreign currency gain / (loss)       17,849 
Changes in operating assets and liabilities:          
(Increase) decrease in -          
Due from related parties       (126,972)
Deposits and other current assets   (66,576)   (22,860)
Increase (decrease) in -          
Accounts payable and accrued expenses   1,990    40,838 
Due to related parties   71,264    2,925 
Operating lease liability   (12,086)   (11,046)
Net cash used in operating activities   (906,577)   (321,620)
           
Cash flows from investing activities:          
Purchase of intellectual property   (166,680)    
Purchase of property and equipment       (5,266)
Net cash used in investing activities   (166,680)   (5,266)
           
Cash flows from financing activities:          
Proceeds from private placement of common stock   3,681,500    210,000 
Repayment of cancelled common stock subscription       (60,000)
Net cash provided by financing activities   3,681,500    150,000 
           
Effect of exchange rate on cash   (11,916)   (4,559)
           
Cash:          
Net increase / (decrease)   2,596,327    (181,445)
Balance at beginning of year   1,946,232    320,402 
Balance at end of year  $4,542,559   $138,957 

 

(Continued)

 

 

 

 5 

 

 

GAMING TECHNOLOGIES, INC.

AND SUBSIDIARY

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(Continued)

 

   Three Months Ended
March 31,
 
   2021   2020 
         
Supplemental disclosures of cash flow information:          
Cash paid for -          
Interest  $   $ 
Income taxes  $   $ 

 

See accompanying notes to condensed consolidated financial statements.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 6 

 

 

GAMING TECHNOLOGIES, INC.

AND SUBSIDIARY

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

Three Months Ended March 31, 2021

 

1. Organization and Basis of Presentation

 

Organization and Combination

 

Gaming Technologies, Inc. (formerly Dito, Inc.,) (“Gaming US”) was incorporated in the State of Delaware on July 23, 2019. Effective as of March 18, 2020, Gaming US completed a Share Exchange Agreement (the "Exchange Agreement") to acquire all of the outstanding ordinary shares of Gaming Technologies Limited, formerly Gaming UK Limited, (“Gaming UK”) that provided for each outstanding ordinary share of Gaming UK to be effectively converted into 25 shares of common stock of Gaming US. As a result, Gaming UK became a wholly-owned subsidiary of Gaming US in a recapitalization transaction (collectively, the “Company”). On December 21, 2020, the Company changed its name from Dito, Inc. to Gaming Technologies Inc.

 

Gaming UK was originally formed as Smart Tower Limited on November 3, 2017 in the United Kingdom for the purpose of software development. On June 29, 2018, Smart Tower Limited changed its name to NENX Gaming Limited and then to Gaming UK Limited on July 29, 2019 and to Gaming Technologies Limited on January 7, 2021.

 

Gaming US maintains its principal executive offices in New York, New York, United States. Gaming UK maintains its principal executive offices in London, England.

 

Business Operations

 

The Company is a mobile games developer and publisher with offices in London and New York. The Company intends to license its software platform to mobile gaming operators and developers to enable rapid development of new games. In addition, the Company operates an online gaming operation in Mexico through its web site vale.mx.

 

On November 13, 2020, we entered into an Agreement for the Provision of Online Gaming Management and Consulting Services (as subsequently amended) with Comercial de Juegos de la Frontera, S.A. de C.V., a Mexican company doing business as Big Bola, pursuant to which we provide to Big Bola consulting and management services related to their interactive online betting and gaming business in Mexico via the web site www.vale.mx, a regulated online casino and sports betting site. vale.mx operates under Big Bola’s existing license issued by the General Directorate of Games and Raffles of the Ministry of Interior (SEGOB). Big Bola is one of only 14 operators legally authorized to offer legal betting and online casino services in Mexico. vale.mx has more than 500 online premium casino games available, which can be enjoyed both on mobile or via desktop. Players can receive promotions and play live roulette and blackjack, or high-definition slots from leading software providers such as NetEnt, Microgaming, Pragmatic Play, Evolution and Matrix Studios. We are responsible for player acquisition, promotion and retention for vale.mx. We manage players’ accounts and are required to ensure that the balance in players’ accounts at all times satisfies the requirements under applicable law, and we pay out winnings to players from Big Bola’s account. While Big Bola bears liability to the players as provided by the permit, as between us and Big Bola we bear the costs of this obligation. Each party indemnifies the other against certain liabilities and claims. Under the terms of the agreement, we share 60% of gross gaming revenue generated from the platform, subject to certain minimum guaranteed monthly amounts of Big Bola’s participation in the remaining gross gaming revenues. This venture began operations in February 2021.

 

On May 19, 2021, we entered into a non-exclusive license agreement with Playboy Enterprises International, Inc. (“Playboy”) to use certain trademarks (including the rabbit head logo) and other intellectual property of Playboy on and in connection with the design, creation, promotion, marketing, advertisement, sales, operation, maintenance and distribution in India of real-money game mobile apps, such as rummy, poker, fantasy sports and other games of skill approved by Playboy.  We will pay Playboy as a royalty a percentage of net gaming revenue. The term of the agreement is through the end of 2025, subject to early termination upon certain events of default, which include our failure to launch a Playboy-branded game in India by November 1, 2021, or to meet certain annual minimum net gaming revenue targets. 

 

 

 

 7 

 

 

Going Concern

 

The Company's condensed consolidated financial statements have been presented on the basis that the Company is a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. As reflected in the accompanying condensed consolidated financial statements, the Company has had no operating revenues to date, and has experienced recurring net losses from operations and negative operating cash flows. During the three months ended March 31, 2021, the Company incurred a net loss of $2,380,823 utilized cash in operating activities of $906,577, and had an accumulated deficit of $10,347,016 as of March 31, 2021. The Company has financed its working capital requirements since inception through the sale of its equity securities and from borrowings.

 

At March 31, 2021, the Company had cash of $4,542,559, reflecting cash of $3,681,500 from the sale of common stock in the first quarter of 2021.  The Company estimates that a significant amount of capital will be necessary over a sustained period of time to advance the development of the Company's business to the point at which it can become commercially viable and self-sustaining. However, there can be no assurances that the Company will be successful in this regard.

 

As a result, management has concluded that there is substantial doubt about the Company's ability to continue as a going concern within one year of the date that the accompanying condensed consolidated financial statements are issued. In addition, the Company's independent registered public accounting firm, in their report on the Company's condensed consolidated financial statements for the year ended December 31, 2020, has also expressed substantial doubt about the Company's ability to continue as a going concern.  The ability of the Company to continue as a going concern is dependent upon the Company's ability to raise additional funds and implement its business plan, and to ultimately achieve sustainable operating revenues and profitability. The accompanying condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

The development and expansion of the Company's business in 2021 and thereafter will be dependent on many factors, including the capital resources available to the Company. No assurances can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company or adequate to fund the development and expansion of the Company's business to a level that is commercially viable and self-sustaining. There is also significant uncertainty as to the effect that the coronavirus pandemic may have on the availability, amount and type of financing in the future.

 

If cash resources are insufficient to satisfy the Company's ongoing cash requirements, the Company would be required to scale back or discontinue its operations, obtain funds, if available, although there can be no certainty, through strategic alliances that may require the Company to relinquish rights to its technology, or to discontinue its operations entirely.

 

2. Summary of Significant Accounting Policies

 

Principles of Combination

 

The accompanying condensed consolidated financial statements of the Company have been prepared in accordance with United States generally accepted accounting principles ("GAAP") and include the financial statements of Gaming US and its wholly-owned foreign subsidiary, Gaming UK. Intercompany balances and transactions have been eliminated in consolidation.

 

Use of Estimates

 

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Management regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly. Actual results could differ from those estimates. Significant estimates are expected to include those related to assumptions used in calculating accruals for potential liabilities, valuing equity instruments issued for services, and the realization of deferred tax assets.

 

 

 

 8 

 

 

Cash

 

The Company maintains its cash balances with financial institutions with high credit ratings. The Company has not experienced any losses to date resulting from this practice.

 

As of March 31, 2021 and December 31, 2020, the Company's cash balances by currency consisted of the following:

 

     
   March 31, 2021   December 31, 2020 
           
GBP  £13,374   £49,127 
USD  $4,524,239    1,879,166 

 

Cash balances in British Pounds are maintained in the United Kingdom and cash balances in United States Dollars are maintained in the United States.

 

Concentration of Risk

 

The Company may periodically contract with consultants and vendors to provide services related to the Company's business development activities. Agreements for these services may be for a specific time period or for a specific project or task. The Company did not have any agreements at March 31, 2021 or December 31, 2020.

 

Revenue Recognition

 

The Company recognizes revenue in accordance with ASC Topic 606, Revenue From Contracts With Customers. ASC Topic 606 requires companies to recognize revenue in a manner that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, the standard requires disclosures of the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. Revenue is recognized based on the following five step model:

 

  · Identification of the contract with a customer

 

  · Identification of the performance obligations in the contract

 

  · Determination of the transaction price

 

  · Allocation of the transaction price to the performance obligations in the contract

 

  · Recognition of revenue when, or as, the Company satisfies a performance obligation 

 

The Company operates an online betting platform allowing users to place wagers on casino games. Each wager placed by users create a single performance obligation for the Company to administer each event wagered. Net gaming revenue is the aggregate of gaming wins and losses based on results of each event that customers wager bets on. Gross gaming revenue is split with our partners, whose share of gross gaming revenue is recorded as a reduction to net gaming revenue.

 

 

 

 9 

 

 

Cost of Revenue

 

Cost of revenue consists primarily of variable costs related to our contract with Big Bola. These include mainly (i) payment processing fees and chargebacks, (ii) product taxes, (iii) technology costs, (iv) revenue share / market access arrangements, and (v) feed / provider services. The Company incurs payment processing fees on user deposits, withdrawals and deposit reversals from payment processors (“chargebacks”). Chargebacks have not been material to date. Cost of revenue also includes expenses related to the distribution of our services, amortization of intangible assets and compensation of revenue associated personnel.

 

Stock-Based Compensation

 

The Company issues common stock and intends to issue stock options to officers, directors and consultants for services rendered. Options will vest and expire according to terms established at the issuance date of each grant. Stock grants, which are generally time vested, will be measured at the grant date fair value and charged to operations ratably over the vesting period.

 

The fair value of stock options granted as stock-based compensation will be determined utilizing the Black-Scholes option-pricing model, and can be affected by several variables, the most significant of which are the life of the equity award, the exercise price of the stock option as compared to the fair market value of the common stock on the grant date, and the estimated volatility of the common stock. Estimated volatility will be based on the historical volatility of the Company's common stock over an appropriate calculation period, or, if not available, by reference to the volatility of a representative sample of comparable public companies. The risk-free interest rate will be based on the U.S. Treasury yield curve in effect at the time of grant. The fair market value of the common stock will be determined by reference to the quoted market price of the Company's common stock on the grant date, or, if not available, by reference to an appropriate alternative valuation methodology.

 

The Company will recognize the fair value of stock-based compensation awards in general and administrative costs or in software development costs, as appropriate, in the Company's condensed consolidated statements of operations. The Company will issue new shares of common stock to satisfy stock option exercises.

 

As of March 31, 2021 and December 31, 2020, the Company did not have any outstanding stock options.

 

Comprehensive Income (Loss)

 

Comprehensive income or loss is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources. Components of comprehensive income or loss, including net income or loss, unrealized gains or losses on available-for-sale securities, unrealized gains or losses on other financial investments, unrealized gains or losses on pension and retirement benefit plans, and foreign currency translation adjustments, are reported in the financial statements in the period in which they are recognized. Net income (loss) and other comprehensive income (loss) are reported net of any related tax effect to arrive at comprehensive income (loss). The Company's comprehensive income (loss) for the three months ended March 31, 2021 and 2020 consists of foreign currency translation adjustments.

 

Earnings (Loss) Per Share

 

The Company's computation of earnings (loss) per share ("EPS") includes basic and diluted EPS. Basic EPS is measured as the income (loss) attributable to common stockholders divided by the weighted average common shares outstanding for the period. Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of potential common shares (e.g., convertible notes payable, convertible preferred stock, warrants and stock options) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS.

 

 

 

 10 

 

 

Loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the respective periods. At March 31, 2021 and December 31, 2020, the Company excluded warrants to acquire 234,000 shares of common stock from its calculation of loss per share as their effect would be antidilutive. Basic and diluted loss per common share is the same for all periods presented because the aforementioned warrants were antidilutive.

 

The Company has adopted ASU 2017-11, Earnings per share (Topic 260), provided that when determining whether certain financial instruments should be classified as liability or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock.

  

Fair Value of Financial Instruments

 

The authoritative guidance with respect to fair value established a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels and requires that assets and liabilities carried at fair value be classified and disclosed in one of three categories, as presented below. Disclosure as to transfers in and out of Levels 1 and 2, and activity in Level 3 fair value measurements, is also required.

 

Level 1. Observable inputs such as quoted prices in active markets for an identical asset or liability that the Company has the ability to access as of the measurement date. Financial assets and liabilities utilizing Level 1 inputs include active-exchange traded securities and exchange-based derivatives.

 

Level 2. Inputs, other than quoted prices included within Level 1, which are directly observable for the asset or liability or indirectly observable through corroboration with observable market data. Financial assets and liabilities utilizing Level 2 inputs include fixed income securities, non-exchange-based derivatives, mutual funds, and fair-value hedges.

 

Level 3. Unobservable inputs in which there is little or no market data for the asset or liability which requires the reporting entity to develop its own assumptions. Financial assets and liabilities utilizing Level 3 inputs include infrequently-traded non-exchange-based derivatives and commingled investment funds and are measured using present value pricing models.

 

The Company will determine the level in the fair value hierarchy within which each fair value measurement falls in its entirety, based on the lowest level input that is significant to the fair value measurement in its entirety. In determining the appropriate levels, the Company will perform an analysis of the assets and liabilities at each reporting period end.

 

The carrying value of financial instruments (consisting of cash and accounts payable and accrued expenses) is considered to be representative of their respective fair values due to the short-term nature of those instruments.

  

Foreign Currency

 

The accompanying condensed consolidated financial statements are presented in United States dollars ("USD"). The functional currency of Gaming UK, the Company's foreign subsidiary, is the British Pound (“GBP”), the local currency in the United Kingdom. Accordingly, assets and liabilities of the foreign subsidiary are translated at the current exchange rate at the end of the period, and revenues and expenses are translated at average exchange rates during the three months ended March 31, 2021 and the year ended December 31, 2020. The resulting translation adjustments are recorded as a component of shareholders' equity (deficiency). Gains and losses from foreign currency transactions are included in net income (loss).

 

 

 

 11 

 

 

Translation of amounts from the local currencies of the foreign subsidiary, Gaming UK, into USD has been made at the following exchange rates for the respective periods:

 

   As of and for the 
   Three months ended March 31, 2021   Year ended December 31, 2020 
         
Period-end GBP to USD1.00 exchange rate   1.3802    1.3652 
Period-average GBP to USD1.00 exchange rate   1.3859    1.2825 

 

Recent Accounting Pronouncements

 

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"). ASU 2016-13 significantly changes how entities measure credit losses for most financial assets, including accounts and notes receivables. ASU 2016-13 will replace the current "incurred loss" approach with an “expected loss” model, under which companies will recognize allowances based on expected rather than incurred losses. Entities will apply the provisions of ASU 2016-13 as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which ASU 2016-13 is effective. As small business filer, ASU 2016-13 will be effective for the Company for interim and annual reporting periods beginning after December 15, 2022. Management is currently in the process of assessing the impact of adopting ASU-2016-13 on the Company's financial statements and related disclosures.

 

In August 2020, the FASB issued ASU 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06). ASU 2020-06 simplifies the accounting for convertible debt by eliminating the beneficial conversion and cash conversion accounting models. Upon adoption of ASU 2020-06, convertible debt proceeds, unless issued with a substantial premium or an embedded conversion feature that is not clearly and closely related to the host contract, will no longer be allocated between debt and equity components. This modification will reduce the issue discount and result in less non-cash interest expense in financial statements. ASU 2020-06 also updates the earnings per share calculation and requires entities to assume share settlement when the convertible debt can be settled in cash or shares. ASU 2020-06 will be effective January 1, 2024, and a cumulative-effect adjustment to the opening balance of retained earnings is required upon adoption. Early adoption is permitted, but no earlier than January 1, 2021, including interim periods within that year. The Company adopted ASU 2020-06 effective January 1, 2021. The adoption of ASU 2020-06 did not have any impact on the Company’s consolidated financial statement presentation or disclosures.

 

Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company's present or future condensed consolidated financial statements and related disclosures.

 

3. Property and Equipment

 

Property and equipment as of March 31, 2021 and December 31, 2020 is summarized as follows:

 

   March 31, 2021   December 31, 2020 
         
Computer and office equipment  $27,307   $27,307 
Less accumulated depreciation   (21,067)   (18,804)
Computer and office equipment, net  $6,240   $8,503 

 

 

 

 12 

 

 

All of the Company's property and equipment is located in the United Kingdom. Depreciation expense for the three months ended March 31, 2021 and 2020 was $2,663 and $1,953, respectively. Depreciation expense is included in general and administrative costs in the Company's condensed consolidated statement of operations.

 

4. Intellectual Property

 

Intellectual property as of March 31, 2021 and December 31, 2020 is summarized as follows:

 

   March 31, 2021   December 31, 2020 
         
Software  $194,978   $194,978 
Internet domain name   181,525    13,055 
Total intellectual property   376,503    208,033 
Less accumulated amortization   (175,469)   (157,066)
Intellectual property, net  $201,034   $50,967 

 

Amortization expense for the three months ended March 31, 2021 and 2020 was $18,403 and $15,239, respectively. Amortization expense is included in software development costs in the Company's condensed consolidated statement of operations.

 

5. Note Payable to Bank

 

On June 9, 2020, Gaming UK received an unsecured loan of $60,600 (equivalent to 47,600£) from Metro Bank PLC under the Bounce Bank Loan Scheme managed by the British Business Bank on behalf of, and with the financial backing of, The Secretary of State for Business, Energy and Industrial Strategy of the Government of the United Kingdom. The Government of the United Kingdom has provided a full guarantee to Metro Bank PLC with respect to the repayment of this loan.  The proceeds from the loan are required to be used for working capital purposes, for investment in a company's business, and to support trading or commercial activity in the United Kingdom. The loan is for a term of 72 months and has a fixed interest rate of 2.5% per annum. Gaming UK is not required to make any payments of interest on the loan during the first 12 months of this loan, with such amount being paid by the Government of the United Kingdom under its business interruption payment program. Beginning in the 13th month after the drawdown of the loan, Gaming UK will be required to repay the loan by making 60 equal monthly payments of principal and interest aggregating $1,076 (equivalent to 845£) per month. During the three months ended March 31, 2021, the Company recorded interest expense of $212 with respect to this loan, which was paid by the Government of the United Kingdom under this program. As of March 31, 2021, $64,982 was due under this note, of which, $2,241 was reflected as current portion due.

 

Maturities of long-term debt for each of the next five years and thereafter are as follows:

 

Year ended December 31,  Amount 
2021  $2,241 
2022   10,137 
2023   10,137 
2024   10,137 
2025   10,137 
Thereafter   22,193 
Total payments   64,982 
Less current portion   2,241 
   $62,741 

 

 

 

 13 

 

 

6. Related Party Transactions

 

During the three months ended March 31, 2021 and 2020, the Company paid base salary, and a bonus of £75,000, totaling $291,855 and $85,509 to Jason Drummond, the Company’s sole director and executive officer.

 

As of March 31, 2021 and December 31, 2020, $86,427 and $14,918 was due to officers. The advances were unsecured, non-interest bearing with no formal terms of repayment.

 

7. Stockholders' Equity

 

Preferred Stock

 

The Company has authorized a total of 5,000,000 shares of preferred stock, par value $0.001 per share. No preferred shares have been designated by the Company as of March 31, 2021 and December 31, 2020.

 

Common Stock

 

The Company is authorized to issue up to 45,000,000 shares of common stock, par value $0.001 per share. As of March 31, 2021 and December 31, 2020, the Company had 30,521,059 and 28,367,525 shares of common stock issued and outstanding, respectively.

 

Private Placement of Common Stock

 

On February 3, 2021, Gaming Technologies, Inc. (the “Company”) entered into a Securities Purchase Agreement with certain accredited investors (“Purchase Agreement”), pursuant to which the Company sold an aggregate of 1,606,600 shares of its Common Stock for gross proceeds of $4,016,500 in a private placement. The Company paid a finder’s fee to registered brokers in the amount of $360,000 in connection with these transactions resulting in net proceeds to the Company of $3,656,500. In connection with the Purchase Agreement, the Company issued to certain registered brokers warrants to purchase an aggregate of 144,000 shares of common at an exercise price of $2.50 per share, with an expiration date 5 years from the date of issuance, pursuant to the terms of certain finder’s fee agreements previously entered into by the Company and such brokers.

 

Under the terms of the Purchase Agreement, each investor was granted customary piggyback registration rights in the event the Company proposes to register the offer and sale of any shares of its common stock, subject to the limitations set forth in the Purchase Agreement, such as a registration statement solely relating to an offering or sale to employees or directors of the Company pursuant to employee stock plan or in connection with any dividend or distribution. The Purchase Agreement also provides the investors the option and right to participate in future capital raising transactions at the same purchase price and on the same terms and conditions as other investors participating in such transactions, for an aggregate purchase price of up to $6,000,000.

 

If, at any time during the twelve months following sale of the Shares, the Company issues or sells shares of common stock or common stock equivalents, except for certain exempt issuances as described in the Purchase Agreement, at a price below $2.50 per share, then immediately upon such issuance or sale, the Company will deliver to the investors that number of restricted shares of common stock equal to the difference between the number of Shares purchased by the investor pursuant to this Purchase Agreement and the number of shares of common stock the investor would have received for the investor’s subscription amount at the dilutive issuance price.

 

In March 2021, the Company sold 10,000 shares of its Common Stock for gross proceeds of $25,000 in a private placement.

 

 

 

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Consulting Agreements

 

On November 6, 2020, the Company entered into an agreement with a consultant to serve as a board advisor. The term of the agreement is for one year and may be renewed at the end of the term. Compensation consists of the following stock grants: 50,000 shares of the Company’s common stock within seven days of the execution of the agreement which was valued at $125,000 and recorded during the year ended December 31, 2020. In addition, 50,000 shares of the Company’s common stock six months after the date of the agreement; 50,000 shares of the Company’s common stock upon the first renewal of the agreement and 50,000 shares of the Company’s common stock six months after the first renewal; and, 100,000 shares of the Company common stock at each of the following two renewal periods, if the agreement is renewed. The grant date fair value of these shares will be recorded during the service period. During the period ended March 31, 2021, the Company amortized $104,167 representing the pro rata portion of the grant date fair value of the next 50,000 shares to be issued.

 

In January 2021, the Company entered into two agreements with two consultants to provide investor relation services to the Company. The agreements are for a term of one year. The Company issued 200,000 shares of its common stock in exchange for the services. The common stock was valued at $500,000 at the time the agreements were executed.

 

In February 2021, the Company entered into an internet advertising campaign with a consultant. The contract is for a term of one year and calls for an initial non-refundable deposit of $20,000 upon the execution of the agreement and a payment of 333,334 shares of the Company’s common stock valued at $833,335 on the date of issuance.

 

In March 2021, the Company issued 3,600 shares of its common stock to a consultant in exchange for consulting services. The fair market value of the services was $9,000.

 

Warrants

 

A summary of warrant activity for the three months ended March 31, 2021 and the year ended December 31, 2020 is presented below:

 

   Warrants   Weighted
average
exercise
price
   Weighted
average
remaining
contractual
life (years)
   Aggregate
intrinsic
value
 
Outstanding on December 31, 2020   90,000   $2.50    4.89   $ 
Granted   144,000    2.50    4.83     
Exercised                
Outstanding on March 31, 2021   234,000   $2.50    4.64   $ 

 

8. Commitments and Contingencies

 

Legal Contingencies

 

The Company may be subject to legal proceedings from time to time as part of its business activities. As of March 31, 2021 and December 31, 2020, the Company was not subject to any threatened or pending legal actions or claims.

 

Impact of COVID-19 on the Company

 

The global outbreak of COVID-19 has led to severe disruptions in general economic activities, as businesses and governments have taken broad actions to mitigate this public health crisis. Although the Company has not experienced any significant disruption to its business to date, these conditions could significantly negatively impact the Company's business in the future.

 

 

 

 15 

 

 

The extent to which the COVID-19 outbreak ultimately impacts the Company's business, future revenues, results of operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to, the duration and spread of the outbreak, its severity and longevity, the actions to curtail the virus and treat its impact (including an effective vaccine), and how quickly and to what extent normal economic and operating conditions can resume. Even after the COVID-19 outbreak has subsided, the Company may be at risk of experiencing a significant impact to its business as a result of the global economic impact, including any economic downturn or recession that has occurred or may occur in the future.

 

Currently, capital markets have been disrupted by the crisis, as a result of which the availability, amount and type of financing available to the Company in the near future is uncertain and cannot be assured and is largely dependent upon evolving market conditions and other factors.

 

The Company intends to continue to monitor the situation and may adjust its current business plans as more information and guidance become available.

 

9. Subsequent Events

 

Canelo Sponsorship Agreement

 

On April 14, 2021, we entered into a Sponsorship Agreement (the “Canelo Agreement”) with SA Holiday, Inc. (“Holiday”), owner of the personality rights of champion professional boxer Saul Alvarez Barragan, or “Canelo,” in connection with a promotional campaign for the Corporation to sponsor a prize fight and certain other activities of Canelo, and for Canelo to promote the Corporation’s “VALE” brand and create certain promotional materials in connection therewith for the Corporation’s use in the United States, Latin America and certain countries in the Caribbean. Pursuant to the Canelo Agreement we will, among other things, pay to Holiday a cash fee of US$1,600,000 and be responsible for paying certain other amounts as provided therein. 

 

Playboy License Agreement

 

On May 19, 2021, we entered into a non-exclusive license agreement with Playboy Enterprises International, Inc. (“Playboy”) to use certain trademarks (including the rabbit head logo) and other intellectual property of Playboy on and in connection with the design, creation, promotion, marketing, advertisement, sales, operation, maintenance and distribution in India of real-money game mobile apps, such as rummy, poker, fantasy sports and other games of skill approved by Playboy.  We will pay Playboy as a royalty a percentage of net gaming revenue. The term of the agreement is through the end of 2025, subject to early termination upon certain events of default, which include our failure to launch a Playboy-branded game in India by November 1, 2021, or to meet certain annual minimum net gaming revenue targets. 

 

Equity Incentive Plan

 

On April 29, 2021, the Company adopted, and on May 21, 2021 a majority of its stockholders approved, the Company’s 2021 Equity Incentive Plan (the “2021 Plan”), pursuant to which awards covering up to 3,000,000 shares of our common stock (subject to increase as provided therein) will be available for issuance. The purpose of the 2021 Plan is to (a) enable the Company and its affiliates to attract and retain the types of employees, directors and consultants who will contribute to the Company’s long-range success; (b) provide incentives that align the interests of employees, consultants and directors with those of the stockholders of the Company; and (c) promote the success of the Company’s business, thus enhancing the value of the Company for the benefit of its stockholders. Subject to adjustment in the case of stock splits and certain other circumstances in accordance with the terms of the 2021 Plan, the Company will reserve for issuance under the 2021 Plan no more than (a) 3,000,000 shares of common stock (b) plus on January 1, 2022, and on each January 1 thereafter, a number of shares of common stock equal to 4% of the number of shares of common stock issued and outstanding on the immediately preceding December 31, or such lesser number of shares as determined by the board of directors no later than the immediately preceding December 31. Shares of Common Stock available for distribution under the 2021 Plan may consist, in whole or in part, of authorized and unissued shares, treasury shares or shares reacquired by the Company in any manner. Shares of Common Stock subject to an award that expires or is canceled, forfeited, or terminated without issuance of the full number of shares of Common Stock to which the award related, as well as any shares of common stock subject to an award that are (a) tendered in payment of an option, (b) delivered or withheld by the company to satisfy any tax withholding obligation, or (c) covered by a stock-settled stock appreciation right or other awards that were not issued upon the settlement of the award, shall be added back to the shares of common stock available for issuance of awards or delivery under the 2021 Plan. Awards that may be granted under the 2021 plan include: (a) incentive stock options, (b) non-qualified stock options, (c) stock appreciation rights, (d) restricted awards, (e) performance share awards, (f) cash awards, and (g) other equity-based awards. Incentive stock options may be granted only to employees. Awards other than incentive stock options may be granted to employees, consultants and directors and those individuals whom the Committee or the Board determines are reasonably expected to become employees, consultants and directors following the grant date. Our principal executive officer, principal financial officer and other named executive officers are eligible to participate in and receive awards under the 2021 Plan. The 2021 Plan has a term of ten years.

 

 

 

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the Company’s condensed consolidated financial statements and related notes appearing elsewhere in this Form 10-Q. In addition to historical information, this discussion and analysis here and throughout this Form 10-Q contains forward-looking statements that involve risks, uncertainties and assumptions. The Company’s actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including, but not limited to, those set forth under Item 1A (“Risk Factors”) in the Form 10-K and elsewhere in this Form 10-Q.

 

Overview

 

The Company is a mobile games developer, publisher, and operator with offices in London and New York.

 

The Company’s activities are subject to significant risks and uncertainties, including the need for additional capital, as described below. The Company commenced revenue-generating operations in February 2021, does not have positive cash flows from operations, and is dependent on periodic infusions of equity capital to fund its operating requirements.

 

Background and Basis of Presentation

 

Gaming Technologies, Inc. was incorporated in the State of Delaware on July 23, 2019 under the name Dito, Inc. and on December 21, 2020 amended its name to Gaming Technologies, Inc. Effective as of March 18, 2020, Gaming Technologies, Inc. completed a Share Exchange Agreement (the “Exchange Agreement”) to acquire all of the outstanding ordinary shares of Gaming Technologies UK that provided for each outstanding ordinary share of Gaming Technologies UK to be effectively converted into 25 shares of common stock of Gaming Technologies, Inc., As a result, Gaming Technologies UK became our wholly-owned subsidiary in a recapitalization transaction, as described below. Gaming Technologies UK was originally formed on November 3, 2017, in the United Kingdom as Dito UK Limited for the purpose of software development.

 

For financial reporting purposes, the Exchange Agreement was accounted for as a combination of entities under common control (the “Combination”), as Gaming Technologies, Inc. was formed by Gaming Technologies UK, with the objective of Gaming Technologies UK becoming a wholly-owned subsidiary of Gaming Technologies, Inc., and the resultant parent company being domiciled in the United States. As a result of the Combination, the former stockholders of Gaming Technologies UK became the controlling shareholders of Dito, Inc., and the Gaming Technologies UK management and board members became the management and board members of Gaming Technologies, Inc.

 

Going Concern

 

The Company's condensed consolidated financial statements have been presented on the basis that the Company is a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. As reflected in the accompanying condensed consolidated financial statements, the Company has had no significant operating revenues to date, and has experienced recurring net losses from operations and negative operating cash flows. During the three months ended March 31, 2021, the Company incurred a net loss of $2,380,823 and utilized cash in operating activities of $906,577, and had an accumulated deficit of $10,347,016 as of March 31, 2021. The Company has financed its working capital requirements since inception through the sale of its equity securities and from borrowings.

 

At March 31, 2021, the Company had cash of $4,542,559, reflecting cash of $3,681,500 from the sale of common stock in the first quarter of 2021.  The Company estimates that a significant amount of capital will be necessary over a sustained period of time to advance the development of the Company's business to the point at which it can become commercially viable and self-sustaining. However, there can be no assurances that the Company will be successful in this regard.

 

 

 17 

 

 

As a result, management has concluded that there is substantial doubt about the Company's ability to continue as a going concern within one year of the date that the accompanying condensed consolidated financial statements are issued. In addition, the Company's independent registered public accounting firm, in their report on the Company's condensed consolidated financial statements for the year ended December 31, 2020, has also expressed substantial doubt about the Company's ability to continue as a going concern.  The ability of the Company to continue as a going concern is dependent upon the Company's ability to raise additional funds and implement its business plan, and to ultimately achieve sustainable operating revenues and profitability. The accompanying condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

The development and expansion of the Company's business in 2021 and thereafter will be dependent on many factors, including the capital resources available to the Company. No assurances can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company or adequate to fund the development and expansion of the Company's business to a level that is commercially viable and self-sustaining. There is also significant uncertainty as to the affect that the coronavirus pandemic may have on the availability, amount and type of financing in the future.

 

If cash resources are insufficient to satisfy the Company's ongoing cash requirements, the Company would be required to scale back or discontinue its operations, obtain funds, if available, although there can be no certainty, through strategic alliances that may require the Company to relinquish rights to its technology, or to discontinue its operations entirely.

 

Critical Accounting Policies and Estimates

 

The following discussion and analysis of financial condition and results of operations is based upon the Company’s condensed consolidated financial statements for the three months ended March 31, 2021 and 2020 presented elsewhere in this Form 10-Q, which have been prepared in conformity with accounting principles generally accepted in the US (“GAAP”). Certain accounting policies and estimates are particularly important to the understanding of the Company’s financial position and results of operations and require the application of significant judgment by management or can be materially affected by changes from period to period in economic factors or conditions that are outside of the Company’s control. As a result, these issues are subject to an inherent degree of uncertainty. In applying these policies, management uses its judgment to determine the appropriate assumptions to be used in the determination of certain estimates. Those estimates are based on the Company’s historical operations, the future business plans and the projected financial results, the terms of existing contracts, trends in the industry, and information available from other outside sources. For a more complete description of the Company’s significant accounting policies, see Note 2 to the condensed consolidated financial statements.

 

Revenue Recognition

 

The Company recognizes revenue in accordance with ASC Topic 606, Revenue From Contracts With Customers. ASC Topic 606 requires companies to recognize revenue in a manner that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, the standard requires disclosures of the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. Revenue is recognized based on the following five step model:

 

  · Identification of the contract with a customer

 

  · Identification of the performance obligations in the contract

 

  · Determination of the transaction price

 

  · Allocation of the transaction price to the performance obligations in the contract

 

  · Recognition of revenue when, or as, the Company satisfies a performance obligation 

 

 

 

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Performance Obligations

 

The Company operates an online betting platform allowing users to place wagers on casino and other games. Each wager placed by users create a single performance obligation for the Company to administer each event wagered. Net gaming revenue is the aggregate of gaming wins and losses based on results of each event that customers wager bets on. Gross gaming revenue is split with our partners, whose share of gross gaming revenue is recorded as a reduction to net gaming revenue.

 

Stock-Based Compensation

 

The Company issues Common Stock and intends to issue stock options to officers, directors and consultants for services rendered. Options will vest and expire according to terms established at the issuance date of each grant. Stock grants, which are generally time vested, will be measured at the grant date fair value and charged to operations ratably over the vesting period.

 

The fair value of stock options granted as stock-based compensation will be determined utilizing the Black-Scholes option-pricing model, and can be affected by several variables, the most significant of which are the life of the equity award, the exercise price of the stock option as compared to the fair market value of the Common Stock on the grant date, and the estimated volatility of the Common Stock. Estimated volatility will be based on the historical volatility of the Company’s Common Stock over an appropriate calculation period, or, if not available, by reference to the volatility of a representative sample of comparable public companies. The risk-free interest rate will be based on the US Treasury yield curve in effect at the time of grant. The fair market value of the Common Stock will be determined by reference to the quoted market price of the Company’s Common Stock on the grant date, or, if not available, by reference to an appropriate alternative valuation methodology.

 

The Company will recognize the fair value of stock-based compensation awards in general and administrative costs or in software development costs, as appropriate, in the Company’s consolidated statements of operations. The Company will issue new shares of Common Stock to satisfy stock option exercises.

 

As of December 31, 2020, the Company did not have any outstanding stock options.

  

Recent Accounting Pronouncements

 

See Note 2 to the condensed consolidated financial statements for discussion of Recent Accounting Policies.

 

Plan of Operation

 

The Company specializes in the rapidly growing financial, gaming and entertainment sectors. Once development is complete, the Company intends to license its software platform to mobile gaming operators and developers to enable rapid development of new games.

 

On November 13, 2020, we entered into an Agreement for the Provision of Online Gaming Management and Consulting Services (as subsequently amended) with Comercial de Juegos de la Frontera, S.A. de C.V., a Mexican company doing business as Big Bola, pursuant to which we provide to Big Bola consulting and management services related to their interactive online betting and gaming business in Mexico via the web site www.vale.mx, a regulated online casino and sports betting site. vale.mx operates under Big Bola’s existing license issued by the General Directorate of Games and Raffles of the Ministry of Interior (SEGOB). Big Bola is one of only 14 operators legally authorized to offer legal betting and online casino services in Mexico. vale.mx has more than 500 online premium casino games available, which can be enjoyed both on mobile or via desktop. Players can receive promotions and play live roulette and blackjack, or high-definition slots from leading software providers such as NetEnt, Microgaming, Pragmatic Play, Evolution and Matrix Studios. We are responsible for player acquisition, promotion and retention for vale.mx. We manage players’ accounts and are required to ensure that the balance in players’ accounts at all times satisfies the requirements under applicable law, and we pay out winnings to players from Big Bola’s account. While Big Bola bears liability to the players as provided by the permit, as between us and Big Bola we bear the costs of this obligation. Each party indemnifies the other against certain liabilities and claims. Under the terms of the agreement, we share 60% of gross gaming revenue generated from the platform, subject to certain minimum guaranteed monthly amounts of Big Bola’s participation in the remaining gross gaming revenues. In February 2021, vale.mx began operations.

 

 

 

 

 19 

 

 

On May 19, 2021, we entered into a non-exclusive license agreement with Playboy Enterprises International, Inc. (“Playboy”) to use certain trademarks (including the rabbit head logo) and other intellectual property of Playboy on and in connection with the design, creation, promotion, marketing, advertisement, sales, operation, maintenance and distribution in India of real-money game mobile apps, such as rummy, poker, fantasy sports and other games of skill approved by Playboy.  We will pay Playboy as a royalty a percentage of net gaming revenue. The term of the agreement is through the end of 2025, subject to early termination upon certain events of default, which include our failure to launch a Playboy-branded game in India by November 1, 2021, or to meet certain annual minimum net gaming revenue targets. 

 

Key Performance Indicators – B2C Operations

 

Registered Players

 

A registered player is a customer who has registered on our app or website and met the Know Your Customer customer identification requirements, which include identity and address verification (“KYC requirements”). During the three months ended March 31, 2021 we registered 17,038 players.

 

Monthly Unique Payers

 

Monthly Unique Payers (“MUPs”). MUPs is the average number of unique paid users (“unique payers”) that use our online games on a monthly basis.

 

MUPs is a key indicator of the scale of our user base and awareness of our brand. We believe that year-over-year MUPs will also generally be indicative of the long-term revenue growth potential of our online casino, although MUPs in individual periods may be less indicative of our longer-term expectations. We expect the number of MUPs to grow as we attract, retain and re-engage users in new and existing jurisdictions and expand our online casino offerings to appeal to a wider audience.

 

We define MUPs as the number of unique payers per month who had a paid engagement (i.e., participated in a casino game) across one or more of our product offerings via our technology. For reported periods longer than one month, we average the MUPs for the months in the reported period.

 

A “unique paid user” or “unique payer” is any person who had one or more paid engagements via our B2C technology during the period (i.e., a user that participates in a paid engagement with one of our B2C product offerings counts as a single unique paid user or unique payer for the period). We exclude users who have made a deposit but have not yet had a paid engagement. Unique payers or unique paid users include users who have participated in a paid engagement with promotional incentives, which are fungible with other funds deposited in their wallets on our technology. The number of these users included in MUPs has not been material to date and a substantial majority of such users are repeat users who have had paid engagements both prior to and after receiving incentives.

 

During the three months ending March 31, 2021, the first quarter in which we generated revenues, our MUPs were 448.

 

Average Revenue per MUP (“ARPMUP”). ARPMUP is the average online casino revenue per MUP, and this key metric represents our ability to drive usage and monetization of our online casino offering.

 

During the quarter ending March 31, 2021, our ARPMUP was $4.66.

  

We define and calculate ARPMUP as the average monthly online casino revenue for a reporting period, divided by MUPs (i.e., the average number of unique payers) for the same period.

 

Handle

 

Handle is a casino or sports betting term referring to the total amount of money bet. We will report the handle or cash wagering which is the total amount of money bet excluding all bonuses.

 

During the three months ended March 31, 2021, our handle was $569,237.

 

 

 

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Hold

 

Hold is essentially the amount of cash that our platforms keep after paying out winning bets. The industry also refers to hold as win or revenue. During the three months ended March 31, 2021, our hold was $27,664.

 

Online games are characterized by an element of chance. Our revenue is impacted by variations in the hold percentage (the ratio of net win to total amount wagered) on bets placed on, or the actual outcome of, games or events on which users bet. Although our product offerings generally perform within a defined statistical range of outcomes, actual outcomes may vary for any given period, and a single large bet can have a sizeable impact on our short-term financial performance. Our hold is also affected by factors that are beyond our control, such as a user’s skill, experience and behavior, the mix of games played, the financial resources of users and the volume of bets placed. As a result of variability in these factors, actual hold rates on our products may differ from the theoretical win rates we have estimated and could result in the winnings of our gaming users exceeding those anticipated. We seek to mitigate these risks through data science and analytics and rules built into our technology, as well as active management of our amounts at risk at a point in time, but may not always be able to do so successfully, particularly over short periods, which can result in financial losses as well as revenue volatility.

 

During the three months ended March 31, 2021, our hold percentage was 4.86%.

 

Results of Operations

 

In February 2021, our online casino, vale.mx, began operations. However, as of March 31, 2021 and 2020, the Company did not have any positive cash flows from operations and was dependent on its ability to raise equity capital to fund its operating requirements.

 

Revenues

 

The Company began generating revenue in February 2021. Revenues consist of the net gaming revenues from the Company’s vale.mx online casino based in Mexico. Total revenues were $2,089 and $0 for the three months ended March 31, 2021 and 2020. The increase of $2,089 is due to the initiation of revenue producing activities in February 2021.

 

Cost of Revenues

 

The Company began generating costs of revenues in February 2021. Cost of revenues consist of the direct costs of operating vale.mx, our online casino based in Mexico. Total costs of revenues were $182,263 and $0 for the three months ended March 31, 2021 and 2020. The increase of $182,263 was due to the initiation of revenue producing activities in February 2021.

 

Operating Expenses

 

The Company generally recognizes operating costs and expenses as they are incurred in two general categories, software development costs and expenses and general and administrative costs and expenses. The Company’s operating costs and expenses also include non-cash components related to depreciation and amortization of property and equipment, and intellectual property, which are allocated, as appropriate, to software development costs and expenses and general and administrative costs and expenses.

 

Software development costs and expenses consist primarily of fees paid to consultants and amortization of intellectual property. Management expects software costs and expenses to increase in the future as the Company increases its efforts to develop technology for potential future products based on its technology and research.

 

 

 

 

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General and administrative costs and expenses consist of fees for directors and officers, and their affiliates, as well as legal and other professional fees, depreciation and amortization of property and equipment, lease and rent expense, and other general corporate expenses. Management expects general and administrative costs and expenses to increase in future periods as the Company adds personnel and incurs additional costs related to its operation as a public company, including higher legal, accounting, insurance, compliance, compensation and other costs.

 

Three Months Ended March 31, 2021 and 2020

 

The Company’s condensed consolidated statements of operations for the three months ended March 31, 2021 and 2020, as discussed herein, are presented below.

 

  

Three Months Ended

March 31,

 
   2020   2019 
     
Revenue  $2,089   $ 
           
Costs and expenses:          
Cost of revenues   182,263     
Software development   18,403    20,105 
General and administrative          
Officers, directors, affiliates and other related parties   291,855    85,509 
Other   1,890,390    127,130 
Total costs and expenses   2,382,911    232,744 
Loss from operations   (2,380,822)   (232,744)
Other income (expense)          
Interest expense       (912)
Foreign currency gain       (17,848)
Total other expense, net       (18,760)
Net loss   (2,380,822)   (251,504)
Foreign currency translation adjustment   (13,173)    
Comprehensive loss  $(2,393,995)  $(251,504)
Net loss per common share – basic and diluted  $(0.08)  $(0.01)
Weighted average common shares outstanding – basic and diluted   29,522,424    24,680,765 

 

Revenue. The Company began generating revenue in February 2021. Revenues consist of the net gaming revenues from the Company’s vale.mx online casino based in Mexico. Total revenues were $2,089 and $0 for the three months ended March 31, 2021 and 2020. The increase of $2,089 is due to the initiation of revenue producing activities in February 2021.

 

Cost of Revenues: The Company began generating costs of revenues in February 2021. Cost of revenues consist of the direct costs of operating and marketing vale.mx, our online casino based in Mexico. Total costs of revenues were $182,263 and $0 for the three months ended March 31, 2021 and 2020. The increase of $182,263 was due to the initiation of revenue producing activities in February 2021.

 

Software Development Costs and Expenses. For three months ended March 31, 2021, software development costs and expenses were $18,403, which consisted of amortization of intellectual property of $18,403.

 

For the three months ended March 31, 2020, software development costs and expenses were $20,105, which consisted of development costs paid to contractors of $4,866 and amortization of intellectual property of $15,239.

 

 

 

 

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Software development costs and expenses decreased by $1,702 or 8% in 2021 as compared to 2020, primarily as a result of a decrease in costs paid to contractors.

 

General and Administrative Costs and Expenses. For the three months ended March 31, 2021, general and administrative costs and expenses were $2,182,245, which consisted of director, consulting, and professional fees to officers, directors, affiliates, and other related parties of $291,855, stock compensation expense of $1,446,502, marketing and advertising of $269,967, legal and accounting fees to non-related parties of $82,580, consulting fees of $29,924, depreciation and amortization of property and equipment of $2,663, lease and rent expense of $13,804, transfer agent fees of $9,951, investor relations costs of $20,045, travel expenses of $13,964, and other operating costs of $990.

 

For the three months ended March 31, 2020, general and administrative costs and expenses were $212,639, which consisted of director, consulting, and professional fees to officers, directors, affiliates, and other related parties of $85,509, legal and accounting fees to non-related parties of $81,933, consulting fees of $28,924, depreciation and amortization of property and equipment of $1,953, lease and rent expense of $12,095, and other operating costs of $2,225.

 

General and administrative costs increased by $1,969,606 or 926% in 2021 as compared to 2020, primarily as a result of stock compensation expense of $1,446,502, an increase in officer compensation of $206,346 and an increase in marketing and advertising of $269,967.

 

Interest Expense. For the three months ended March 31, 2021, the Company had interest expense of $0, as compared to interest expense of $912 for the three months ended March 31, 2020, primarily as a result of interest on notes payable.

 

Foreign Currency Gain (Loss). For the three months ended March 31, 2021, the Company had a foreign currency loss of $0, as compared to a foreign currency loss of $17,848 for the three months ended March 31, 2020, as a result of a decrease in the value of the GB Pound compared to the US Dollar.

 

Net Loss. For the three months ended March 31, 2021, the Company incurred a net loss of $2,380,822, as compared to a net loss of $251,504 for the three months ended March 31, 2020.

 

Foreign Currency Translation Adjustment. For the three months ended March 31, 2021, the Company had a foreign currency translation adjustment of $(13,173), as compared to a foreign currency translation adjustment of $0 for the three months ended March 31, 2020. The foreign currency translation adjustment is a result of fluctuations between the GBP, the functional currency of the Company’s UK subsidiary, and the USD, the reporting currency of the Company.

 

Comprehensive Loss. For the three months ended March 31, 2021, the Company incurred a comprehensive loss of $2,393,995, as compared to a comprehensive loss of $251,504 for the three months ended March 31, 2020.

 

Liquidity and Capital Resources – March 31, 2021 and December 31, 2020

 

The Company’s condensed consolidated financial statements have been presented on the basis that the Company is a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has had no operating revenues to date, and has experienced recurring net losses from operations and negative operating cash flows. The Company has financed its working capital requirements since inception through the sale of its equity securities and from borrowings.

 

As a result, management has concluded that there is substantial doubt about the Company’s ability to continue as a going concern within one year of the date that the condensed consolidated financial statements are being issued. In addition, the Company’s independent registered public accounting firm, in their report on the Company’s condensed consolidated financial statements for the year ended December 31, 2020, has also expressed substantial doubt about the Company’s ability to continue as a going concern (see “—Going Concern”).

 

The ability of the Company to continue as a going concern is dependent upon the Company’s ability to raise additional funds and implement its business plan, and to ultimately achieve sustainable operating revenues and profitability. The accompanying condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

 

 

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As of March 31, 2021, the Company had a working capital of $4,184,408, as compared to working capital of $1,586,238 as of December 31, 2020, reflecting an increase in working capital of $2,598,170 for the three months ended March 31, 2021. The increase in working capital during the three months ended March 31, 2021, was primarily the result of an increase in cash on hand due to the sale of common stock in the first quarter of 2021.

  

As of March 31, 2021, the Company had cash of $4,542,559, reflecting cash of $3,681,500 from the sale of Common Stock in 2021. As of December 31, 2020, the Company had cash of $1,946,232, reflecting cash of $2,628,000 from the sale of Common Stock in December 2020.

 

In February 2021, the Company began earning revenues, however they are not a level sufficient to support the Company’s operations. The Company estimates that its working capital requirements for the next twelve months to be approximately $1,800,000, or $150,000 per month.

 

The working capital budget will enable the Company to support the existing monthly operating costs of the Company of approximately $150,000 per month, consisting of monthly (and quarterly) accounting and US securities filing costs estimated at $20,000 per month and a sales and marketing budget of $130,000 per month to engage in a sales and marketing campaign to sell licenses of the Company’s software platform to third parties and attach customers to its online casino based in Mexico.

 

During the year ended December 31, 2020, the Company completed a series of private placements of its Common Stock, with proceeds totaling $2,628,000. See Item 1 (“Business—The Private Placements and Share Exchange”) in the Form 10-K. During the three months ended March 31, 2021 the Company completed another series of private placements of its Common Stock, with proceeds totaling $3,681,500. The Company believes that resulting working capital will be sufficient to fund the Company’s operations for the next twelve months.

 

Since acquiring the software platform, the Company has successfully carried out development to port the software platform from its former physical server dependencies and reliance on third parties for hardware management and deployment to a cloud-based platform where deployment is automated through the use of infrastructure as code. To make the Company’s software platform work for business-to-business (B2B) licensees, the Company has modified the software to enable remote management by system administrators of prospective licensees. Previously, the platform was business to consumer (B2C) focused, with outsourced management and deployment. As a result of this software development, the Company expects to be able to monetize its software platform by selling licenses to third parties.

 

The Company’s ability to raise additional funds through equity or debt financings or other sources may depend on the stage of development of the software platform, the commercial success of the software, and financial, economic and market conditions and other factors, some of which are beyond the Company’s control. No assurance can be given that the Company will be successful in raising the required capital at reasonable cost and at the required times, or at all. Further equity financings may have a dilutive effect on shareholders and any debt financing, if available, may require restrictions to be placed on the Company’s future financing and operating activities. If the Company requires additional capital and is unsuccessful in raising that capital, the Company may not be able to continue the development of its software platform and continue to advance its growth initiatives, or ultimately to be able to continue its business operations, which could adversely impact the Company’s business, financial condition and results of operations.

 

Operating Activities

 

For the three months ended March 31, 2021, operating activities utilized cash of $906,577, as compared to utilized cash of $321,620 for the three months ended March 31, 2020, to fund the Company’s ongoing operating expenses.

 

Investing Activities

 

For the three months ended March 31, 2021, the Company’s investing activities consisted of the acquisition of intellectual property for $166,680.

 

For the three months ended March 31, 2020, the Company’s investing activities consisted of the acquisition of property and equipment of $5,266.

 

 

 

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Financing Activities

 

For the three months ended March 31, 2021, the Company’s financing activities consisted of gross proceeds from the private placement of 1,616,600 shares of Common Stock of $3,681,500.

 

For the three months ended March 31, 2020, the Company’s financing activities consisted of proceeds from the private placement of 84,000 shares of Common Stock of $210,000 and the repayment of $60,000 in connection with the cancellation of an investment in the private placement.

 

Off-Balance Sheet Arrangements

 

As of March 31, 2021, the Company did not have any transactions, obligations or relationships that could be considered off-balance sheet arrangements.

 

Trends, Events and Uncertainties

 

Development of new software is, by its nature, unpredictable. Although the Company will undertake development efforts with commercially reasonable diligence, there can be no assurance that the Company’s efforts to raise funds in the future will be sufficient to enable the Company to develop its technology to the extent needed to create future revenues to sustain operations as contemplated herein.

 

There can be no assurances that the Company’s technology will be adopted or that the Company will ever achieve sustainable revenues sufficient to support its operations. Even if the Company is able to generate revenues, there can be no assurances that the Company will be able to achieve profitability or positive operating cash flows. There can be no assurances that the Company will be able to secure additional financing on acceptable terms or at all. If cash resources are insufficient to satisfy the Company’s ongoing cash requirements, the Company would be required to scale back or discontinue its software development programs, or obtain funds, if available (although there can be no certainty), through strategic alliances that may require the Company to relinquish rights to certain of its potential products, or to curtail or discontinue its operations entirely.

 

Other than as discussed above and elsewhere in this Form 10-Q, the Company is not currently aware of any trends, events or uncertainties that are likely to have a material effect on the Company’s financial condition in the near term, although it is possible that new trends or events may develop in the future that could have a material effect on the Company’s financial condition.

 

Impact of COVID-19 on the Company

 

The global outbreak of COVID-19 has led to severe disruptions in general economic activities, as businesses and governments have taken broad actions to mitigate this public health crisis. Although the Company has not experienced any significant disruption to its business to date, these conditions could significantly negatively impact the Company’s business in the future.

 

The extent to which the COVID-19 outbreak ultimately impacts the Company’s business, future revenues, results of operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to, the duration and spread of the outbreak, its severity and longevity, the actions to curtail the virus and treat its impact (including an effective vaccine), and how quickly and to what extent normal economic and operating conditions can resume. Even after the COVID-19 outbreak has subsided, the Company may be at risk of experiencing a significant impact to its business as a result of the global economic impact, including any economic downturn or recession that has occurred or may occur in the future.

 

 

 

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Currently, capital markets have been disrupted by the crisis, as a result of which the availability, amount and type of financing available to the Company in the near future is uncertain and cannot be assured and is largely dependent upon evolving market conditions and other factors.

 

The Company intends to continue to monitor the situation and may adjust its current business plans as more information and guidance become available.

 

Other than as discussed above and elsewhere in this Form 10-Q, the Company is not currently aware of any trends, events or uncertainties that are likely to have a material effect on the Company’s financial condition in the near term, although it is possible that new trends or events may develop in the future that could have a material effect on the Company’s financial condition.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

 

A smaller reporting company is not required to provide the information required by this Item.

 

Item 4. Controls and Procedures

 

Under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures as required by Exchange Act Rule 13a-15(b) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures are not effective. There were no changes in our internal control over financial reporting during the quarter ended March 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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PART II: OTHER INFORMATION

 

Item 1. Legal Proceedings

 

From time to time, we may become involved in litigation relating to claims arising out of its operations in the normal course of business. Currently there are no legal proceedings, government actions, administrative actions, investigations or claims are currently pending against us or that involve the Company or any of its affiliates which, in the opinion of the management of the Company, could reasonably be expected to have a material adverse effect on its business or financial condition.

 

Item 1A. Risk Factors.

 

There have been no material changes from the Risk Factors previously disclosed in Part I, Item 1A, in our Form 10-K.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

In February 2021, the Company sold 1,606,600 shares of its Common Stock for gross proceeds of $4,016,500 in a private placement. The Company paid a finders fee to registered brokers in the amount of $360,000 in connection with these transactions.

 

In March 2021, the Company sold 10,000 shares of its Common Stock for gross proceeds of $25,000 in a private placement.

 

Item 3. Defaults Upon Senior Securities.

 

None.

 

Item 4. Mine Safety Disclosure.

 

None.

 

Item 5. Other Information

 

On May 19, 2021, we entered into a non-exclusive license agreement with Playboy Enterprises International, Inc. (“Playboy”) to use certain trademarks (including the rabbit head logo) and other intellectual property of Playboy on and in connection with the design, creation, promotion, marketing, advertisement, sales, operation, maintenance and distribution in India of real-money game mobile apps, such as rummy, poker, fantasy sports and other games of skill approved by Playboy.  We will pay Playboy as a royalty a percentage of net gaming revenue. The term of the agreement is through the end of 2025, subject to early termination upon certain events of default, which include our failure to launch a Playboy-branded game in India by November 1, 2021, or to meet certain annual minimum net gaming revenue targets.

 

We expect to begin generating revenues under this license agreement in the third quarter of 2021, although there can be no assurance this will be the case.

 

 

 

 27 

 

 

Item 6. Exhibits

 

Exhibits

 

Certain of the agreements filed as exhibits to this Report contain representations and warranties by the parties to the agreements that have been made solely for the benefit of the parties to the agreement. These representations and warranties:

 

· may have been qualified by disclosures that were made to the other parties in connection with the negotiation of the agreements, which disclosures are not necessarily reflected in the agreements;
   
· may apply standards of materiality that differ from those of a reasonable investor; and
   
· made only as of specified dates contained in the agreements and are subject to subsequent developments and changed circumstances.

 

Accordingly, these representations and warranties may not describe the actual state of affairs as of the date that these representations and warranties were made or at any other time. Investors should not rely on them as statements of fact.

 

Exhibit Number Exhibit Description
3.1 Certificate of Incorporation (filed as Exhibit 3.1 to Form S-1 filed with the SEC on November 10, 2020)
3.1 Certificate of Amendment to Certificate of Incorporation (filed as Exhibit 3.1 to Form 8-K filed with the SEC on January 7, 2021
3.3 Bylaws (filed as Exhibit 3.2 to Form S-1 filed with the SEC on November 10, 2020)
10.1 Form of Securities Purchase Agreement (filed as Exhibit 10.1 to Form 8-K filed with the SEC on April 1, 2021)
10.2 Gaming Technologies, Inc., 2021 Equity Incentive Plan (filed as Exhibit 10.1 to Form 8-K filed with the SEC on May 6, 2021)
31.1* Certification of Principal Executive, Financial and Accounting Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1** Certification of Principal Executive Officer, Financial and Accounting Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS * XBRL Instance Document
101.SCH * XBRL Taxonomy Schema
101.CAL * XBRL Taxonomy Calculation Linkbase
101.DEF * XBRL Taxonomy Definition Linkbase
101.LAB* XBRL Taxonomy Label Linkbase
101.PRE * XBRL Taxonomy Presentation Linkbase
   

*       Filed herewith

 **       Furnished herewith

 

 

 

 

 

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SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

GAMING TECHNOLOGIES, INC.

 

Date: May 24, 2021

 

By: /s/ Jason Drummond                      

Name: Jason Drummond

Title: President, Chief Executive Officer, Chief Financial Officer and Secretary

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 29 

 

EX-31.1 2 gamingtech_ex3101.htm CERTIFICATION

Exhibit 31.1

 

CERTIFICATION

 

I, Jason Drummond, certify that:

 

  1. I have reviewed this quarterly report on Form 10-Q of Gaming Technologies, Inc.;

 

  2. Based on my knowledge, this 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 such statements were made, not misleading with respect to the period covered by this report;

 

  3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

  4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15-d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

  5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

  b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: May 24, 2021

 

By: /s/ Jason Drummond                      

Name: Jason Drummond

Title: President, Chief Executive Officer,

Chief Financial Officer and Secretary

EX-32.1 3 gamingtech_ex3201.htm CERTIFICATION

Exhibit 32.1

 

CERTIFICATION

 

In connection with the quarterly report of Gaming Technologies, Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2020, as filed with the Securities and Exchange Commission (the “Report”), I, Jason Drummond, Chief Executive Officer and President (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer) of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my knowledge:

 

  (1) The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and

 

  (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.

 

Date: May 24, 2021

 

By: /s/ Jason Drummond                      

Name: Jason Drummond

Title: President, Chief Executive Officer,

Chief Financial Officer and Secretary

 

This certification is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of the Company. under the Securities Act of 1933, as amended, or the Exchange Act (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing. A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

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Cover - shares
3 Months Ended
Mar. 31, 2021
May 24, 2021
Cover [Abstract]    
Document Type 10-Q  
Amendment Flag false  
Document Period End Date Mar. 31, 2021  
Document Fiscal Period Focus Q1  
Document Fiscal Year Focus 2021  
Current Fiscal Year End Date --12-31  
Entity File Number 333-249998  
Entity Registrant Name Gaming Technologies, Inc.  
Entity Central Index Key 0001816906  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Non-accelerated Filer  
Entity Small Business true  
Entity Emerging Growth Company true  
Elected Not To Use the Extended Transition Period false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   30,521,059
Entity Incorporation State DE  
XML 12 R2.htm IDEA: XBRL DOCUMENT v3.21.1
Condensed Consolidated Balance Sheets (Unaudited) - USD ($)
Mar. 31, 2021
Dec. 31, 2020
Current assets:    
Cash $ 4,542,559 $ 1,946,232
Deposits and other current assets 104,950 37,917
Total current assets 4,647,509 1,984,149
Property and equipment, net 6,240 8,503
Operating lease right of use asset, net 0 11,968
Intellectual property, net 201,034 50,967
Total assets 4,854,783 2,055,587
Current liabilities:    
Accounts payable and accrued expenses 374,433 368,784
Due to related parties 86,427 14,918
Current portion of note payable, bank 2,241 2,241
Current portion of operating lease liability 0 11,968
Total current liabilities 463,101 397,911
Note payable, bank 62,741 62,741
Total liabilities 525,842 460,652
Stockholders' equity:    
Preferred stock, $0.001 par value; authorized -5,000,000 shares; issued - none 0 0
Common stock, $0.001 par value; authorized - 45,000,000 shares; issued and outstanding - 30,521,059 shares and 28,367,525 shares at March 31, 2021 and December 31, 2020, respectively 30,521 28,367
Additional paid-in capital 14,677,355 9,551,507
Accumulated other comprehensive income (31,919) (18,746)
Accumulated deficit (10,347,016) (7,966,193)
Total stockholders' equity 4,328,941 1,594,935
Total liabilities and stockholders' equity $ 4,854,783 $ 2,055,587
XML 13 R3.htm IDEA: XBRL DOCUMENT v3.21.1
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares
Mar. 31, 2021
Dec. 31, 2020
Statement of Financial Position [Abstract]    
Preferred stock, par value $ 0.001 $ 0.001
Preferred stock, shares authorized 5,000,000 5,000,000
Preferred stock, shares issued 0 0
Preferred stock, shares outstanding 0 0
Common stock, par value $ 0.001 $ 0.001
Common stock, shares authorized 45,000,000 45,000,000
Common stock, shares issued 30,521,059 28,367,525
Common stock, shares outstanding 30,521,059 28,367,525
XML 14 R4.htm IDEA: XBRL DOCUMENT v3.21.1
Condensed Consolidated Statements of Operations And Comprehensive Loss (Unaudited) - USD ($)
3 Months Ended
Mar. 31, 2021
Mar. 31, 2020
Income Statement [Abstract]    
Revenue $ 2,089 $ 0
Cost of revenues 182,263 0
Software development, including amortization of intellectual property of $18,403 and $15,239 in 2021 and 2020, respectively 18,403 20,105
Officers, directors, affiliates, and other related parties 291,855 85,509
Other (including stock compensation costs of $1,446,502 in 2021) 1,890,390 127,130
Total Costs and expenses 2,382,911 232,744
Loss from operations (2,380,822) (232,744)
Other income (expense):    
Interest expense 0 (912)
Foreign currency gain 0 (17,848)
Total other expense, net 0 (18,760)
Net loss (2,380,822) (251,504)
Foreign currency translation adjustment (13,173) 0
Comprehensive loss $ (2,393,995) $ (251,504)
Net loss per common share - basic and diluted $ (0.08) $ (0.01)
Weighted average common shares outstanding - basic and diluted 29,522,424 24,680,765
XML 15 R5.htm IDEA: XBRL DOCUMENT v3.21.1
Condensed Consolidated Statements of Operations And Comprehensive Loss (Unaudited) (Parenthetical) - USD ($)
3 Months Ended
Mar. 31, 2021
Mar. 31, 2020
Income Statement [Abstract]    
Amortization of intellectual property $ 18,403 $ 15,239
Stock compensation costs $ 1,446,502 $ 0
XML 16 R6.htm IDEA: XBRL DOCUMENT v3.21.1
Condensed Consolidated Statements of Stockholders' Equity (Deficiency) (Unaudited) - USD ($)
Common Stock
Additional Paid-In Capital
Accumulated Other Comprehensive Income
Accumulated Deficit
Total
Beginning balance, shares at Dec. 31, 2019 24,614,325        
Beginning balance, value at Dec. 31, 2019 $ 24,614 $ 1,040,199 $ 2,766 $ (754,376) $ 313,203
Common stock issued in connection with private placement, net, shares 84,000        
Common stock issued in connection with private placement, net, value $ 84 209,916 210,000
Acquisition of Game Tech 12,061 12,061
Foreign currency translation adjustment 7,463 7,463
Net loss (251,504) (251,504)
Ending balance, shares at Mar. 31, 2020 24,698,325        
Ending balance, value at Mar. 31, 2020 $ 24,698 1,262,176 (10,229) (1,005,880) 291,223
Beginning balance, shares at Dec. 31, 2020 28,367,525        
Beginning balance, value at Dec. 31, 2020 $ 28,367 9,551,507 (18,746) (7,966,193) 1,594,935
Common stock issued in connection with private placement, net, shares 1,616,600        
Common stock issued in connection with private placement, net, value $ 1,617 3,679,883 3,681,500
Common stock issued as compensation, shares 536,934        
Common stock issued as compensation, value $ 537 1,445,965 1,446,502
Foreign currency translation adjustment (13,173) (13,173)
Net loss (2,380,823) (2,380,822)
Ending balance, shares at Mar. 31, 2021 30,521,059        
Ending balance, value at Mar. 31, 2021 $ 30,521 $ 14,677,355 $ (31,919) $ (10,347,016) $ 4,328,941
XML 17 R7.htm IDEA: XBRL DOCUMENT v3.21.1
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)
3 Months Ended
Mar. 31, 2021
Mar. 31, 2020
Cash flows from operating activities:    
Net loss $ (2,380,822) $ (251,504)
Adjustments to reconcile net loss to net cash used in operating activities:    
Depreciation 2,663 1,953
Amortization of intellectual property 18,403 15,239
Amortization of accrued lending fee 0 912
Amortization of operating lease right of use asset 12,086 11,046
Stock compensation 1,446,502 0
Foreign currency gain / (loss) 0 17,849
Changes in operating assets and liabilities:    
Due from related parties 0 (126,972)
Deposits and other current assets (66,576) (22,860)
Accounts payable and accrued expenses 1,990 40,838
Due to related parties 71,264 2,925
Operating lease liability (12,086) (11,046)
Net cash used in operating activities (906,577) (321,620)
Cash flows from investing activities:    
Purchase of intellectual property (166,680) 0
Purchase of property and equipment 0 (5,266)
Net cash used in investing activities (166,680) (5,266)
Cash flows from financing activities:    
Proceeds from private placement of common stock 3,681,500 210,000
Repayment of cancelled common stock subscription 0 (60,000)
Net cash provided by financing activities 3,681,500 150,000
Effect of exchange rate on cash (11,916) (4,559)
Net increase / (decrease) 2,596,327 (181,445)
Balance at beginning of year 1,946,232 320,402
Balance at end of year 4,542,559 138,957
Supplemental disclosures of cash flow information:    
Cash paid for - Interest 0 0
Cash paid for - Income taxes $ 0 $ 0
XML 18 R8.htm IDEA: XBRL DOCUMENT v3.21.1
1. Organization and Basis of Presentation
3 Months Ended
Mar. 31, 2021
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Organization and Basis of Presentation

1. Organization and Basis of Presentation

 

Organization and Combination

 

Gaming Technologies, Inc. (formerly Dito, Inc.,) (“Gaming US”) was incorporated in the State of Delaware on July 23, 2019. Effective as of March 18, 2020, Gaming US completed a Share Exchange Agreement (the "Exchange Agreement") to acquire all of the outstanding ordinary shares of Gaming Technologies Limited, formerly Gaming UK Limited, (“Gaming UK”) that provided for each outstanding ordinary share of Gaming UK to be effectively converted into 25 shares of common stock of Gaming US. As a result, Gaming UK became a wholly-owned subsidiary of Gaming US in a recapitalization transaction (collectively, the “Company”). On December 21, 2020, the Company changed its name from Dito, Inc. to Gaming Technologies Inc.

 

Gaming UK was originally formed as Smart Tower Limited on November 3, 2017 in the United Kingdom for the purpose of software development. On June 29, 2018, Smart Tower Limited changed its name to NENX Gaming Limited and then to Gaming UK Limited on July 29, 2019 and to Gaming Technologies Limited on January 7, 2021.

 

Gaming US maintains its principal executive offices in New York, New York, United States. Gaming UK maintains its principal executive offices in London, England.

 

Business Operations

 

The Company is a mobile games developer and publisher with offices in London and New York. The Company intends to license its software platform to mobile gaming operators and developers to enable rapid development of new games. In addition, the Company operates an online gaming operation in Mexico through its web site vale.mx.

 

On November 13, 2020, we entered into an Agreement for the Provision of Online Gaming Management and Consulting Services (as subsequently amended) with Comercial de Juegos de la Frontera, S.A. de C.V., a Mexican company doing business as Big Bola, pursuant to which we provide to Big Bola consulting and management services related to their interactive online betting and gaming business in Mexico via the web site www.vale.mx, a regulated online casino and sports betting site. vale.mx operates under Big Bola’s existing license issued by the General Directorate of Games and Raffles of the Ministry of Interior (SEGOB). Big Bola is one of only 14 operators legally authorized to offer legal betting and online casino services in Mexico. vale.mx has more than 500 online premium casino games available, which can be enjoyed both on mobile or via desktop. Players can receive promotions and play live roulette and blackjack, or high-definition slots from leading software providers such as NetEnt, Microgaming, Pragmatic Play, Evolution and Matrix Studios. We are responsible for player acquisition, promotion and retention for vale.mx. We manage players’ accounts and are required to ensure that the balance in players’ accounts at all times satisfies the requirements under applicable law, and we pay out winnings to players from Big Bola’s account. While Big Bola bears liability to the players as provided by the permit, as between us and Big Bola we bear the costs of this obligation. Each party indemnifies the other against certain liabilities and claims. Under the terms of the agreement, we share 60% of gross gaming revenue generated from the platform, subject to certain minimum guaranteed monthly amounts of Big Bola’s participation in the remaining gross gaming revenues. This venture began operations in February 2021.

 

On May 19, 2021, we entered into a non-exclusive license agreement with Playboy Enterprises International, Inc. (“Playboy”) to use certain trademarks (including the rabbit head logo) and other intellectual property of Playboy on and in connection with the design, creation, promotion, marketing, advertisement, sales, operation, maintenance and distribution in India of real-money game mobile apps, such as rummy, poker, fantasy sports and other games of skill approved by Playboy.  We will pay Playboy as a royalty a percentage of net gaming revenue. The term of the agreement is through the end of 2025, subject to early termination upon certain events of default, which include our failure to launch a Playboy-branded game in India by November 1, 2021, or to meet certain annual minimum net gaming revenue targets. 

 

Going Concern

 

The Company's condensed consolidated financial statements have been presented on the basis that the Company is a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. As reflected in the accompanying condensed consolidated financial statements, the Company has had no operating revenues to date, and has experienced recurring net losses from operations and negative operating cash flows. During the three months ended March 31, 2021, the Company incurred a net loss of $2,380,823, utilized cash in operating activities of $906,577, and had an accumulated deficit of $10,347,016 as of March 31, 2021. The Company has financed its working capital requirements since inception through the sale of its equity securities and from borrowings.

 

At March 31, 2021, the Company had cash of $4,542,559, reflecting cash of $3,681,500 from the sale of common stock in the first quarter of 2021.  The Company estimates that a significant amount of capital will be necessary over a sustained period of time to advance the development of the Company's business to the point at which it can become commercially viable and self-sustaining. However, there can be no assurances that the Company will be successful in this regard.

 

As a result, management has concluded that there is substantial doubt about the Company's ability to continue as a going concern within one year of the date that the accompanying condensed consolidated financial statements are issued. In addition, the Company's independent registered public accounting firm, in their report on the Company's condensed consolidated financial statements for the year ended December 31, 2020, has also expressed substantial doubt about the Company's ability to continue as a going concern.  The ability of the Company to continue as a going concern is dependent upon the Company's ability to raise additional funds and implement its business plan, and to ultimately achieve sustainable operating revenues and profitability. The accompanying condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

The development and expansion of the Company's business in 2021 and thereafter will be dependent on many factors, including the capital resources available to the Company. No assurances can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company or adequate to fund the development and expansion of the Company's business to a level that is commercially viable and self-sustaining. There is also significant uncertainty as to the effect that the coronavirus pandemic may have on the availability, amount and type of financing in the future.

 

If cash resources are insufficient to satisfy the Company's ongoing cash requirements, the Company would be required to scale back or discontinue its operations, obtain funds, if available, although there can be no certainty, through strategic alliances that may require the Company to relinquish rights to its technology, or to discontinue its operations entirely.

XML 19 R9.htm IDEA: XBRL DOCUMENT v3.21.1
2. Summary of Significant Accounting Policies
3 Months Ended
Mar. 31, 2021
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

 

Principles of Combination

 

The accompanying condensed consolidated financial statements of the Company have been prepared in accordance with United States generally accepted accounting principles ("GAAP") and include the financial statements of Gaming US and its wholly-owned foreign subsidiary, Gaming UK. Intercompany balances and transactions have been eliminated in consolidation.

 

Use of Estimates

 

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Management regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly. Actual results could differ from those estimates. Significant estimates are expected to include those related to assumptions used in calculating accruals for potential liabilities, valuing equity instruments issued for services, and the realization of deferred tax assets.

 

Cash

 

The Company maintains its cash balances with financial institutions with high credit ratings. The Company has not experienced any losses to date resulting from this practice.

 

As of March 31, 2021 and December 31, 2020, the Company's cash balances by currency consisted of the following:

 

     
   March 31, 2021   December 31, 2020 
           
GBP  £13,374   £49,127 
USD  $4,524,239    1,879,166 

 

Cash balances in British Pounds are maintained in the United Kingdom and cash balances in United States Dollars are maintained in the United States.

 

Concentration of Risk

 

The Company may periodically contract with consultants and vendors to provide services related to the Company's business development activities. Agreements for these services may be for a specific time period or for a specific project or task. The Company did not have any agreements at March 31, 2021 or December 31, 2020.

 

Revenue Recognition

 

The Company recognizes revenue in accordance with ASC Topic 606, Revenue From Contracts With Customers. ASC Topic 606 requires companies to recognize revenue in a manner that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, the standard requires disclosures of the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. Revenue is recognized based on the following five step model:

 

  · Identification of the contract with a customer

 

  · Identification of the performance obligations in the contract

 

  · Determination of the transaction price

 

  · Allocation of the transaction price to the performance obligations in the contract

 

  · Recognition of revenue when, or as, the Company satisfies a performance obligation 

 

The Company operates an online betting platform allowing users to place wagers on casino games. Each wager placed by users create a single performance obligation for the Company to administer each event wagered. Net gaming revenue is the aggregate of gaming wins and losses based on results of each event that customers wager bets on. Gross gaming revenue is split with our partners, whose share of gross gaming revenue is recorded as a reduction to net gaming revenue.

 

Cost of Revenue

 

Cost of revenue consists primarily of variable costs related to our contract with Big Bola. These include mainly (i) payment processing fees and chargebacks, (ii) product taxes, (iii) technology costs, (iv) revenue share / market access arrangements, and (v) feed / provider services. The Company incurs payment processing fees on user deposits, withdrawals and deposit reversals from payment processors (“chargebacks”). Chargebacks have not been material to date. Cost of revenue also includes expenses related to the distribution of our services, amortization of intangible assets and compensation of revenue associated personnel.

 

Stock-Based Compensation

 

The Company issues common stock and intends to issue stock options to officers, directors and consultants for services rendered. Options will vest and expire according to terms established at the issuance date of each grant. Stock grants, which are generally time vested, will be measured at the grant date fair value and charged to operations ratably over the vesting period.

 

The fair value of stock options granted as stock-based compensation will be determined utilizing the Black-Scholes option-pricing model, and can be affected by several variables, the most significant of which are the life of the equity award, the exercise price of the stock option as compared to the fair market value of the common stock on the grant date, and the estimated volatility of the common stock. Estimated volatility will be based on the historical volatility of the Company's common stock over an appropriate calculation period, or, if not available, by reference to the volatility of a representative sample of comparable public companies. The risk-free interest rate will be based on the U.S. Treasury yield curve in effect at the time of grant. The fair market value of the common stock will be determined by reference to the quoted market price of the Company's common stock on the grant date, or, if not available, by reference to an appropriate alternative valuation methodology.

 

The Company will recognize the fair value of stock-based compensation awards in general and administrative costs or in software development costs, as appropriate, in the Company's condensed consolidated statements of operations. The Company will issue new shares of common stock to satisfy stock option exercises.

 

As of March 31, 2021 and December 31, 2020, the Company did not have any outstanding stock options.

 

Comprehensive Income (Loss)

 

Comprehensive income or loss is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources. Components of comprehensive income or loss, including net income or loss, unrealized gains or losses on available-for-sale securities, unrealized gains or losses on other financial investments, unrealized gains or losses on pension and retirement benefit plans, and foreign currency translation adjustments, are reported in the financial statements in the period in which they are recognized. Net income (loss) and other comprehensive income (loss) are reported net of any related tax effect to arrive at comprehensive income (loss). The Company's comprehensive income (loss) for the three months ended March 31, 2021 and 2020 consists of foreign currency translation adjustments.

 

Earnings (Loss) Per Share

 

The Company's computation of earnings (loss) per share ("EPS") includes basic and diluted EPS. Basic EPS is measured as the income (loss) attributable to common stockholders divided by the weighted average common shares outstanding for the period. Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of potential common shares (e.g., convertible notes payable, convertible preferred stock, warrants and stock options) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS.

 

Loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the respective periods. At March 31, 2021 and December 31, 2020, the Company excluded warrants to acquire 234,000 shares of common stock from its calculation of loss per share as their effect would be antidilutive. Basic and diluted loss per common share is the same for all periods presented because the aforementioned warrants were antidilutive.

 

The Company has adopted ASU 2017-11, Earnings per share (Topic 260), provided that when determining whether certain financial instruments should be classified as liability or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock.

  

Fair Value of Financial Instruments

 

The authoritative guidance with respect to fair value established a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels and requires that assets and liabilities carried at fair value be classified and disclosed in one of three categories, as presented below. Disclosure as to transfers in and out of Levels 1 and 2, and activity in Level 3 fair value measurements, is also required.

 

Level 1. Observable inputs such as quoted prices in active markets for an identical asset or liability that the Company has the ability to access as of the measurement date. Financial assets and liabilities utilizing Level 1 inputs include active-exchange traded securities and exchange-based derivatives.

 

Level 2. Inputs, other than quoted prices included within Level 1, which are directly observable for the asset or liability or indirectly observable through corroboration with observable market data. Financial assets and liabilities utilizing Level 2 inputs include fixed income securities, non-exchange-based derivatives, mutual funds, and fair-value hedges.

 

Level 3. Unobservable inputs in which there is little or no market data for the asset or liability which requires the reporting entity to develop its own assumptions. Financial assets and liabilities utilizing Level 3 inputs include infrequently-traded non-exchange-based derivatives and commingled investment funds and are measured using present value pricing models.

 

The Company will determine the level in the fair value hierarchy within which each fair value measurement falls in its entirety, based on the lowest level input that is significant to the fair value measurement in its entirety. In determining the appropriate levels, the Company will perform an analysis of the assets and liabilities at each reporting period end.

 

The carrying value of financial instruments (consisting of cash and accounts payable and accrued expenses) is considered to be representative of their respective fair values due to the short-term nature of those instruments.

  

Foreign Currency

 

The accompanying condensed consolidated financial statements are presented in United States dollars ("USD"). The functional currency of Gaming UK, the Company's foreign subsidiary, is the British Pound (“GBP”), the local currency in the United Kingdom. Accordingly, assets and liabilities of the foreign subsidiary are translated at the current exchange rate at the end of the period, and revenues and expenses are translated at average exchange rates during the three months ended March 31, 2021 and the year ended December 31, 2020. The resulting translation adjustments are recorded as a component of shareholders' equity (deficiency). Gains and losses from foreign currency transactions are included in net income (loss).

 

Translation of amounts from the local currencies of the foreign subsidiary, Gaming UK, into USD has been made at the following exchange rates for the respective periods:

 

   As of and for the 
   Three months ended March 31, 2021   Year ended December 31, 2020 
         
Period-end GBP to USD1.00 exchange rate   1.3802    1.3652 
Period-average GBP to USD1.00 exchange rate   1.3859    1.2825 

 

Recent Accounting Pronouncements

 

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"). ASU 2016-13 significantly changes how entities measure credit losses for most financial assets, including accounts and notes receivables. ASU 2016-13 will replace the current "incurred loss" approach with an “expected loss” model, under which companies will recognize allowances based on expected rather than incurred losses. Entities will apply the provisions of ASU 2016-13 as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which ASU 2016-13 is effective. As small business filer, ASU 2016-13 will be effective for the Company for interim and annual reporting periods beginning after December 15, 2022. Management is currently in the process of assessing the impact of adopting ASU-2016-13 on the Company's financial statements and related disclosures.

 

In August 2020, the FASB issued ASU 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06). ASU 2020-06 simplifies the accounting for convertible debt by eliminating the beneficial conversion and cash conversion accounting models. Upon adoption of ASU 2020-06, convertible debt proceeds, unless issued with a substantial premium or an embedded conversion feature that is not clearly and closely related to the host contract, will no longer be allocated between debt and equity components. This modification will reduce the issue discount and result in less non-cash interest expense in financial statements. ASU 2020-06 also updates the earnings per share calculation and requires entities to assume share settlement when the convertible debt can be settled in cash or shares. ASU 2020-06 will be effective January 1, 2024, and a cumulative-effect adjustment to the opening balance of retained earnings is required upon adoption. Early adoption is permitted, but no earlier than January 1, 2021, including interim periods within that year. The Company adopted ASU 2020-06 effective January 1, 2021. The adoption of ASU 2020-06 did not have any impact on the Company’s consolidated financial statement presentation or disclosures.

 

Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company's present or future condensed consolidated financial statements and related disclosures.

XML 20 R10.htm IDEA: XBRL DOCUMENT v3.21.1
3. Property and Equipment
3 Months Ended
Mar. 31, 2021
Property, Plant and Equipment [Abstract]  
Property and Equipment

3. Property and Equipment

 

Property and equipment as of March 31, 2021 and December 31, 2020 is summarized as follows:

 

   March 31, 2021   December 31, 2020 
         
Computer and office equipment  $27,307   $27,307 
Less accumulated depreciation   (21,067)   (18,804)
Computer and office equipment, net  $6,240   $8,503 

 

All of the Company's property and equipment is located in the United Kingdom. Depreciation expense for the three months ended March 31, 2021 and 2020 was $2,663 and $1,953, respectively. Depreciation expense is included in general and administrative costs in the Company's condensed consolidated statement of operations.

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4. Intellectual Property
3 Months Ended
Mar. 31, 2021
Goodwill and Intangible Assets Disclosure [Abstract]  
Intellectual Property

4. Intellectual Property

 

Intellectual property as of March 31, 2021 and December 31, 2020 is summarized as follows:

 

   March 31, 2021   December 31, 2020 
         
Software  $194,978   $194,978 
Internet domain name   181,525    13,055 
Total intellectual property   376,503    208,033 
Less accumulated amortization   (175,469)   (157,066)
Intellectual property, net  $201,034   $50,967 

 

Amortization expense for the three months ended March 31, 2021 and 2020 was $18,403 and $15,239, respectively. Amortization expense is included in software development costs in the Company's condensed consolidated statement of operations.

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5. Note Payable to Bank
3 Months Ended
Mar. 31, 2021
Debt Disclosure [Abstract]  
Note Payable to Bank

5. Note Payable to Bank

 

On June 9, 2020, Gaming UK received an unsecured loan of $60,600 (equivalent to 47,600£) from Metro Bank PLC under the Bounce Bank Loan Scheme managed by the British Business Bank on behalf of, and with the financial backing of, The Secretary of State for Business, Energy and Industrial Strategy of the Government of the United Kingdom. The Government of the United Kingdom has provided a full guarantee to Metro Bank PLC with respect to the repayment of this loan.  The proceeds from the loan are required to be used for working capital purposes, for investment in a company's business, and to support trading or commercial activity in the United Kingdom. The loan is for a term of 72 months and has a fixed interest rate of 2.5% per annum. Gaming UK is not required to make any payments of interest on the loan during the first 12 months of this loan, with such amount being paid by the Government of the United Kingdom under its business interruption payment program. Beginning in the 13th month after the drawdown of the loan, Gaming UK will be required to repay the loan by making 60 equal monthly payments of principal and interest aggregating $1,076 (equivalent to 845£) per month. During the three months ended March 31, 2021, the Company recorded interest expense of $212 with respect to this loan, which was paid by the Government of the United Kingdom under this program. As of March 31, 2021, $64,982 was due under this note, of which, $2,241 was reflected as current portion due.

 

Maturities of long-term debt for each of the next five years and thereafter are as follows:

 

Year ended December 31,  Amount 
2021  $2,241 
2022   10,137 
2023   10,137 
2024   10,137 
2025   10,137 
Thereafter   22,193 
Total payments   64,982 
Less current portion   2,241 
   $62,741
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6. Related Party Transactions
3 Months Ended
Mar. 31, 2021
Related Party Transactions [Abstract]  
Related Party Transactions

6. Related Party Transactions

 

During the three months ended March 31, 2021 and 2020, the Company paid base salary, and a bonus of £75,000, totaling $291,855 and $85,509 to Jason Drummond, the Company’s sole director and executive officer.

 

As of March 31, 2021 and December 31, 2020, $86,427 and $14,918 was due to officers. The advances were unsecured, non-interest bearing with no formal terms of repayment.

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7. Stockholders' Equity
3 Months Ended
Mar. 31, 2021
Equity [Abstract]  
Stockholders' Equity

7. Stockholders' Equity

 

Preferred Stock

 

The Company has authorized a total of 5,000,000 shares of preferred stock, par value $0.001 per share. No preferred shares have been designated by the Company as of March 31, 2021 and December 31, 2020.

 

Common Stock

 

The Company is authorized to issue up to 45,000,000 shares of common stock, par value $0.001 per share. As of March 31, 2021 and December 31, 2020, the Company had 30,521,059 and 28,367,525 shares of common stock issued and outstanding, respectively.

 

Private Placement of Common Stock

 

On February 3, 2021, Gaming Technologies, Inc. (the “Company”) entered into a Securities Purchase Agreement with certain accredited investors (“Purchase Agreement”), pursuant to which the Company sold an aggregate of 1,606,600 shares of its Common Stock for gross proceeds of $4,016,500 in a private placement. The Company paid a finder’s fee to registered brokers in the amount of $360,000 in connection with these transactions resulting in net proceeds to the Company of $3,656,500. In connection with the Purchase Agreement, the Company issued to certain registered brokers warrants to purchase an aggregate of 144,000 shares of common at an exercise price of $2.50 per share, with an expiration date 5 years from the date of issuance, pursuant to the terms of certain finder’s fee agreements previously entered into by the Company and such brokers.

 

Under the terms of the Purchase Agreement, each investor was granted customary piggyback registration rights in the event the Company proposes to register the offer and sale of any shares of its common stock, subject to the limitations set forth in the Purchase Agreement, such as a registration statement solely relating to an offering or sale to employees or directors of the Company pursuant to employee stock plan or in connection with any dividend or distribution. The Purchase Agreement also provides the investors the option and right to participate in future capital raising transactions at the same purchase price and on the same terms and conditions as other investors participating in such transactions, for an aggregate purchase price of up to $6,000,000.

 

If, at any time during the twelve months following sale of the Shares, the Company issues or sells shares of common stock or common stock equivalents, except for certain exempt issuances as described in the Purchase Agreement, at a price below $2.50 per share, then immediately upon such issuance or sale, the Company will deliver to the investors that number of restricted shares of common stock equal to the difference between the number of Shares purchased by the investor pursuant to this Purchase Agreement and the number of shares of common stock the investor would have received for the investor’s subscription amount at the dilutive issuance price.

 

In March 2021, the Company sold 10,000 shares of its Common Stock for gross proceeds of $25,000 in a private placement.

 

Consulting Agreements

 

On November 6, 2020, the Company entered into an agreement with a consultant to serve as a board advisor. The term of the agreement is for one year and may be renewed at the end of the term. Compensation consists of the following stock grants: 50,000 shares of the Company’s common stock within seven days of the execution of the agreement which was valued at $125,000 and recorded during the year ended December 31, 2020. In addition, 50,000 shares of the Company’s common stock six months after the date of the agreement; 50,000 shares of the Company’s common stock upon the first renewal of the agreement and 50,000 shares of the Company’s common stock six months after the first renewal; and, 100,000 shares of the Company common stock at each of the following two renewal periods, if the agreement is renewed. The grant date fair value of these shares will be recorded during the service period. During the period ended March 31, 2021, the Company amortized $104,167 representing the pro rata portion of the grant date fair value of the next 50,000 shares to be issued.

 

In January 2021, the Company entered into two agreements with two consultants to provide investor relation services to the Company. The agreements are for a term of one year. The Company issued 200,000 shares of its common stock in exchange for the services. The common stock was valued at $500,000 at the time the agreements were executed.

 

In February 2021, the Company entered into an internet advertising campaign with a consultant. The contract is for a term of one year and calls for an initial non-refundable deposit of $20,000 upon the execution of the agreement and a payment of 333,334 shares of the Company’s common stock valued at $833,335 on the date of issuance.

 

In March 2021, the Company issued 3,600 shares of its common stock to a consultant in exchange for consulting services. The fair market value of the services was $9,000.

 

Warrants

 

A summary of warrant activity for the three months ended March 31, 2021 and the year ended December 31, 2020 is presented below:

 

   Warrants   Weighted
average
exercise
price
   Weighted
average
remaining
contractual
life (years)
   Aggregate
intrinsic
value
 
Outstanding on December 31, 2020   90,000   $2.50    4.89   $ 
Granted   144,000    2.50    4.83     
Exercised                
Outstanding on March 31, 2021   234,000   $2.50    4.64   $ 
XML 25 R15.htm IDEA: XBRL DOCUMENT v3.21.1
8. Commitments and Contingencies
3 Months Ended
Mar. 31, 2021
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies

8. Commitments and Contingencies

 

Legal Contingencies

 

The Company may be subject to legal proceedings from time to time as part of its business activities. As of March 31, 2021 and December 31, 2020, the Company was not subject to any threatened or pending legal actions or claims.

 

Impact of COVID-19 on the Company

 

The global outbreak of COVID-19 has led to severe disruptions in general economic activities, as businesses and governments have taken broad actions to mitigate this public health crisis. Although the Company has not experienced any significant disruption to its business to date, these conditions could significantly negatively impact the Company's business in the future.

 

The extent to which the COVID-19 outbreak ultimately impacts the Company's business, future revenues, results of operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to, the duration and spread of the outbreak, its severity and longevity, the actions to curtail the virus and treat its impact (including an effective vaccine), and how quickly and to what extent normal economic and operating conditions can resume. Even after the COVID-19 outbreak has subsided, the Company may be at risk of experiencing a significant impact to its business as a result of the global economic impact, including any economic downturn or recession that has occurred or may occur in the future.

 

Currently, capital markets have been disrupted by the crisis, as a result of which the availability, amount and type of financing available to the Company in the near future is uncertain and cannot be assured and is largely dependent upon evolving market conditions and other factors.

 

The Company intends to continue to monitor the situation and may adjust its current business plans as more information and guidance become available.

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9. Subsequent Events
3 Months Ended
Mar. 31, 2021
Subsequent Events [Abstract]  
Subsequent Events

9. Subsequent Events

  

Canelo Sponsorship Agreement

 

On April 14, 2021, we entered into a Sponsorship Agreement (the “Canelo Agreement”) with SA Holiday, Inc. (“Holiday”), owner of the personality rights of champion professional boxer Saul Alvarez Barragan, or “Canelo,” in connection with a promotional campaign for the Corporation to sponsor a prize fight and certain other activities of Canelo, and for Canelo to promote the Corporation’s “VALE” brand and create certain promotional materials in connection therewith for the Corporation’s use in the United States, Latin America and certain countries in the Caribbean. Pursuant to the Canelo Agreement we will, among other things, pay to Holiday a cash fee of US$1,600,000 and be responsible for paying certain other amounts as provided therein. 

 

Playboy License Agreement

 

On May 19, 2021, we entered into a non-exclusive license agreement with Playboy Enterprises International, Inc. (“Playboy”) to use certain trademarks (including the rabbit head logo) and other intellectual property of Playboy on and in connection with the design, creation, promotion, marketing, advertisement, sales, operation, maintenance and distribution in India of real-money game mobile apps, such as rummy, poker, fantasy sports and other games of skill approved by Playboy.  We will pay Playboy as a royalty a percentage of net gaming revenue. The term of the agreement is through the end of 2025, subject to early termination upon certain events of default, which include our failure to launch a Playboy-branded game in India by November 1, 2021, or to meet certain annual minimum net gaming revenue targets. 

 

Equity Incentive Plan

 

On April 29, 2021, the Company adopted, and on May 21, 2021 a majority of its stockholders approved, the Company’s 2021 Equity Incentive Plan (the “2021 Plan”), pursuant to which awards covering up to 3,000,000 shares of our common stock (subject to increase as provided therein) will be available for issuance. The purpose of the 2021 Plan is to (a) enable the Company and its affiliates to attract and retain the types of employees, directors and consultants who will contribute to the Company’s long-range success; (b) provide incentives that align the interests of employees, consultants and directors with those of the stockholders of the Company; and (c) promote the success of the Company’s business, thus enhancing the value of the Company for the benefit of its stockholders. Subject to adjustment in the case of stock splits and certain other circumstances in accordance with the terms of the 2021 Plan, the Company will reserve for issuance under the 2021 Plan no more than (a) 3,000,000 shares of common stock (b) plus on January 1, 2022, and on each January 1 thereafter, a number of shares of common stock equal to 4% of the number of shares of common stock issued and outstanding on the immediately preceding December 31, or such lesser number of shares as determined by the board of directors no later than the immediately preceding December 31. Shares of Common Stock available for distribution under the 2021 Plan may consist, in whole or in part, of authorized and unissued shares, treasury shares or shares reacquired by the Company in any manner. Shares of Common Stock subject to an award that expires or is canceled, forfeited, or terminated without issuance of the full number of shares of Common Stock to which the award related, as well as any shares of common stock subject to an award that are (a) tendered in payment of an option, (b) delivered or withheld by the company to satisfy any tax withholding obligation, or (c) covered by a stock-settled stock appreciation right or other awards that were not issued upon the settlement of the award, shall be added back to the shares of common stock available for issuance of awards or delivery under the 2021 Plan. Awards that may be granted under the 2021 plan include: (a) incentive stock options, (b) non-qualified stock options, (c) stock appreciation rights, (d) restricted awards, (e) performance share awards, (f) cash awards, and (g) other equity-based awards. Incentive stock options may be granted only to employees. Awards other than incentive stock options may be granted to employees, consultants and directors and those individuals whom the Committee or the Board determines are reasonably expected to become employees, consultants and directors following the grant date. Our principal executive officer, principal financial officer and other named executive officers are eligible to participate in and receive awards under the 2021 Plan. The 2021 Plan has a term of ten years.

 

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2. Summary of Significant Accounting Policies (Policies)
3 Months Ended
Mar. 31, 2021
Accounting Policies [Abstract]  
Principles of Combination

Principles of Combination

 

The accompanying condensed consolidated financial statements of the Company have been prepared in accordance with United States generally accepted accounting principles ("GAAP") and include the financial statements of Gaming US and its wholly-owned foreign subsidiary, Gaming UK. Intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

Use of Estimates

 

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Management regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly. Actual results could differ from those estimates. Significant estimates are expected to include those related to assumptions used in calculating accruals for potential liabilities, valuing equity instruments issued for services, and the realization of deferred tax assets.

Cash

Cash

 

The Company maintains its cash balances with financial institutions with high credit ratings. The Company has not experienced any losses to date resulting from this practice.

 

As of March 31, 2021 and December 31, 2020, the Company's cash balances by currency consisted of the following:

 

     
   March 31, 2021   December 31, 2020 
           
GBP  £13,374   £49,127 
USD  $4,524,239    1,879,166 

 

Cash balances in British Pounds are maintained in the United Kingdom and cash balances in United States Dollars are maintained in the United States.

Concentration of Risk

Concentration of Risk

 

The Company may periodically contract with consultants and vendors to provide services related to the Company's business development activities. Agreements for these services may be for a specific time period or for a specific project or task. The Company did not have any agreements at March 31, 2021 or December 31, 2020.

Revenue Recognition

Revenue Recognition

 

The Company recognizes revenue in accordance with ASC Topic 606, Revenue From Contracts With Customers. ASC Topic 606 requires companies to recognize revenue in a manner that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, the standard requires disclosures of the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. Revenue is recognized based on the following five step model:

 

  · Identification of the contract with a customer

 

  · Identification of the performance obligations in the contract

 

  · Determination of the transaction price

 

  · Allocation of the transaction price to the performance obligations in the contract

 

  · Recognition of revenue when, or as, the Company satisfies a performance obligation 

 

The Company operates an online betting platform allowing users to place wagers on casino games. Each wager placed by users create a single performance obligation for the Company to administer each event wagered. Net gaming revenue is the aggregate of gaming wins and losses based on results of each event that customers wager bets on. Gross gaming revenue is split with our partners, whose share of gross gaming revenue is recorded as a reduction to net gaming revenue.

Cost of Revenue

Cost of Revenue

 

Cost of revenue consists primarily of variable costs. These include mainly (i) payment processing fees and chargebacks, (ii) product taxes, (iii) technology costs, (iv) revenue share / market access arrangements, and (v) feed / provider services. The Company incurs payment processing fees on user deposits, withdrawals and deposit reversals from payment processors (“chargebacks”). Chargebacks have not been material to date. Cost of revenue also includes expenses related to the distribution of our services, amortization of intangible assets and compensation of revenue associated personnel.

Stock-Based Compensation

Stock-Based Compensation

 

The Company issues common stock and intends to issue stock options to officers, directors and consultants for services rendered. Options will vest and expire according to terms established at the issuance date of each grant. Stock grants, which are generally time vested, will be measured at the grant date fair value and charged to operations ratably over the vesting period.

 

The fair value of stock options granted as stock-based compensation will be determined utilizing the Black-Scholes option-pricing model, and can be affected by several variables, the most significant of which are the life of the equity award, the exercise price of the stock option as compared to the fair market value of the common stock on the grant date, and the estimated volatility of the common stock. Estimated volatility will be based on the historical volatility of the Company's common stock over an appropriate calculation period, or, if not available, by reference to the volatility of a representative sample of comparable public companies. The risk-free interest rate will be based on the U.S. Treasury yield curve in effect at the time of grant. The fair market value of the common stock will be determined by reference to the quoted market price of the Company's common stock on the grant date, or, if not available, by reference to an appropriate alternative valuation methodology.

 

The Company will recognize the fair value of stock-based compensation awards in general and administrative costs or in software development costs, as appropriate, in the Company's condensed consolidated statements of operations. The Company will issue new shares of common stock to satisfy stock option exercises.

 

As of March 31, 2021 and December 31, 2020, the Company did not have any outstanding stock options.

Comprehensive Income (Loss)

Comprehensive Income (Loss)

 

Comprehensive income or loss is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources. Components of comprehensive income or loss, including net income or loss, unrealized gains or losses on available-for-sale securities, unrealized gains or losses on other financial investments, unrealized gains or losses on pension and retirement benefit plans, and foreign currency translation adjustments, are reported in the financial statements in the period in which they are recognized. Net income (loss) and other comprehensive income (loss) are reported net of any related tax effect to arrive at comprehensive income (loss). The Company's comprehensive income (loss) for the three months ended March 31, 2021 and 2020 consists of foreign currency translation adjustments.

Earnings (Loss) Per Share

Earnings (Loss) Per Share

 

The Company's computation of earnings (loss) per share ("EPS") includes basic and diluted EPS. Basic EPS is measured as the income (loss) attributable to common stockholders divided by the weighted average common shares outstanding for the period. Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of potential common shares (e.g., convertible notes payable, convertible preferred stock, warrants and stock options) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS.

 

Loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the respective periods. At March 31, 2021 and December 31, 2020, the Company excluded warrants to acquire 90,000 shares of common stock from its calculation of loss per share as their effect would be antidilutive. Basic and diluted loss per common share is the same for all periods presented because the aforementioned warrants were antidilutive.

 

The Company has adopted ASU 2017-11, Earnings per share (Topic 260), provided that when determining whether certain financial instruments should be classified as liability or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

 

The authoritative guidance with respect to fair value established a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels and requires that assets and liabilities carried at fair value be classified and disclosed in one of three categories, as presented below. Disclosure as to transfers in and out of Levels 1 and 2, and activity in Level 3 fair value measurements, is also required.

 

Level 1. Observable inputs such as quoted prices in active markets for an identical asset or liability that the Company has the ability to access as of the measurement date. Financial assets and liabilities utilizing Level 1 inputs include active-exchange traded securities and exchange-based derivatives.

 

Level 2. Inputs, other than quoted prices included within Level 1, which are directly observable for the asset or liability or indirectly observable through corroboration with observable market data. Financial assets and liabilities utilizing Level 2 inputs include fixed income securities, non-exchange-based derivatives, mutual funds, and fair-value hedges.

 

Level 3. Unobservable inputs in which there is little or no market data for the asset or liability which requires the reporting entity to develop its own assumptions. Financial assets and liabilities utilizing Level 3 inputs include infrequently-traded non-exchange-based derivatives and commingled investment funds and are measured using present value pricing models.

 

The Company will determine the level in the fair value hierarchy within which each fair value measurement falls in its entirety, based on the lowest level input that is significant to the fair value measurement in its entirety. In determining the appropriate levels, the Company will perform an analysis of the assets and liabilities at each reporting period end.

 

The carrying value of financial instruments (consisting of cash and accounts payable and accrued expenses) is considered to be representative of their respective fair values due to the short-term nature of those instruments.

Foreign Currency

Foreign Currency

 

The accompanying condensed consolidated financial statements are presented in United States dollars ("USD"). The functional currency of Gaming UK, the Company's foreign subsidiary, is the British Pound (“GBP”), the local currency in the United Kingdom. Accordingly, assets and liabilities of the foreign subsidiary are translated at the current exchange rate at the end of the period, and revenues and expenses are translated at average exchange rates during the three months ended March 31, 2021 and the year ended December 31, 2020. The resulting translation adjustments are recorded as a component of shareholders' equity (deficiency). Gains and losses from foreign currency transactions are included in net income (loss).

 

Translation of amounts from the local currencies of the foreign subsidiary, Gaming UK, into USD has been made at the following exchange rates for the respective periods:

 

   As of and for the 
   Three months ended March 31, 2021   Year ended December 31, 2020 
         
Period-end GBP to USD1.00 exchange rate   1.3802    1.3652 
Period-average GBP to USD1.00 exchange rate   1.3859    1.2825 
Recent Accounting Pronouncements

Recent Accounting Pronouncements

 

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"). ASU 2016-13 significantly changes how entities measure credit losses for most financial assets, including accounts and notes receivables. ASU 2016-13 will replace the current "incurred loss" approach with an “expected loss” model, under which companies will recognize allowances based on expected rather than incurred losses. Entities will apply the provisions of ASU 2016-13 as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which ASU 2016-13 is effective. As small business filer, ASU 2016-13 will be effective for the Company for interim and annual reporting periods beginning after December 15, 2022. Management is currently in the process of assessing the impact of adopting ASU-2016-13 on the Company's financial statements and related disclosures.

 

In August 2020, the FASB issued ASU 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06). ASU 2020-06 simplifies the accounting for convertible debt by eliminating the beneficial conversion and cash conversion accounting models. Upon adoption of ASU 2020-06, convertible debt proceeds, unless issued with a substantial premium or an embedded conversion feature that is not clearly and closely related to the host contract, will no longer be allocated between debt and equity components. This modification will reduce the issue discount and result in less non-cash interest expense in financial statements. ASU 2020-06 also updates the earnings per share calculation and requires entities to assume share settlement when the convertible debt can be settled in cash or shares. ASU 2020-06 will be effective January 1, 2024, and a cumulative-effect adjustment to the opening balance of retained earnings is required upon adoption. Early adoption is permitted, but no earlier than January 1, 2021, including interim periods within that year. The Company adopted ASU 2020-06 effective January 1, 2021. The adoption of ASU 2020-06 did not have any impact on the Company’s consolidated financial statement presentation or disclosures.

 

Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company's present or future condensed consolidated financial statements and related disclosures.

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2. Summary of Significant Accounting Policies (Tables)
3 Months Ended
Mar. 31, 2021
Accounting Policies [Abstract]  
Schedule of cash

As of March 31, 2021 and December 31, 2020, the Company's cash balances by currency consisted of the following:

 

     
   March 31, 2021   December 31, 2020 
           
GBP  £13,374   £49,127 
USD  $4,524,239    1,879,166 
Foreign currency exchange rates table

Translation of amounts from the local currencies of the foreign subsidiary, Gaming UK, into USD has been made at the following exchange rates for the respective periods:

 

   As of and for the 
   Three months ended March 31, 2021   Year ended December 31, 2020 
         
Period-end GBP to USD1.00 exchange rate   1.3802    1.3652 
Period-average GBP to USD1.00 exchange rate   1.3859    1.2825 
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3. Property and Equipment (Tables)
3 Months Ended
Mar. 31, 2021
Property, Plant and Equipment [Abstract]  
Schedule of property and equipment

Property and equipment as of March 31, 2021 and December 31, 2020 is summarized as follows:

 

   March 31, 2021   December 31, 2020 
         
Computer and office equipment  $27,307   $27,307 
Less accumulated depreciation   (21,067)   (18,804)
Computer and office equipment, net  $6,240   $8,503 
XML 30 R20.htm IDEA: XBRL DOCUMENT v3.21.1
4. Intellectual Property (Tables)
3 Months Ended
Mar. 31, 2021
Goodwill and Intangible Assets Disclosure [Abstract]  
Schedule of intellectual property

Intellectual property as of March 31, 2021 and December 31, 2020 is summarized as follows:

 

   March 31, 2021   December 31, 2020 
         
Software  $194,978   $194,978 
Internet domain name   181,525    13,055 
Total intellectual property   376,503    208,033 
Less accumulated amortization   (175,469)   (157,066)
Intellectual property, net  $201,034   $50,967 
XML 31 R21.htm IDEA: XBRL DOCUMENT v3.21.1
5. Note Payable to Bank (Tables)
3 Months Ended
Mar. 31, 2021
Debt Disclosure [Abstract]  
Schedule of debt maturities

Maturities of long-term debt for each of the next five years and thereafter are as follows:

 

Year ended December 31,  Amount 
2021  $2,241 
2022   10,137 
2023   10,137 
2024   10,137 
2025   10,137 
Thereafter   22,193 
Total payments   64,982 
Less current portion   2,241 
   $62,741 
XML 32 R22.htm IDEA: XBRL DOCUMENT v3.21.1
7. Stockholders' Equity (Tables)
3 Months Ended
Mar. 31, 2021
Equity [Abstract]  
Schedule of warrant activity

A summary of warrant activity for the three months ended March 31, 2021 and the year ended December 31, 2020 is presented below:

 

   Warrants   Weighted
average
exercise
price
   Weighted
average
remaining
contractual
life (years)
   Aggregate
intrinsic
value
 
Outstanding on December 31, 2020   90,000   $2.50    4.89   $ 
Granted   144,000    2.50    4.83     
Exercised                
Outstanding on March 31, 2021   234,000   $2.50    4.64   $ 
XML 33 R23.htm IDEA: XBRL DOCUMENT v3.21.1
1. Organization and Basis of Presentation (Details Narrative) - USD ($)
3 Months Ended
Mar. 31, 2021
Mar. 31, 2020
Dec. 31, 2020
Dec. 31, 2019
Organization, Consolidation and Presentation of Financial Statements [Abstract]        
Net loss $ (2,380,822) $ (251,504)    
Cash used in operating activities (906,577) (321,620)    
Accumulated deficit (10,347,016)   $ (7,966,193)  
Cash 4,542,559 138,957 $ 1,946,232 $ 320,402
Proceeds from sale of stock $ 3,681,500 $ 210,000    
XML 34 R24.htm IDEA: XBRL DOCUMENT v3.21.1
2. Summary of Significant Accounting Policies (Details - Cash)
Mar. 31, 2021
GBP (£)
Mar. 31, 2021
USD ($)
Dec. 31, 2020
GBP (£)
Dec. 31, 2020
USD ($)
Mar. 31, 2020
USD ($)
Dec. 31, 2019
USD ($)
Cash   $ 4,542,559   $ 1,946,232 $ 138,957 $ 320,402
United Kingdom, Pounds            
Cash | £ £ 13,374   £ 49,127      
United States of America, Dollars            
Cash   $ 4,524,239   $ 1,879,166    
XML 35 R25.htm IDEA: XBRL DOCUMENT v3.21.1
2. Summary of Significant Accounting Policies (Details - Foreign Currency)
3 Months Ended 12 Months Ended
Mar. 31, 2021
Dec. 31, 2020
Accounting Policies [Abstract]    
Translation rate at period end 1.3802 1.3652
Translation rate - period average 1.3859 1.2825
XML 36 R26.htm IDEA: XBRL DOCUMENT v3.21.1
2. Summary of Significant Accounting Policies (Details Narrative) - shares
Mar. 31, 2021
Dec. 31, 2020
Accounting Policies [Abstract]    
Options outstanding 0 0
XML 37 R27.htm IDEA: XBRL DOCUMENT v3.21.1
3. Property and Equipment (Details) - USD ($)
Mar. 31, 2021
Dec. 31, 2020
Property, Plant and Equipment [Abstract]    
Computer and office equipment $ 27,307 $ 27,307
Less accumulated depreciation (21,067) (18,804)
Computer and office equipment, net $ 6,240 $ 8,503
XML 38 R28.htm IDEA: XBRL DOCUMENT v3.21.1
3. Property and Equipment (Details Narrative) - USD ($)
3 Months Ended
Mar. 31, 2021
Mar. 31, 2020
Property, Plant and Equipment [Abstract]    
Depreciation $ 2,263 $ 1,952
XML 39 R29.htm IDEA: XBRL DOCUMENT v3.21.1
4. Intellectual Property (Details - Property) - USD ($)
Mar. 31, 2021
Dec. 31, 2020
Intellectual property, gross $ 376,503 $ 208,033
Less: accumulated amortization (175,469) (157,066)
Intellectual property, net 201,034 50,967
Software [Member]    
Intellectual property, gross 194,978 194,978
Internet Domain Name [Member]    
Intellectual property, gross $ 181,525 $ 13,055
XML 40 R30.htm IDEA: XBRL DOCUMENT v3.21.1
4. Intellectual Property (Details Narrative) - USD ($)
3 Months Ended
Mar. 31, 2021
Mar. 31, 2020
Goodwill and Intangible Assets Disclosure [Abstract]    
Amortization of intellectual property $ 18,403 $ 15,239
XML 41 R31.htm IDEA: XBRL DOCUMENT v3.21.1
5. Note Payable to Bank (Details - Debt maturities)
Mar. 31, 2021
USD ($)
Debt Disclosure [Abstract]  
Debt maturity 2021 $ 2,241
Debt maturity 2022 10,137
Debt maturity 2023 10,137
Debt maturity 2024 10,137
Debt maturity 2025 10,137
Debt maturity thereafter 22,193
Total payments 64,982
Less current portion 2,241
Debt maturity, noncurrent $ 62,741
XML 42 R32.htm IDEA: XBRL DOCUMENT v3.21.1
5. Note Payable to Bank (Details Narrative)
3 Months Ended 5 Months Ended
Mar. 31, 2021
USD ($)
Jun. 09, 2020
USD ($)
Dec. 31, 2020
USD ($)
Jun. 09, 2020
GBP (£)
Note payable to bank current $ 2,241   $ 2,241  
Bounce Back Loan [Member]        
Debt face amount   $ 60,600    
Debt maturity term   72 months    
Debt interest rate   2.50%   2.50%
Interest expense 212      
Note payable to bank current 2,241      
Note payable to bank $ 64,982      
Bounce Back Loan [Member] | United Kingdom, Pounds        
Debt face amount | £       £ 47,600
XML 43 R33.htm IDEA: XBRL DOCUMENT v3.21.1
6. Related Party Transactions (Details Narrative) - USD ($)
3 Months Ended
Mar. 31, 2021
Mar. 31, 2020
Dec. 31, 2020
Due to related parties $ 86,427   $ 14,918
Jason Drummond [Member]      
Related party costs and expenses 291,855 $ 85,509  
Due to related parties $ 39,158   $ 14,918
XML 44 R34.htm IDEA: XBRL DOCUMENT v3.21.1
7. Stockholders' Equity (Details - Warrants) - Warrants [Member] - USD ($)
3 Months Ended 12 Months Ended
Mar. 31, 2021
Dec. 31, 2020
Number of Warrants    
Number of Warrants Outstanding, Beginning 90,000  
Number of Warrants Granted 144,000  
Number of Warrants Exercised 0  
Number of Warrants Outstanding, Ending 234,000 90,000
Weighted Average Exercise Price    
Weighted Average Exercise Price Outstanding, Beginning $ 2.50  
Weighted Average Exercise Price Granted 2.50  
Weighted Average Exercise Price Outstanding, Ending $ 2.50 $ 2.50
Weighted average remaining contractual life, granted 4 years 9 months 29 days  
Weighted average remaining contractual life, outstanding 4 years 7 months 21 days 4 years 10 months 21 days
Aggregate intrinsic value, outstanding $ 0  
XML 45 R35.htm IDEA: XBRL DOCUMENT v3.21.1
7. Stockholders' Equity (Details Narrative) - USD ($)
1 Months Ended 3 Months Ended 10 Months Ended
Feb. 03, 2021
Feb. 28, 2021
Jan. 31, 2021
Mar. 31, 2021
Nov. 06, 2020
Private Placement [Member]          
Number of stock sold       10,000  
Proceeds from sale of stock       $ 25,000  
Consultant [Member]          
Stock issued for services, shares         50,000
Stock issued for services, value         $ 125,000
Accredited investors | Securities Purchase Agreement | Private Placement [Member]          
Number of stock sold 1,606,600        
Proceeds from sale of stock $ 4,016,500        
Legal fees paid with issuance $ 360,000        
Warrants granted 144,000        
Payment of stock issuance fees $ 3,656,500        
Exercise price $ 2.50        
Term 5 years        
Consultant 2 [Member]          
Stock issued for services, shares     200,000    
Stock issued for services, value     $ 500,000    
Consultant 3 [Member]          
Stock issued for services, shares       3,600  
Stock issued for services, value       $ 9,000  
Consultant 4 [Member]          
Term   1 year      
Shares issued advertising campaign, shares   333,334      
Shares issued advertising campaign, value   $ 833,000      
Initial non-refundable deposit   $ 20,000      
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