Golden Matrix (GMGI) - 2021 Q4 - Annual Report

PART I ITEM 1. BUSINESS Golden Matrix Group, Inc. provides SaaS for online casino and sports betting, offering the GM-X System with over 4,000 games and 3.5 million players, with revenue from platform licensing and content resale - The company operates as an enterprise Software-as-a-Service (SaaS) provider, developing and owning online gaming intellectual property and building configurable turn-key and white-label gaming platforms for international iGaming operators, mainly in the Asia Pacific region[45] Key Operational Metrics (as of January 31, 2021) | Metric | Value | | :--- | :--- | | Registered Players | Over 3.5 million | | Unique Casino & Live Game Operations | Over 400 | | Unique Online Games (GM-X System) | Over 4,000 | | Daily Games Played (approx.) | 14 million | | Daily Wagers (approx.) | $14.5 million | - The company's business model is based on two primary revenue streams: (1) a share of revenues generated by customers' use of its iGaming platform and software services, and (2) revenue from the resale of online gaming content from third-party providers[77][87] - Key growth strategies include supporting existing customer growth, expanding globally into new markets like Africa and Latin America, developing proprietary E-sport content (Player2P platform), and pursuing synergistic acquisitions[93] - The company has entered into significant recent agreements, including a Sportsbook Software License with Amelco UK Limited and a Distribution Agreement with Playtech Software Limited, which grants Playtech exclusive worldwide distribution rights for certain company products[152][156][157] - On December 22, 2020, the company acquired Global Technology Group Pty Ltd (GTG) from CEO Anthony Brian Goodman to obtain a recognized gaming license from the Alderney Gambling Control Commission (AGCC), facilitating expansion into European markets[164][165][166] ITEM 1A. RISK FACTORS The company faces risks including financing needs, CEO dependence, related-party revenue, internal control weaknesses, intense industry competition, evolving regulations, and stock market volatility - The company may require additional financing for future operations and expansion, which may not be available on favorable terms and could result in significant dilution to existing shareholders[181][183] - The company is heavily dependent on its CEO and Chairman, Anthony Brian Goodman, who beneficially owns approximately 99.98% of the voting shares, giving him control over all corporate transactions and matters submitted to shareholders[193][195] - A significant portion of the company's revenue comes from a limited number of customers, with the most significant being Articulate, a related party beneficially owned by the CEO and his wife, with related party revenues of $2,248,877 for the year ended January 31, 2021[205] - Management has identified material weaknesses in its disclosure controls and procedures and internal control over financial reporting as of January 31, 2021, which could result in material misstatements in financial statements[209][211] - The online gaming industry is highly regulated and competitive, where the company's failure to obtain or maintain necessary licenses or comply with regulations could disrupt business, and the U.S. market is currently limited, with online sports betting and casino games legal in only a small number of states[249][247] - The company's Series B Voting Preferred Stock, held by an entity controlled by the CEO, has super-majority voting power, effectively controlling 99.975% of the total vote on all shareholder matters, which severely restricts other shareholders' ability to influence corporate decisions[267] ITEM 1B. UNRESOLVED STAFF COMMENTS The company reports that it has no unresolved staff comments from the SEC - None[337] ITEM 2. PROPERTIES The company utilizes approximately 700 square feet of office space in Sydney, Australia, through a month-to-month back-office agreement with Articulate, a related party, at a current rate of $11,000 per month - The Company subleases approximately 700 square feet of office space in Sydney, Australia, from Articulate, a related party, on a month-to-month basis with a current rate of $11,000 per month[338] ITEM 3. LEGAL PROCEEDINGS The company is not currently a party to any material lawsuits but may be involved in legal matters in the ordinary course of business, with no expected material adverse effect on its financial position - The company may become a party to lawsuits in the ordinary course of business but believes the ultimate resolution of any current proceeding will not have a material adverse effect on its financial position, results of operations, or cash flows[339] ITEM 4. MINE SAFETY DISCLOSURES This item is not applicable to the company - Not applicable[340] PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. The company's common stock, quoted on OTC Pink with limited liquidity, seeks NASDAQ listing, has never paid dividends, and recently issued shares through warrant exercises and private placements - The company's common stock is quoted on the OTC Pink Market under the symbol "GMGI" and has a very limited market, with an application filed for listing on The NASDAQ Capital Market[342][343] Quarterly Stock Price Range (12 Months Ended Jan 31, 2021) | Quarter Ended | High ($) | Low ($) | | :--- | :--- | :--- | | April 30, 2020 | 1.92 | 0.19 | | July 31, 2020 | 4.00 | 0.97 | | October 31, 2020 | 7.55 | 3.00 | | January 31, 2021 | 7.75 | 4.00 | - The company has never paid cash dividends on its common stock and anticipates retaining all future earnings for business use[346] - During the quarter ended January 31, 2021, the company issued 409,029 shares of common stock from warrant exercises, raising $1,677,019[352] ITEM 6. SELECTED FINANCIAL DATA As a smaller reporting company, Golden Matrix Group is not required to provide the information for this item - The company is a smaller reporting company and is not required to provide the information under this item[367] ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. For fiscal year 2021, net income decreased to $398,080 due to increased option amortization, while a new content resale stream generated $2.38 million, and liquidity significantly improved with cash reaching $11.7 million from $7.97 million in financing activities Revenue Breakdown by Source (Years Ended January 31) | Revenue Source | 2021 ($) | 2020 (unaudited) ($) | | :--- | :--- | :--- | | Related party | 2,248,877 | 2,167,773 | | Third party | 595,819 | 1,120,802 | | Total Gaming IP & Tech | 2,844,696 | 3,288,575 | | Reselling Gaming Content | 2,378,363 | 0 | Net Income Comparison (Years Ended January 31) | Metric | 2021 ($) | 2020 ($) | | :--- | :--- | :--- | | Net Income | 398,080 | 1,982,892 | - The decrease in net income for fiscal 2021 was mainly due to a $1.4 million increase in option amortization expenses compared to the prior period[413] Liquidity and Capital Resources (as of January 31) | Metric | 2021 ($) | 2020 ($) | | :--- | :--- | :--- | | Cash and cash equivalents | 11,706,349 | 1,856,505 | | Working capital | 13,261,937 | 2,473,198 | - Cash provided by financing activities was $7,971,610 for the year ended January 31, 2021, primarily from sales of equity securities in private placements and warrant exercises in August 2020 and January 2021[423] ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As a smaller reporting company, Golden Matrix Group is not required to provide the information for this item - The company is a smaller reporting company and is not required to provide the information under this item[431] ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA This section presents the company's audited consolidated financial statements for fiscal year 2021, with M&K CPAS, PLLC confirming fair presentation, highlighting $13.8 million in total assets, $0.55 million in liabilities, and $398,080 net income - The independent auditor, M&K CPAS, PLLC, issued an opinion that the financial statements are fairly presented, identifying Revenue Recognition as a critical audit matter regarding management's evaluation of principal versus agent in customer agreements[436][442] Consolidated Balance Sheet Highlights (as of January 31, 2021) | Account | Amount ($) | | :--- | :--- | | Cash and cash equivalents | 11,706,349 | | Total current assets | 13,814,547 | | Total current Liabilities | 552,610 | | Total shareholders' equity | 13,261,937 | Consolidated Statement of Operations Highlights (Year Ended January 31, 2021) | Account | Amount ($) | | :--- | :--- | | Gross profit | 3,223,007 | | Net income | 398,080 | | Net earnings per common share - basic | 0.02 | | Net earnings per common share - diluted | 0.01 | Consolidated Statement of Cash Flow Highlights (Year Ended January 31, 2021) | Account | Amount ($) | | :--- | :--- | | Net cash provided by operating activities | 1,878,043 | | Net cash provided by financing activities | 7,971,610 | | Net increase in cash and cash equivalents | 9,849,844 | ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None[598] ITEM 9A. CONTROLS AND PROCEDURES Management concluded that as of January 31, 2021, the company's disclosure controls and procedures and internal control over financial reporting were not effective due to material weaknesses, with plans to remediate by hiring additional staff and developing formal procedures - Management concluded that the company's disclosure controls and procedures were not effective as of January 31, 2021[599] - Material weaknesses in internal control over financial reporting were identified, specifically insufficient personnel resources for duty segregation and a lack of written accounting policies and procedures[602][608] - To remediate the weaknesses, management plans to hire additional knowledgeable accounting personnel and develop and maintain adequate written accounting policies and procedures[604] ITEM 9B. OTHER INFORMATION This section discloses material definitive agreements not timely reported on Form 8-K, including a Stock Purchase Agreement with Brett Goodman and Jason Silver, a tripartite agreement with Articulate and Hopestar, and a change in role for Weiting 'Cathy' Feng from CFO to COO - On August 10, 2020, the company entered into a Stock Purchase Agreement to issue 4,000 shares of restricted common stock to Brett Goodman (CEO's son) and Jason Silver for their management of a Peer-to-Peer betting application development project[609] - On December 31, 2020, the company entered into an agreement with Articulate (related party) and Hopestar (customer) to settle $500,000 of amounts owed by the company to Hopestar, with Articulate providing gaming credits to Hopestar and reducing amounts owed by the company to Articulate by $500,000[610] - On April 22, 2021, Weiting 'Cathy' Feng's role changed from Chief Financial Officer to Chief Operating Officer[611] PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE This section provides biographical information for the company's directors and executive officers, including CEO Anthony Brian Goodman and COO Weiting 'Cathy' Feng, detailing the board's committee structure, independent directors, and the adopted Code of Business Conduct and Ethics - The company's leadership includes Anthony Brian Goodman as President, CEO, and Chairman, Weiting 'Cathy' Feng as Chief Operating Officer and Director, and Omar Jimenez appointed CFO and Chief Compliance Officer in April 2021[614] - The Board of Directors formed an Audit Committee, a Compensation Committee, and a Nominating and Governance Committee on August 13, 2020, all comprised exclusively of independent directors[640][642][650] - The Board has determined that directors Thomas E. McChesney, Murray G. Smith, and Aaron Richard Johnston are independent[665][758] - The company adopted a Code of Business Conduct and Ethics on August 13, 2020, applicable to all officers, directors, and employees[657] ITEM 11. EXECUTIVE COMPENSATION This section details compensation for Named Executive Officers, including CEO Anthony B. Goodman and then-CFO Weiting 'Cathy' Feng, for fiscal year 2021, outlining their employment agreements, outstanding equity awards, and non-executive director compensation Executive Compensation (Fiscal Year Ended Jan 31, 2021) | Name and Principal Position | Salary ($) | All Other Compensation ($) | Total ($) | | :--- | :--- | :--- | :--- | | Anthony B. Goodman, CEO | 106,663 | 3,683 | 110,346 | | Weiting 'Cathy' Feng, CFO | 100,202 | 3,069 | 103,271 | - As of January 31, 2021, CEO Anthony B. Goodman held unexercised options for 7,200,000 exercisable shares and 900,000 unexercisable shares, while then-CFO Weiting 'Cathy' Feng held unexercised options for 1,866,667 exercisable shares and 233,333 unexercisable shares[677] - The company entered into new employment agreements with CEO Anthony Goodman and then-CFO Weiting 'Cathy' Feng on October 26, 2020, establishing annual salaries of $144,000 and $120,000, respectively, plus superannuation[680][687][689] Non-Executive Director Compensation (Fiscal Year Ended Jan 31, 2021) | Name | Fees Earned ($) | Option Awards ($) | Total ($) | | :--- | :--- | :--- | :--- | | Thomas E. McChesney | 18,000 | 79,966 | 97,966 | | Murray G. Smith | 12,000 | 252,350 | 264,350 | | Aaron Richard Johnston | 10,000 | 433,096 | 443,096 | ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS. This section details the beneficial ownership of the company's stock as of April 29, 2021, highlighting CEO Anthony B. Goodman's effective voting control of 99.984% through Series B Voting Preferred Stock, and provides information on the 2018 Equity Incentive Plan - As of April 29, 2021, CEO Anthony B. Goodman beneficially owned 16,255,688 shares of common stock (51.8%) and 1,000 shares of Series B Voting Preferred Stock (100%)[711] - The 1,000 shares of Series B Voting Preferred Stock provide the holder with votes equal to four times the total votes of all other outstanding common and preferred stock, giving Mr. Goodman approximately 99.984% of the total voting power[711][714] - As of January 31, 2021, under the company's equity compensation plans, 12,686,664 securities were to be issued upon exercise of outstanding options, warrants, and rights, with 18,846,664 securities remaining available for future issuance[715] ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE The company has engaged in numerous significant transactions with related parties, primarily entities controlled by CEO Anthony Brian Goodman, including agreements with Luxor Capital, LLC and Articulate Pty Ltd, and the acquisition of Global Technology Group Pty Ltd from Mr. Goodman, with the Audit Committee reviewing all such transactions - The company has multiple agreements with Luxor Capital, LLC, an entity wholly-owned by CEO Anthony Brian Goodman, including asset purchase agreements for Gaming IP and the GM2 Asset, and related promissory notes[717][720] - The company has a Back Office/Service Provider Agreement and a License Agreement with Articulate Pty Ltd, owned by the CEO and his wife, generating $2,248,877 in revenues for the twelve months ended January 31, 2021[735][739] - On December 22, 2020, the company entered into a Share Purchase Agreement to acquire Global Technology Group Pty Ltd from CEO Anthony Brian Goodman for 85,000 GBP[728] - The Audit Committee is tasked with reviewing and approving all related party transactions, determining if the terms are beneficial and fair to the company[753] ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES This section details the fees billed by the company's principal independent accountant, M&K CPAS, PLLC, totaling $37,310 for fiscal year 2021, primarily for audit and audit-related services, all pre-approved by the board of directors Principal Accountant Fees | Service Category | Year Ended Jan 31, 2021 ($) | Transition Period Ended Jan 31, 2020 ($) | | :--- | :--- | :--- | | Audit Fees | 34,810 | 14,800 | | Audit Related Fees | 2,500 | — | | Tax Fees | — | — | | All Other Fees | — | — | | Total | 37,310 | 14,800 | - All services provided by M&K CPAS, PLLC for the fiscal year ended January 31, 2021, were pre-approved by the company's board of directors[764] PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES This section lists the documents filed as part of the Form 10-K report, including the index to consolidated financial statements and a comprehensive list of all exhibits required by Regulation S-K - This section provides an index to the company's financial statements and a detailed list of all exhibits filed with the report, including articles of incorporation, bylaws, material contracts (e.g., with Luxor, Articulate, Amelco, Playtech), employment agreements, and required certifications[765][766] ITEM 16. FORM 10–K SUMMARY. The company has not provided a summary for its Form 10-K - None[771]