Golden Matrix (GMGI) - 2023 Q3 - Quarterly Report

Special Note Regarding Forward-Looking Statements General Statement This section warns that the report contains forward-looking statements subject to risks and uncertainties, which may cause actual results to differ materially from projections, with no obligation to update - The report contains forward-looking statements involving known and unknown risks and uncertainties that may cause actual results to differ materially from future projections[8] - Readers should review 'Risk Factors' for cautionary statements applicable to all forward-looking statements[8] Summary Risk Factors The Company faces numerous risks, including financing needs, acquisition completion (Meridian), reliance on third-party content, potential dilution, economic downturns, and regulatory changes - Key risks include the need for significant additional financing, ability to obtain gaming licenses, and successful completion of acquisitions like the pending Meridian acquisition[11] - The Company faces risks from reliance on third-party gaming content suppliers, potential dilution from fundraising or acquisitions, and maintaining its Nasdaq listing[11] - Economic downturns, inflation, increasing interest rates, and global conflicts pose risks to discretionary spending and product demand[11] - Operational risks include protecting proprietary information, competition, managing expenses, complying with regulations, and mitigating gaming fraud, cyber-attacks, and system failures[11][16] PART I. FINANCIAL INFORMATION Item 1. Financial Statements This section presents unaudited consolidated financial statements, including balance sheets, statements of operations, shareholders' equity, and cash flow, with notes on accounting policies and specific accounts Consolidated Balance Sheets The consolidated balance sheets present the financial position of Golden Matrix Group, Inc. and its subsidiaries as of July 31, 2023, and October 31, 2022, detailing changes in assets, liabilities, and equity Consolidated Balance Sheet Highlights (USD) | Metric | July 31, 2023 | October 31, 2022 | Change (YoY) | | :--------------------------------- | :-------------- | :--------------- | :----------- | | Total Assets | $34,989,870 | $32,571,413 | +$2,418,457 | | Total Current Assets | $22,088,606 | $19,288,950 | +$2,799,656 | | Cash | $16,142,096 | $14,949,673 | +$1,192,423 | | Accounts Receivable, net | $3,923,213 | $2,641,023 | +$1,282,190 | | Inventory, prizes | $1,521,855 | $1,147,591 | +$374,264 | | Total Liabilities | $4,089,346 | $2,774,932 | +$1,314,414 | | Total Current Liabilities | $4,089,346 | $2,715,154 | +$1,374,192 | | Customer deposits | $433,034 | $109,328 | +$323,706 | | Total Shareholders' Equity | $30,900,524 | $29,796,481 | +$1,104,043 | Consolidated Statements of Operations and Comprehensive Income (Loss) The consolidated statements of operations present financial performance for the three and nine months ended July 31, 2023, and 2022, showing a shift from net income to net loss attributable to GMGI Consolidated Statements of Operations Highlights (USD) | Metric | 3 Months Ended July 31, 2023 | 3 Months Ended July 31, 2022 | Change (YoY) | 9 Months Ended July 31, 2023 | 9 Months Ended July 31, 2022 | Change (YoY) | | :--------------------------------------- | :--------------------------- | :--------------------------- | :----------- | :--------------------------- | :--------------------------- | :----------- | | Total Revenues | $11,307,026 | $9,101,541 | +$2,205,485 | $32,393,064 | $26,461,389 | +$5,931,675 | | Cost of Goods Sold | $(9,171,849) | $(6,620,517) | $(2,551,332) | $(25,754,871) | $(19,415,700) | $(6,339,171) | | Gross Profit | $2,135,177 | $2,481,024 | $(345,847) | $6,638,193 | $7,045,689 | $(407,496) | | Income (Loss) from Operations | $(892,099) | $729,312 | $(1,621,411) | $(1,711,787) | $1,891,804 | $(3,603,591) | | Net Income (Loss) attributable to GMGI | $(965,628) | $628,332 | $(1,593,960) | $(1,942,902) | $1,564,695 | $(3,507,597) | | Basic EPS | $(0.03) | $0.02 | $(0.05) | $(0.06) | $0.06 | $(0.12) | | Diluted EPS | $(0.03) | $0.02 | $(0.05) | $(0.06) | $0.04 | $(0.10) | Consolidated Statement of Shareholders' Equity The consolidated statements of shareholders' equity detail changes in equity for the nine months ended July 31, 2023, and 2022, reflecting share issuances, stock-based compensation, and net losses - Total shareholders' equity attributable to GMGI increased from $26,797,415 to $30,900,524 from October 31, 2022, to July 31, 2023[21][23] - Key changes include issuing 165,444 shares for RKings acquisition, 7,122,230 shares from cashless option exercise, 104,277 shares for services, and $2,556,064 in stock-based compensation[21][23] - The Company recorded a net loss of $1,942,902 for the nine months ended July 31, 2023[23] Consolidated Statements of Cash Flow The consolidated statements of cash flow provide an overview of cash generated from or used in operating, investing, and financing activities for the nine months ended July 31, 2023, and 2022, showing a net increase in cash Consolidated Statements of Cash Flow Highlights (USD) | Metric | 9 Months Ended July 31, 2023 | 9 Months Ended July 31, 2022 | Change (YoY) | | :--------------------------------------- | :--------------------------- | :--------------------------- | :----------- | | Net Cash Provided by Operating Activities | $1,058,631 | $2,660,332 | $(1,601,701) | | Net Cash Used in Investing Activities | $(96,071) | $(3,499,050) | +$3,402,979 | | Net Cash Provided by (Used in) Financing Activities | $(32,322) | $32,000 | $(64,322) | | Effect of Exchange Rate Changes on Cash | $262,185 | $(121,278) | +$383,463 | | Net Increase (Decrease) in Cash | $1,192,423 | $(927,996) | +$2,120,419 | | Cash at End of Quarter | $16,142,096 | $15,869,660 | +$272,436 | - Cash provided by operating activities decreased significantly due to a net loss and changes in working capital, despite high non-cash expenses like stock-based compensation[33][377] - Cash used in investing activities decreased substantially due to lower acquisition-related cash payments compared to the prior year's RKings acquisition[35][380] Notes to the Consolidated Financial Statements These notes provide detailed explanations of the Company's accounting policies, significant transactions, and financial statement line items, offering crucial context for understanding financial performance and position NOTE 1 - BASIS OF PRESENTATION AND ACCOUNTING POLICIES This note outlines the Company's organization, operations, and key accounting policies, including business segments, recent acquisitions, consolidation principles, revenue recognition, and stock-based compensation - Golden Matrix Group, Inc. operates in two segments: B2B (SaaS solutions for iGaming and sports betting, primarily Asia Pacific) and B2C (pay-to-enter prize competitions in the UK via RKings and online casino in Mexico via Mexplay)[36][37][38][39] - Significant acquisitions include 100% of RKingsCompetitions Ltd. (November 2022), 100% of GMG Assets Limited (August 2022), and 99.99% of Golden Matrix MX (July 2022, Mexplay launched March 2023)[38][39][44][48][49][51] - Revenue recognition follows FASB Topic 606, with B2B revenue from software usage and third-party content royalties, and B2C revenue from prize competition ticket sales and online casino operations (net of payouts and incentives)[62][66][67][68][69] - The Company is pursuing the acquisition of 100% of the Meridian Companies for cash, a promissory note, and equity, with the transaction not yet closed[45] NOTE 2 – ACCOUNTS RECEIVABLE, NET This note details the Company's accounts receivable, carried at estimated collectible amounts, including a significant amount due from Citibank for erroneously processed ACH transfers Accounts Receivable, Net (USD) | Metric | July 31, 2023 | October 31, 2022 | Change (YoY) | | :--------------------------- | :-------------- | :--------------- | :----------- | | Accounts receivable, net | $3,923,213 | $2,641,023 | +$1,282,190 | | Allowance for doubtful accounts | $0 | $0 | $0 | - A receivable of $46,495 is due from Citibank for erroneously posted ACH transfers, with $683,010 already replenished[88] - $1,000,000 of accounts payable were settled with accounts receivable during the nine months ended July 31, 2023[89] NOTE 3 – ACCOUNTS RECEIVABLE – RELATED PARTY This note discloses accounts receivable from Articulate Pty Ltd., a related party wholly-owned by the CEO and his wife, which decreased from October 2022 to July 2023 Accounts Receivable – Related Party (USD) | Metric | July 31, 2023 | October 31, 2022 | Change (YoY) | | :--------------------------------- | :-------------- | :--------------- | :----------- | | Accounts receivable – related parties | $324,326 | $413,714 | $(89,388) | - The related party is Articulate Pty Ltd., owned by CEO Anthony Brian Goodman and his wife[91] NOTE 4 – PREPAID EXPENSES This note details the composition of prepaid expenses, primarily including prepayments for gaming content, licensing fees, and payroll, showing an overall increase Prepaid Expenses (USD) | Metric | July 31, 2023 | October 31, 2022 | Change (YoY) | | :--------------------------- | :-------------- | :--------------- | :----------- | | Total prepaid expenses | $122,393 | $84,372 | +$38,021 | | Prepayments to suppliers | $93,485 | $70,156 | +$23,329 | | Prepayment for gaming license fee | $24,229 | $8,744 | +$15,485 | NOTE 5 – SHORT-TERM DEPOSITS This note describes short-term deposits, primarily a bank guarantee for an office lease in Australia, which has been automatically reinvested annually Short-Term Deposits (USD) | Metric | July 31, 2023 | October 31, 2022 | Change (YoY) | | :----------------- | :-------------- | :--------------- | :----------- | | Short-term deposit | $54,723 | $52,577 | +$2,146 | - The deposit is for an office lease in Australia, collateral for a bank guarantee, earning 0.25% interest[92][93] NOTE 6 – ACQUISITIONS This note details the Company's acquisitions of GMG Assets, RKings, and Golden Matrix MX, including consideration paid, financial impact, and ongoing disputes related to RKings - Acquired 100% of GMG Assets Limited for $30,708 (GBP 25,000) effective August 1, 2022, contributing $4,447,181 in revenues and $176,856 in net income for the nine months ended July 31, 2023[95][96][98] - Completed 100% acquisition of RKings by November 4, 2022, with total consideration paid through July 31, 2023, amounting to $10,896,960[107][108] - RKings contributed $16,183,951 in revenues and $1,611,306 in net income for the nine months ended July 31, 2023[113] - Acquired 99.99% of Golden Matrix MX for $2,411 on July 11, 2022, to operate an online casino in Mexico, which commenced generating revenues in March 2023[119] - The Company is in an ongoing dispute with Paul Hardman (an RKings seller) regarding a £1,000,000 holdback amount, with a partial settlement reached with Mark Weir for £450,000[104][114][115][116] NOTE 7 – INTANGIBLE ASSETS – SOFTWARE PLATFORM, WEBSITE DEVELOPMENT COSTS, TRADEMARKS AND NON-COMPETE AGREEMENTS This note outlines the Company's intangible assets, including capitalized website development costs for Mexplay and RKings, trademarks, non-compete agreements, a gaming permit in Mexico, and their amortization Net Definite-Lived Intangible Assets (USD) | Metric | July 31, 2023 | October 31, 2022 | Change (YoY) | | :--------------------------------------- | :-------------- | :--------------- | :----------- | | Gross definite-lived intangible assets | $3,133,833 | $3,029,554 | +$104,279 | | Total accumulated amortization | $(758,733) | $(422,479) | $(336,254) | | Net definite-lived intangible assets | $2,375,100 | $2,607,075 | $(231,975) | - Capitalized website development costs for Mexplay were $52,788 for the nine months ended July 31, 2023, amortized over 3 years[120][121] - Trademarks ($2,000,000) are amortized over 10 years, and non-compete agreements ($600,000) over 5 years, related to the RKings acquisition[121] - A gaming permit in Mexico ($223,725) is amortized over 6 years[122] - Amortization expense for intangible assets was $328,669 for the nine months ended July 31, 2023, up from $285,815 in the prior year[123] NOTE 8 – ACCOUNTS PAYABLE – RELATED PARTIES This note details accounts payable to related parties, primarily superannuation payable to the Company's management Accounts Payable – Related Parties (USD) | Metric | July 31, 2023 | October 31, 2022 | Change (YoY) | | :--------------------------------- | :-------------- | :--------------- | :----------- | | Accounts payable – related parties | $11,798 | $10,637 | +$1,161 | NOTE 9 – DEFERRED REVENUES This note explains deferred revenues, representing payments received in advance for prize competitions and recognized as revenue upon prize transfer to winners Deferred Revenues (USD) | Metric | July 31, 2023 | October 31, 2022 | Change (YoY) | | :--------------- | :-------------- | :--------------- | :----------- | | Deferred revenues | $270,245 | $182,444 | +$87,801 | NOTE 10 – CUSTOMER DEPOSITS This note details customer deposits across both B2B and B2C segments, including deposits for Progressive Jackpot Games, advance payments for gaming content, and user account balances in Mexico Customer Deposits (USD) | Metric | July 31, 2023 | October 31, 2022 | Change (YoY) | | :----------------- | :-------------- | :--------------- | :----------- | | Total customer deposits | $433,034 | $109,328 | +$323,706 | | B2B segment deposits | $418,176 | $109,328 | +$308,848 | | B2C segment (Mexico) user balances | $14,858 | $0 | +$14,858 | NOTE 11 – RELATED PARTY TRANSACTIONS This note provides extensive details on transactions and compensation with key management personnel and related entities, including employment agreements, stock-based compensation, and licensing agreements - CEO Anthony Brian Goodman's employment agreement was amended, extending to August 2026 with an increased annual salary of $158,400 plus superannuation, receiving 750,000 RSUs (250,000 vested) and exercising options for 5,248,983 common shares[134][137][138] - COO Weiting 'Cathy' Feng's employment agreement was amended, extending to August 2026 with an increased annual salary of $132,000 plus superannuation, receiving 375,000 RSUs (125,000 vested) and exercising options for 1,364,406 common shares[139][141][142] - Directors Thomas E. McChesney and Murray G. Smith received increased monthly compensation ($5,000) and 150,000 RSUs each, with 50,000 vested for each[144][147][149][150] - Revenues from related party Articulate Pty Ltd. (owned by CEO and wife) were $555,613 for the nine months ended July 31, 2023, down from $661,155 in the prior year[167] - The Company entered into a Software License Agreement with Elray Resources Inc. (where CEO and COO hold positions) effective December 1, 2022, for online games, with no revenues generated yet[172][174][178][179] NOTE 12 - EQUITY This note details the Company's equity structure, including preferred and common stock, stock option and RSU activity under its 2018 and 2022 Equity Incentive Plans, and treasury stock repurchases - Series B Preferred Stock (1,000 shares) held by the CEO grants 7,500 votes per share (7,500,000 total votes) and is convertible into 1,000 common shares each, providing significant voting control[182][183] - Common stock outstanding increased from 28,182,575 shares to 36,134,932 shares from October 31, 2022, to July 31, 2023, primarily due to cashless option exercises and shares issued for acquisitions/services[186][188][193][195][196] - Total stock-based compensation cost related to stock options was $470,379 for the nine months ended July 31, 2023[200] - 1,575,000 Restricted Stock Units (RSUs) were granted to officers and directors in September 2022, with 575,000 vesting based on FY2022 performance metrics (revenue and Adjusted EBITDA targets)[203][205][210][212][224] - The Company repurchased 14,594 shares of common stock for $32,322 in April 2023 as part of a $2 million share repurchase program, which were subsequently cancelled[226][227] NOTE 13 – SEGMENT REPORTING AND GEOGRAPHIC INFORMATION This note provides a breakdown of revenues and cost of goods sold by business segment (B2B and B2C) and geographic region, highlighting the increasing contribution of the B2C segment Revenues by Segment and Geographic Region (USD) | Metric | 3 Months Ended July 31, 2023 | 3 Months Ended July 31, 2022 | 9 Months Ended July 31, 2023 | 9 Months Ended July 31, 2022 | | :---------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Total Revenues | $11,307,026 | $9,101,541 | $32,393,064 | $26,461,389 | | B2B Revenues | $3,699,259 (33%) | $4,256,372 (47%) | $11,723,699 (36%) | $11,002,837 (42%) | | B2C Revenues | $7,607,767 (67%) | $4,845,169 (53%) | $20,669,365 (64%) | $15,458,552 (58%) | | Asia Pacific Revenues | $3,699,259 (33%) | $4,256,372 (47%) | $11,723,699 (36%) | $11,002,837 (42%) | | UK Revenues | $7,451,586 (66%) | $4,845,169 (53%) | $20,493,274 (63%) | $15,458,552 (58%) | | Latin America Revenues | $156,181 (1%) | $0 (0%) | $176,091 (1%) | $0 (0%) | Cost of Goods Sold by Segment and Geographic Region (USD) | Metric | 3 Months Ended July 31, 2023 | 3 Months Ended July 31, 2022 | 9 Months Ended July 31, 2023 | 9 Months Ended July 31, 2022 | | :---------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Total COGS | $9,171,849 | $6,620,517 | $25,754,871 | $19,415,700 | | B2B COGS | $2,929,124 (32%) | $3,059,856 (46%) | $8,927,250 (35%) | $8,063,306 (42%) | | B2C COGS | $6,242,725 (68%) | $3,560,661 (54%) | $16,827,621 (65%) | $11,352,394 (58%) | | Asia Pacific COGS | $2,929,124 (32%) | $3,059,856 (46%) | $8,927,250 (35%) | $8,063,306 (42%) | | UK COGS | $6,227,763 (68%) | $3,560,661 (54%) | $16,806,753 (65%) | $11,352,394 (58%) | | Latin America COGS | $14,962 (0%) | $0 (0%) | $20,868 (0%) | $0 (0%) | - B2C segment revenue increased significantly, becoming 67% of total revenue for the three months ended July 31, 2023, up from 53% in the prior year, driven by UK prize competitions and new Mexico online casino operations[232] NOTE 14 - INCOME TAXES This note details the Company's income tax liabilities and expenses across its operating jurisdictions, highlighting the UK's contribution to tax expense and the use of net operating losses in other regions - The Company has $0 tax liability for USA operations due to sufficient net operating losses[235] - UK operations (RKings and GMG Assets) incurred income tax expense of $81,084 for the three months and $299,071 for the nine months ended July 31, 2023, subject to a 19% statutory tax rate[236][238] - Mexico operations (Golden Matrix MX) had $0 income tax expense for the nine months ended July 31, 2023, despite commencing revenues in March 2023, subject to a 30% statutory tax rate[240][241] UK Income Tax Liability (USD) | Metric | Amount | | :--------------------------------------- | :-------------- | | Balance November 1, 2021 | $602,628 | | Income Tax Nov 1, 2021 - Oct 31, 2022 | $419,049 | | Income Tax Nov 1, 2022 - July 31, 2023 | $299,071 | | Tax paid | $(982,855) | | Currency Adjustment | $(130,918) | | Income Tax Liability (July 31, 2023) | $206,975 | NOTE 15 - COMMITMENTS AND CONTINGENCIES This note addresses legal matters and operating lease commitments, including an ongoing dispute with an RKings seller over a holdback amount and details of the Company's office lease - The Company is in dispute with Mr. Paul Hardman regarding a $641,766 holdback amount from the RKings acquisition, which is accrued as a liability[244] - The Company has a three-year office lease in Australia, commenced June 1, 2021, with an annual rent of $112,780 (AUD $167,338), and a renewal option for three years[246] Operating Lease Liabilities (USD) | Metric | July 31, 2023 | October 31, 2022 | Change (YoY) | | :--------------------------------- | :-------------- | :--------------- | :----------- | | Operating lease right-of-use asset | $84,518 | $150,653 | $(66,135) | | Current operating lease liability | $88,198 | $95,085 | $(6,887) | | Non-current operating lease liability | $0 | $59,778 | $(59,778) | NOTE 16 - PURCHASE AGREEMENT This note details the Amended and Restated Sale and Purchase Agreement to acquire 100% of the Meridian Companies for $70 million, comprising cash, restricted common stock, Series C preferred stock, and promissory notes, with closing subject to various conditions - The Company agreed to acquire 100% of the Meridian Companies for a total consideration of $70,000,000[249][294] Meridian Acquisition Consideration (USD) | Component | Amount | Due Date | | :--------------------------------------- | :-------------- | :--------------------------------------- | | Cash payment at Closing | $30,000,000 | At Closing (prior to Dec 31, 2023) | | Restricted common stock (82,141,857 shares) | $246,425,571 (at $3.00/share) | At Closing | | Series C Voting Preferred Stock (1,000 shares) | N/A | At Closing | | Contingent Post-Closing Cash | $5,000,000 | 6 months after Closing | | Contingent Post-Closing Restricted Shares (5,000,000 shares) | $15,000,000 (at $3.00/share) | 6 months after Closing | | Non-Contingent Post-Closing Cash | $20,000,000 | $10M at 12 months, $10M at 18 months after Closing | | Promissory Notes | $15,000,000 | 24 months after Closing | - The Meridian Sellers are expected to collectively own approximately 70% of the Company's outstanding common stock and voting shares post-closing, resulting in a change of control[251] - The acquisition requires the Company to raise approximately $30 million in cash at closing, with plans for debt and/or equity financing[298][407] - The Series C Voting Preferred Stock will grant holders 7,500 votes per share and the right to appoint directors[258][259] NOTE 17 – SUBSEQUENT EVENTS The Company evaluated subsequent events through September 7, 2023, and reported no material subsequent events - No subsequent events were reported after July 31, 2023, through the filing date of September 7, 2023[263] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the Company's financial condition, results of operations, and cash flows, covering business segments, growth strategies, liquidity, capital resources, and critical accounting policies General Information This sub-section provides introductory context for the Management's Discussion and Analysis, including references to forward-looking statements, risk factors, and the Company's public filings - The discussion should be read in conjunction with the 2022 Annual Report on Form 10-K and is subject to forward-looking statements and risk factors[265][266] - Market data and statistical information are based on independent industry publications and the Company's good faith estimates, which are subject to change[269] - The Company files annual, quarterly, and current reports with the SEC, available on the SEC's website and the Company's investor relations page[270] OVERVIEW This overview describes Golden Matrix Group's business model, encompassing B2B SaaS solutions and B2C prize competitions/online casinos, its growth strategy, and financial implications of recent and pending acquisitions - The Company operates in B2B (SaaS for iGaming in Asia Pacific) and B2C (UK prize competitions via RKings, Mexico online casino via Mexplay) segments[273][274] - B2B segment has over 7.7 million registered players and 771 unique casino/live game operations; B2C (RKings) has over 311,000 registered users, and Mexplay has over 32,000 registered users since March 2023 launch[276][278] - Key growth strategies include expanding global reach, investing in sales/marketing for B2C platforms, developing proprietary gaming content, and pursuing synergistic acquisitions, notably the pending Meridian Purchase Agreement[286] - The Company is seeking debt funding for the Meridian acquisition, which will require $70 million in total consideration, including $30 million cash at closing[291][294] RESULTS OF OPERATIONS This section analyzes the Company's financial performance for the three and nine months ended July 31, 2023, compared to 2022, detailing changes in revenues, cost of goods sold, gross profit, and operating expenses across B2B and B2C segments Three months ended July 31, 2023, compared to the three months ended July 31, 2022. For the three months ended July 31, 2023, total revenues increased by 24.2%, driven by B2C growth, despite B2B decline; gross profit decreased due to margin erosion and technology challenges, while operating expenses rose sharply from stock-based compensation and payroll Revenue Performance (3 Months Ended July 31, USD) | Revenue Stream | 2023 | 2022 | Change (YoY) | | :--------------------------------------- | :-------------- | :-------------- | :----------- | | Total Revenues | $11,307,026 | $9,101,541 | +$2,205,485 | | IP & Technology Systems (B2B) | $153,186 | $218,491 | $(65,305) | | Reselling Third-Party Gaming Content (B2B) | $3,546,073 | $4,037,881 | $(491,808) | | Prize Competitions (B2C) | $7,451,586 | $4,845,169 | +$2,606,417 | | Online Casino (Mexplay, B2C) | $156,181 | $0 | +$156,181 | Gross Profit & Margin Performance (3 Months Ended July 31, USD) | Metric | 2023 | 2022 | Change (YoY) | | :---------------- | :-------------- | :-------------- | :----------- | | Gross Profit | $2,135,177 | $2,481,024 | $(345,847) | | Gross Profit Margin | 19% | 27% | -8% | | B2B Gross Profit Margin | 21% | 28% | -7% | | B2C Gross Profit Margin | 18% | 27% | -9% | - General and administrative expenses increased by $725,201, primarily due to $198,833 in stock-based compensation, $154,285 in B2B payroll costs, and $214,472 for Mexplay operations[327] - Related party G&A expenses increased by $550,363, mainly from $529,129 in stock-based compensation for directors and management[328] - Net loss attributable to the Company was $(965,628) in 2023, a significant decrease from $628,332 net income in 2022, driven by lower gross profit and higher operating expenses[337] Nine months ended July 31, 2023, compared to the nine months ended July 31, 2022. For the nine months ended July 31, 2023, total revenues grew by 22.4%, primarily due to B2C expansion; however, gross profit declined, and the Company reported a net loss, largely due to increased stock-based compensation, higher payroll, and reduced foreign exchange gains Revenue Performance (9 Months Ended July 31, USD) | Revenue Stream | 2023 | 2022 | Change (YoY) | | :--------------------------------------- | :-------------- | :-------------- | :----------- | | Total Revenues | $32,393,064 | $26,461,389 | +$5,931,675 | | IP & Technology Systems (B2B) | $560,597 | $668,996 | $(108,399) | | Reselling Third-Party Gaming Content (B2B) | $11,163,102 | $10,333,841 | +$829,261 | | Prize Competitions (B2C) | $20,493,274 | $15,458,552 | +$5,034,722 | | Online Casino (Mexplay, B2C) | $176,091 | $0 | +$176,091 | Gross Profit & Margin Performance (9 Months Ended July 31, USD) | Metric | 2023 | 2022 | Change (YoY) | | :---------------- | :-------------- | :-------------- | :----------- | | Gross Profit | $6,638,193 | $7,045,689 | $(407,496) | | Gross Profit Margin | 20% | 27% | -7% | | B2B Gross Profit Margin | 24% | 26% | -2% | | B2C Gross Profit Margin | 19% | 27% | -8% | - General and administrative expenses increased by $1,522,712, mainly due to $819,937 in stock-based compensation and $540,154 in B2B payroll costs[359] - Related party G&A expenses increased by $1,673,383, primarily from $1,562,753 in stock-based compensation for directors and management[360] - Net loss attributable to the Company was $(1,942,902) in 2023, a significant decline from $1,564,695 net income in 2022, primarily due to lower gross profits, increased stock-based compensation, and higher payroll costs[367] LIQUIDITY AND CAPITAL RESOURCES This section discusses the Company's liquidity position, cash flows, and capital resources, emphasizing self-sustaining operations, funding needs for the Meridian acquisition, and potential future financing strategies Liquidity and Capital Resources (USD) | Metric | July 31, 2023 | October 31, 2022 | Change (YoY) | | :--------------------------- | :-------------- | :--------------- | :----------- | | Cash and cash equivalents | $16,142,096 | $14,949,673 | +$1,192,423 | | Working capital | $17,999,260 | $16,573,796 | +$1,425,464 | | Shareholders' equity of GMGI | $30,900,524 | $26,797,415 | +$4,103,109 | - The Company's operations are self-sustaining, generating positive cash flows since 2018, and are expected to meet working capital needs for the next 12 months[371] - The Company needs to raise approximately $30 million in cash for the Meridian Purchase Agreement, with plans for debt and/or equity financing, which could lead to dilution or increased interest expense[298][407] - Cash provided by operating activities decreased to $1,058,631 for the nine months ended July 31, 2023, from $2,660,332 in the prior year, primarily due to net loss and changes in working capital[376][377] CRITICAL ACCOUNTING POLICIES AND ESTIMATES This section reiterates that the Company's financial statements rely on management's estimates and judgments, particularly for bad debts, accrued liabilities, goodwill, and contingencies, with no material changes since the last annual report - Financial statements require management estimates and judgments for items like bad debts, accrued liabilities, goodwill, and contingencies[385] - No material changes to critical accounting policies have occurred since the October 31, 2022, Annual Report on Form 10-K[385] - Key estimates include foreign currency translation and transactions, with losses recognized in accumulated other comprehensive income (loss) and realized gains/losses in other income[385] Item 3. Quantitative And Qualitative Disclosures About Market Risk As a 'smaller reporting company,' Golden Matrix Group, Inc. is not required to provide quantitative and qualitative disclosures about market risk - The Company is exempt from providing market risk disclosures as it qualifies as a 'smaller reporting company'[386] Item 4. Controls and Procedures The Company's CEO and CFO concluded that disclosure controls and procedures were effective as of July 31, 2023, providing reasonable assurance for timely and accurate financial reporting, with no material changes to internal control - CEO and CFO assessed disclosure controls and procedures as effective as of July 31, 2023, ensuring timely and accurate reporting[387] - No material changes in internal control over financial reporting occurred during the three months ended July 31, 2023[388] - Management acknowledges that controls provide only reasonable assurance and involve judgment in balancing benefits and costs[389] PART II. OTHER INFORMATION Item 1. Legal Proceedings The Company is not currently a party to any material legal proceedings, though an ongoing dispute with an RKings seller over a holdback amount is noted without formal legal action - The Company is not currently a party to any material legal proceedings[391] - An ongoing dispute exists with Mr. Paul Hardman (an RKings seller) over a $641,766 holdback amount, but no formal legal action has been initiated[383] Item 1A. Risk Factors This section updates previously disclosed risk factors, highlighting new risks related to discretionary stock repurchases, financial services industry developments, technology disruptions, and significant dilution and change of control from the Meridian Purchase Agreement - Stock repurchases are discretionary and may not achieve desired objectives or mitigate dilution from stock option exercises and RSU vesting[393][394] - Adverse developments in the financial services industry (e.g., liquidity issues, bank closures) could impair access to funding and hinder acquisitions, including the Meridian Purchase[395][397][398] - Past technology disruptions (e.g., in B2C segment in April 2023) have caused financial and reputational harm, leading to reduced gross profit margins, and future disruptions could reoccur[399][400] - The Meridian Purchase Agreement will cause significant dilution to existing shareholders, with Meridian Sellers expected to own approximately 70% of common stock and voting shares, resulting in a change of control[402][403][405] - The Company needs to raise approximately $30 million in additional capital for the Meridian acquisition, which may involve debt secured by substantially all assets, posing default risks[406][407][408] - The Meridian Purchase Agreement is subject to various closing conditions and termination rights, meaning the acquisition may not be completed[410] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section reports no unregistered sales of equity securities during the quarter ended July 31, 2023, and details the Company's common stock repurchase activity under its authorized program - No unregistered sales of equity securities occurred during the quarter ended July 31, 2023[411] Common Stock Repurchase Activity (USD) | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Total Amount (thousands) | | :--------------------------- | :------------------------------- | :--------------------------- | :----------------------- | | May 1, 2023 to May 31, 2023 | — | — | $1,967.7 | | June 1, 2023 to June 30, 2023 | — | — | $1,967.7 | | July 1, 2023 to July 31, 2023 | — | — | $1,967.7 | | Total | — | — | — | - The Company has an authorized share repurchase program for up to $2 million of common stock, scheduled to expire September 29, 2023, with 14,594 shares totaling $32,322 repurchased to date (as of March 29, 2023, not in the table for Q3)[393][412] Item 3. Defaults Upon Senior Securities The Company reported no defaults upon senior securities - No defaults upon senior securities were reported[413] Item 4. Mine Safety Disclosures This item is not applicable to the Company - This item is not applicable to the Company[414] Item 5. Other Information The Company reported no other information - No other information was reported[415] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including the Amended and Restated Sale and Purchase Agreement for Meridian, certifications of principal officers, and Inline XBRL documents - Key exhibits include the Amended and Restated Sale and Purchase Agreement for Meridian Companies (Exhibit 2.1), certifications of principal executive and financial officers (Exhibits 31.1, 31.2, 32.1, 32.2), and Inline XBRL documents[416][417]