Golden Matrix Group, Inc. — Form 10-Q Summary
Period: Fiscal first quarter ended October 31, 2017; filed December 5, 2017. The supplied filing identifies the issuer as Golden Matrix Group, Inc., not Meridian Holdings Inc.
Business context and financial performance
Golden Matrix describes itself as a software technology company focused on social online gaming platforms, with a stated focus on the Asian market. Quarterly revenue came from providing social gaming systems to one related-party customer.
| Metric | Three months ended Oct. 31, 2017 | Prior-year quarter |
|---|---|---|
| Revenue | $30,000 | $30,000 |
| Operating expenses | $95,747 | $87,672 |
| Operating loss | $65,747 | $57,672 |
| Net income (loss) | $(458,043) | $1,255,673 |
| Operating cash flow | $(20,942) | $1,356 |
| Financing cash flow | $38,000 | $0 |
The filing does not provide a clear gross margin or gross profit figure. The net loss included a $319,401 loss from revaluing conversion-feature derivative liabilities and $73,709 of interest expense; other income included only an $814 debt-extinguishment gain. Basic loss per share was reported as $(0.00), rounded.
Liquidity, debt and capital
At October 31, 2017, cash was $42,225, total current assets were $99,725, and current liabilities were $1,936,607, leaving a working-capital deficit of $1,836,882. Total liabilities equaled current liabilities. Convertible notes payable, net of discounts, totaled $902,600; accrued interest was $148,026, and derivative liabilities were $442,100. The filing identifies several notes as in default, including a related-party note of $795,712.
Cash increased by $17,058 during the quarter, reflecting $38,000 of new convertible-note proceeds against $20,942 of operating cash use. The company issued 278,387,927 shares for conversions of notes, interest and stock payable; outstanding common shares rose from 141,096,983 at July 31 to 419,484,910 at October 31. The filing also reports 65,956,133 additional shares issued after quarter-end for debt and interest conversions.
Changes, outlook and risks
- Revenue was unchanged year over year, while operating expenses rose to $95,747 from $87,672. Net results swung from prior-year income to a loss, mainly as the prior-year quarter included large derivative fair-value and debt-extinguishment gains; the current quarter recorded a derivative loss and only a small debt-extinguishment gain.
- Management states there is substantial doubt about the company’s ability to continue as a going concern. It plans to seek additional public or private debt or equity financing and ultimately to achieve profitable operations through development of its gaming business; no quantified guidance is provided.
- Revenue and the $57,500 accounts receivable balance were concentrated in Globaltech Software Services, an entity owned by the CEO. The company also reported $252,347 payable to a related-party service provider.
- Management reported disclosure controls were not effective, citing the absence of independent directors and an audit committee financial expert, and deficiencies in disclosure controls. The evaluation described was as of July 31, 2016; management reported no significant subsequent changes in internal control.
- The company reported no known legal disputes at the filing date. It had settled a noteholder dispute during the quarter through cash and share issuance. Results are described as difficult to forecast, and the company cautions that development-stage operating risks may affect its prospects.
Important facts for investors to verify
- Whether the issuer and period match the requested entity and reporting period: this filing is for Golden Matrix Group, Inc. and the quarter ended October 31, 2017.
- Funding availability and the company’s ability to meet obligations given the going-concern warning, working-capital deficit, and defaulted notes.
- Terms and potential dilution from convertible debt, derivative liabilities, and the large number of shares issued for conversions, including subsequent issuances.
- Collection of the related-party receivable and sustainability of revenue concentrated in a single related-party customer.
- Current status of disclosure-control weaknesses and the independence and financial expertise of the board and audit oversight.