Filing summary
Issuer and period: The filing is Golden Matrix Group, Inc.’s unaudited Form 10-Q for the quarter ended January 31, 2019 (its fiscal second quarter), with six-month results also presented. This does not match the request metadata naming Meridian Holdings Inc.; verify the issuer before relying on this summary.
Business context
Golden Matrix develops social-gaming software and related technology, with a stated focus on Asian markets. The filing attributes most current revenue growth to a software-use license with Articulate Pty Ltd, a company owned by the CEO. The company also reports a license arrangement with Red Label Technology and describes development and launch delays for its social gaming platform.
Key financial metrics
| Metric | Three months ended Jan. 31, 2019 | Six months ended Jan. 31, 2019 |
|---|---|---|
| Revenue | $713,542 | $1,352,237 |
| Gross profit | $644,564 | $1,213,735 |
| Gross margin | About 90.3% | About 89.8% |
| Operating income | $407,145 | $763,789 |
| Net income | $421,791 | $753,790 |
| Operating cash flow | Not separately presented | $839,338 |
- At January 31, 2019, cash was $1,118,499; current assets were $1,828,435 and current liabilities were $1,801,442, for working capital of about $26,993.
- Total liabilities were $1,946,442, including a $1,139,394 related-party contingent liability tied to the GM2 Asset earn-out. Shareholders’ deficit was $118,007.
- Debt included $30,000 in convertible notes and a $10,000 note in default. Related-party settlement payables totaled $290,000, split between $145,000 current and $145,000 long-term.
- Basic and diluted earnings per share were each reported as $0.00, reflecting the very large share count. There were 2,835,318,757 common shares outstanding at January 31, 2019 and March 3, 2019.
Changes versus prior comparable period
- Six-month revenue rose to $1.35 million from $60,000; quarterly revenue was $713,542 versus $30,000. Growth was primarily from Articulate license fees.
- Six-month net income was $753,790, compared with a $373,559 loss a year earlier. Operating income also improved, from a $142,759 loss to $763,789 income.
- Operating cash flow improved to $839,338 from $56,359 used. Cash increased from $446,581 at July 31, 2018 to $1,118,499 at January 31, 2019.
- Common shares outstanding increased by about 212.4 million during the six months, including 209.4 million shares issued to convert related-party debt.
- Interest expense fell substantially, which management attributed mainly to debt settlements. The company also settled or resolved significant prior convertible-note balances, although a $10,000 note remained in default.
Outlook, risks and unusual items
- Going concern: Management states that the accumulated deficit and other factors raise substantial doubt about the company’s ability to continue as a going concern. It expects to seek debt or equity financing as needed and ultimately relies on developing profitable gambling-business operations.
- Revenue concentration and related parties: The filing says related parties generated about 99.8% of six-month revenue. It reports $697,188 in related-party receivables on the balance sheet, including $666,841 due from Articulate and $30,339 from Globaltech. The filing’s concentration disclosure also describes $1,349,485 as the amount due from two related parties, so the wording and amounts should be checked against the underlying statements.
- CEO-related earn-out: The GM2 Asset purchase from the CEO-owned Luxor Capital includes an earn-out equal to 50% of specified 12-month revenues. The estimated contingent liability was $1,139,394 at quarter-end and remains subject to adjustment until the final amount is known.
- Governance and controls: Management reported disclosure controls were ineffective as of July 31, 2018, citing no independent directors, no audit committee financial expert, and weaknesses in disclosure controls. It reported no significant subsequent changes in internal control over financial reporting.
- Equity and control: The company had 6 billion common shares authorized. It also had 1,000 Series B preferred shares outstanding, with voting rights described as four times the votes of all common and other voting preferred shares, a potentially significant control feature.
- No formal financial guidance is provided. Management cautions that results are difficult to forecast and that forward-looking plans and expectations are subject to risks and change.
Investor verification priorities
- Confirm that this Golden Matrix filing, rather than a Meridian Holdings filing, is the intended document and that the reporting period is fiscal Q2 ended January 31, 2019.
- Validate the related-party revenue, receivable and concentration disclosures, including the apparent wording or amount inconsistency in Note 8.
- Review collectability and payment terms for Articulate receivables and the company’s dependence on related-party customers.
- Confirm the final GM2 earn-out obligation, its valuation assumptions, and amounts payable to CEO-affiliated entities.
- Assess near-term liquidity, the maturity and default status of notes and settlement payables, and the company’s financing needs given the going-concern warning.
- Evaluate dilution and voting control, including the large share count, outstanding options, and Series B preferred voting rights.