Business context and reporting period
The filing is Golden Matrix Group, Inc.’s unaudited Form 10-Q for the quarter and six months ended January 31, 2017 (its fiscal second quarter). This does not match the request metadata naming Meridian Holdings Inc.; confirm the intended issuer and filing. Golden Matrix had shifted from mining to software technology, focusing on social gaming and related systems, and reported no mining assets.
Financial results and condition
Amounts are in U.S. dollars. The filing reports revenue entirely from a related party, Globaltech Software Services LLC, in which the CEO has an interest.
| Metric | Three months ended Jan. 31, 2017 | Six months ended Jan. 31, 2017 | Comparable 2016 period |
|---|---|---|---|
| Revenue | $30,000 | $60,000 | $0 |
| Operating expenses | $151,215 | $238,887 | $642,717 / $893,954 |
| Operating loss | $121,215 | $178,887 | $642,717 / $893,954 |
| Net income (loss) | $169,891 | $1,425,564 | $(1,658,627) / $(3,290,509) |
| Operating cash flow | Not presented | $(26,499) | $(871,714) |
Six-month net income included a $1,144,313 noncash gain from revaluing embedded conversion derivatives and an $806,867 gain on debt extinguishment; it should not be read as evidence of profitable core operations. The filing does not provide a clear gross margin or a useful operating-margin comparison.
At January 31, cash was $13,797, related-party receivables $22,500, total current assets $36,297, and current liabilities $2,032,638. Working capital and shareholders’ equity were each in deficit by $1,996,341. Convertible notes and related accrued interest totaled $1,103,979 net of discount; the balance sheet also reports $648,370 in derivative liabilities. Several notes were in default. Cash increased from $2,296 at July 31, 2016; six-month financing provided $38,000, while investing cash flow was zero.
Changes, outlook, and risks
- Revenue began in 2017, but all six-month revenue came from one related-party customer; $22,500 was receivable from that customer at period-end.
- Operating expenses fell year over year, which management attributed mainly to the business shift away from mining. Interest expense also fell, which management attributed to debt cancellations.
- Management said it planned to seek public or private debt or equity financing as needed and ultimately rely on gambling-business revenue. No quantified guidance was provided. Management warned that operating results are difficult to forecast and that there is no assurance the company will address development-stage risks.
- The filing states that substantial doubt exists about the company’s ability to continue as a going concern absent additional capital and profitable operations.
- Convertible-note conversions drove substantial dilution. A 1-for-150 reverse split took effect January 9, 2017; common shares outstanding were reported as 48,587,906 on January 31 and 70,387,906 on March 13. The authorized common-share count was increased to 2.48 billion.
- Management reported disclosure controls were not effective as of July 31, 2016, citing no independent directors or audit committee financial expert and disclosure-control weaknesses; no significant subsequent changes to internal controls were reported. The company said it had no known legal disputes.
Important facts to verify
- Confirm the issuer: the supplied filing names Golden Matrix Group, Inc., not Meridian Holdings Inc.
- Reconcile derivative-liability disclosures: the balance sheet gives $648,370, while Note 4 gives an ending balance of $646,370.
- Confirm the share-count movement, including reverse-split treatment and conversions between January 31 and March 13.
- Assess the sustainability and collectability of related-party revenue and receivables, and the company’s ability to fund operations and meet defaulted debt obligations.
- Distinguish operating performance from noncash derivative remeasurement and debt-extinguishment gains when evaluating reported net income.