Business Context and Reporting Period
Company: Golden Matrix Group, Inc. (GMGI)
Filing Type: Form 8-K (Current Report)
Date of Report: August 20, 2024
Event: Entry into a Material Definitive Agreement (Share Exchange Agreement) dated August 16, 2024.
Target: Classics Holdings Co. Pty Ltd. ("Classics"), an Australian online trade promotions company operating a B2C platform offering discounts and promotional giveaways (e.g., vehicles, holidays).
Transaction Scope: Acquisition of 80% of Classics' outstanding capital stock.
Key Financial Metrics and Transaction Terms
Consideration for 80% Stake:
- Equity: 810,390 shares of GMGI common stock (Closing Shares).
- Cash at Closing: AU$6,780,000 (approx. US$4,407,000).
- Net Asset Adjustment: AU$33,808 (approx. US$21,975).
- Holdback Cash: Up to AU$500,000 (approx. US$325,000), subject to release within 6 months if no defaults occur.
- Valuation Assumption: GMGI stock valued at AU$3.85 (US$2.51) per share for transaction calculations.
Contingent Consideration (Earnout): Based on Classics' net profit from Closing Date to June 30, 2025.
| Net Profit (AU$) | Earnout Cash (AU$) | Earnout Shares |
|---|---|---|
| < 2,500,000 | 0 | 0 |
| 2,500,000 - 3,000,000 | 910,000 | 100,996 |
| 3,000,001 - 3,500,000 | 1,820,000 | 201,992 |
| > 3,500,000 | 2,184,000 | 242,391 |
True-Up Mechanism: If GMGI stock price 180 days post-closing is lower than the closing date price, shareholders receive additional cash or shares equal to the difference multiplied by the Closing Shares.
Material Changes and Future Obligations
Buyout Option: GMGI retains the right to purchase the remaining 20% of Classics held by shareholders within two years of closing. The price is calculated as 20% of (3-month trailing net profit x Buyout Multiplier x 4). Payment is 70% cash, 30% stock.
- Buyout Multiplier: 5x (if profit < AU$3M), 6x (if profit AU$3M-4.5M), or 7x (if profit > AU$4.5M).
Restrictions:
- Non-Compete: Shareholders cannot compete in Australia, UK, or US in the betting/gambling industry for two years.
- Lock-Up: Think Tank Enterprises Pty Ltd. cannot sell GMGI shares for one year post-closing.
Closing Conditions: Subject to due diligence and entry into a Shareholders Agreement. Closing required by August 21, 2024.
Guidance, Risks, and Unusual Items
Management Commentary: The transaction is intended to expand GMGI's presence in the Australian market through Classics' established B2C platform. The effective date of the exchange is August 1, 2024.
Risks and Contingencies:
- Forward-Looking Statements: Actual results may differ materially due to risks beyond management's control.
- Termination Rights: The agreement can be terminated if closing does not occur by the required date, if regulatory approvals are denied, or if a breach is not cured within 30-45 days.
- Unregistered Securities: Shares issued are exempt from registration under Section 4(a)(2) and Rule 506 of Regulation D; they are subject to transfer restrictions.
Financial Impact: The filing does not provide specific revenue, profit, or cash flow metrics for GMGI or Classics for the current or prior periods. The filing text does not provide a clear value for the total enterprise value of the deal beyond the sum of the consideration components.
Investor Verification Checklist
- Closing Confirmation: Verify if the transaction closed by the August 21, 2024 deadline.
- Stock Price Impact: Monitor GMGI stock price 180 days post-closing to determine if the "True-Up" obligation is triggered.
- Earnout Performance: Track Classics' net profit through June 30, 2025, to assess potential additional cash and stock payouts.
- Regulatory Approvals: Confirm no regulatory bodies have disapproved the transaction or imposed burdensome conditions.
- Shareholder Agreement: Review the attached Shareholders Agreement (Exhibit 10.1) for specific governance details and buyout mechanics.