Filing summary
Entity and period: The supplied filing is Golden Matrix Group, Inc.’s Form 10-Q for the quarter ended July 31, 2022, not a filing identified in the request metadata as Meridian Holdings Inc. The filing reports unaudited results for the three and nine months ended July 31, 2022, compared with the same periods in 2021. Golden Matrix provides B2B iGaming software and content services and, following its acquisition of 80% of RKings, UK B2C prize competitions.
Financial performance
| Metric | Three months ended July 31 | Nine months ended July 31 |
|---|---|---|
| Total revenue | $9.10 million vs. $3.25 million | $26.46 million vs. $7.84 million |
| Gross profit | $2.48 million vs. $1.21 million | $7.05 million vs. $3.35 million |
| Gross margin | 27% vs. 37% | 27% vs. 43% |
| Operating income | $729,312 vs. $510,776 | $1.89 million vs. $682,006 |
| Net income attributable to Golden Matrix | $628,332 vs. $484,613 | $1.56 million vs. $664,757 |
| Diluted earnings per share | $0.02 vs. $0.01 | $0.04 vs. $0.02 |
Revenue growth largely reflects RKings, which contributed $15.46 million in revenue from acquisition through July 31, 2022. In the nine-month period, B2C generated $15.46 million of revenue and B2B generated $11.00 million. B2B third-party content resale revenue rose, while revenue from the company’s own IP and technology systems declined, including lower related-party revenue. Management attributed lower consolidated gross margin primarily to the larger share of lower-margin content resale and B2C revenue.
Nine-month operating expenses were $5.15 million, up from $2.67 million; general and administrative expense and professional fees increased, with acquisition-related operations among the drivers. Nine-month foreign-exchange gain was $227,324, versus a $16,421 loss in 2021. Income tax expense was $326,135, primarily related to UK operations.
Cash, liquidity and obligations
- At July 31, 2022, cash was $15.87 million, current assets $19.91 million, current liabilities $3.60 million, and working capital $16.31 million. Total assets were $33.39 million and total liabilities $3.70 million.
- Nine-month operating cash flow was $2.66 million; investing cash flow was negative $3.50 million, mainly reflecting $3.34 million cash consideration for RKings; financing cash flow was $32,000. Cash declined $928,000 from October 31, 2021.
- The filing reports no conventional borrowings or interest expense for the 2022 periods. Lease liabilities totaled approximately $193,000. A $1.22 million RKings acquisition holdback was recorded as a contingent liability; the company subsequently paid approximately $548,000 to settle with one seller, while claims against the other seller remained outstanding.
- Goodwill of $10.72 million and intangible assets of $2.49 million were primarily associated with RKings. Related-party receivables were $659,515 at quarter-end.
Changes, outlook and risks
- Compared with 2021, reported revenue and earnings increased substantially, but the comparison includes RKings, which was acquired effective November 1, 2021. Pro forma figures show lower revenue and net income attributable to Golden Matrix for the nine-month period versus the prior-year pro forma period.
- Management said operations were self-sustaining and cash should meet working-capital needs for the next 12 months and beyond. It stated that additional capital could be sought for expansion or acquisitions; financing may be unavailable or dilutive.
- Stated priorities include expanding distributors and markets, investing in sales and marketing, developing proprietary gaming content, and pursuing strategic acquisitions. Management said it planned to launch its peer-to-peer gaming system by December 2022 and expected to seek improved margins through scale and prize-level margin improvements. The filing provides no quantified financial guidance.
- Risks include regulation and licensing, competition and dependence on third-party content suppliers, customer concentration, consumer discretionary spending and economic conditions, currency movements, cybersecurity and systems failures, acquisition integration, possible financing dilution, and the CEO’s voting control. The company reported no material adverse operational impact from COVID-19 to date.
- After quarter-end, Golden Matrix entered into a settlement with RKings seller Mark Weir: it paid approximately $548,000 on August 21, 2022, and Weir entered an employment agreement. Disputes and claims against the other seller remained ongoing.
Important facts to verify
- Confirm the correct issuer: the supplied text is for Golden Matrix Group, Inc. (ticker GMGI), not Meridian Holdings Inc.
- Review RKings acquisition economics, final purchase-price allocation, the holdback settlement, and the remaining seller dispute; confirm any subsequent payments or liabilities.
- Assess the sustainability and margins of RKings and third-party content resale, given lower reported consolidated gross margin and the decline in legacy IP-related revenue.
- Reconcile the filing’s disclosures about Series B preferred shares and voting/conversion rights. The text contains inconsistent share-count descriptions in its risk-factor discussion; the financial statements report 1,000 Series B shares outstanding.
- Consider dilution and governance: the filing reports 28,182,575 common shares outstanding as of September 7, 2022, options and warrants, and CEO voting control.
- Monitor collection of related-party receivables and the remaining Citibank receivable relating to unauthorized ACH transfers; $67,498 remained due at July 31, 2022.