Golden Matrix Group, Inc. — Form 10-Q Summary
Filing identity: The supplied filing is for Golden Matrix Group, Inc., not Meridian Holdings Inc. It covers the quarter and nine months ended October 31, 2020; financial statements are unaudited. The filing reports the company as a software technology business focused on online gaming platforms and content distribution.
Financial performance and position
| Metric | Three months ended Oct. 31, 2020 | Nine months ended Oct. 31, 2020 |
|---|---|---|
| Total revenue | $1.491 million | $3.272 million |
| Gross profit | $872,422 | $2.226 million |
| Operating income | $41,610 | $369,569 |
| Net income | $30,558 | $345,922 |
| Basic EPS | $0.00 | $0.02 |
| Operating cash flow | Not separately presented for the quarter | $1.799 million |
- For the nine-month period, revenue comprised $2.076 million from proprietary technology and $1.196 million from resale of third-party gaming content. Resale revenue began in June 2020; management said its expected margin was about 25%, substantially below historical technology revenue margins.
- Nine-month revenue increased from $2.411 million in 2019, while gross profit declined from $2.496 million and net income fell from $1.562 million. Quarterly revenue rose from $881,845, but net income declined from $545,888.
- At October 31, cash was $5.010 million; current assets were $6.812 million and current liabilities $957,769, yielding reported working capital of $5.854 million. All reported assets and liabilities were current. Total liabilities included $66,803 of related-party settlement payable in default and $211,171 of customer deposits.
- Nine-month financing cash flow was $1.354 million, including $1.792 million from an August private placement, partly offset by debt and settlement repayments. Cash increased by $3.153 million from January 31.
- Shareholders’ equity was $5.854 million, compared with $2.473 million at January 31. Common shares outstanding were 20,743,430 at October 31 and 21,332,636 as of December 11. The filing gives no separate debt balance at quarter-end beyond the listed liabilities; convertible notes and the related-party promissory note had been settled.
Material changes, outlook and risks
- Higher third-party content costs, stock-based compensation and related-party general and administrative expenses weighed on earnings. Nine-month related-party G&A rose to $1.313 million from $398,735, including $1.032 million of stock-based compensation.
- Revenue and receivables are concentrated: Articulate Pty Ltd, a related party owned by the CEO and his wife, generated 50% of nine-month revenue and represented 58% of net receivables. Red Label represented the remaining 42% of net receivables. The Articulate receivable was $1.046 million after a $410,045 payable/receivable offset.
- The company reported a $29,988 Nevada unclaimed-property penalty relating to a previously outstanding $30,000 note. It applied for a voluntary disclosure program and was awaiting a response.
- Management said cash on hand and potential access to financing were expected to support operations for the foreseeable future, but warned that additional financing might not be available on acceptable terms. COVID-19 effects remained uncertain and could adversely affect demand, operations, cash flows and results.
- Potential commercial developments include an Amelco sportsbook software licence and a Playtech distribution agreement effective December 1, 2020. The filing provides no quantified revenue forecast or formal earnings guidance. Nasdaq listing approval was still pending.
- Disclosure controls were deemed ineffective due to material weaknesses: insufficient accounting staff to segregate duties and lack of formal written procedures for related-party transactions. Management described plans to address both. The filing reported no material legal proceedings and no material changes to previously disclosed risk factors.
Important facts for investors to verify
- Confirm the issuer identity: the filing is Golden Matrix Group, Inc., despite the request metadata naming Meridian Holdings Inc.
- Assess the collectability and timing of the substantial Articulate and Red Label receivables, as well as the risks from customer and related-party concentration.
- Review the economics and realized margins of third-party content resale and whether the new channel can offset lower margins and declining proprietary-system revenue.
- Track resolution of the Nevada penalty, the defaulted Luxor settlement payable, and management’s remediation of control weaknesses.
- Evaluate dilution from outstanding options and warrants, the reverse split, and the status and terms of the Nasdaq application and commercial agreements.