Notes
to the Consolidated Financial Statements
(expressed
in U.S. dollars)
(Unaudited)
1.
Nature of Operations and Continuance of Business
Good
Gaming, Inc. (Formerly HDS International Corp.) (the “Company”) was incorporated on November 3, 2008, under the laws of the
State of Nevada. The Company is a leading tournament gaming platform and online destination targeting over 250 million e-sports players
and participants worldwide that want to compete at the high school or college level. A substantial portion of the Company’s activities
has involved developing a business plan and establishing contacts and visibility in the marketplace and the Company has not generated
any substantial revenue to date. Beginning in 2018, the Company began deriving revenue by providing transaction verification services
within the digital currency networks of cryptocurrencies. However, on December 12, 2018, the Company discontinued such transaction verification
services by dissolving Crypto Strategies Group, Inc., its wholly-owned subsidiary. In 2021, the Company formulated a new plan to create
a new game called “MicroBuddies™” that combines Ethereum ERC721 NFTs (Non-fungible tokens), non-standard ERC20 tokens
(GOO™), and strategic gameplay to replicate and create unique and rare NFTs. The game will be played online via the MicroBuddies
website and blockchain transactions take place on the Polygon Network. The game is currently in beta and is set to launch in Q4 of 2021.
Going
Concerns
These
financial statements have been prepared on a going concern basis, which implies that the Company will continue to realize its assets
and discharge its liabilities in the normal course of business. The Company has recurring operating losses and an accumulated
deficit. Prior to 2021, the Company has generated minimal revenues. In the third quarter of 2021, the Company generated $269,355
in revenues relating to its’ “MicroBuddies™” business. Although management’s plans are for growth of
revenues from the “MicroBuddies™” business, the current continuation of the Company as a going concern is
dependent upon the continued financial support from its shareholders, the ability to raise equity or debt financing, and the
attainment of profitable operations from the Company’s future business. These factors raise substantial doubt regarding the
Company’s ability to continue as a going concern for a period of one year from the issuance of these financial statements.
These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and
classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
2. Summary of Significant Accounting Policies
Basis
of Presentation
The
accompanying unaudited consolidated financial statements have been prepared in accordance with the U.S. generally accepted accounting
principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they
do not include all of the information and footnotes required by the U.S. generally accepted accounting principles for complete consolidated
financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included.
Use
of Estimates
The
preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management
to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The
Company regularly evaluates estimates and assumptions related to the fair values of convertible debentures, derivative liability, stock-based
compensation, and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical
experience, and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis
for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent
from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates.
To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
Certain
reclassifications have been made to prior-year amounts to conform to the current period presentation.
Cash
Equivalents
The
Company considers all highly liquid instruments with maturities of three months or less at the time of issuance to be cash equivalents.
Amounts receivable from credit card processors are also considered cash equivalents because they are both short-term and highly liquid
in nature.
Intangible
Assets
Intangible
assets are carried at the purchased cost less accumulated amortization. Amortization is computed over the estimated useful lives of the
respective assets, generally five years.
Impairment
of Long-Lived Assets
Long-lived
assets and certain identifiable intangible assets to be held and used are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of such assets may not be recoverable. Determination of recoverability is based on an estimate of undiscounted
future cash flows resulting from the use of the asset and its eventual disposition. Measurement of an impairment loss for long-lived
assets and certain identifiable intangible assets that management expects to hold and use is based on the fair value of the asset. Long-lived
assets and certain identifiable intangible assets to be disposed of are reported at the lower of carrying amount or fair value less costs
to sell.
Derivative
Liability
From
time to time, the Company may issue equity instruments that may contain an embedded derivative instrument which may result in derivative
liability. A derivative liability exists on the date the equity instrument is issued when there is a contingent exercise provision. The
derivative liability is recorded at its fair value calculated by using an option pricing model. The fair value of the derivative liability
is then calculated on each balance sheet date with the corresponding gains and losses recorded in the statement of operations.
Basic
and Diluted Net Loss Per Share
The
Company computes net loss per share in accordance with ASC 260, Earnings Per Share, which requires the presentation of both basic and
diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net loss available to common
shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect
to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock
using the if-converted method. In computing Diluted EPS, the average stock price for the period is used in determining the number of
shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if
their effect is anti-dilutive. On September 30, 2021, and December 31, 2020, the Company had 10,000,000 and 10,000,000 potentially dilutive
shares from outstanding convertible debentures, respectively.
Income
Taxes
Potential
benefits of income tax losses are not recognized in the accounts until realization is more likely than not. Pursuant to ASC 740, the
Company is required to compute tax asset benefits for net operating losses carried forward. The potential benefits of net operating losses
have not been recognized in these consolidated financial statements because the Company cannot be assured it is more likely than not
it will utilize the net operating losses carried forward in future years. Unrecognized tax positions, if ever recognized in the consolidated
financial statements, are recorded in the statement of operations as part of the income tax provision. Our policy is to recognize interest
and penalties accrued on uncertain tax positions, if any, as part of the income tax provision. The Company has no liability for uncertain
tax positions. Unrecognized tax positions, if ever recognized in the consolidated financial statements, are recorded in the statement
of operations as part of the income tax provision. The Company’s policy is to recognize interest and penalties accrued on uncertain
tax positions, if any, as part of the income tax provision. The Company has no liability for uncertain tax positions.
Financial
Instruments
ASC
820, “Fair Value Measurements” and ASC 825, Financial Instruments, requires an entity to maximize the use of observable inputs
and minimize the use of unobservable inputs when measuring fair value. It establishes a fair value hierarchy based on the level of independent,
objective evidence surrounding the inputs used to measure fair value. A financial instrument categorized within the fair value hierarchy
is based upon the lowest level of input that is significant to the fair value measurement. It prioritizes the inputs into three levels
that may be used to measure fair value:
Level
1
Level
1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level
2
Level
2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability
such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets
with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are
observable or can be derived principally from, or corroborated by, observable market data.
Level
3
Level
3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement
of the fair value of the assets or liabilities.
Assets
and liabilities measured at fair value on a recurring basis were presented on the Company’s consolidated balance sheet as of September
30, 2021, and 2020 as follows:
Schedule
of Assets and Liabilities Measured at Fair Value on Recurring Basis
Description
|
|
Fair Value Measurements at September 30, 2021, Using Fair
Value Hierarchy
|
|
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Derivative liability
|
|
$
|
16,508,750
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
16,508,750
|
|
Total
|
|
$
|
16,508,750
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
16,508,750
|
|
Description
|
|
Fair Value Measurements at September 30, 2020, Using Fair
Value Hierarchy
|
|
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Derivative liability
|
|
$
|
991,322
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
991,322
|
|
Total
|
|
$
|
991,322
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
991,322
|
|
The
carrying values of all of our other financial instruments, which include accounts payable and accrued liabilities, and amounts due to
related parties approximate their current fair values because of their nature and respective maturity dates or durations.
Advertising
Expenses
Advertising
expenses are included in general and administrative expenses in the consolidated Statements of Operations and are expensed as incurred.
The Company incurred $158,715 and $1,514 in advertising and promotion expenses in the three months ended September 30, 2021, and 2020,
respectively.
Revenue
Recognition
Revenue
is recognized in accordance with ASC 606. The Company performs the following five steps: (i) identify the contract(s) with a customer,
(ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price
to the performance obligations in the contract, and (v) recognize revenue when (or as) the entity satisfies a performance obligation.
The Company applies the five-step model to arrangements that meet the definition of a contract under Topic 606, including when it is
probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer.
At contract inception, once the contract is determined to be within the scope of Topic 606, the Company evaluates the goods or services
promised within each contract-related performance obligation and assesses whether each promised good or service is distinct. The Company
recognizes as revenue, the amount of the transaction price that is allocated to the respective performance obligation when (or as) the
performance obligation is satisfied. Revenues primarily include revenues from microtransactions. Microtransaction revenues are derived
from the sale of virtual goods to the Company’s players. Proceeds from the sales of virtual goods directly are recognized as revenues
when a player uses the virtual goods.
Recent
Accounting Pronouncements
In
February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.
2016-02, Leases (Topic 842), which amends the existing accounting standards for leases. The new standard requires lessees to record a
right-of-use (“ROU”) asset and a corresponding lease liability on the balance sheet (with the exception of short-term leases).
This new standard is effective for annual reporting periods beginning after December 15, 2018, and interim reporting periods within those
annual reporting periods, with early adoption permitted. We adopted this new standard effective January 1, 2019. The adoption did not
have any effect on the Company as it does not have any leases.
The
Company has implemented all other new accounting pronouncements that are in effect. These pronouncements did not have any material impact
on the consolidated financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting
pronouncements that have been issued that might have a material impact on its financial position or results of operations.
3.
Other Assets
Property
and Equipment consisted of the following:
Schedule
of Property and Equipment
|
|
2021
|
|
|
2020
|
|
|
|
September 30,
|
|
|
|
2021
|
|
|
2020
|
|
Computers and servers
|
|
$
|
20,333
|
|
|
$
|
18,781
|
|
|
|
|
|
|
|
|
|
|
Accumulated Depreciation
|
|
|
(16,077
|
)
|
|
|
(12,366
|
)
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
$
|
4,256
|
|
|
$
|
6,415
|
|
Depreciation
expense for the three months ended September 30, 2021, and 2020 was $540 and $4,100, respectively.
4.
Digital Assets
In
2021, the Company has been working to create a new game called MicroBuddies™ that will be played online and will use blockchain
technology. Digital Asset prices have been volatile in the past and may continue to be so in the future, owing to a variety of risks
and uncertainties. Under current accounting rules, digital assets are considered indefinite-lived intangible assets. The Company needs
to recognize impairment charges if any decrease in their fair values, whereas the Company may not make any upward revisions for market
price increases until a sale. Thus, the carrying value represents the lowest fair value of the digital assets.
As
of September 30, 2021, the carrying value of the Company’s digital assets was $323,207, which reflects $0 impairment charges compared
to no digital assets during September 30, 2020.
5.
Debt
Convertible
Debentures
On
April 15, 2015, the Company issued a convertible debenture with the principal amount of $100,000 to HGT Capital, LLC (“HGT”),
a non-related party. During the quarter ended June 30, 2015, the Company received the first $50,000 in payment. The remaining $50,000
payment would be made at the request of the borrower. No additional payments have been made as of September 30, 2018. Under the terms
of the debentures, the amount was unsecured and was due on October 16, 2016. The note is currently in default and bears interest of 22%
per annum. It was convertible into shares of common stock any time after the maturity date at a conversion rate of 50% of the average
of the five lowest closing bid prices of the Company’s common stock for the thirty trading days ending one trading day prior to
the date the conversion notice was sent by the holder to the Company. On September 21, 2018, the Company entered into a modification
agreement with HGT with respect to the convertible promissory note which has a balance of $107,238. Pursuant to such modification agreement,
all defaults were waived and it was agreed that such note will convert at a 25% discount to the market rather than the default rate.
HGT also agreed to certain sale restrictions which limit the number of shares that they can sell in any month for the next three months.
HGT also agreed to dismiss, with prejudice, the lawsuit that it had filed against the Company. On November 29, 2018, HGT converted $6,978
of a convertible note into 1,655,594 shares of the Company’s common stock. On August 17, 2020, HGT converted $5,833 of notes into
2,645,449 shares of the Company’s common stock. On September 9, 2020, HGT converted $11,822 of notes into 2,775,076 shares of the
Company’s common stock. On November 11, 2020, HGT converted $25,239 of notes into 2,911,055 shares of the Company’s common
stock. On December 18, 2020, HGT converted $40,126 of notes into 3,053,696 shares of the Company’s common stock. On June 25, 2021,
HGT converted the remaining note balance of $17,240 into 1,257,476 shares of the Company’s common stock.
On
September 30, 2021, the Company and ViaOne Services, LLC entered into a revolving convertible promissory note (the “Revolving Note”).
The Company agrees to pay ViaOne the principal sum of $1,000,000 or such a smaller amount as ViaOne may advance to the Company from time
to time under the Revolving Note, which is subject to a simple interest rate of 8% per annum and will expire earlier on demand or the
third anniversary of the Original Issue Date. The Revolving Note (and any unpaid interest or liquidated damages amount) may be converted
into shares of Common Stock at a conversion price of eighty-five percent (85%) of the VWAP for the five (5) trading days immediately
prior to the date of the notice of conversion.
On
September 30, 2021, the Company entered into a new Employee Services Agreement with ViaOne effective as of September 1, 2021 (the “Effective
Date”). For a monthly management fee of $42,000 (the “Monthly Management Fee”), ViaOne shall provide to the Company
services related to Company’s human resources, payroll, marketing, advertising, accounting, and financial services for a period
of one year beginning on the Effective Date and automatically renewing for successive terms of one year each unless either party provides
90 days’ notice. ViaOne has the right to convert part or all of the Monthly Management Fee into shares of the Company’s common
stock, par value $0.001 per share at a Conversion Rate equal to 125% of the Conversion Amount, divided by the Conversion Price. The Conversion
Price means, with respect to Management Fee, 85% of the volume weighted average price (“VWAP”) for the 5 trading days immediately
prior to the date of the notice of conversion.
6. Derivative Liabilities
The
following inputs and assumptions were used to value the convertible debentures outstanding during the years ended September 30, 2021,
and September 30, 2020:
The
projected annual volatility for each valuation period was based on the historic volatility of the Company of 245.6% and 269.5% on September
30, 2021, and 2020, respectively. The risk-free rate was .07% and 0.08% on September 30, 2021, and 2020, respectively. The expected life
was nine months and the dividend yield was 0% for each year.
A
summary of the activity of the derivative liability is shown below:
Schedule
of Derivative Liability
Balance, September 30, 2019
|
|
$
|
659,381
|
|
Change in value
|
|
|
331,941
|
|
Balance, September 30, 2020
|
|
|
991,322
|
|
Change in value
|
|
|
15,517,428
|
|
Balance, September 30, 2021
|
|
|
16,508,750
|
|
7. Common Stock
Share
Transactions for the Quarter Ended September 30, 2020:
On
August 17, 2020, HGT converted $5,833 of a convertible note into 2,645,449 shares of the Company’s common stock.
On
September 09, 2020, HGT converted $11,822 of a convertible note into 2,775,076 shares of the Company’s common stock.
Share
Transactions for the Quarter Ended September 30, 2021:
On
July 21, 2021, William Schultz converted 2,500 shares of Preferred B Stock into 500,000 of the Company’s common stock.
On
August 24, 2021, the Company issued 1,000,000 Company’s common shares to David B. Dorwart for accrued compensation.
On
August 24, 2021, the Company issued 1,000,000 Company’s common shares to Eric Brown for accrued compensation.
On
August 24, 2021, the Company issued 500,000 Company’s common shares to Jordan Axt for accrued compensation.
On
August 24, 2021, the Company issued 500,000 Company’s common shares to Domenic Edward Fontana for accrued compensation.
On
August 24, 2021, the Company issued 500,000 Company’s common shares to John D Hilzendager for accrued compensation.
On
August 24, 2021, the Company issued 300,000 Company’s common shares to Alexandra M Dorwart for accrued compensation.
On
August 24, 2021, the Company issued 200,000 Company’s common shares to Marjorie Greenhalgh for accrued compensation.
On
August 24, 2021, the Company issued 150,000 Company’s common shares to Frances Lynn Martin for accrued compensation.
On
August 24, 2021, the Company issued 50,000 Company’s common shares to Kaitlyn Kazanjian as stock based compensation.
On
August 24, 2021, the Company issued 50,000 Company’s common shares to Elizabeth Van Fossen as stock based compensation.
On
August 24, 2021, the Company issued 400,000 Company’s common shares to Douglas Wathen as stock based compensation.
On
August 24, 2021, the Company issued 100,000 Company’s common shares to Tim Bergman as stock based compensation.
On
August 24, 2021, the Company issued 25,000 Company’s common shares to Samuel Joseph Schwieters as stock based compensation.
On
August 24, 2021, the Company issued 50,000 Company’s common shares to Robert Welch as stock based compensation.
On
August 24, 2021, the Company issued 10,000 Company’s common shares to Nuno Neto as stock based compensation.
On
August 24, 2021, the Company issued 10,000 Company’s common shares to Maria Iriarte Uriarte as stock based compensation.
On
August 24, 2021, the Company issued 100,000 Company’s common shares to Infinity Global Consulting Group, Inc. as stock based
compensation.
On
September 03, 2021, the Company issued 8,000 Company’s common shares to Netleon Technologies Private Limited as stock based compensation.
On
September 03, 2021, the Company issued 105,000 Company’s common shares to Whole Plant Systems, LLC as stock based compensation.
On
September 03, 2021, the Company issued 10,000 Company’s common shares to J Ramsdell Consulting as stock based compensation.
8. Preferred Stock
Our
Articles of Incorporation authorize us to issue up to 2,250,350 shares of preferred stock, $0.001 par value. Of the 2,250,000 authorized
shares of preferred stock, the total number of shares of Series A Preferred Stock the Corporation shall have the authority to issue is
2,000,000, with a stated par value of $0.001 per share, the total number of shares of Series B Preferred Stock the Corporation shall
have the authority to issue is 249,999, with a stated par value of $0.001 per share, the total number of shares of Series C Preferred
Stock the Corporation shall have the authority to issue is 1, with a stated par value of $0.001 per share, and the total number of shares
of Series D Preferred Stock the Corporation shall have the authority to issue is 350, with a stated par value of $0.001 per share. Our
Board of Directors is authorized, without further action by the shareholders, to issue shares of preferred stock and to fix the designations,
number, rights, preferences, privileges, and restrictions thereof, including dividend rights, conversion rights, voting rights, terms
of redemption, liquidation preferences and sinking fund terms. We believe that the Board of Directors’ power to set the terms of,
and our ability to issue preferred stock, will provide flexibility in connection with possible financing or acquisition transactions
in the future. The issuance of preferred stock, however, could adversely affect the voting power of holders of common stock and decrease
the amount of any liquidation distribution to such holders. The presence of outstanding preferred stock could also have the effect of
delaying, deterring, or preventing a change in control of our company.
As
of September 30, 2021, we had 7,500 shares of our Series A preferred stock, 18,616 shares of Series B preferred stock, 1 share of Series
C Preferred Stock, and 0 shares of Series D Preferred Stock issued and outstanding.
The
7,500 issued and outstanding shares of Series A Preferred Stock are convertible into shares of common stock at a rate of 20 common shares
for each Series A Preferred Share. The 18,616 issued and outstanding shares of Series B Preferred Stock are convertible into shares of
common stock at a rate of 200 common shares for each Series B Preferred Share. If all of our Series A Preferred Stock and Series B Preferred
Stock are converted into shares of common stock, the number of issued and outstanding shares of our common stock will increase by 3,873,201
shares.
The
1 issued and outstanding shares of Series C Preferred Stock have voting rights equivalent to 51% of all shares entitled to vote and are
held by ViaOne Services LLC, a Company controlled by our CEO.
The
0 issued and outstanding shares of Series D Preferred Stock were convertible into shares of common stock at the lower of the Fixed Conversion
Price ($.06 per share) or at the VWAP which shall be defined as the average of the five (5) lowest closing prices during the 20 days
prior to conversion.
The
holders of Series A, Series B, Series C, and Series D have a liquidation preference to the common shareholders.
9. Warrant
In
connection with the $100,000 convertible debenture issued to HGT Capital, LLC (“HGT”), the Company issued HGT a warrant to
purchase 100,000 shares of the Company’s common stock at $1.00 per share. This warrant was not exercised and expired on April 15,
2020.
On
September 30, 2021, the Company and ViaOne entered into a revolving convertible promissory note (the “Revolving Note”). The
Company agrees to pay ViaOne the principal sum of $1,000,000 or such a smaller amount as ViaOne may advance to the Company from time
to time under the Revolving Note, which is subject to a simple interest rate of 8% per annum and will expire earlier on demand or the
third anniversary of the Original Issue Date. The Company granted ViaOne warrants to purchase the 1,000,000 shares of Common Stocks at
an exercise price of $0.42, a premium of 20% to the closing bid price of the Common Stock the trading day prior to the execution of the
Revolving Note. Payment of all obligations under the Revolving Note is secured by a security interest granted to ViaOne by the Company
in all of the right, title and interest of the Company in all of the assets of the Company currently owned or acquired hereafter.
10. Related Party Transactions
On
or around April 7, 2016, Silver Linings Management, LLC funded the Company $13,440 in the form of convertible debentures secured by certain
high-powered gaming machines purchased from XIDAX. Such note bore interest at a rate of 10% per annum, payable in cash or kind at the
option of the Company, matured on April 1, 2018, and was convertible into Series B Preferred shares at the option of the holder at any
time.
On
November 30, 2016, ViaOne purchased a Secured Promissory Note equal to a maximum initial principal amount of $150,000 issued by the Company
to ViaOne. As additional advances were made by ViaOne to the Company, the principal amount of the Note was increased to $225,000 and
$363,000 by amendments dated January 31, 2017, and March 1, 2017, respectively.
On
May 5, 2017, ViaOne delivered a default notice to the Company pursuant to Section 6 of the Note Purchase Agreement but has subsequently
extended the due date and has increased the funding up to One Million ($1,000,000) dollars. After giving the Company a fifteen (15) day
notice period to cure the default under the Stock Pledge Agreement, dated November 30, 2016, entered by and among the Company, CMG, and
ViaOne (“Pledge Agreement”), ViaOne took possession of the Series C Stock, which was subject of the Pledge Agreement.
The
Secured Promissory Note as amended increased from time to time due to additional advances provided to the Company by ViaOne.
On
September 1, 2017, the Company executed an amended Employee Services Agreement with ViaOne which stipulated that ViaOne would continue
providing to the Company services relating to the Company’s human resources, marketing, advertising, accounting, and financing
for a monthly management fee of $25,000. This agreement was amended on January 1, 2018. The accrued monthly management fees, $100,000
at December 31, 2017, are convertible by ViaOne into the Company’s common stock at a rate of 125% of the accrued fees at a conversion
price of (i) $0.05 per share; or (ii) the volume-weighted adjusted price (“VWAP”) of the common stock on the 14th day of
each month if the 14th of that month is a trading day. In the event the 14th day of a month falls on a Saturday, Sunday, or a trading
holiday, the VWAP of the Common Stock will be valued on the last trading day before the 14th day of the month. The agreement was terminated
on August 31, 2021.
On
September 27, 2018, the Company and ViaOne entered into a Line of Credit Agreement (the “LOC Agreement”), pursuant to which
the Company issued a secured promissory note with the initial principal amount of $25,000 to ViaOne in exchange for a loan of $25,000
(the “Initial Loan Amount”). In accordance with this Agreement, the Company may request ViaOne to provide loans of up to
$250,000, including the Initial Loan Amount, and ViaOne has the right to decide whether it will honor such request. The Initial Loan
Amount became due on September 30, 2019 (the “Maturity Date”) and bore an interest rate of 8.0% per annum. The unpaid principal
and interest of the Promissory Note after the Maturity Date accrued interest at a rate of 18.0% per annum. The principal amount of the
Promissory Note may increase from time to time up to $250,000 in accordance with the terms and conditions of the Agreement. In connection
with the Agreement and Promissory Note, the Company and ViaOne executed a security agreement dated September 27, 2018, whereby the Company
granted ViaOne a security interest in all of its assets, including without limitation, cash, inventory, account receivables, real property,
and intellectual properties, to secure the repayment of the loans made pursuant to the LOC Agreement and Promissory Note.
On
September 30, 2021, the Company entered into a new Employee Services Agreement with ViaOne effective as of September 1, 2021 (the “Effective
Date”). For a monthly management fee of $42,000 (the “Monthly Management Fee”), ViaOne shall provide to the Company
services related to Company’s human resources, payroll, marketing, advertising, accounting, and financial services for a period
of one year beginning on the Effective Date and automatically renewing for successive terms of one year each unless either party provides
90 days’ notice. ViaOne has the right to convert part or all of the Monthly Management Fee into shares of the Company’s common
stock, par value $0.001 per share at a Conversion Rate equal to 125% of the Conversion Amount, divided by the Conversion Price. The Conversion
Price means, with respect to Management Fee, 85% of the volume weighted average price (“VWAP”) for the 5 trading days immediately
prior to the date of the notice of conversion.
On
September 30, 2021, the Company and ViaOne entered into a revolving convertible promissory note (the “Revolving Note”). The
Company agrees to pay ViaOne the principal sum of $1,000,000 or such a smaller amount as ViaOne may advance to the Company from time
to time under the Revolving Note, which is subject to a simple interest rate of 8% per annum and will expire earlier on demand or the
third anniversary of the Original Issue Date. The Company granted ViaOne warrants to purchase the 1,000,000 shares of Common Stocks at
an exercise price of $0.42, a premium of 20% to the closing bid price of the Common Stock the trading day prior to the execution of the
Revolving Note. Payment of all obligations under the Revolving Note is secured by a security interest granted to ViaOne by the Company
in all of the right, title and interest of the Company in all of the assets of the Company currently owned or acquired hereafter. The
Revolving Note (and any unpaid interest or liquidated damages amount) may be converted into shares of Common Stock at a conversion price
of eighty-five percent (85%) of the VWAP for the five (5) trading days immediately prior to the date of the notice of conversion. The
Revolving Note contains customary events of default, including, among others, the failure by the Company to make a payment of principal
or interest when due. Following an event of default, ViaOne is entitled to accelerate the entire indebtedness under the Revolving Note.
The restrictions are also subject to certain additional qualifications and carve outs, as set forth in the Revolving Note.
As
of September 30, 2021, the total amount the Company owed to ViaOne Services was $2,682,337.
The
Company’s Chairman and Chief Executive Officer is the Chairman of ViaOne.
11. Income Taxes
The
Company has a net operating loss carried forward of $12,789,652 available to offset taxable income in future years until the end of the
fiscal year of 2030.
The
significant components of deferred income tax assets and liabilities on September 30, 2021, and 2020 are as follows:
Schedule
of Deferred Tax Assets and Liabilities
|
|
2021
|
|
|
2020
|
|
Net Operating Loss Carryforward
|
|
$
|
2,685,827
|
|
|
$
|
799,762
|
|
|
|
|
|
|
|
|
|
|
Valuation allowance
|
|
|
(2,685,827
|
)
|
|
$
|
(799,762
|
)
|
|
|
|
|
|
|
|
|
|
Net Deferred Tax Asset
|
|
$
|
-
|
|
|
$
|
-
|
|
The
income tax benefit has been computed by applying the weighted average income tax rates of the United States (federal and state rates)
of 21% to a net loss before income taxes calculated for each jurisdiction. The tax effects of significant temporary differences, which
comprise future tax assets and liabilities, are as follows:
Schedule
of Components of Income Tax Expense
|
|
2021
|
|
|
2020
|
|
Income tax recovery at the statutory rate
|
|
$
|
(1,103,684
|
)
|
|
$
|
(115,837
|
)
|
|
|
|
|
|
|
|
|
|
Valuation allowance change
|
|
|
1,103,684
|
|
|
$
|
115,837
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
11.
Commitments and Contingencies
None.
12.
Subsequent Events
The
Company evaluates subsequent events and transactions that occur after the balance sheet date up to the date that the financial statements
are available to be issued. Any material events that occur between the balance sheet date and the date that the financial statements
were available for issuance are disclosed as subsequent events, while the financial statements are adjusted to reflect any conditions
that existed at the balance sheet date. Based upon this review, except as disclosed within the footnotes or as discussed below, the Company
did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the financial
statements.
On
November 12, 2021 Good Gaming, Inc. (OTCQB: GMER) announced that it has entered into a securities purchase agreement with several institutional
and accredited investors for the purchase of 20,733,337 shares of its common stock (or common stock equivalents in lieu thereof) and
warrants to purchase up to an aggregate of 20,733,337 shares of common stock, in a private placement. The combined purchase price for
one share of common stock (or common stock equivalent) and a warrant to purchase one share of common stock is $0.15. The warrants have
an exercise price of $0.20 per share, will be immediately exercisable and will expire five and one-half years from the issuance date. The
gross proceeds from the private placement offering are expected to be approximately $3.1 million. The Company intends to use the net
proceeds to expand and promote Microbuddies as well as for working capital and general corporate purposes. The offering is expected to
close on or about November 16, 2021, subject to the satisfaction of customary closing conditions.