UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal quarter ended September 30, 2024
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 333-273220
GAMER PAKISTAN INC.
(Exact Name of Registrant as Specified in Its Charter)
| Delaware |
|
87-3732146 |
|
(State or Other Jurisdiction of
Incorporation or Organization) |
|
(I.R.S. Employer
Identification No.) |
|
35 E Horizon Ridge Pkwy, Suite 110-481
Henderson, Nevada |
|
89002 |
| (Address of Principal Executive Offices) |
|
(Zip Code) |
Registrant’s telephone number, including area
code: 702-905-1171
N/A
(Former name, former address and former fiscal year,
if changed since last report)
Securities registered pursuant to Section 12(b) of
the Act:
| Title of each class |
|
Trading Symbol(s) |
|
Name of each exchange on which registered |
| Common stock, $0.0001 par value per share |
|
GPAK |
|
The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant (1)
has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has
submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of
this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No
☐
Indicate by check mark whether the registrant is a
large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See
the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and
“emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large Accelerated Filer ☐ |
Accelerated Filer ☐ |
Non-accelerated Filer ☒ |
Smaller Reporting Company ☒ |
| |
|
|
|
| |
|
|
Emerging Growth Company ☒ |
If an emerging growth company, indicate by check mark
if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards
provided pursuant to Section 13(a) of the Exchange Act
Indicate by check mark whether the registrant is a
shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No
☒
At November 19, 2024, there were 25,579,319 shares
of the registrant’s common stock outstanding.
GAMER PAKISTAN INC.
Table of Contents
- i -
Table of Contents
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking
statements. All statements other than statements of historical facts contained in this Quarterly Report may be forward-looking statements.
The forward-looking statements are contained principally in the sections entitled “Risk Factors,” and “Management’s
Discussion and Analysis of Financial Condition and Results of Operations,” but are also contained elsewhere in this Quarterly Report.
In some cases, you can identify forward-looking statements by terms such as “may,” “might,” “will,”
“should,” “expects,” “plans,” “anticipates,” “could,” “would,”
“intends,” “targets,” “projects,” “contemplates,” “believes,” “estimates,”
“predicts,” “potential” or “continue” or the negative of these terms or other similar expressions.
Forward-looking statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results,
performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the
forward-looking statements. Forward-looking statements include, but are not limited to, statements about:
| |
● |
Failure of future market acceptance of our mobile esports products and services; |
| |
● |
Increased levels of competition; |
| |
● |
Changes in political, economic or regulatory conditions generally and in the markets in which we operate; |
| |
● |
Our ability to retain and attract senior management and other key employees; |
| |
● |
Our ability to protect our trade secrets or other proprietary rights, operate without infringing upon the proprietary rights of others and prevent others from infringing on the proprietary rights of the Company; and |
| |
● |
Other risks, including those described in the “Risk Factors” discussion. |
You should carefully review and consider the information
regarding certain factors which could materially affect our business, financial condition or future results set forth under the heading
“Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023. There have
been no material changes from the risk factors previously disclosed therein, except as set in the “Risk Factors” section of
this Quarterly Report on Form 10-Q for a discussion of important factors that may cause our actual results to differ materially from those
expressed or implied by our forward-looking statements. The forward-looking statements in this Quarterly Report are only predictions,
and we may not actually achieve the plans, intentions or expectations included in our forward-looking statements. We have based these
forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe
may affect our business, financial condition and results of operations. Because forward- looking statements are inherently subject to
risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as predictions
of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results
could differ materially from those projected in the forward-looking statements.
These forward-looking statements speak only as of
the date of this Quarterly Report. While we may elect to update these forward-looking statements at some point in the future, we have
no current intention of doing so except to the extent required by applicable law. You should therefore not rely on these forward-looking
statements as representing our views as of any date subsequent to the date of this Quarterly Report on Form 10-Q.
- ii -
Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
GAMER PAKISTAN INC.
Consolidated Balance Sheets
| |
|
|
|
|
|
|
|
|
| |
|
|
September 30 |
|
December 31, |
|
| |
Note |
|
2024 |
|
2023 |
|
| |
|
|
|
|
|
|
|
|
| Assets |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| Current assets: |
|
|
|
|
|
|
|
|
| Cash |
|
|
$ |
1,224,560 |
|
$ |
3,371,123 |
|
| Note receivable, current portion |
4 |
|
|
125,000 |
|
|
— |
|
| Restricted cash |
2 |
|
|
112,450 |
|
|
— |
|
| Prepaid expenses and other current assets |
|
|
|
184,697 |
|
|
164,022 |
|
| Total current assets |
|
|
$ |
1,646,707 |
|
$ |
3,535,145 |
|
| |
|
|
|
|
|
|
|
|
| Restricted cash |
2 |
|
|
— |
|
|
400,000 |
|
| Furniture and equipment, net |
2 |
|
|
1,058 |
|
|
— |
|
| Right-of-use asset, related party |
6 |
|
|
54,973 |
|
|
— |
|
| Note receivable, net of current portion |
4 |
|
|
175,000 |
|
|
— |
|
| Other long-term assets |
6 |
|
|
— |
|
|
54,422 |
|
| Total assets |
|
|
$ |
1,877,738 |
|
$ |
3,989,567 |
|
| |
|
|
|
|
|
|
|
|
| Liabilities |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| Current liabilities: |
|
|
|
|
|
|
|
|
| Accounts payable and accrued expenses |
5 |
|
$ |
37,881 |
|
$ |
170,464 |
|
| Due to related parties |
6 |
|
|
1,078 |
|
|
30,816 |
|
| Total current liabilities |
|
|
|
38,959 |
|
|
201,280 |
|
| |
|
|
|
|
|
|
|
|
| Total liabilities |
|
|
|
38,959 |
|
|
201,280 |
|
| |
|
|
|
|
|
|
|
|
| Commitments and contingencies |
8 |
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| Stockholders’ equity |
7 |
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| Preferred stock; $0.0001 par value; 10,000,000 shares authorized; nil shares issued and outstanding |
|
|
|
— |
|
|
— |
|
| Common stock, $0.0001 par value, 100,000,000 shares authorized, 25,579,319 shares issued and outstanding |
|
|
|
2,558 |
|
|
2,558 |
|
| Additional paid-in capital |
|
|
|
6,152,033 |
|
|
6,152,033 |
|
| Accumulated deficit |
|
|
|
(4,312,660 |
) |
|
(2,362,440 |
) |
| Accumulated other comprehensive loss |
|
|
|
(2,869 |
) |
|
(3,561 |
) |
| |
|
|
|
|
|
|
|
|
| Total stockholders’ equity - Gamer Pakistan Inc. |
|
|
|
1,839,062 |
|
|
3,788,590 |
|
| Non-controlling interest |
|
|
|
(283 |
) |
|
(303 |
) |
| Total stockholders’ equity |
|
|
|
1,838,779 |
|
|
3,788,287 |
|
| Total liabilities and stockholders’ equity |
|
|
$ |
1,877,738 |
|
$ |
3,989,567 |
|
The accompanying footnotes are an integral part of
these unaudited consolidated financial statements.
- 1 -
Table of Contents
GAMER PAKISTAN INC.
Consolidated Statements of Operations (Unaudited)
For the three and nine months ended September 30, 2024 and 2023
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
Nine Months |
|
Nine Months |
|
Three Months |
|
Three Months |
|
| |
|
|
Ended |
|
Ended |
|
Ended |
|
Ended |
|
| |
Note |
|
September 30, 2024 |
|
September 30, 2023 |
|
September 30, 2024 |
|
September 30, 2023 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Revenue |
2 |
|
$ |
2,189 |
|
$ |
— |
|
$ |
205 |
|
$ |
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cost of revenue |
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gross profit |
|
|
|
2,189 |
|
|
— |
|
|
205 |
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| General and administrative expenses |
9 |
|
|
1,972,389 |
|
|
297,752 |
|
|
507,537 |
|
|
166,169 |
|
| Total operating expenses |
|
|
|
1,972,389 |
|
|
297,752 |
|
|
507,537 |
|
|
166,169 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total expenses |
|
|
|
1,972,389 |
|
|
— |
|
|
507,537 |
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Loss from operations |
|
|
|
(1,970,200 |
) |
|
(297,752 |
) |
|
(507,332 |
) |
|
(166,169 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Interest expense |
|
|
|
— |
|
|
(13,794 |
) |
|
— |
|
|
(5,244 |
) |
| Interest income |
|
|
|
20,000 |
|
|
— |
|
|
6,500 |
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Income tax expense |
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net loss |
|
|
$ |
(1,950,200 |
) |
$ |
(311,546 |
) |
$ |
(500,832 |
) |
$ |
(171,413 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net income (loss) - non-controlling interest |
|
|
$ |
20 |
|
$ |
(473 |
) |
$ |
(178 |
) |
$ |
(473 |
) |
| Net loss attributable to Gamer Pakistan Inc. |
|
|
$ |
(1,950,220 |
) |
$ |
(311,073 |
) |
$ |
(500,654 |
) |
$ |
(170,940 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net loss per share attributable to common stockholders, basic and diluted |
|
|
$ |
(0.08 |
) |
$ |
(0.01 |
) |
$ |
(0.02 |
) |
$ |
(0.01 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted average common shares outstanding, basic and diluted |
|
|
|
25,579,319 |
|
|
23,879,319 |
|
|
25,579,319 |
|
|
23,879,319 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Comprehensive loss: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net loss |
|
|
|
(1,950,200 |
) |
|
(311,546 |
) |
|
(500,832 |
) |
|
(171,413 |
) |
| Unrealized loss on foreign currency translation |
|
|
|
692 |
|
|
(2,132 |
) |
|
(104 |
) |
|
(2,132 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total comprehensive loss |
|
|
$ |
(1,949,508 |
) |
$ |
(313,678 |
) |
$ |
(500,936 |
) |
$ |
(173,545 |
) |
| Comprehensive loss attributable to non-controlling interest |
|
|
|
20 |
|
|
(473 |
) |
|
(178 |
) |
|
(473 |
) |
| Comprehensive loss - Gamer Pakistan Inc. |
|
|
|
(1,949,528 |
) |
|
(313,205 |
) |
|
(500,758 |
) |
|
(173,072 |
) |
The accompanying footnotes are an integral part of
these unaudited consolidated financial statements.
- 2 -
Table of Contents
GAMER PAKISTAN INC.
Consolidated Statements of Stockholders’ Equity (Unaudited)
For the nine months ended September 30, 2024 and 2023
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
| |
|
|
|
Additional |
|
|
|
Other |
|
Non- |
|
Total |
|
| |
|
Common Stock |
|
Paid-In |
|
Accumulated |
|
Comprehensive |
|
controlling |
|
Stockholders’ |
|
| |
|
Shares |
|
Amount |
|
Capital |
|
Deficit |
|
Income (Loss) |
|
Interest |
|
Equity |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2023 |
|
25,579,319 |
|
$ |
2,558 |
|
$ |
6,152,033 |
|
$ |
(2,362,440 |
) |
$ |
(3,561 |
) |
$ |
(303 |
) |
$ |
3,788,287 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net loss |
|
— |
|
|
— |
|
|
— |
|
|
(873,195 |
) |
|
— |
|
|
(2,030 |
) |
|
(875,225 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Unrealized gain on foreign currency translation |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
682 |
|
|
— |
|
|
682 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
March 31, 2024
(unaudited) |
|
25,579,319 |
|
|
2,558 |
|
|
6,152,033 |
|
|
(3,235,635 |
) |
|
(2,879 |
) |
|
(2,333 |
) |
|
2,913,744 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net loss |
|
— |
|
|
— |
|
|
— |
|
|
(576,371 |
) |
|
— |
|
|
2,228 |
|
|
(574,143 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Unrealized gain on foreign currency translation |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
114 |
|
|
— |
|
|
114 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
June 30, 2024
(unaudited) |
|
25,579,319 |
|
|
2,558 |
|
|
6,152,033 |
|
|
(3,812,006 |
) |
|
(2,765 |
) |
|
(105 |
) |
|
2,339,715 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net loss |
|
— |
|
|
— |
|
|
— |
|
|
(500,654 |
) |
|
— |
|
|
(178 |
) |
|
(500,832 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Unrealized loss on foreign currency translation |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(104 |
) |
|
— |
|
|
(104 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
September 30, 2024
(unaudited) |
|
25,579,319 |
|
$ |
2,558 |
|
$ |
6,152,033 |
|
$ |
(4,312,660 |
) |
$ |
(2,869 |
) |
$ |
(283 |
) |
$ |
1,838,779 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2022 |
|
23,879,319 |
|
$ |
2,388 |
|
$ |
541,819 |
|
$ |
(311,632 |
) |
$ |
— |
|
$ |
— |
|
$ |
232,228 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net loss |
|
— |
|
|
— |
|
|
— |
|
|
(80,699 |
) |
|
— |
|
|
— |
|
|
(80,699 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
March 31, 2023
(unaudited) |
|
23,879,319 |
|
|
2,388 |
|
|
541,819 |
|
|
(392,331 |
) |
|
— |
|
|
— |
|
|
151,876 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net loss |
|
— |
|
|
— |
|
|
— |
|
|
(59,434 |
) |
|
— |
|
|
— |
|
|
(59,434 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
June 30, 2023
(unaudited) |
|
23,879,319 |
|
|
2,388 |
|
|
541,819 |
|
|
(451,765 |
) |
|
— |
|
|
— |
|
|
92,442 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net loss |
|
— |
|
|
— |
|
|
— |
|
|
(170,940 |
) |
|
— |
|
|
(473 |
) |
|
(171,413 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Unrealized loss on foreign currency translation |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(2,132 |
) |
|
— |
|
|
(2,132 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
September 30, 2023
(unaudited) |
|
23,879,319 |
|
$ |
2,388 |
|
$ |
541,819 |
|
$ |
(622,705 |
) |
$ |
(2,132 |
) |
$ |
(473 |
) |
$ |
(81,103 |
) |
The accompanying footnotes are an integral part of
these unaudited consolidated financial statements.
- 3 -
Table of Contents
GAMER PAKISTAN INC.
Consolidated Statements of Cash Flows (Unaudited)
For the nine months ended September 30, 2024 and 2023
| |
|
|
|
|
|
|
|
| |
|
Nine months ended |
|
| |
|
September 30, 2024
unaudited |
|
September 30, 2023
unaudited |
|
| Cash flows from operating activities |
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
| Net loss |
|
$ |
(1,950,200 |
) |
$ |
(311,546 |
) |
| Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
| Depreciation |
|
|
114 |
|
|
— |
|
| Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
| Prepaid expenses and other assets |
|
|
(20,599 |
) |
|
4,818 |
|
| Accounts payable and accrued expenses |
|
|
(132,587 |
) |
|
(14,679 |
) |
| Related Party Payable |
|
|
(29,767 |
) |
|
13,794 |
|
| |
|
|
|
|
|
|
|
| Net cash used in operating activities |
|
|
(2,133,039 |
) |
|
(307,613 |
) |
| |
|
|
|
|
|
|
|
| Cash flows from investing activities |
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
| Payments for property and equipment |
|
|
(1,168 |
) |
|
— |
|
| Issuance of note receivable |
|
|
(300,000 |
) |
|
— |
|
| |
|
|
|
|
|
|
|
| Net cash used in investing activities |
|
|
(301,168 |
) |
|
— |
|
| |
|
|
|
|
|
|
|
| Cash flows from financing activities |
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
| Payment of deferred offering costs |
|
|
— |
|
|
(56,934 |
) |
| Advances from related party |
|
|
— |
|
|
89,700 |
|
| Issuance of notes payable, short term
|
|
|
— |
|
|
260,000 |
|
| |
|
|
|
|
|
|
|
| Net cash provided by financing activities |
|
|
— |
|
|
292,766 |
|
| |
|
|
|
|
|
|
|
| Effect of exchange rate changes on cash and restricted cash |
|
|
94 |
|
|
(2,135 |
) |
| |
|
|
|
|
|
|
|
| Net increase (decrease) in cash and restricted cash |
|
|
(2,434,113 |
) |
|
(16,982 |
) |
| |
|
|
|
|
|
|
|
| Cash and restricted cash as of beginning of period |
|
|
3,771,123 |
|
|
88,463 |
|
| |
|
|
|
|
|
|
|
| Cash and restricted cash as of end of period |
|
$ |
1,337,010 |
|
$ |
71,481 |
|
The accompanying footnotes are an integral part of
these unaudited consolidated financial statements.
- 4 -
Table of Contents
Note 1 – Organization and Basis of Presentation
Organization
Gamer Pakistan Inc. (the “Gamer Pakistan”)
was incorporated on November 23, 2021 under the laws of the State of Delaware. Gamer Pakistan is an interactive esports event promotion
and product marketing company.
We conduct our operations in Pakistan through K2 Gamer
(PVT) Ltd. (“K2 Gamer”), and Elite Sports Pakistan Pvt. Ltd. (“ESP”), each a company duly incorporated under the
laws of Pakistan. Pursuant to agreements with the three owners of K2 Gamer, we acquired 90% ownership of K2 Gamer in November 2022 subject
to required approval by the Securities and Exchange Commission of Pakistan (“SECP”), which approval was granted in July 2023.
We acquired 90% of K2 Gamer so that it could be our operating subsidiary in Pakistan.
The Company determined that K2 Gamer was a variable interest entity and
it was the primary beneficiary of K2 Gamer prior to acquiring 90% of K2 Gamer in July 2023. However, the activity in K2 Gamer was immaterial
prior to July 2023 and the results of K2 Gamer have only been included in the Company’s results since July 2023. K2 Gamer comprised
approximately 3.9% and 1.8% of the Company’s total assets as of September 30, 2024 and December 31, 2023, and 0.4% and 0.0% of the Company’s
net loss for the three and nine months ended September 30, 2024, respectively.
Basis of Presentation
The accompanying consolidated financial statements
were prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The
consolidated financial statements include the accounts of Gamer Pakistan and K2 Gamer (collectively, the “Company”). Gamer
Pakistan owns a 90% controlling interest in K2 Gamer. The value of the non-controlling interest in K2 Gamer is immaterial.
The functional currency of K2 Gamer is the Pakistan
Rupee (“PKR”). The assets and liabilities of K2 Gamer are translated to United States Dollars (“USD”) at period
end exchange rates, while statements of operations accounts are translated at the average exchange rate during the period. The effects
of foreign currency translation adjustments are included in other comprehensive loss, which is a component of accumulated other comprehensive
income (loss) in stockholders’ equity. All significant intercompany accounts and transactions have been eliminated in consolidation.
Interim financial statements
The unaudited consolidated financial statements are prepared by the Company,
pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). The information furnished herein
reflects all adjustments, consisting only of normal recurring adjustments, which in the opinion of management, are necessary to fairly
state the Company’s financial position, the results of its operations, and cash flows for the periods presented. Certain information
and footnote disclosures normally present in annual financial statements prepared in accordance with accounting principles generally accepted
in the United States of America were omitted pursuant to such rules and regulations. The results of operations for the three and nine months
ended September 30, 2024 are not necessarily indicative of the results expected for the year ending December 31, 2024.
Note 2 – Summary of Significant Accounting
Policies
Use of Estimates
The preparation of consolidated financial statements
in conformity with U.S. GAAP 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 consolidated financial statements and the reported amounts
of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions. 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. Significant estimates in the accompanying financial statements include valuation allowance
on deferred tax assets.
Cash Equivalents
For the purpose of the statement of cash flows, cash equivalents include
time deposits, certificate of deposits, and all highly-liquid debt instruments with original maturities of three months or less.
At September 30, 2024 and December 31, 2023, the Company did not have any cash equivalents.
Restricted Cash
As part of its agreement with the underwriters
for the Company’s initial public offering (“IPO”), the Company was required to maintain $400,000
in an escrow account for up to 24 months from the closing of the IPO. During September 2024, the restriction on these funds was
removed and the Company entered into a note receivable agreement for $300,000 of the funds (See Note 4). As of September 30, 2024,
the remaining funds of approximately $112,000 remained in the escrow account and were released to the Company in October 2024.
Therefore, as of September 30, 2024, the funds were recorded as a current asset and as of December 31, 2023 they were recorded as a
noncurrent asset.
The following table provides a reconciliation of cash
and restricted cash reported within the balance sheets that sum to the total of the same such amounts shown in the statements of cash
flows:
| |
|
September 30,
2024 |
|
December 31,
2023 |
|
| |
|
|
|
|
|
|
|
| Cash |
|
$ |
1,224,560 |
|
$ |
3,371,123 |
|
| Restricted cash |
|
|
112,450 |
|
|
400,000 |
|
| Total cash and restricted cash shown in the statements of cash flows |
|
$ |
1,337,010 |
|
$ |
3,771,123 |
|
Furniture and equipment, net
Furniture and equipment, net, is stated at cost. Depreciation
is computed over the estimated useful lives of the assets, generally three to five years, using the straight-line method. Expenditures
for maintenance and repairs are charged to operations; major expenditures for renewals and betterments are capitalized and depreciated
over their useful lives. Leasehold improvements are amortized over the lesser of the asset life or the life of the lease.
At September 30, 2024, the cost of furniture and
equipment was $1,172
and accumulated depreciation was $114.
Depreciation expense was $49
and $114 for the three and nine months ended September 30, 2024.
Fair Value of Financial Instruments
For certain of the Company’s financial instruments,
including cash, restricted cash and accounts payable, the carrying amounts approximate their fair values due to their short maturities.
FASB ASC Topic 820, Fair Value Measurements and
Disclosures, requires disclosure of the fair value of financial instruments held by the Company. FASB ASC Topic 825, Financial
Instruments, defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that
enhances disclosure requirements for fair value measures. The carrying amounts reported in the balance sheets for receivables and
current liabilities each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period
of time between the origination of such instruments and their expected realization and their current market rate of interest. The three
levels of valuation hierarchy are defined as follows:
| |
● |
Level 1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets. |
| |
|
|
| |
● |
Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets in inactive markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. |
| |
|
|
| |
● |
Level 3 inputs to the valuation methodology us one or more unobservable inputs which are significant to the fair value measurement. |
The Company analyzes all financial instruments with
features of both liabilities and equity under FASB ASC Topic 480, Distinguishing Liabilities from Equity, and FASB ASC Topic 815,
Derivatives and Hedging.
At September 30, 2024 and December 31, 2023, the
Company did not identify any assets or liabilities required to be presented on the balance sheet at fair value.
Concentration of Credit Risk
Financial instruments, which potentially subject the
Company to concentrations of credit risk, consist of cash and restricted cash. The Company places its cash with high quality financial
institutions and at times may exceed the Federal Deposit Insurance Corporation $250,000 insurance limit. The Company has not and does
not anticipate incurring any losses related to this credit risk.
Income Taxes
The Company accounts for income taxes in accordance
with ASC Topic 740, Income Taxes. ASC 740 requires a company to use the asset and liability method of accounting for income taxes,
whereby deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable
temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax
bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some
portion, or all of, the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the
effects of changes in tax laws and rates on the date of enactment.
Under ASC 740, a tax position is recognized as a benefit
only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination
being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized
on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. The Company has
no material uncertain tax positions for any of the reporting periods presented.
Revenue
The Company records revenue in accordance with Accounting
Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”). The core principle
of ASC 606 is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that
reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The following five steps
are applied to achieve that core principle:
| |
● |
Step 1: Identify the contract with the customer |
| |
|
|
| |
● |
Step 2: Identify the performance obligations in the contract |
| |
|
|
| |
● |
Step 3: Determine the transaction price |
| |
|
|
| |
● |
Step 4: Allocate the transaction price to the performance obligations in the contract |
| |
|
|
| |
● |
Step 5: Recognize revenue when the company satisfies a performance obligation |
In order to identify the performance obligations in
a contract with a customer, the Company assesses the promised goods or services in the contract and identifies each distinct promised
good or service.
If a good or service is not distinct, the good or
service is combined with other promised goods or services until a bundle of goods or services is identified as distinct.
The transaction price is the amount of consideration
to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer. The consideration promised
in a contract with a customer may include fixed amounts, variable amounts, or both.
Variable consideration is included in the transaction
price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur
when the uncertainty associated with the variable consideration is subsequently resolved. The Company evaluates any noncash consideration,
consideration payable to the customer, potential returns and refunds, and whether consideration contains a significant financing element
in determining the transaction price.
Revenue is measured based on consideration specified
in a contract with a customer. The Company recognizes revenue when it satisfies a performance obligation by transferring control over
a service to its customer.
During the nine months ended September 30, 2024, the Company’s revenue
consisted of commissions, registration fees received, and sponsorship fees for K2 Gamer and totaled approximately $2,100. During the three
months ended September 30, 2024, the Company’s revenue was immaterial. The Company had no revenue for the three and nine months
ended September 30, 2023.
Leases
The Company leases office space in Pakistan under
a non-cancelable lease arrangement through K2 Gamer. The building is owned by the CEO of K2 Gamer. The Company applies the accounting
guidance in Accounting Standards Codification (“ASC”) 842, Leases. As such, the Company assesses all arrangements,
that convey the right to control the use of property and equipment, at inception, to determine if it is, or contains, a lease based on
the unique facts and circumstances present in that arrangement. For those leases identified, the Company determines the lease classification,
recognition, and measurement at the lease commencement date.
Fixed lease payments on operating leases are recognized
over the expected term of the lease on a straight-line basis. Variable lease expenses that are not considered fixed are expensed as incurred.
Fixed and variable lease expense on operating leases is recognized within operating expenses within the accompanying consolidated statements
of operations and comprehensive loss.
The interest rate implicit in the Company’s
lease contracts is typically not readily determinable and as such, the Company uses its incremental borrowing rate based on the information
available at the lease commencement date, which represents an internally developed rate that would be incurred to borrow, on a collateralized
basis, over a similar term, an amount equal to the lease payments in a similar economic environment.
Basic and Diluted Earnings Per Share
Earnings per share is calculated in accordance with
ASC Topic 260, Earnings Per Share. Basic earnings per share (“EPS”) is based on the weighted average number of common
shares outstanding. Diluted EPS assumes that all dilutive securities are converted. Dilution is computed by applying the treasury stock
method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance,
if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period.
There were 170,000
warrants outstanding at September 30, 2024 and December 31, 2023 that were potentially dilutive and no
potentially dilutive securities outstanding at September 30, 2023.
Recent Accounting Pronouncements
During 2023, the Company adopted Accounting Standards
Update No. 2016-13 (“ASU 2016-13”), Financial Instruments-Credit Losses. ASU 2016-13 requires organizations to measure
all expected credit losses for instruments held at the reporting date based on historical experience, current conditions, and reasonable
and supportable forecasts. This guidance is applicable for the Company’s note receivable. However, the adoption of ASU 2016-13 did
not have a material impact to the Company’s consolidated financial statements.
Management does not believe that any recently issued,
but not yet effective, accounting standards could have a material effect on the accompanying consolidated financial statements. As new
accounting pronouncements are issued, we will adopt those that are applicable under the circumstances.
Note 3 – Going Concern Uncertainty
The Company has an accumulated deficit of
approximately $4,313,000
as of September 30, 2024. The Company had minimal revenue-generating operations from which it generated revenues through September 30, 2024.
The Company expects that it will operate at a loss for the foreseeable future. During October 2023, the Company raised gross
proceeds of approximately $6,800,000
through its initial public offering (“IPO”), with net proceeds of approximately $5,835,000
after deducting underwriting discounts and commissions.
Management believes the net proceeds from the
IPO will be sufficient to meet its cash, operational and liquidity requirements for at least 12 months after the date of this annual
report. However, the Company anticipates that it will be required to raise additional funds through public or private equity
financings in the future to expand its business. Should such financing not be available in that time-frame, the Company might be
required to reduce its activities.
While management of the Company believes that it will be successful in
its capital formation and planned operating activities, there can be no assurance that the Company will be able to raise additional equity
capital or be successful in the development and commercialization of the products it develops or initiate collaboration agreements thereon.
However, the failure of the Company to achieve its business objectives could have a material adverse effect on the Company’s results
of operations and could require the Company to need additional equity or debt financing to continue its operations. These conditions,
among other factors, raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying consolidated
financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of
assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going
concern.
- 8 -
Table of Contents
Note 4 – Note Receivable
During September 2024, the Company entered into a
loan agreement with WestPark Capital Group, LLC (“WestPark”), whereby the Company loaned WestPark $300,000. WestPark will
repay the Company monthly payments of $12,500 plus interest on the unpaid balance beginning on December 1, 2024 and will continue over
the next 23 months until the loan is paid in full. The interest rate on the loan is eight percent (8%).
Note 5 – Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses consist of the
following at:
| |
|
September 30,
2024 |
|
December 31,
2023 |
|
| Accrued professional fees |
|
$ |
35,001 |
|
$ |
157,338 |
|
| Other accrued expenses |
|
|
2,880 |
|
|
13,126 |
|
| Total |
|
$ |
37,881 |
|
$ |
170,464 |
|
Note 6 – Related Party Transactions
Note Payable Due to Related Party
In February of 2023, the Company borrowed $260,000
from Sports Industry of India Inc. The loan bears 8% simple interest, and was due and payable upon the earlier of the completion of the
IPO by the Company or December 31, 2023. This note payable and approximately $19,500 of interest was repaid in October 2023.
Due to Related Parties
At September 30, 2024, due to related parties consists of approximately $1,000
due to certain Directors of K2 Gamer. At December 31, 2023, due to
related parties represents approximately $28,000
due to a certain stockholder and approximately $3,000
due to certain Directors of K2 Gamer. These amounts are unsecured, payable upon demand and non-interest bearing.
Other Related Party Transactions
The Company’s Chief Executive Officer
(“CEO”) is also the CEO of Pin Stripe Entertainment, Inc. (“Pin Stripe”). The Company made payments to the
CEO and Pin Stripe totaling approximately $41,000
and $190,000
for the three and nine months ended September 30, 2024 and payments of approximately $27,000 and $70,000 for the three and nine months ended September 30, 2023, which included compensation
for services provided by the CEO to the Company in his role as an officer of the Company, board stipend payments, and certain expense
reimbursements.
The Company had an agreement for Alexander
Alexandrov to serve as the Chief Technology Officer of the Company. Mr. Alexandrov owns Pixel Colony, LLC (see Note 7). Pixel
Colony, LLC and Mr. Alexandrov provided services to the Company during the three and nine months ended September 30, 2023 and received
payment from the Company totaling approximately $8,000
and $14,000, respectively. The agreement was terminated and the Company and Mr. Alexandrov agreed to a final settlement for services provided of $60,000,
which is included in accrued expenses as of December 31, 2023 and was paid in January 2024.
The Company also paid certain shareholders of
the Company for consulting and other services performed during the three and nine months ended September 30, 2024 of approximately $15,000
and $123,000
and approximately $17,000 and $27,000 for the three and nine months ended September 30, 2023, respectively.
The Company has an agreement with Face Rebel, LLC., to provide various
certain consulting services. Face Rebel’s CEO, Keith Fredriksen, was the Secretary and a director of the Company until June 7, 2024.
During the three and nine months ended September 30, 2024 and 2023, the Company paid Face Rebel approximately $51,000 and $146,000 and $20,000 and $51,000 for services provided, respectively (see Note 7).
Muhammad Jamal Qureshi is the CEO and Director
of K2 Gamer and also owns approximately 5%
and 7%
of K2 Gamer and ESP, respectively. The Company paid ESP approximately $10,000
and $25,000 for services provided for the three and nine months ended September 30, 2023. In addition, at September 30, 2024 and December 31,
2023, ESP owes K2 Gamer approximately $1,000
and $3,000,
which is included in prepaid expenses and other current assets.
Related Party Lease
During 2023, K2 Gamer made an advanced rent payment of approximately $60,000
to the CEO of K2 Gamer for use of a building owned by the CEO. The rent for the building approximates $6,000 per year for the next 10
years starting in January 2024 and the advanced funds are not refundable. At December 31, 2023, approximately $54,000 of this amount was
recorded in other long-term assets and $6,000 was included in prepaid expenses and other current assets. The lease commencement date was
January 1, 2024 and a right-of-use asset (“ROU asset”) was created at that date for $60,000. The Company recorded lease expense
of approximately $2,000 and $5,000 for the three and nine months ended September 30, 2024 and the balance on the ROU asset was approximately
$55,000 as of September 30, 2024.
Note 7 - Stockholders’ Equity
Preferred Stock
The Company has authorized the issuance of 10,000,000
shares of $0.0001
par value preferred stock. At September 30, 2024, there were nil
shares issued and outstanding.
Common Stock
The Company has authorized the issuance of 100,000,000
shares of $0.0001
par value common stock. At September 30, 2024, there were 25,579,319
shares issued and outstanding.
During October 2023, the Company raised gross proceeds
of approximately $6,800,000 through its initial public offering (“IPO”), with net proceeds of approximately $5,835,000 after
deducting underwriting discounts and commissions. As a result of the IPO, deferred offering costs of approximately $225,000 that were
incurred in 2022 and 2023, were reclassified to stock issuance costs. In addition, the Company issued warrants to the underwriters (“IPO
Warrants”) to purchase up to 170,000 shares of the Company’s common stock at an exercise price of $5.20 per share. The warrants
have a term of five years. The estimated fair value of the IPO Warrants approximated $552,000. The IPO Warrants are recorded as stock
issuance costs but the net impact to the Company’s equity from the issuance of these warrants is nil since these warrants are classified
as equity.
The Company utilized the Black-Scholes option-pricing
model to value the IPO Warrants issued.
The following table summarizes the assumptions used
for estimating the fair value of the IPO Warrants issued in 2023:
| Expected dividend yield |
|
|
— |
|
| Risk-free interest rate |
|
|
4.7 |
% |
| Expected volatility |
|
|
118 |
% |
| Expected life (years) |
|
|
5 |
|
Note 8 – Commitments and Contingencies
Assignment and Consulting Agreement Between ESP
and K2 Gamer
Pursuant to an Assignment and Consulting Agreement
effective as of January 1, 2022, ESP has assigned its esports rights under a certain Memorandum of Understanding (“MOU”) to
K2 Gamer, but remains a holder of the rights. Each of ESP and K2 Gamer is entitled to the esports rights and responsible for the obligations
of ESP pursuant to the MOU, but any exercise of the rights or obligations by ESP is subject to the approval of K2 Gamer. K2 Gamer has
agreed to provide or cause to be provided funding necessary for the exploitation of rights and the engagement of employees and third parties
authorized by K2 Gamer, as well as such compensation as is reasonably determined from time to time. The agreement shall continue until
the termination of the MOU.
Spivak Management Inc. Consulting Agreement
Pursuant to an agreement dated December 1, 2022,
the Company had agreed to pay to Spivak Management Inc. (“SMI”) $240,000
for business consulting services rendered by SMI, which was paid upon the commencement of the closing of the Company’s IPO,
which occurred in October 2023. In addition, during the nine months ended September 30, 2024, the Company utilized SMI for
consulting services and paid them approximately $102,000.
There are no further obligations or commitments with SMI as of September 30, 2024.
Agreement with Face Rebel, LLC
On December 29, 2022, the Company entered into a consulting
agreement with Face Rebel, LLC., to provide various services and support, including creating marketing materials to promote the Company
and educate potential business partners about the Company, research, copywriting, design & layout, photo color correction & manipulation,
illustrations, revisions, and computer back-up of files. In addition, Face Rebel will assist the Company’s IP attorney with the
necessary materials to file US registrations and will assist outside vendors with artistic direction and files needed to complete their
tasks. Face Rebel will receive $16,000 per month commencing with the closing of the Company’s IPO. The agreement will continue until
either party gives the other at least ten days’ prior written notice of termination. Face Rebel’s CEO, Keith Fredriksen, was the
Secretary and a director of the Company until June 7, 2024.
Kurt Warner Consulting Agreement
In February 2023, the Company entered into an agreement
with Kurt Warner for his assistance, as an officer, director or other position with the Company, as shall be mutually agreed, commencing
on the first of the month after completion of the IPO and continuing for two years for his services. Mr. Warner will receive $5,000 per
month for two years, commencing upon completion of the IPO. Mr. Warner is an investor in the Company.
Letter of Intent with Nick Venezia
In February 2023, the Company entered into a
Letter of Intent with Nick Venezia and Social Outlier (collectively “Social Outlier”) pursuant to which, subject to the
negotiation and execution of a definitive agreement, the Company and Social Outlier would form a new company (“Newco”)
to design and implement data collection and evaluation, engine and platform focused on the Pakistan population. Newco
would be 80% owned by the Company and 20% owned by Social Outlier, and the Company would make a financial commitment to Newco in the
aggregate amount of $200,000, payable in four quarterly installments of $50,000 beginning upon the latter of when a definitive
agreement is signed or the completion of the IPO by the Company. Mr. Venezia will serve as Chief Technical Data Officer of the
Company on a part-time basis. During the three and nine months ended September 30, 2024 and 2023, Social Outlier did not provide any
services to the Company. The Company has not executed a definitive agreement with Social Outlier.
Agreement with Pixel Colony, LLC
In February 2023, the Company entered into a binding
MOU with Pixel Colony, LLC (“Pixel”) pursuant to which Pixel was to develop and maintain the GAMER Core Platform. The "GAMER
Core Platform" is a web platform that would allow the Company to create customized profiles for schools and universities with whom
the Company partners. The Company planned to also use the platform to conduct championships/tournaments; host / stream online events,
record/display game scores and player statistics and sell tickets and merchandise through the platform and leverage the audience and features
into social interactions between the users as well and expand the platform. Pixel may utilize third party developers and hardware. Pixel
was to provide development services for the GAMER Core Platform, including without limitation ideation, architecture and development services
and integration of third-party software. The parties will develop a mutually agreed upon set of features, budget and timeline. Pixel also
was to be available to provide ongoing development and maintenance to the Company under terms to be negotiated in good faith. The Company
was obligated to set aside approximately $1.2 million to be deployed over a two-year period for the services of Pixel and any third-party
developers. There was no minimum payment that is guaranteed. The CEO of Pixel is Alexander Alexandrov and he has a 100% interest
in this amount. Either party can terminate the agreement for cause upon 30 days prior written notice, unless the cause is cured within
30 days. Mr. Alexandrov served as Chief Technical Officer of the Company on a part-time basis. During January 2024, the Company and Mr.
Alexandrov entered into a Settlement Agreement and Release of Claims that terminated the agreement with Pixel and Mr. Alexandrov. In accordance
with the Settlement Agreement and Release of Claims, the Company and Mr. Alexandrov agreed to a final payment of $60,000 to Pixel for
services provided under the original agreement and the original agreement has been terminated.
Legal
From time to time, the Company may be involved in
various litigation matters, which arise in the ordinary course of business. There is currently no litigation that management
believes will have a material impact on the financial position of the Company.
- 11 -
Table of Contents
Note 9 – General and Administrative Expense
General and administrative costs are expensed as incurred and primarily
include personnel costs, public filing fees, travel expenses, contractor fees, and professional fees. During the three and nine months
ended September 30, 2024, the Company incurred the following general and administrative costs with certain vendors:
Spivak Management Inc.
The Company paid Spivak Management Inc.
(“SMI”) approximately nil and $102,000 during
the three and nine months ended September 30, 2024 for business consulting services provided. The agreement with SMI has expired and no
continuing services are being provided to the Company by SMI. See Note 7.
ST7 Investments, LLC
The Company had an agreement with ST7 Investments,
LLC (“ST7”) for the development, technical support, marketing, and upgrades for certain intellectual property and paid ST7
$43,000 during January 2024. In April 2024, the Company and ST7 entered into a Settlement Agreement
and Release of All Claims pursuant to which the parties separated and settled all disputes between them. Pursuant to such agreement,
the Company paid $75,000 to ST7 and quitclaimed to it certain intellectual property ST7 may have acquired for the Company.
Pin Stripe
The Company paid Pin Stripe approximately $41,000 and $190,000
during the three and nine months ended September 30, 2024. See Note 5.
Face Rebel, LLC
The Company paid Face Rebel, LLC approximately $51,000
and $146,000 during the three and nine months ended September 30, 2024. See Note 5 and Note 7.
Mercurius & Associates LLP
The Company paid Mercurius & Associates LLP approximately $58,000 and $213,000 for audit services during the
three and nine months ended September 30, 2024.
Note 10 – Subsequent Events
Due to the ongoing political and economic uncertainty in Pakistan, the Company has decided to cease operations in
Pakistan and reduce overhead expenses wherever possible while it continues to seek alternative opportunities for the Company.
Management has evaluated events that occurred subsequent
to the end of the reporting period and determined there are no other subsequent events to report.
- 12 -
Table of Contents
Item 2. Management’s Discussion and Analysis
of Financial Condition and Results of Operations.
You should read the following discussion and analysis
of our financial condition and results of operations together with our consolidated financial statements and related notes appearing in
this Quarterly Report on Form 10-Q. This discussion and other parts of this Quarterly Report contain forward-looking statements that
involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. As a result of many factors,
including those factors set forth in the “Risk Factors” section of this Quarterly Report, our actual results could differ
materially from the results described in, or implied by, the forward-looking statements contained in the following discussion and analysis.
Overview
We are a development-stage interactive esports event
promotion and product marketing company, founded in November 2021. Our initial focus is on creating college, inter-college, inter-university
and professional esports events for men’s and women’s teams, particularly esports opportunities involving colleges and universities
in Pakistan. Though creating sports opportunities involving colleges and universities in Pakistan likely will remain our primary focus
for at least 12 months, thereafter, over time, we intend to expand the range of our esports offerings, expand to other markets and eventually
consider live sports. We will endeavor to integrate competitive events that include our teams and leagues with regional and global teams
and leagues sponsored by others, including companies formed by certain of our stockholders to promote sports, including esports, in other
countries. We have not conducted any operations ourselves, but conduct our operations in Pakistan through K2 Gamer, our 90% owned subsidiary
(such acquisition was entered into in November 2022 but was not approved by the SECP until July 2023), and ESP, the affiliate of K2 Gamer
with whom K2 Gamer has an assignment and consulting agreement. We acquired 90% of K2 Gamer so that it could be our operating subsidiary
in Pakistan. Mr. Muhammed Jamal Qureshi is an owner, CEO and a director of K2 Gamer and ESP.
From inception in November 2021 through the present
date, we have focused on having K2 Gamer and/or ESP enter into agreements with universities to undertake esports tournaments endorsed
by the universities in which their students will participate, and for which the universities will provide marketing support, building
the necessary infrastructure for our business, and conducting initial tournaments. The purpose of our initial tournaments was to refine
our logistics and technology, demonstrate competence to universities, and provide a showcase to potential marketing partners, advertisers
and other sponsors. We have not yet generated any significant income, nor has K2 Gamer or ESP.
During 2024, we anticipate that we will organize or
co-organize approximately 12 or more tournaments and we intend to commence solicitation of marketing partners, advertisers and other sponsors,
with the goal of beginning to generate revenue thereafter. There is no assurance that we will succeed in this endeavor, achieve revenues,
achieve revenues that exceed the cost of the tournaments, or generate a profit, based on our selling, general and administrative expenses.
Recent Events
Issuance of Common Stock in IPO
During October 2023, we raised gross proceeds of approximately
$6,800,000 through our initial public offering (“IPO”), with net proceeds of approximately $5,835,000 after deducting underwriting
discounts and commissions. In addition, the Company issued warrants to the underwriters to purchase up to 170,000 shares of the Company’s
common stock at an exercise price of $5.20 per share. The warrants have a term of five years.
On June 4, 2024, the Staff of Nasdaq notified Gamer
Pakistan Inc. (“Company”) that unless the Company timely requests a hearing before a Hearings Panel (the “Panel”),
the Company’s securities will be delisted from The Nasdaq Stock Market for the reasons set forth below. The Company timely requested
a hearing before the Panel, which hearing will be held on July 18, 2024. Nasdaq has granted the Company’s request that any trading
suspension or delisting action be stayed through the hearing date. Pursuant to the Nasdaq Listing Rules, the Panel may grant an additional
extension period. However, there can be no assurance that the Panel will grant the Company an additional extension, or that the Company
will be able to regain compliance by the end of any additional extension period.
The reason for the delisting notice is as follows:
On December 4, 2023, Nasdaq had notified the Company
that the bid price of its listed security had closed at less than $1 per share over the previous 30 consecutive business days, and, as
a result, did not comply with Listing Rule 5550(a)(2) (the “Rule”). In accordance with Listing Rule 5810(c)(3)(A), the Company
was provided 180 calendar days, or until June 3, 2024, to regain compliance with the Rule. The Company has not regained compliance with
the Rule and is not eligible for a second 180-day period, because the Company does not meet the $5,000,000 minimum stockholders’
equity requirement for initial listing on The Nasdaq Capital Market or any of the alternatives set forth under Listing Rule 5550(b).
- 13 -
Table of Contents
Separately, on April 18 and May 17, 2024, the Staff
notified the Company that since it failed to file the Form 10-K for the year ended December 31, 2023, and the Form 10-Q for the period
ended March 31, 2024, the Company no longer met the filing requirement for continued listing on The Nasdaq Stock Market set forth under
Listing Rule 5250(c)(1). In light of the foregoing and in accordance with Listing Rule 5810(c)(2)(A), the Staff cannot accept a plan to
regain compliance. As such, these matters are an additional and separate basis for delisting the Company’s securities from The Nasdaq
Stock Market.
On August 5, 2024, the Company’s was delisted
from the Nasdaq Stock Market.
Due to the ongoing political and economic uncertainty
in Pakistan, the Company has decided to cease operations in Pakistan and reduce overhead expenses wherever possible while it continues
to seek alternative opportunities for the Company.
Components of Statements of Operations
Revenue and Cost of Revenue
We have not generated any significant revenue or cost
of revenue to date.
General and Administrative Expenses
General and administrative expenses consist principally
of employee compensation, event marketing and development fees, insurance expense, public listing fees, and other professional fees for
consulting, legal, auditing and tax services.
Critical Accounting Estimates
We discussed our accounting policies and significant assumptions used in
our estimates in Note 2 of our audited financial statements included in the financial statements in our Annual Report on Form 10-K
for the fiscal year ended December 31, 2023 (“Form 10-K”), and that disclosure should be read in conjunction with the Quarterly
Report on Form 10-Q. There have been no material changes during the three and nine months ended September 30, 2024 to our critical accounting
policies, significant judgments and estimates disclosed in our Form 10-K.
Results of Operations
Three and Nine Months Ended September 30, 2024 compared with the Three
and Nine Months Ended September 30, 2023
The following table summarizes the results of our operations for each of
the three and nine month periods ended September 30, 2024 and 2023. together with the changes in those items in dollars and as a percentage:
| |
|
Three Months Ended |
|
|
|
|
|
|
|
|
Nine Months Ended |
|
|
|
|
|
|
|
| |
|
September 30, |
|
|
$ |
|
|
% |
|
|
September 30, |
|
|
$ |
|
|
% |
|
| |
|
2024 |
|
|
2023 |
|
|
Change |
|
|
Change |
|
|
2024 |
|
|
2023 |
|
|
Change |
|
|
Change |
|
| Revenue |
|
$ |
205 |
|
|
$ |
— |
|
|
$ |
205 |
|
|
|
* |
|
|
$ |
2.189 |
|
|
$ |
— |
|
|
$ |
2,189 |
|
|
|
* |
|
| Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cost of revenue |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
* |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
* |
|
| General and administrative |
|
|
507,537 |
|
|
|
166,169 |
|
|
|
341,368 |
|
|
|
** |
|
|
|
1,972,389 |
|
|
|
297,752 |
|
|
|
1,674,637 |
|
|
|
** |
|
| Total costs and expenses |
|
|
507,537 |
|
|
|
166,169 |
|
|
|
341,368 |
|
|
|
** |
|
|
|
1,972,389 |
|
|
|
297,752 |
|
|
|
1,674,637 |
|
|
|
** |
|
| Loss from operations |
|
|
(507,332 |
) |
|
|
(166,169 |
) |
|
|
(341,163 |
) |
|
|
** |
|
|
|
(1,970,200 |
) |
|
|
(297,752 |
) |
|
|
(1,672,448 |
) |
|
|
** |
|
| Interest expense |
|
|
— |
|
|
|
(5,244 |
) |
|
|
(5,244 |
) |
|
|
* |
|
|
|
— |
|
|
|
(13,794 |
) |
|
|
(13,794 |
) |
|
|
* |
|
| Interest income |
|
|
6,500 |
|
|
|
— |
|
|
|
6,500 |
|
|
|
* |
|
|
|
20,000 |
|
|
|
— |
|
|
|
20,000 |
|
|
|
* |
|
| Net loss |
|
$ |
(500,832 |
) |
|
$ |
(171,413 |
) |
|
$ |
(329,419 |
) |
|
|
** |
|
|
$ |
(1,950,200 |
) |
|
$ |
(311,546 |
) |
|
$ |
(1,638,654 |
) |
|
|
** |
|
| * |
Not meaningful |
| |
|
| ** |
Change is significantly more than 100% |
- 14 -
Table of Contents
General and Administrative Expenses
General and administrative expenses were approximately
$508,000 for the three months ended September 30, 2024, compared with $166,000 for the three months ended September 30, 2023. The increase
in general and administrative expenses was primarily driven by an increase of approximately $73,000 in consulting fees, $183,000 in professional,
accounting, legal and business development fees, $53,000 in payroll, $68,000 in board stipend and insurance fees, and approximately $32,000
of expenses in Pakistan, offset by a decrease of $70,000 in public filing fees.
General and administrative expenses were approximately
$1,972,000 for the nine months ended September 30, 2024, compared with $298,000 for the nine months ended September 30, 2023. The increase
in general and administrative expenses was primarily driven by an increase of approximately $452,000 in consulting fees, $645,000 in professional,
accounting, legal and business development fees, $273,000 in payroll, $182,000 in public filing fees, board stipend and insurance fees,
and approximately $116,000 of expenses in Pakistan.
Liquidity and Capital Resources
At September 30, 2024 and December 31, 2023, we had cash and restricted
cash of approximately $1,337,000 and $3,771,000, respectively.
We have financed our operations through the issuance
of common stock. In October 2023, we issued 1,700,000 shares of common stock for total gross proceeds of $6,800,000 through an initial
public offering (“IPO”). We received net proceeds after commissions and fees of approximately $5,835,000.
Funding Requirements
We believe the net proceeds of the IPO will be sufficient to meet our cash,
operational and liquidity requirements for approximately the next 12 to 15 months.
We cannot specify with certainty all of the particular
uses for the net proceeds to us from the IPO. Accordingly, our management will have broad discretion in the application of these proceeds.
We intend to use the net proceeds from the IPO for
operating expenses, marketing, event expenses, streaming, retention of additional staff in Pakistan, working capital and general corporate
purposes, including perhaps acquisitions of game licenses, technology platform agreements and strategic partnerships. Investors are cautioned,
however, that expenditures may vary substantially from these uses. Investors will be relying on the judgment of our management, who will
have broad discretion regarding the application of the proceeds of the IPO. The amounts and timing of our actual expenditures will depend
upon numerous factors, including the amount of cash generated by our operations and the amount of competition we face and other operational
factors. We may find it necessary or advisable to use portions of the proceeds from the IPO for other purposes.
Because of the numerous risks and uncertainties associated
with establishing a new business in Pakistan, we are unable to estimate the exact amount of our working capital requirements. Our future
funding requirements will depend on many factors, including without limitation:
| |
● |
Failure of future market acceptance of our mobile esports products and services; |
| |
● |
Increased levels of competition; |
| |
● |
Changes in political, economic or regulatory conditions generally and in the markets in which we operate; |
| |
● |
Our ability to retain and attract senior management and other key employees; |
| |
● |
Our ability to protect our trade secrets or other proprietary rights, operate without infringing upon the proprietary rights of others and prevent others from infringing on the proprietary rights of the Company; and |
| |
● |
Other risks, including those described in the “Risk Factors” discussion. |
See “Risk Factors” for additional risks
associated with our substantial capital requirements.
- 15 -
Table of Contents
Cash Flows
The following table summarizes our sources and uses
of cash and restricted cash:
| |
|
Nine months Ended |
|
| |
|
September 30, |
|
| |
|
2024 |
|
|
2023 |
|
| Net cash provided by (used in): |
|
|
|
|
|
|
| Operating activities |
|
$ |
(2,133,039 |
) |
|
$ |
(307,613 |
) |
| Investing activities |
|
|
(301,168 |
) |
|
|
— |
|
| Financing activities |
|
|
— |
|
|
|
292,766 |
|
| Effect of exchange rate changes on cash and restricted cash |
|
|
94 |
|
|
|
(2,135 |
) |
| Net increase (decrease) in cash and restricted cash |
|
$ |
(2,434,113 |
) |
|
$ |
(16,982 |
) |
Operating Activities
Net cash used in operating activities increased by approximately $1,825,000
for the nine months ended September 30, 2024 compared with the nine months ended September 30, 2023. The increase was primarily due to
an increase in general and administrative expenses of approximately $1,675,000 and a change in accounts payable and accrued expenses of
$118,000, prepaid expenses and other current assets of $25,000, and related party payable of approximately $44,000.
Investing Activities
Net cash used in investing activities increased by approximately $301,000
for the nine months ended September 30, 2024 compared with the nine months ended September 30, 2023. The increase was primarily due to
the $300,000 loaned to WestPark Capital Group, LLC.
Financing activities
Net cash provided in financing activities decreased by approximately $293,000
for the nine months ended September 30, 2024 compared with the nine months ended September 30, 2023. The change was primarily due to approximately
$260,000 of proceeds from a related party note payable and $90,000 in advances from a related party received in the nine months ended
September 30, 2023 compared to nil proceeds in the nine months ended September 30, 2024. This was offset by the payment of approximately
$57,000 of deferred offering costs in the nine months ended September 30, 2023 compared to nil payments in the nine months ended September
30, 2024.
JOBS Act
As an “emerging growth company” under
the Jumpstart Our Business Startups Act of 2012, as amended, or the JOBS Act, we can take advantage of an extended transition period for
complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of certain accounting
standards until those standards would otherwise apply to private companies. We have irrevocably elected to “opt out” of this
provision and, as a result, we will comply with new or revised accounting standards when they are required to be adopted by public companies
that are not emerging growth companies.
Subject to certain conditions, as an emerging growth
company, we rely on certain of these exemptions, including without limitation:
| |
● |
reduced disclosure about our executive compensation arrangements; |
| |
● |
no advisory votes on executive compensation or golden parachute arrangements; and |
| |
● |
exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting. |
We may take advantage of these exemptions for up to
five years or such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company
on the date that is the earliest of (i) the last day of the fiscal year in which we have total annual gross revenue of $1.07
billion or more; (ii) the last day of 2027; (iii) the date on which we have issued more than $1.0 billion in nonconvertible
debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer under the rules of
the SEC. We may choose to take advantage of some but not all of these exemptions. Accordingly, the information contained herein may be
different from the information you receive from other public companies in which you hold stock.
- 16 -
Table of Contents
Smaller Reporting Company
As a “smaller reporting company,” as defined
in Rule 12b-2 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, in addition to providing reduced disclosure
about our executive compensation arrangements and business developments, among other reduced disclosure requirements available to smaller
reporting companies, we present only two years of audited financial statements in addition to any required unaudited interim financial
statements with correspondingly reduced “Management’s Discussion and Analysis of Financial Condition and Results of Operations”
disclosure. Accordingly, the information contained herein may be different from the information you receive from other public companies
in which you hold stock.
Off-Balance Sheet Arrangements
We did not have during the periods presented, and
we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.
Item 3. Quantitative and Qualitative Disclosures
About Market Risk
Not applicable.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
At September 30, 2024, management, with the
participation of the Chief Executive Officer and Chief Financial Officer, performed an evaluation of the effectiveness of the
design and operation of the Company’s disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the
Exchange Act. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s
disclosure controls and procedures were not effective at the reasonable assurance level as of September 30, 2024.
At September 30, 2024, management has not
completed an effective assessment of the Company’s internal controls over financial reporting based on the 2013 Committee of
Sponsoring Organizations (COSO) framework. Management has concluded that, during the period covered by this report, our internal
controls and procedures were not effective to detect the inappropriate application of U.S. GAAP. Management identified the following
material weaknesses set forth below in our internal control over financial reporting.
1. We lack the necessary corporate accounting resources
to maintain adequate segregation of duties.
2. We did not perform an effective risk assessment
or monitor internal controls over financial reporting or our cyber security environment.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting
during the quarter ended September 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.
PART II. OTHER INFORMATION.
Item 1. Legal Proceedings.
We are not currently subject to any legal proceedings
or claims, however, we may become subject to legal proceedings and claims arising in connection with the normal course of our business.
Item 1A. Risk Factors.
RISK FACTORS
You should carefully review and consider the information
regarding certain factors which could materially affect our business, financial condition or future results set forth under the heading
“Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023. There have
been no material changes from the risk factors previously disclosed therein, except as set forth below;
- 17 -
Table of Contents
We will require additional financing in order
to implement and execute our business plan, and we cannot be certain that such additional financing will be available on reasonable terms
when required, or at all.
At September 30, 2024, we had a cash and restricted cash balance of approximately
$1,337,000. While management estimates this amount is sufficient to continue with operating activities over the next 12 months, we likely
will need to raise additional capital to fund our operations while we implement and execute our business plan and expand our business.
However, the failure of the Company to achieve its business objectives could have a material adverse effect on the Company’s results
of operations and could require the Company to need additional equity or debt financing to continue its operations. These conditions,
among other factors, raise substantial doubt about the Company’s ability to continue as a going concern.
We currently do not have any contracts or commitments
for additional financing. Any future equity financing may involve substantial dilution to existing shareholders. There can be no assurance
that such additional capital will be available on a timely basis, or on terms acceptable to the Company. If adequate funds are not available
or are not available on acceptable terms when needed, the Company may not be able to fund its business or its expansion, take advantage
of strategic acquisitions or investment opportunities or respond to competitive pressures. Such inability to obtain additional financing
when needed could have a material adverse effect on the Company’s business, results of operations, cash flow, financial condition
and prospects.
If we raise additional funds by issuing equity or
convertible debt securities, we will reduce the percentage ownership of our then-existing stockholders, and the holders of those newly-issued
equity or convertible debt securities may have rights, preferences, or privileges senior to those possessed by our then-existing stockholders
and/or note holders. Additionally, future sales of a substantial number of shares of our Common Stock or other equity-related securities
could depress the market price of our Common Stock in the public market, and could impair our current or future ability to raise capital
through the sale of additional equity or equity-linked securities or the sale of debt. We cannot predict the effect that future sales
of our Common Stock or other equity-related securities would have on the market price of our Common Stock.
Item 6. Exhibits.
The exhibits listed on the Exhibit Index hereto are
filed or furnished (as stated therein) as part of this Quarterly Report on Form 10-Q.
EXHIBIT INDEX
| Exhibit No. |
|
Document |
| 31.1* |
|
Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act. |
| 31.2* |
|
Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act. |
| 32.1** |
|
Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act. |
| 32.2** |
|
Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act. |
| 101* |
|
The following materials from Gamer Pakistan Inc.’s Quarterly Report
on Form 10-Q for the quarter ended September 30, 2024, formatted in Extensible Business Reporting Language (iXBRL): (i) Balance Sheets
as of September 30, 2024 (unaudited) and December 31, 2023, (ii) Statements of Operations (unaudited) for the three and nine months ended
September 30, 2024 and 2023 (iii) Statement of Stockholders’ Equity (unaudited) for the three and nine months ended September 30,
2024 and 2023, (iv) Statements of Cash Flows (unaudited) for the nine months ended September 30, 2024 and 2023 and (v) Notes to Financial
Statements (unaudited). |
| 104* |
|
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
| * |
Filed herewith. |
| |
|
| ** |
Furnished herewith. |
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Table of Contents
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| |
GAMER PAKISTAN INC. |
| |
|
|
| DATE: December 4, 2024 |
By: |
/s/ James Knopf |
| |
|
James Knopf |
| |
|
Chief Executive Officer |
| |
|
|
| |
GAMER PAKISTAN INC. |
| |
|
|
| DATE: December 4, 2024 |
By: |
/s/ Jerry J. Goldstein |
| |
|
Jerry J. Goldstein |
| |
|
Interim Chief Financial Officer |
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