SEC Form 10-Q filed by Gamer Pakistan Inc.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the fiscal quarter ended
or
For the transition period from to
Commission File Number:
(Exact Name of Registrant as Specified in Its Charter)
|
(State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) |
|
|
||
| (Address of Principal Executive Offices) | (Zip Code) |
Registrant’s telephone number, including area
code:
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 | ||
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.
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).
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 ☐ | 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 ☐
At August 19, 2024, there were shares of the registrant’s common stock outstanding.
GAMER PAKISTAN INC.
Table of Contents
- i -
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 -
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
GAMER PAKISTAN INC.
Consolidated Balance Sheets
| June 30 | December 31, | |||||||
| Note | 2024 | 2023 | ||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | $ | $ | ||||||
| Restricted cash | 2 | |||||||
| Furniture and equipment, net | 2 | |||||||
| Right-of-use asset, related party | 5 | |||||||
| Other long-term assets | 5 | |||||||
| Total assets | $ | $ | ||||||
| Liabilities | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued expenses | 4 | $ | $ | |||||
| Due to related parties | 5 | |||||||
| Total current liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies | 7 | |||||||
| Stockholders’ equity | 6 | |||||||
| Preferred stock; $ par value; shares authorized; shares issued and outstanding | ||||||||
| Common stock, $ par value, shares authorized, shares issued and outstanding | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( |
) | ( |
) | ||||
| Accumulated other comprehensive loss | ( |
) | ( |
) | ||||
| Total stockholders' equity - Gamer Pakistan Inc. | ||||||||
| Non-controlling interest | ( |
) | ( |
) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders' equity | $ | $ | ||||||
The accompanying footnotes are an integral part of these unaudited consolidated financial statements.
- 1 -
GAMER PAKISTAN INC.
Consolidated Statements of Operations (Unaudited)
For the three and six months ended June 30, 2024 and 2023
| Six Months | Six Months | Three Months | Three Months | |||||||||||
| Ended | Ended | Ended | Ended | |||||||||||
| Note | June 30, 2024 | June 30, 2023 | June 30, 2024 | June 30, 2023 | ||||||||||
| Revenue | 2 | $ | $ | $ | $ | |||||||||
| Cost of revenue | ||||||||||||||
| Gross profit | ||||||||||||||
| Operating expenses: | ||||||||||||||
| General and administrative expenses | 8 | |||||||||||||
| Total operating expenses | ||||||||||||||
| Total expenses | ||||||||||||||
| Loss from operations | ( |
) | ( |
) | ( |
) | ( |
) | ||||||
| Interest expense | ( |
) | ( |
) | ||||||||||
| Interest income | ||||||||||||||
| Net loss before income taxes | ( |
) | ( |
) | ( |
) | ( |
) | ||||||
| Income tax expense | ||||||||||||||
| Net loss | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||
| Net loss - non-controlling interest | $ | $ | $ | $ | ||||||||||
| Net loss attributable to Gamer Pakistan Inc. | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||
| Net loss per share attributable to common stockholders, basic and diluted | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||
| Weighted average common shares outstanding, basic and diluted | ||||||||||||||
| Comprehensive loss: | ||||||||||||||
| Net loss | ( |
) | ( |
) | ( |
) | ( |
) | ||||||
| Unrealized loss on foreign currency translation | ||||||||||||||
| Total comprehensive loss | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||
| Comprehensive loss attributable to non-controlling interest | ||||||||||||||
| Comprehensive loss - Gamer Pakistan Inc. | ( |
) | ( |
) | ( |
) | ( |
) | ||||||
The accompanying footnotes are an integral part of these unaudited consolidated financial statements.
- 2 -
GAMER PAKISTAN INC.
Consolidated Statements of Stockholders’ Equity (Unaudited)
For the three and six months ended June 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 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | |||||||||
| Net loss | — | ( |
) | ( |
) | ( |
) | ||||||||||||||
| Unrealized gain on foreign currency translation | — | ||||||||||||||||||||
| Balance, March 31, 2024 (unaudited) |
$ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | |||||||||
| Net loss | — | ( |
) | ( |
) | ||||||||||||||||
| Unrealized gain on foreign currency translation | — | ||||||||||||||||||||
| Balance, June 30, 2024 (unaudited) |
$ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | |||||||||
| Balance, December 31, 2022 |
$ | $ | $ | ( |
) | $ | $ | ( |
) | $ | |||||||||||
| Net loss | — | ( |
) | ( |
) | ||||||||||||||||
| Balance, March 31, 2023 (unaudited) |
$ | $ | $ | ( |
) | $ | $ | ( |
) | $ | |||||||||||
| Net loss | — | ( |
) | ( |
) | ||||||||||||||||
| Balance, June 30, 2023 (unaudited) |
$ | $ | $ | ( |
) | $ | $ | ( |
) | $ | |||||||||||
The accompanying footnotes are an integral part of these unaudited consolidated financial statements.
- 3 -
GAMER PAKISTAN INC.
Consolidated Statements of Cash Flows (Unaudited)
For the six months ended June 30, 2024 and 2023
| Six months ended | |||||||
| June 30, 2024 unaudited |
June 30, 2023 unaudited |
||||||
| Cash flows from operating activities | |||||||
| Net loss | $ | ( |
) | $ | ( |
) | |
| Adjustments to reconcile net loss to net cash provided (used) by operating activities: | |||||||
| Depreciation | |||||||
| Changes in operating assets and liabilities: | |||||||
| Prepaid expenses and other assets | |||||||
| Accounts payable and accrued expenses | ( |
) | ( |
) | |||
| Related Party Payable | ( |
) | |||||
| Net cash used in operating activities | ( |
) | ( |
) | |||
| Cash flows from investing activities | |||||||
| Payments for property and equipment | ( |
) | |||||
| Net cash used in investing activities | ( |
) | |||||
| Cash flows from financing activities | |||||||
| Payment of deferred offering costs | ( |
) | |||||
| Advances from related party | |||||||
| Advances to related party | ( |
) | |||||
| Issuance of notes payable, short term | |||||||
| Net cash provided by financing activities | |||||||
| Effect of exchange rate changes on cash and restricted cash | |||||||
| Net increase (decrease) in cash and restricted cash | ( |
) | |||||
| Cash and restricted cash as of beginning of period | |||||||
| Cash and restricted cash as of end of period | $ | $ | |||||
The accompanying footnotes are an integral part of these unaudited consolidated financial statements.
- 4 -
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
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 six months ended June 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 June 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 is required to maintain $
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:
| June 30, 2024 |
December 31, 2023 |
||||||
| Cash | $ | $ | |||||
| Restricted cash | |||||||
| Total cash and restricted cash shown in the statements of cash flows | $ | $ | |||||
Furniture and equipment, net
Furniture and equipment, net, is stated at cost. Depreciation is computed over the estimated useful lives of the assets, generally to 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 June 30, 2024, the cost of furniture and
equipment was $
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 June 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 $
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 six months ended June 30, 2024, the Company’s revenue consisted of commissions recognized by K2 Gamer for the delivery of certain products and totaled approximately $2,000. During the three months ended June 30, 2024, the Company’s revenue was immaterial. The Company had no revenue for the three and six months ended June 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.
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 warrants outstanding at June 30, 2024 and December 31, 2023 that were potentially dilutive and potentially dilutive securities outstanding at June 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 $
Management believes the net proceeds from the
IPO will be sufficient to meet its cash, operational and liquidity requirements for at least
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 -
Note 4 – Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses consist of the following at:
| June 30, 2024 |
December 31, 2023 |
||||||
| Accrued professional fees | $ | $ | |||||
| Other accrued expenses | |||||||
| Total | $ | $ | |||||
Note 5 – Related Party Transactions
Note Payable Due to Related Party
In February of 2023, the Company borrowed $
Due to Related Parties
At June 30, 2024, due to related parties consists of approximately $
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 $
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 six months ended June 30, 2023 and received
payment from the Company totaling approximately $
The Company also paid certain shareholders of
the Company for consulting and other services performed during the three and six months ended June 30, 2024 of approximately $
The Company has an agreement with Face Rebel, LLC., to provide various
certain consulting services. Face Rebel’s CEO, Keith Fredriksen, is Secretary and a director of the Company. During the three and
six months ended June 30, 2024 and 2023, the Company paid Face Rebel approximately $
Muhammad Jamal Qureshi is the CEO and Director
of K2 Gamer and also owns approximately
Related Party Lease
- 9 -
Note 6 - Stockholders’ Equity
Preferred Stock
The Company has authorized the issuance of shares of $ par value preferred stock. At June 30, 2024, there were shares issued and outstanding.
Common Stock
The Company has authorized the issuance of shares of $ par value common stock. At June 30, 2024, there were shares issued and outstanding.
During October 2023, the Company raised gross proceeds
of approximately $
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 | % | |||
| Expected volatility | % | |||
| Expected life (years) |
Note 7 – 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 has agreed to pay to Spivak Management Inc. (“SMI”) $
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 $
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 $
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.
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 $
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 -
Note 8 – 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 six months ended June 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 $
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
$
Pin Stripe
The Company paid Pin Stripe approximately $
Face Rebel, LLC
The Company paid Face Rebel, LLC approximately $
Mercurius & Associates LLP
The Company paid Mercurius & Associates LLP approximately $
Note 9 – Subsequent Events
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).
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 June 30, 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.
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 -
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.
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.
- 13 -
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 six months ended June 30, 2024 to our critical accounting policies, significant judgments and estimates disclosed in our Form 10-K.
Results of Operations
Three and Six Months Ended June 30, 2024 compared with the Three and Six Months Ended June 30, 2023
The following table summarizes the results of our operations for each of the three and six month periods ended June 30, 2023 and 2022. together with the changes in those items in dollars and as a percentage:
| Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||
| June 30, | $ | % | June 30, | $ | % | |||||||||||||||||||||||||||
| 2024 | 2023 | Change | Change | 2024 | 2023 | Change | Change | |||||||||||||||||||||||||
| Revenue | $ | 52 | $ | — | $ | 52 | * | $ | 1,984 | $ | — | $ | 1,984 | * | ||||||||||||||||||
| Costs and expenses: | ||||||||||||||||||||||||||||||||
| Cost of revenue | — | — | — | * | — | — | — | * | ||||||||||||||||||||||||
| General and administrative | 587,695 | 54,247 | 533,448 | ** | 1,464,852 | 131,583 | 1,333,269 | ** | ||||||||||||||||||||||||
| Total costs and expenses | 587,695 | 54,247 | 533,448 | ** | 1,464,852 | 131,583 | 1,333,269 | ** | ||||||||||||||||||||||||
| Loss from operations | (587,643 | ) | (54,247 | ) | (533,396 | ) | ** | (1,462,868 | ) | (131,583 | ) | (1,331,285 | ) | ** | ||||||||||||||||||
| Interest expense | — | (5,187 | ) | (5,187 | ) | ** | — | (8,550 | ) | (8,550 | ) | * | ||||||||||||||||||||
| Interest income | — | — | — | * | 13,500 | — | 13,500 | * | ||||||||||||||||||||||||
| Net loss | $ | (574,143 | ) | $ | (59,434 | ) | $ | (514,709 | ) | ** | $ | (1,449,368 | ) | $ | (140,133 | ) | $ | (1,309,235 | ) | ** | ||||||||||||
| * | Not meaningful |
| ** | Change is significantly more than 500% |
General and Administrative Expenses
General and administrative expenses were approximately $588,000 for the three months ended June 30, 2024, compared with $54,000 for the three months ended June 30, 2023. The increase in general and administrative expenses was primarily driven by an increase of approximately $148,000 in consulting fees, $223,000 in professional, accounting, legal and business development fees, $57,000 in payroll, $58,000 in board stipend and insurance fees, and approximately $32,000 of expenses in Pakistan.
General and administrative expenses were approximately $1,465,000 for the six months ended June 30, 2024, compared with $132,000 for the six months ended June 30, 2023. The increase in general and administrative expenses was primarily driven by an increase of approximately $379,000 in consulting fees, $462,000 in professional, accounting, legal and business development fees, $220,000 in payroll, $182,000 in public filing fees, board stipend and insurance fees, and approximately $83,000 of expenses in Pakistan.
Liquidity and Capital Resources
At June 30, 2024 and December 31, 2023, we had cash and restricted cash of approximately $2,289,000 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.
- 14 -
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 18 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.
Cash Flows
The following table summarizes our sources and uses of cash and restricted cash:
| Six months Ended | ||||||||
| June 30, | ||||||||
| 2024 | 2023 | |||||||
| Net cash provided by (used in): | ||||||||
| Operating activities | $ | (1,481,344 | ) | $ | (140,133 | ) | ||
| Investing activities | (746 | ) | — | |||||
| Financing activities | — | 219,712 | ||||||
| Effect of exchange rate changes on cash and restricted cash | 213 | — | ||||||
| Net increase (decrease) in cash and restricted cash | $ | (1,481,877 | ) | $ | 78,442 | |||
Operating Activities
Net cash used in operating activities increased by approximately $1,309,000 for the six months ended June 30, 2024 compared with the six months ended June 30, 2023. The increase was primarily due to an increase in general and administrative expenses of approximately $1,300,000 and a decrease in accounts payable and accrued expenses of $115,000 offset by a decrease in prepaid expenses and other current assets of $112,000, and a decrease in related party payable of approximately $28,000.
- 15 -
Investing Activities
We had an immaterial amount of cash investing activities for the three months ended June 30, 2024 and 2023.
Financing activities
Net cash provided in financing activities decreased by approximately $220,000 for the six months ended June 30, 2024 compared with the six months ended June 30, 2023. The change was primarily due to approximately $260,000 of proceeds from a related party note payable received in the six months ended June 30, 2023 compared to nil proceeds in the six months ended June 30, 2024. This was offset by the payment of approximately $40,000 of deferred offering costs in the six months ended June 30, 2023 compared to nil payments in the six months ended June 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.
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.
- 16 -
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
At June 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 June 30, 2024.
At June 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 June 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;
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 June 30, 2024, we had a cash and restricted cash balance of approximately $2,289,000. 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.
- 17 -
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 June 30, 2024, formatted in Extensible Business Reporting Language (iXBRL): (i) Balance Sheets as of June 30, 2024 (unaudited) and December 31, 2023, (ii) Statements of Operations (unaudited) for the three and six months ended June 30, 2024 and 2023 (iii) Statement of Stockholders’ Equity (unaudited) for the three and six months ended June 30, 2024 and 2023, (iv) Statements of Cash Flows (unaudited) for the six months ended June 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. |
- 18 -
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: August 19, 2024 | By: | /s/ James Knopf |
| James Knopf | ||
| Chief Executive Officer | ||
| GAMER PAKISTAN INC. | ||
| DATE: August 19, 2024 | By: | /s/ Jerry J. Goldstein |
| Jerry J. Goldstein | ||
| Interim Chief Financial Officer | ||
- 19 -