Meridian Holdings Inc.: Form 10-Q for the period ended Jan 31, 2024

General Information

The following discussion should be read in conjunction with the financial statements for the fiscal year ended October 31, 2023 and notes thereto, which the Company filed with the Securities and Exchange Commission (the “SEC”) on January 17, 2024 as part of our Annual Report on Form 10-K for the year ended October 31, 2023 (the “2023 Annual Report”) and Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our 2023 Annual Report.

Statements made in this “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” are subject to forward-looking statements and various risks and should be read in connection with the “Special Note Regarding Forward-Looking Statements”, above and “Risk Factors”, incorporated by reference into this Report, as described below.

Certain capitalized terms used below and otherwise defined below, have the meanings given to such terms in the footnotes to our consolidated financial statements included above under “Part I - Financial Information - Item 1. Financial Statements”.

Our logo and some of our trademarks and tradenames are used in this Report. This Report also includes trademarks, tradenames and service marks that are the property of others. Solely for convenience, trademarks, tradenames and service marks referred to in this Report may appear without the ®, ™ and SM symbols. References to our trademarks, tradenames and service marks are not intended to indicate in any way that we will not assert to the fullest extent under applicable law our rights or the rights of the applicable licensors if any, nor that respective owners to other intellectual property rights will not assert, to the fullest extent under applicable law, their rights thereto. We do not intend the use or display of other companies’ trademarks and trade names to imply a relationship with, or endorsement or sponsorship of us by, any other companies.

The market data and certain other statistical information used throughout this Report are based on independent industry publications, reports by market research firms or other independent sources that we believe to be reliable sources. Industry publications and third-party research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. We are responsible for all of the disclosures contained in this Report, and we believe these industry publications and third-party research, surveys and studies are reliable; however, we have not commissioned or paid for any such reports or studies. While we are not aware of any misstatements regarding any third-party information presented in this Report, their estimates, in particular, as they relate to projections, involve numerous assumptions, are subject to risks and uncertainties, and are subject to change based on various factors, including those referenced under the section entitled “Item 1A. Risk Factors”. These and other factors could cause our future performance to differ materially from our assumptions and estimates. Some market and other data included herein, as well as the data of competitors as they relate to Golden Matrix Group, Inc., is also based on our good faith estimates.

Where You Can Find Other Information

We file annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and proxy and information statements and amendments to reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended. The SEC maintains a website (http: //www.sec.gov (http://www.sec.gov)) that contains reports, proxy and information statements and other information regarding us and other companies that file materials with the SEC electronically. Our filings can be found at https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0001437925. Copies of documents filed by us with the SEC are also available from us without charge, upon oral or written request to our Secretary, who can be contacted at the address and telephone number set forth on the cover page of this Report and are also available on our website at https://goldenmatrix.com/investors-overview/sec-filings/ which website includes information we do not desire to incorporate by reference into this Report.

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Definitions:

Unless the context requires otherwise, references to the “Company,” “we,” “us,” “our,” and “Golden Matrix” in this Report refer specifically to Golden Matrix Group, Inc. and its consolidated subsidiaries.

In addition, unless the context otherwise requires and for the purposes of this report only:

• “AUD” means Australian dollars;
• “Exchange Act” refers to the Securities Exchange Act of 1934, as amended;
• “Euro” or “€” refers to the Euro, the official currency of the majority of the member states of the European Union;
• “GBP” or “£” means Pounds Sterling or Great British Pounds;
• “SEC” or the “Commission” refers to the United States Securities and Exchange Commission;
• “Securities Act” refers to the Securities Act of 1933, as amended; and
• “USD” or “$” means United States dollars.

All dollar amounts in this Report are in U.S. dollars unless otherwise stated.

Summary of The Information Contained in Management’s Discussion and Analysis of Financial Condition and Results of Operations

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is provided in addition to the accompanying consolidated financial statements and notes to assist readers in understanding our results of operations, financial condition, and cash flows. MD&A is organized as follows:

• Overview. Discussion of our business and overall analysis of financial and other highlights affecting us, to provide context for the remainder of MD&A.
• Results of Operations. An analysis of our financial results comparing the three months ended January 31, 2024 and 2023.
• Liquidity and Capital Resources. An analysis of changes in our consolidated balance sheets and cash flows and discussion of our financial condition.
• Critical Accounting Policies and Estimates. Accounting estimates that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results and forecasts.

OVERVIEW

We operate (i) as an innovative provider of enterprise Software-as-a-Service (“SaaS”) solutions for online casino operators and online sports betting operators, commonly referred to as iGaming operators and, (ii) a provider of pay to enter prize competitions in the United Kingdom (UK), through RKingsCompetitions Ltd. and GMG Assets Limited and (iii) an online casino in Mexico through Golden Matrix MX, S.A. DE C.V.

We have historically operated in the B2B segment where we develop and own online gaming intellectual property (IP) and build configurable and scalable, turn-key and white-label gaming platforms for our international customers, located primarily in the Asia Pacific (APAC) region. With the acquisitions of RKingsCompetitions Ltd. (effective November 1, 2021 as to 80% and effective November 4, 2022, as to the remaining 20%) and GMG Assets (effective on August 1, 2022), we entered into the business-to-consumer (“B2C”) segment by offering pay to enter prize competitions throughout the UK. Also, in the B2C segment, on July 11, 2022, the Company acquired Golden Matrix MX, S.A. DE C.V., which had no assets or operations at the time of acquisition and was formed for the benefit of the Company, for the sole purpose of operating an online casino in Mexico, branded as Mexplay, which features an extensive number of table games, slots, as well as sportsbook, and offers tournament competition prizes similar to those offered by RKings. The Company’s online casino and related activities in Mexico commenced generating revenues in March 2023.

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B2B Segment

The Company provides business-to-business (B2B) services and products. Our customers are primarily gaming Distributors and licensed online gaming operators. The Company also provides services and resells third party gaming content to licensed online gaming distributors and gaming operators.

We derive revenues primarily from licensing fees received from gaming operators, in most cases via gaming Distributors located in the Asia Pacific (APAC) region that utilize the Company’s technology.

As of January 31, 2024, our systems had over 8.3 million registered players and a total of more than 808 unique casino and live game operations within all of our platforms including our GM-X, GM-Ag, Turnkey Solution, and White Label Solutions.

The Company’s goal is to expand our customer base globally and to integrate additional operators, launch additional synergistic products and appoint more Distributors.

As described above, our core markets are currently the Asia-Pacific (APAC) region and while we have a solid customer base; we are continuing to engage new gaming Distributors and gaming operators on a regular basis and we anticipate that our current gaming Distributors and gaming operators will continue to grow.

B2C Segment

Our B2C segment customers are primarily located in Northern Ireland and we have expanded our marketing efforts to reach customers throughout the UK. As of January 31, 2024, RKings has over 338,000 registered users. GMG Assets completed 42 transactions from November 1, 2023 to January 31, 2024, representing $1,330,351 in revenues and $73,947 in net income. Also, Mexplay commenced generating revenues from online casino (and related activities) in Mexico in March 2023. As of January 31, 2024, Mexplay has over 84,000 registered users; and for the three months ended January 31, 2024, it generated $204,164 in revenues.

We derive revenues primarily from selling prize competitions tickets directly to customers for prizes throughout the United Kingdom ranging from automobiles to jewelry as well as travel and entertainment experiences and we generate revenues from our online casino in Mexico, branded as Mexplay, which features an extensive number of table games, slots, as well as sportsbook, and offer tournament competition prizes similar to those offered by RKings.

Our objective in managing our resources is to ensure that we have sufficient liquidity to fund our operations and meet our growth objectives while maximizing returns to shareholders. Liquidity is necessary to meet (i) the working capital needs of our operations, (ii) fund our growth and expansion plans, and (iii) consummate strategic acquisitions (including the Meridian Purchase Agreement, discussed below). We have met, and plan to continue to meet, our cash requirements through our operations and sales of equity securities. As to the funding of strategic acquisitions (including the pending Meridian Purchase Agreement), we may issue debt in addition to raising funds through the sales of the Company’s capital stock.

The Company’s financial performance is subject to Asia Pacific, UK and Mexico economic conditions and their impact on levels of spending by consumers and customers, particularly discretionary spending for entertainment, gaming and leisure activities. Economic recessions may have adverse consequences across industries, including the global entertainment and gaming industries, which may adversely affect the Company’s business and financial condition. As a result of rising interest rates and inflation, there is substantial uncertainty about the strength of the Asia Pacific, UK and Mexico economies, which may currently or in the near term be in a recession and have experienced rapid increases in uncertainty about the pace of potential recovery. In addition, changes in general market, economic and political conditions in domestic and foreign economies or financial markets, including fluctuation in stock markets resulting from, among other things, trends in the economy, and increases in inflation and interest rates, as are being currently experienced, may reduce users’ disposable income and/or lead to recessions.

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We believe that our business will continue to be resilient through a continued economic downturn or recession, or slowing or stalled recovery therefrom, and that we have the liquidity to address the Company’s financial obligations and alleviate possible adverse effects on the Company’s business, financial condition, results of operations or prospects.

Key elements of our growth strategy include:

• Supporting our existing customers as they scale up their respective iGaming and online sportsbook operations. As our customers’ businesses grow, we intend to deploy additional resources to develop the GM-X and GM-Ag Systems’ platform functionality, expand our gaming content portfolios by integrating additional third-party content providers, and seek to obtain additional regulatory approvals to operate in other global markets. The GM-X and GM-Ag Systems’ turn-key solution (including modular, configurable and scalable gaming platforms), is a complete software package for starting an online gaming business, incorporating all the tools and gaming content necessary to run an online Casino and/or Sportsbook and offers a full suite of tools and features for successfully operating and maintaining an online gaming website; from player registration to user management and content management.
• Expanding our global reach by securing new gaming distributors, casino and sportsbook operator customers in existing and newly regulated markets.
• Investing in sales and marketing initiatives to aggressively pursue new deployment opportunities in developing markets such as Africa and Latin America, as well as exploring opportunities in the U.S.
• Investing in sales and marketing initiatives to drive UK and Mexican customers to the respective RKings and Mexplay platforms.
• Expanding the prizes and prize options available to customers on the RKings and Mexplay platforms.
• Developing and deploying our own proprietary gaming content in the casino iGaming category. Our E-sport project is currently on hold.
• Pursuing acquisitions of synergistic companies and assets with the goal of expanding our competitive position in the markets in which we operate, including the pending Meridian Purchase Agreement, which transaction we are currently working to close, as discussed above. We are also exploring the opportunity to selectively acquire independent slot and gaming development studios in order to launch our own proprietary games on our platform.

The Company does not intend to make significant investments (except for potential acquisitions, none of which are currently pending other than the pending Meridian Purchase Agreement discussed above) to support our business growth strategy. We believe that our business model is highly scalable and our existing resources can be leveraged to (i) develop new offerings and features, (ii) enhance our existing platform, and (iii) improve our operating infrastructure.

The Company may face significant costs with respect to legal fees incurred in the applications for licenses, continued regulatory requirements, and legal representation.

To acquire complementary businesses and technologies, we may need to pursue equity or debt financing to secure additional funds, and we are currently seeking debt or convertible debt funding in connection with the acquisition contemplated by the Meridian Purchase Agreement. Our ability to obtain additional capital will depend on our business plans, investor demand, our operating performance, capital markets conditions and other factors. If we raise additional funds by issuing equity, equity-linked or debt securities, those securities may have rights, preferences or privileges senior to the rights of our then issued and outstanding equity or debt, and our existing shareholders may experience dilution. If we are unable to obtain additional capital when required, or on satisfactory terms, our ability to continue to support our business growth or to respond to business opportunities, challenges or unforeseen circumstances could be adversely affected, and our business may be harmed.

We may acquire other businesses, and our business may be detrimentally affected if we are unable to successfully integrate acquired businesses into our company or otherwise manage the growth associated with multiple acquisitions.

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As part of our business strategy, we intend to make acquisitions of new or complementary businesses, products, brands, or technologies, including the pending Meridian Purchase Agreement. In some cases, the costs of such acquisitions may be substantial, including the costs of professional fees and due diligence efforts. There is no assurance that the time and resources expended on pursuing a particular acquisition will result in a completed transaction, or that any completed transaction will ultimately be successful. In addition, we may be unable to identify suitable acquisition or strategic investment opportunities or may be unable to obtain the required financing or regulatory approvals, and therefore we may be unable to complete such acquisitions or strategic investments on favorable terms. We may pursue acquisitions that our investors may not agree with, and we cannot assure investors that any acquisition or investment will be successful or otherwise provide a favorable return on investment. In addition, if we fail to successfully close transactions, integrate new technology or operational teams, or integrate the products and technologies associated with these acquisitions into our company, our business could be seriously harmed.

Cash requirements

The Company is self-sustaining, and its cash needs for ongoing operations are met through current operations; as of January 31, 2024, the cash balance is $17,292,978. There are no current expected future cash demands or commitments other than ongoing operations for the following next 12 months and beyond, except that the Company has entered into the Meridian Purchase Agreement, as discussed above in “NOTE 16 – MERIDIAN PURCHASE AGREEMENT” to the unaudited financial statements included under “Part I – Financial Statements – “Item 1. Financial Statements”, which will require the Company to raise additional funding to complete the acquisition, and the Company may acquire additional businesses or assets in the future, which acquisitions may require additional capital as well.

As discussed in greater detail in “NOTE 16 - MERIDIAN PURCHASE AGREEMENT”, in the notes to the financial statements included under “Item 1. Financial Statements”, on June 28, 2023, the Company entered into an Amended and Restated Sale and Purchase Agreement of Share Capital (as amended from time to time, the “Meridian Purchase Agreement”) with Aleksandar Milovanovic, Zoran Milosevic (“Milosevic”) and Snezana Bozovic (collectively, the “Meridian Sellers”), the owners of Meridian Tech Društvo Sa Ograničenom Odgovornošću Beograd, a private limited company formed and registered in and under the laws of the Republic of Serbia (“Meridian Serbia”); Društvo Sa Ograničenom Odgovornošću “Meridianbet” Društvo Za Proizvodnju, Promet Roba I Usluga, Export Import Podgorica, a private limited company formed and registered in and under the laws of Montenegro; Meridian Gaming Holdings Ltd., a company formed and registered in the Republic of Malta; and Meridian Gaming (Cy) Ltd, a company formed and registered in the republic of Cyprus (collectively, the “Meridian Companies”).

Pursuant to the Meridian Purchase Agreement, the Meridian Sellers agreed to sell the Company 100% of the outstanding capital stock of each of the Meridian Companies in consideration for (a) a cash payment of $30 million, due at the closing of the A&R Meridian Purchase Agreement (the “Closing”); (b) 82,141,857 restricted shares of the Company’s common stock (the “Closing Shares”), with an agreed upon value of $3.00 per share, due at the Closing; (c) 1,000 shares of a to be designated series of Series C preferred stock of the Company (the “Series C Voting Preferred Stock”), due at the Closing; (d) $5,000,000 in cash and 5,000,000 restricted shares of Company common stock (the “Post-Closing Shares”), due within five business days following the six month anniversary of the Closing, if (and only if) the Company has determined that: the Meridian Sellers and their affiliates are not then in default in any of their material obligations, covenants or representations under the Purchase Agreement, or any of the other transaction documents entered into in connection therewith (the “Contingent Post-Closing Consideration”); (e) $20,000,000 in cash, of which $10,000,000 is due 12 months after the date of the Closing and $10,000,000 is due 18 months after the date of the Closing (the “Non-Contingent Post-Closing Consideration”); and (f) promissory notes in the aggregate amount of $15,000,000 (the “Promissory Notes”) issuable to the Meridian Sellers, due 24 months after the Closing.

On, and effective on, January 22, 2024, the Company and the Sellers entered into a Second Amendment to Amended and Restated Sale and Purchase Agreement of Share Capital (the “Second Amendment”) which extended the required closing date of the Purchase from March 31, 2024, to June 30, 2024, or such other later date as may be approved by the mutual consent of the parties (subject to an automatic extension right described in the Purchase Agreement).

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The Company is actively pursuing funding sources to meet the cash payment requirements described above, which are summarized below, as discussed in greater detail under “Capital Resources”, below:

As discussed above, to the extent the Meridian Purchase Agreement closes, we will need to raise $70 million to pay the amounts summarized above, including $30 million at the Closing, less cash on hand and generated through our operations, and up to $20 million of cash which may be paid from cash on hand of the Meridian Companies at Closing, with the approval of the Meridian Sellers.

Liquidity

There are no known trends, demands, commitments, events or uncertainties that will result in or that are reasonably likely to result in the Company’s liquidity decreasing in any material way. As previously noted, the Company is self-sustaining through its operations and therefore is not considering additional sources of liquidity, except in connection with the Meridian Purchase Agreement, described above; however, the Company may consider raising funds through debt, private placements, or additional public offerings for expansion of operations or synergetic acquisitions if additional external funds are sought. Sources of liquid assets, as of January 31, 2024, include cash of $17,292,978, receivables of $4,031,349 and inventory of $2,376,836, with offsetting liabilities (current and long-term) of $4,950,412.

Capital Resources

The Company does not require material cash requirements for its ongoing operations other than a possible holdback payment of approximately $636,650 (GBP 500,000) as part of the hold-back on the 80% acquisition of RKings that was completed effective November 1, 2021. The hold-back is contested by the Company and currently subject to ongoing claims. With a cash balance of $17,292,978 and operations that are self-sustaining, the contested obligation to pay the aforementioned holdback of approximately $636,650 may be met without burdening the Company.

We do not currently have any additional commitments or identified sources of additional capital from third parties or from our officers, directors or majority stockholders. Additional financing may not be available on favorable terms, if at all.

The Company is actively pursuing funding sources to meet the cash requirements for the Meridian Purchase Agreement described above in “Overview - Cash requirements” of which the initial $30 million is due at the Closing; however, with the consent of, and in the sole discretion of, the Meridian Sellers, up to $20 million of the $30 million required to be paid to the Meridian Sellers by the Company at the closing of the Meridian Purchase Agreement, may be paid from cash on hand of the Meridian Companies at closing, including from the $10 million of cash the Meridian Sellers are required to have as of Closing pursuant to the terms of the Meridian Purchase Agreement. We plan to raise this funding through debt (including potentially convertible debt) and/or equity (which may include conversion rights); however, we have not entered into any agreements regarding such funding to date, and such funding may not be available on favorable terms, if at all. If debt financing is available and obtained, our interest expense may increase and we may be subject to the risk of default, depending on the terms of such financing. If equity financing is available and obtained it may result in our shareholders experiencing significant dilution. If such financing is unavailable, we may be unable to complete the acquisition of the Meridian Companies.

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Assuming we successfully complete the acquisition of the Meridian Companies, it is expected the combined operations of the Company and Meridian will continue to be self-sustaining through their respective operations with minimal impact on liquidity.

In the future, we may be required to seek additional capital by selling equity securities or debt securities, or taking on additional debt, or otherwise be required to bring cash flows in balance when we approach a condition of cash insufficiency. The sale of additional equity or debt securities, if accomplished, may result in dilution to our then stockholders. Financing may not be available in amounts or on terms acceptable to us, or at all. In the event we are unable to raise additional funding and/or obtain revenues sufficient to support our expenses, we may be forced to scale down our operations, which could cause our securities to decline in value.

Our historical primary sources of liquidity are the cash flows generated from our operations, along with debt and equity financing and available cash and cash equivalents. Our primary use of this liquidity is to fund ongoing cash requirements, including our working capital needs, capital investments, and acquisitions. As previously mentioned, we believe that the cash generated from our operations will be sufficient to meet our working capital needs for the next 12 months and beyond, including investments made and expenses incurred in connection with system development, marketing initiatives, and inventory purchase.

Adjusted EBITDA – Adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization

In addition to our results calculated under generally accepted accounting principles in the United States (“GAAP”), we also present EBITDA and Adjusted EBITDA below. EBITDA and Adjusted EBITDA are “non-GAAP financial measures” presented as a supplemental measure of the Company’s performance. They are not presented in accordance with GAAP. The Company uses EBITDA and Adjusted EBITDA as a metric of profits and successful operations management. In particular, we use Adjusted EBITDA as a milestone for the purposes of certain incentive compensation programs applicable to some of our officers and directors, in order to evaluate our company’s performance and determine whether certain restricted stock units vest as of the end of October 31, 2023 and 2024. EBITDA means net income (loss) before interest, taxes, depreciation and amortization. Adjusted EBITDA means EBITDA before stock-based compensation. Adjusted EBITDA should be viewed as supplemental to, and not as an alternative for net income or loss calculated in accordance with GAAP.

EBITDA and Adjusted EBITDA are presented because we believe it provides additional useful information to investors due to the various noncash items during the period. EBITDA and Adjusted EBITDA are also frequently used by analysts, investors and other interested parties to evaluate companies in our industry. EBITDA and Adjusted EBITDA are unaudited, and have limitations as an analytical tool, and you should not consider them in isolation, or as a substitute for analysis of our operating results as reported under GAAP. Some of these limitations are: EBITDA and Adjusted EBITDA do not reflect cash expenditures, or future or contractual commitments; EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements for, capital expenditures or working capital needs; EBITDA and Adjusted EBITDA do not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on debt or cash income tax payments; although depreciation and amortization are noncash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA and Adjusted EBITDA do not reflect any cash requirements for such replacements. In addition, other companies in this industry may calculate EBITDA and Adjusted EBITDA differently than the Company does, limiting its usefulness as a comparative measure. The Company’s presentation of these measures should not be construed as an inference that future results will be unaffected by unusual or nonrecurring items. We compensate for these limitations by providing a reconciliation of such non-GAAP measures to the most comparable GAAP measure, below. We encourage investors and others to review our business, results of operations, and financial information in their entirety, not to rely on any single financial measure, and to view non-GAAP measures in conjunction with the most directly comparable GAAP financial measure.

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Reconciliation of EBITDA and Adjusted EBITDA to Net income (loss):

Recent and Pending Transactions

Meridian Purchase Agreement:

See “NOTE 16 – MERIDIAN PURCHASE AGREEMENT”, included herein in the notes to the financial statements included under “Item 1. Financial Statements”, for a detailed discussion of the Meridian Purchase Agreement.

RESULTS OF OPERATIONS

Three months ended January 31, 2024, compared to the three months ended January 31, 2023.

Revenues

The Company currently has four distinctive revenue streams. In the B2B segment there are two revenue streams (i) charges for usage of the Company’s software, and (ii) a royalty charged on the use of third-party gaming content. In the B2C segment, there are two revenue streams (i) selling tickets directly to customers to enter prize competitions in the UK through RKings, and (ii) the operation of an online casino in Mexico.

B2B segment, revenue descriptions:

(i). charges for usage of the Company’s software

The Company charges gaming operators for the use of its unique intellectual property (IP) and technology systems. Revenues derived from such charges were based on the usage of the systems by the clients.

Total revenues recognized from the usage of our gaming IP and technology systems for the three months ended January 31, 2024, and 2023, are shown in the following table:

The decrease of $121,282 in revenues in the three-month period ended January 31, 2024, relating to IP gaming revenues, compared to the three-month period ended January 31, 2023, is due to the Company focusing on appointing more resellers of third-party gaming content and reducing its reliance on related parties. The increase in revenues from third-party clients can be attributed to the acquisition of new customers. Although the Company operates in a highly competitive environment, the Company’s aim is to appoint more resellers that will expand the Company’s global presence while it continues to broaden its product offerings which have already resulted in an increase in alternate revenue streams, as discussed below.

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Included in the IP and technology systems revenues are $65,226 of revenues from Articulate Pty Ltd (“Articulate”), a related party, which is wholly-owned by Anthony Brian Goodman, CEO and Chairman of the Company and his wife, Marla Goodman. During the three months ended January 31, 2024, the Company generated $68,099 of revenues from its unique IP and technology systems, including $65,226 from Articulate.

(ii). a royalty charged on the use of third-party gaming content

Since June 2020, the Company has contracted with certain clients to offer third party gaming content and as such become a reseller of this gaming content. The Company acquires the third-party gaming content for a fixed cost and resells the content at a margin.

Revenues derived from the reselling of gaming content during the three-months ended January 31, 2024, and 2023, are shown in the following table:

Revenues from reselling of gaming content increased by $517,535 in the three-month period ended January 31, 2024, compared to the three-month period ended January 31, 2023. The increase can be attributed to the adjustment of an accrued liability of $564,957 which led to an increase in revenues of $639,895 and cost of goods sold (COGS) of $74,938. The accrued liability was due to customer usage of our gaming content via a third-party platform which was not conclusively verified at the time. During the period of November 2021 to December 2023, the total amount of invoices issued to the customers for this usage via the third-party platform was $639,895, and this usage was accounted for as other income. The Company chose to be prudent and transferred the balance of this income and its related expense, in the amount of $564,957, to accrued liability, whilst the Company substantiated and validated the data on the third-party platform. All of the usage amounts have now been confirmed and fully paid by the customers. The data has now been verified and as a result the Company has adjusted the total other income from November 2021 to December 2023 in the amount of $639,895 and captured the revenue, adjusted the total corresponding other expense in the amount of $74,938 to COGS, and reversed the accrued liability of $564,957.

There has been recent pressure from the highly competitive online gaming landscape in the Asian Pacific region and the Company has also been affected by the loss of certain gaming operators. The Company has implemented certain strategies to overcome the recent loss of certain gaming operators and also to mitigate the competitive environment. These strategies include adding new popular gaming content to its portfolio that offers higher margins and implementing certain innovations in the Company’s GM-Ag system.

The Company’s strategic emphasis on expanding product diversity is expected to attract more resellers, allowing the Company to scale its distribution more efficiently and broaden its global reach. As the Company engages additional resellers, it is also expected to increase its number of operators and broaden its global market. We believe that this is achievable via the Company’s GM-Ag system which we believe is more suitable for Latin American and European markets, where the Company plans to market its services in the future.

B2C segment, revenue description:

The Company generates revenues from sales of prize competitions tickets directly to customers for prizes throughout the United Kingdom ranging from automobiles to jewelry as well as travel and entertainment experiences. In addition, prize winners may elect to accept the cash value of a prize instead of accepting the prize. The cash value of the prize is less than the actual value of the prize. If the cash value is accepted, GMG Assets purchases the prize from the prize winner and then sells the prize in the market, which has historically generated a profit on the sale.

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The Company also generates revenues from operating an online casino in Mexico, branded Mexplay, which features an extensive number of table games, slots, as well as sportsbook, and offers tournament competition prizes similar to those offered by RKings. Mexplay commenced generating revenues in March 2023.

Revenues derived from the sales of prize competitions tickets, purchases and sales of prizes from the RKings prize winners as well as the online casino in Mexico during the three-months ended January 31, 2024, and 2023, are shown in the following table:

Prize competition tickets and purchases and sales of prizes from the RKings prize winners

During the three months ended January 31, 2024, and 2023, revenues from prize competitions were $7,019,008 and $6,553,222, respectively, which included $1,330,351 and $1,215,516, respectively, of revenues which were derived from facilitating cash alternative offers for winners of prizes within RKings’ business. This aspect of the business became effective August 1, 2022. The increase of $465,786 in revenues in the three-month period ended January 31, 2024, relating to sales of prize competitions tickets, compared to the three-month period ended January 31, 2023, is mainly attributable to the introduction of an expanded tournament platform at RKings beginning in June 2023, which has increased the popularity and revenues of RKings.

Online casino in Mexico

During the three months ended January 31, 2024, and 2023, revenues from online casinos were $204,164 and $0, respectively. The increase of $204,164 is due to the Mexplay online casino not being operational until March 2023.

Total B2B and B2C combined revenues for the three months ended January 31, 2024 and 2023 were $11,843,882 and $10,777,679, respectively, as discussed in greater detail above.

Costs of goods sold

The Company currently has four distinctive sources of cost of goods sold. Two are related to the B2B segment (i.e., (i). charges for usage of the Company’s software and (ii). a royalty charged on the use of third-party gaming content) and two are related to the B2C segment (i.e., (iii) prizes purchased which are awarded to winners of RKings’ prize competitions and (iv) usage of third-party gaming content for the online casino).

B2B segment, Cost of goods sold descriptions:

(i). charges for usage of the Company’s software

The Company recognizes the value of stock options granted to consultants under the 2018 Equity Incentive Plan as cost of goods sold. These stock options directly contributed to the revenue generated by the Company’s GM2 Asset. The amortization expenses of the stock options granted to consultants recognized in the three months ended January 31, 2024, and 2023 are shown in the following table:

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During the three months ended January 31, 2024, and 2023, cost of goods sold, due to the amortization of options, was $49,651 and $120,054, respectively. The decrease of $70,403 was due to certain stock options being fully amortized in the prior fiscal years.

(ii). a royalty charged on the use of third-party gaming content

The cost of usage of the third-party content (the reselling of the gaming content) is recognized as a cost of goods sold (COGS). The cost of goods sold during the three months ended January 31, 2024, and 2023 is shown in the following table:

During the three months ended January 31, 2024, and 2023, the cost of goods sold due to the usage of gaming content was $3,187,421 and $3,081,356, respectively. The increase of $106,065 in cost of goods sold from the resale of gaming content in the three months ended January 31, 2024, compared to the three months ended January 31, 2023, was attributable to the increase in the diversity and usage of the gaming content via the Company’s GM-Ag system. The Company incorporated new popular gaming content into its GM-Ag system between 2022 and 2023, leading to enhanced royalty charges. The increase in the cost of goods sold was mainly due to the increased royalty charges associated with the newly integrated gaming content.

B2C segment, Cost of goods sold descriptions:

The Company incurs cost of goods sold due to the prizes purchased which are awarded to winners of RKings’ prize competitions throughout the United Kingdom, ranging from automobiles to jewelry as well as travel and entertainment experiences.

The Company also incurs the cost of goods sold related to the online casino Mexplay for usage of third-party gaming content. Mexplay commenced generating revenues in March 2023.

Cost of goods sold due to prizes purchased which are awarded to winners of RKings’ prize competitions throughout the United Kingdom and the purchases of prizes from the RKings prize winners as well as the costs of goods sold related to the online casino in Mexico during the three months ended January 31, 2024, and 2023, are shown in the following table:

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(iii) prizes purchased which are awarded to winners of RKings’ prize competitions

During the three months ended January 31, 2024, and 2023, cost of goods sold relating to prizes purchased to be awarded in the prize competitions was $5,205,021 and $5,133,235, respectively. The increase of $71,786 in cost of goods sold from the resale of prizes in the three months ended January 31, 2024, compared to the three months ended January 31, 2023, was mainly attributable to the increase in the COGS from GMG Assets, as a result of the increase in the revenues.

(iv) usage of third-party gaming content for the online casino

During the three months ended January 31, 2024, and 2023, cost of goods sold due to usage of third-party gaming content on the online casino in Mexico was $26,529 and $0, respectively. The increase of $26,529 in cost of goods sold in the three months ended January 31, 2024, relating to online casinos, compared to the three months ended January 31, 2023, is due to the online casino not being operational during the three months ended January 31, 2023.

Total cost of goods sold for the three months ended January 31, 2024, and 2023 was $8,468,622 and $8,334,645, respectively.

Gross Profit and Gross Profit Margin

We had gross profit of $3,375,260 for the three months ended January 31, 2024, compared to gross profit of $2,443,034 for the three months ended January 31, 2023, an increase of $932,226 from the prior period, mainly due to the adjustment of the accrued liability in the amount of $564,957 as discussed above and an increase in the gross profit in the B2C segment of $571,635, also as discussed above.

Gross profit margin was 28% for the three months ended January 31, 2024, compared to 23% for the three months ended January 31, 2023. The gross profit margin on the B2B segment was approximately 30% for the three months ended January 31, 2024, compared to 24% for the three months ended January 31, 2023, which increase was mainly due to the adjustment of the accrued liability. The gross profit margin on the B2C segment was approximately 28% for the three months ended January 31, 2024, compared to 22% for the three months ended January 31, 2023, which increase is mainly due to the introduction of tournaments that offer higher margins.

Moving forward, the Company expects to enhance the variety of gaming content within its GM-Ag system and to emphasize the promotion of gaming content with higher profit margins in the B2B segment. Additionally, the Company plans to persist in the expansion of RKings’ website, undertaking initiatives to introduce a new and more diverse range of tournaments offering higher margins.

General and administrative expenses

During the three months ended January 31, 2024, and 2023, general and administrative expenses were $2,336,792 and $2,037,295, respectively. General and administrative expenses consisted primarily of stock-based compensation, advertising and promotion expenses, travel expenses, website maintenance expenses, payroll expenses, office expenses, bank charges, commission expenses, lease expenses, gaming license expenses, depreciation, amortization expense, and professional fees.

The increase of general and administrative expenses was mainly due to increased payroll costs of $54,906 in the B2B segment and increased operating expenses of $256,986 for our Mexplay operation. The increase in payroll costs was mainly due to an increase in inflation. The operating expenses of Mexplay were primarily associated with the marketing expenditures, payment gateway transaction fees and accounting service fees.

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General and administrative expenses – Related parties

General and administrative expenses from related parties consisted primarily of stock-based compensation, consulting expenses and salary expenses payable to the Company’s management and Directors. During the three months ended January 31, 2024, and 2023, general and administrative expenses from related parties were $759,264 and $734,694, respectively. The components of general and administrative expenses from related parties were as follows:

During the three-month period ended January 31, 2024, and 2023, the stock-based compensation was $527,309 and $522,896, respectively, which was mainly due to RSUs issued to directors and officers, as discussed in greater detail above under “NOTE 12 – EQUITY” to the unaudited financial statements included under “Part I – Financial Statements – “Item 1. Financial Statements”. The consulting and salary expenses increase of $4,856 was mainly due to the increase in salaries to the Company’s directors and officers.

Interest expense

During the three months ended January 31, 2024, and 2023, interest expense was $600 and $998, respectively.

Interest income

Interest income was attributable to the interest from the bank savings. During the three months ended January 31, 2024, and 2023, interest income was $39,264 and $11,905, respectively.

Foreign exchange gain

The foreign exchange gain was due to the fluctuation of the Euro, British Pound and Mexican Peso, against the US dollar, and as a result of certain suppliers billing the Company in Euros, and settlement of other liabilities in currencies other than US dollars. During the three months ended January 31, 2024, foreign exchange gain was $18,817, compared to $20,213 for the three months ended January 31, 2023.

Provision for income taxes

The provision for income taxes was $262,180 for the three months ended January 31, 2024, compared to $145,686 for the three months ended January 31, 2023. The increase of $116,494 was attributable to the increase in UK gross profits resulting in the corresponding increase in tax expenses in the B2C segment in the UK. There was no provision for income taxes in the B2B segment during the three months ended January 31, 2024, and 2023, as a result of operating losses carried forward in the B2B segment.

Net income (loss) attributable to the Company

During the three months ended January 31, 2024, and 2023, the Company had net income/(loss) attributable to the Company of $74,505 and $(443,521), respectively. The increase in net income attributable to the Company of $518,026 was primarily due to an increase in gross profit of $932,226, offset by an increase in general and administrative expenses of $299,497 and an increase in income taxes of $116,494, each as discussed in greater detail above.

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LIQUIDITY AND CAPITAL RESOURCES

The Company had $17,292,978 of cash on hand at January 31, 2024 and total assets of $37,097,153 ($24,194,465 of which were current assets) and total working capital of $19,501,130 as of January 31, 2024. Included in total assets at January 31, 2024 was $10,381,710 of goodwill associated with the Company’s interest in RKingsCompetition Ltd. and $1,880,000 in net intangible assets related to trademarks and non-compete agreements, as discussed in greater detail above under “NOTE 7 – INTANGIBLE ASSETS – SOFTWARE PLATFORM, WEBSITE DEVELOPMENT COSTS, TRADEMARKS AND NON-COMPETE AGREEMENTS” to the unaudited financial statements included under “Part I – Financial Statements – “Item 1. Financial Statements”.

The Company had $17,100,280 of cash on hand and total assets of $35,582,817 ($22,852,676 were current assets) at October 31, 2023. The Company had total working capital of $18,373,253 as of October 31, 2023. Included in total assets at October 31, 2023 was $10,381,710 of goodwill associated with the Company’s interest in RKings and $1,960,000 in net intangible assets related to trademarks and non-compete agreements, as discussed in greater detail above under “NOTE 7 – INTANGIBLE ASSETS – SOFTWARE PLATFORM, WEBSITE DEVELOPMENT COSTS, TRADEMARKS AND NON-COMPETE AGREEMENTS” to the unaudited financial statements included under “Part I – Financial Statements – “Item 1. Financial Statements”.

The increase in cash of $192,698 between January 31, 2024, and October 31, 2023, was mainly due to the effect of exchange rate changes on cash.

Our financial focus is on long-term, sustainable growth in revenue with the goal of marginal increases in expenses. The Company’s operations are highly scalable and we plan to continuously add new products to our offerings with the anticipation that they will provide successful revenue growth.

The Company has generated positive cash flows from operations since 2018. The Company is self-sustaining, and its cash needs are met through current operations which, as noted above, has resulted in cash balances of $17,292,978 as of January 31, 2024, and $17,100,280 as of October 31, 2023. Except as discussed above under “Overview-Cash Requirements” and “Overview-Capital Resources” in connection with the pending Meridian Purchase Agreement, we believe that the cash generated from our operations will be sufficient to meet our working capital needs for the next 12 months and beyond, including investments made and expenses incurred in connection with system development, marketing initiatives, and inventory purchase.

Because the Company is self-sustaining through its operations, it is not considering additional sources of liquidity, except to complete the acquisition of the Meridian Companies as discussed above; however, the Company may also consider raising funds through debt, private placements, or additional public offerings for expansion of operations or synergetic acquisitions if additional external funds are sought.

The Company does not have material cash requirements other than a possible payment of approximately $636,650 (GBP 500,000) in connection with the acquisition of RKings, which payment is currently subject to ongoing claims, and the requirement to raise funds to complete the transactions contemplated by the Meridian Purchase Agreement, discussed above.

Except as discussed above under “Overview-Cash Requirements” and “Overview-Capital Resources” in connection with the pending Meridian Purchase Agreement, there are no known trends, demands, commitments, events or uncertainties that will result in or that are reasonably likely to result in the Company’s liquidity decreasing in any material way. We do not currently have any additional commitments or identified sources of additional capital from third parties or from our officers, directors or majority shareholders. Additional financing may not be available on favorable terms, if at all.

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In the future, we may be required to seek additional capital, including in connection with the Meridian Purchase Agreement, as discussed above, by selling additional debt or equity securities, or otherwise be required to bring cash flows in balance when we approach a condition of cash insufficiency. The sale of additional equity or debt securities, if accomplished, may result in dilution to our then shareholders. Financing may not be available in amounts or on terms acceptable to us, or at all. In the event we are unable to raise additional funding and/or obtain revenues sufficient to support our expenses, we may be forced to scale down our operations, which could cause our securities to decline in value.

See “NOTE 3 – ACCOUNTS RECEIVABLE – RELATED PARTY”, for a description of related party accounts receivable; “NOTE 7 – INTANGIBLE ASSETS – SOFTWARE PLATFORM, WEBSITE DEVELOPMENT COSTS, TRADEMARKS AND NON-COMPETE AGREEMENTS”, for a description of the Company’s intangible assets; “NOTE 8 – ACCOUNTS PAYABLE – RELATED PARTIES”, for a description of related party accounts payable; and “NOTE 11 – RELATED PARTY TRANSACTIONS”, for a description of related party transactions, each included herein in the notes to the financial statements included under “Item 1. Financial Statements.”

Cash flows from operating activities include net income adjusted for certain non-cash expenses, and changes in operating assets and liabilities. Non-cash expenses for the three months ended January 31, 2024, include stock-based compensation, amortization expenses on intangible assets, and unrealized foreign exchange gain on contingent liability.

The Company generated cash from operating activities of $8,175 during the three months ended January 31, 2024, due primarily to $74,505 of net income, non-cash expenses relating to stock-based compensation of $770,951, depreciation and amortization of $121,440, a $34,774 increase in accounts receivable from related party, and $251,584 of increase in accounts payable and accrued liabilities, and offset by $766,129 of increase in accounts receivable, and $571,196 of increase in inventory, prize. The Company generated cash from operating activities of $401,653 during the three months ended January 31, 2023, due primarily to non-cash expenses relating to stock-based compensation of $1,081,784 (including RSUs and options issued for services of $818,395, and stock issued for services of $263,389), depreciation and amortization of $116,563, and $626,252 of increase in accounts payable and accrued liabilities, offset by $443,521 of net loss, $820,054 of increase in accounts receivable, and $378,170 of increase in inventory, prize.

During the three months ended January 31, 2024, cash used in investing activities was $1,511 which was primarily due to the purchase of computer equipment. During the three months ended January 31, 2023, cash used in investing activities was $60,923 which was primarily due to a $52,788 payment related to website development costs.

During the three months ended January 31, 2024, and 2023, cash provided by financing activities was $0.

The Company had a net increase in cash of $192,698 for the three months ended January 31, 2024, which is mostly attributable to cash provided by operating activities of $8,175, the effect of exchange rate changes on cash of $186,034, offset by cash used in investing activities of $1,511, as discussed above.

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Material Events and Uncertainties

RKings Purchase – Holdback Amount In Dispute:

The Company has an ongoing dispute with Mr. Paul Hardman (one of the sellers of RKings) with regards to the Holdback Amount of approximately $636,650 that he has alleged is still owed to him, and which we alleged was forfeited. That amount is accrued and included in the Company’s liabilities as of January 31, 2024. The Company’s dispute and claims against Mr. Hardman stem from breaches of the terms of the Purchase Agreement by Mr. Hardman. The Company is vigorously pursuing the claim of breach of the Purchase Agreement against Mr. Hardman; however, at this point, no formal legal action has been initiated by either party to date.

Our operating results are difficult to forecast. Our prospects should be evaluated in light of the risks, expenses and difficulties commonly encountered by comparable development stage companies.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The discussion and analysis of the Company’s financial condition and results of operations are based upon its consolidated unaudited financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these unaudited financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent liabilities. On an on-going basis, management evaluates past judgments and estimates, including those related to bad debts, accrued liabilities, goodwill and contingencies. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The accounting policies and related risks described in the Company’s Annual Report on Form 10-K for the year ended October 31, 2023, filed with the Commission on January 17, 2024, are those that depend most heavily on these judgments and estimates. As of January 31, 2024, there had been no material changes to any of the critical accounting policies contained therein. “NOTE 2 - SUMMARY OF ACCOUNTING POLICIES,” of the notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended October 31, 2023, filed with the Commission on January 17, 2024, describes the significant accounting policies and methods used in the preparation of the Company’s consolidated financial statements. The critical accounting estimates include transactions, assets, liabilities and obligations that are stated in foreign local currency and their conversion to US currency. Resulting loss on currency conversions related to assets and liabilities is recognized in shareholders’ equity in accumulated other comprehensive income (loss) on the Company’s consolidated balance sheets and realized foreign currency translation adjustments are recognized in other income in the consolidated statements of operations and comprehensive income.

Pursuant to Item 305(e) of Regulation S-K (§ 229.305(e)), the Company is not required to provide the information required by this Item as it is a “smaller reporting company,” as defined by Rule 229.10(f)(1).

Disclosure controls and procedures

The Company’s Chief Executive Officer (the principal executive officer) and Chief Financial Officer (principal financial/accounting officer) have evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of January 31, 2024. Based upon such evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in our reports filed with the Commission pursuant to the Exchange Act, is recorded properly, processed, summarized and reported within the time periods specified in the rules and forms of the Commission and that such information is accumulated and communicated to our management, including our CEO and CFO, to allow timely decisions regarding required disclosures.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting during the three months ended January 31, 2024, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

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Our business is subject to numerous risks and uncertainties, including those described below and elsewhere in this Report. These risks include, but are not limited to, the following:

Risks Related to the Company’s Need for Additional Funding and Demand For Products and Services

• our need for significant additional financing to grow and expand our operations, the availability and terms of such financing, and potential dilution which may be caused by such financing, if obtained through the sale of equity or convertible securities;
• the impact of pandemics and epidemics on the Company;
• the potential effect of economic downturns and market conditions, including recessions, on the Company’s operations and prospects as a result of increased inflation, increasing interest rates, global conflicts and other events;
• general consumer sentiment and economic conditions that may affect levels of discretionary customer purchases of the Company’s products; and
• our limited operating history.

Risks Related to Our Business Operations and Industry

• our reliance on suppliers of third-party gaming content and the cost of such content;
• the ability of the Company to manage growth;
• the ability of the Company to compete in its market and develop, market or sell new products or adopt new technology;
• disruptions caused by acquisitions;
• the risks associated with gaming fraud, user cheating and cyber-attacks;
• risks relating to inventory management;
• risks associated with systems failures, disruptions and failures of technology and infrastructure on which the Company’s programs rely, as well as cybersecurity and hacking risks;
• foreign exchange and currency risks;
• the outcome of contingencies, including legal proceedings in the normal course of business;
• the ability to compete against existing and new competitors;
• the ability to manage expenses associated with sales and marketing and necessary general and administrative and technology investments;
• cyber security risks that could result in damage to our reputation and/or subject us to fines, payment of damages, lawsuits and restrictions on our use of data and systems failures and resulting interruptions in the availability of our websites, applications, products, or services that could harm our business; and
• our non-U.S. operations.

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Risks Relating to Regulation

• the effect of future regulation, the Company’s ability to comply with regulations (current and future) and potential penalties in the event it fails to comply with such regulations; and
• material increases to our taxes or the adoption of new taxes or the authorization of new or increased forms of gaming could have a material adverse effect on our future financial results.

Risks Related to Intellectual Property and Technology

• we may be subject to claims of intellectual property infringement or invalidity and adverse outcomes of litigation could unfavorably affect our operating results; and
• the Company’s ability to protect proprietary information.

Risks Relating to our Management

• the Company’s reliance on its management;
• the fact that the Company’s Chief Executive Officer has voting control over the Company; and
• related party relationships, as well as conflicts of interest related thereto.

Risks Related to International Operations

• The risks related to international operations, in particular in countries outside of the United States, could negatively affect the Company’s results; and
• foreign exchange risks.

Risks Relating to our Common Stock and Securities

• dilution caused by efforts to obtain additional financing;
• our ability to issue common and preferred stock without further shareholder approval;
• the lack of a market for our securities and the volatility in the trading prices thereof caused thereby;
• no assurance that we will be able to comply with Nasdaq’s continued listing standards; and
• dilution caused by the sale of common stock or convertible securities.

Risks relating to the Meridian Purchase Agreement

• dilution and a change of control which will result from the closing of the Meridian Purchase Agreement;
• costs, fees and expenses, and the timing associated with, the Meridian Purchase Agreement;
• the Company’s ability to meet conditions to closing the Meridian Purchase Agreement, including required funding, the terms and availability of such funding, and the ability of the parties to the Meridian Purchase Agreement to terminate such agreement, and potential break-fees due in connection therewith;
• uncertainties while the Meridian Purchase Agreement is pending; and
• risks related to the ability of the combined company to recognize the benefits of the acquisition.

Other risks

• risks related to our governing documents and indemnification obligations;
• risks related to future acquisitions;
• risks related to inventory impropriety;
• risks related to behavior and acts by management and/or employees to the detriment of the Company;
• risks related to significant sales by officers, directors and third parties; and
• Other risks disclosed below.

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There have been no material changes from the risk factors previously disclosed in Part I, Item 1A of the Company’s Form 10-K for the year ended October 31, 2023, filed with the Commission on January 17, 2024 (the “Form 10-K”), under the heading “Risk Factors”, which includes more detailed information regarding the summary risk factors described above, and investors should review the risks provided in the Form 10-K, prior to making an investment in the Company. The business, financial condition and operating results of the Company can be affected by a number of factors, whether currently known or unknown, including but not limited to those described in the Form 10-K, under “Risk Factors”, any one or more of which could, directly or indirectly, cause the Company’s actual financial condition and operating results to vary materially from past, or from anticipated future, financial conditions and operating results. Any of these factors, in whole or in part, could materially and adversely affect the Company’s business, financial condition, operating results and stock price.