Good Gaming, Inc.: Form 10-Q for the period ended Sep 30, 2024

Cautionary Statements

This Quarterly Report on Form 10-Q (“Form 10-Q”) may contain “forward-looking statements,” as that term is used in federal securities laws, about Good Gaming, Inc. (“GMER,” “we,” “our,” “us,” the “Company,” “management”) and its financial condition, results of operations and business. These statements include, among others:

• statements concerning the potential benefits that we may experience from our business activities and certain transactions we contemplate or have completed; and
• statements of GMER’s expectations, beliefs, future plans and strategies, anticipated developments and other matters that are not historical facts. These statements may be made expressly in this Form 10-Q. You can find many of these statements by looking for words such as “believes,” “expects,” “anticipates,” “estimates,” “opines,” or similar expressions used in this Form 10-Q. These forward-looking statements are subject to numerous assumptions, risks and uncertainties that may cause GMER’s actual results to be materially different from any future results expressed or implied by GMER in those statements. The most important facts that could prevent GMER from achieving its stated goals include, but are not limited to, the following:

(a) volatility or decline of our stock price;

(b) potential fluctuation of quarterly results;

(c) failure of GMER to achieve revenues or profits;

(d) inadequate capital to continue or expand our business, and inability to raise additional capital or financing to implement our business plans;

(e) decline in demand for GMER’s products and services;

(f) rapid adverse changes in markets;

(g) litigation with or legal claims and allegations by outside parties against us, including but not limited to challenges to our intellectual property rights; and

(h) insufficient revenues to cover operating costs.

There is no assurance that GMER will be profitable, able to successfully develop, manage or market its products and services, be able to attract or retain qualified executives and personnel, able to obtain customers for its products or services, additional dilution in outstanding stock ownership may be incurred due to the issuance of more shares, warrants and stock options, the exercise of outstanding warrants and stock options, or the conversion of convertible promissory notes, and other risks inherent in GMER’s businesses.

Because the statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by the forward-looking statements. GMER cautions you not to place undue reliance on the statements, which speak only as of the date of this Form 10-Q. The cautionary statements contained or referred to in this section should be considered in connection with any subsequent written or oral forward-looking statements that GMER or persons acting on its behalf may issue. GMER does not undertake any obligation to review or confirm analysts’ expectations or estimates or to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date of this Form 10-Q, or to reflect the occurrence of unanticipated events.

Overview

Drawing on its extensive history and vast experience in the gaming industry, the Company currently serves as a distributor of mobile games, pre-installing them on devices sold by mobile service providers.

In 2022, the Company entered the Roblox gaming space by developing “experiences” with its platform. As the year concluded, the Company launched Roblox adaptations of well-received Minecraft titles, namely “Treasure Island,” incorporating the unique elements of “MicroBuddies™”, a previously launched crypto game. The strategic release allowed the Company to collect valuable player feedback, aiding in the ongoing refinement of both titles’ features and functionality.

Furthermore, the Company had embarked on a robust development schedule, unveiling beta versions of its SCBB franchise on both the Minecraft™ PC platform and Roblox, a Prison variant for Minecraft™ PC, and various Microbuddies-themed games on the Roblox platform.

However, the Company encountered substantial challenges related to developers, leading to missed updates, development complexities, and postponed product launches. Consequently, the Company decided to temporarily halt Roblox and Minecraft development to conduct comprehensive reviews of platforms, developers, and marketing efforts. These evaluations aimed to identify and address pain points in processes, paving the way for realistic expectations and enhanced gaming experiences that align with both the Company’s and customers’ expectations, ultimately contributing to improved financial performance and shareholder value.

In response to these challenges, the Company initiated an in-depth business development research project, exploring opportunities in the mobile gaming industry. Following the review, the Company forged a multi-year strategic partnership with ViaOne Services Inc. to distribute Good Gaming mobile games to the Assist Wireless® and enTouch Wireless® customer bases. Simultaneously, the Company planned to release its new mobile gaming experiences on popular platforms like the Apple App Store® and Google Play™ Store.

A significant development partnership with Arcadia Studios, a division of the Coeus Group of Companies, was also announced. Coeus Solutions, a leading German software development group, collaborated with the Company in this endeavor. The first mobile game resulting from this partnership, titled “Galactic Acres,” launched on February 16, 2024.

On April 19, 2024, the Board of Directors of Good Gaming, Inc. accepted the resignation of Chief Financial Officer and Principal Accounting Officer Mr. Domenic Fontana. Mr. Fontana’s resignation was not the result of any dispute or disagreement with the Company or the Company’s Board of Directors on any matter relating to the operations, policies, or practices of the Company.

Simultaneously, on April 19, 2024, John D. “JD” Hilzendager was appointed as Chief Financial Officer of the Company. Mr. Hilzendager in his role as Chief Financial Officer will report to David Dorwart, the Company’s Chief Executive Officer. Mr. Hilzendager has been designated as the Company’s Principal Accounting Officer.

The terms of Mr. Hilzendager’s employment will be covered under the Second Amendment to the Amended Employee Services Agreement Dated January 14, 2022, with ViaOne Services, LLC.

In June 2024, the Company eliminated the positions of Chief Operating Officer, Gaming Director, and Operations Manager. In July 2024, the Company also sold all assets related to MicroBuddies™, all owned Minecraft Servers, and Roblox because those assets failed to generate revenue and were not actively maintained by the Company. This asset sale formally exited the Company from the blockchain, Minecraft, and Roblox gaming spaces.

To broaden its mobile game distribution, the company is actively seeking to establish new partnerships with telecommunications providers, device manufacturers, and game publishers.

Technology

Expanding its development portfolio in 2022, the Company ventured into the Roblox gaming platform, releasing Roblox versions of popular Minecraft titles. Development partnerships with Meraki Studios and multiple releases were completed in 2023, featuring updates to the Minecraft 1.19 software version.

In 2024, the Company entered the mobile gaming market, focusing on creating character and story-driven experiences. In Q1 2024, the Company launched a new intellectual property on mobile called “Galactic Acres™”. In Q2, the Company began preparing the game for pre-installation in mobile devices. In Q2 Galactic Acres saw more than 10,000 downloads.

In Q3 2024, the Company sold all assets and proprietary technology related to MicroBuddies™, all owned Minecraft Servers, and Roblox because those assets failed to generate revenue and were not actively maintained by the Company. They were sold for $12,500, when offset by their carrying value resulted in a gain of $12,253.

Business Strategy

In the past, our management team’s business strategy was to be a full-service company providing best-in-class Esports gaming tournaments and Minecraft experiences. With the onset of the pandemic, the Esports industry has suffered a considerable amount of lost business opportunities. We were not immune to the effects of the pandemic on our Esports business. In addition, the size of the PC-based Minecraft gaming community has shrunk considerably. We have taken a hard look at both the Esports and Minecraft business verticals and determined that both strategies are no longer in the best interest of the Company and our shareholders. We feel that neither the Esports nor Minecraft verticals will have a significant upside in the future. As such, the Esports and Minecraft business verticals will not comprise a meaningful segment of our ongoing business strategy. We will not designate any future investment in either of these verticals for the foreseeable future.

With the rise in the popularity of cryptocurrency and blockchain technologies, the Company had decided to invest in the creation of its new game, “MicroBuddies™,” which combines Ethereum ERC721 NFTs (Non-fungible tokens), non-standard ERC20 tokens (GOO™), and strategic, long-tail web browser gameplay to replicate and create unique and collectible NFTs. ERC20 “GOO™” tokens are limited to use as in-game currency only. This strategy enabled us to enter the emerging NFT and blockchain gaming space. Initial revenues from “MicroBuddies™” came from selling Nano Factory Tokens used to synthesize generation 0 of “MicroBuddies™.” Ongoing “MicroBuddies™” revenues were generated from a 5% royalty on all sales of “MicroBuddy™” NFTs in third-party marketplaces and a 0.01 MATIC per “MicroBuddy™” replication. In 2022, we introduced additional initiatives around the “MicroBuddies™” intellectual property. We expected the ancillary “MicroBuddies™” initiatives to create consistent, recurring revenue over the life of the project. However, due to fluctuations in cryptocurrency markets and the slow adoption of blockchain games, revenues underperformed, and we did not pursue additional opportunities with MicroBuddies™.

In 2023, the Company encountered significant challenges related to Roblox™ and Minecraft™ game development and publishing initiative, including developer issues, publishing delays due to platform integrations and functionality, and marketing strategy lapses. Consequently, the Company has decided to halt Roblox and Minecraft development until publishing to both platforms makes sense. The Company sold these assets for $12,500 to Despawn, LLC in July of 2024 and officially exited all operations related to Blockchain/Crypto gaming, Minecraft, and Roblox. The asset sale included all game code, artwork, rights to use related trademarks, social media channels, and all other intellectual property related to the games developed on these platforms.

In 2023, the Company announced a strategic partnership with ViaOne Services Inc. to distribute Good Gaming mobile games to the Assist Wireless® and enTouch Wireless® the Company is committed to building connected mobile gaming experiences. We believe our pivot to mobile game publishing and pre-loading on mobile phones will lead to ongoing revenue and profit generation. The Company plans to integrate its intellectual properties into our mobile games in order to continue to build long-lasting awareness across a global audience.

Our initial strategic partnership with ViaOne Services allows us to embed our mobile games on thousands of phones per month. Player acquisition is the most challenging aspect of game publishing. Our partnership with ViaOne Services will produce considerable exposure for game developers to a new player base and intends to enhance player acquisition efforts significantly.

The Company is focused on creating partnerships with other game developers and partners to broker agreements that generate revenue by preloading their already successful games on ViaOne Services telecommunication company devices. The Company will also look to partner with other niche mobile telecommunications companies and device manufacturers to expand its footprint.

Employees

In shifting the focus toward pre-loading games, the full-time Chief Operating Officer, Gaming Director, and Operations Manager positions were eliminated in July 2024, as were certain other external consultant positions. Pursuant to our Management Services Agreement with ViaOne Services LLC, certain ViaOne employees are considered consultants of the Company. ViaOne Services will continue day-to-day operations until it becomes necessary to create additional positions for the Company.

Offices

Our executive offices are at 415 McFarlan Rd, Suite 108, Kennett Square, PA 19501, and our phone number is (844) 419-7445.

Recently Issued Accounting Pronouncements

None.

RESULTS OF OPERATIONS

Our auditors have issued a going concern opinion on the financial statements for the year ended December 31, 2023. This means that our auditors believe there is substantial doubt that we can continue as an ongoing business for the next twelve months from the date of issuance of the financial statements unless we obtain additional capital to pay our bills. This is because we have generated little revenue although revenue is anticipated to grow as we have completed the development of our game, Galactic Acres. We anticipate moving into the pre-loading phase through our partnership with ViaOne Services in the coming months. Accordingly, we must raise cash from sources other than operations. Our only other source of cash at this time is investments through our existing agreement with ViaOne Services and the revenue we generate from our products and services. We must raise cash to continue our project and build our operations.

Plan of Operation – Milestones

We are at an early stage of our new business operations focusing on pre-installing games on mobile devices through our partnership with ViaOne Services. Over the next twelve months, our primary target milestones include:

1. Create a partnership with a game developer and preinstall a game on thousands of ViaOne Services devices.

2. Measure the results of pre-installing games through a series of controlled tests. Make adjustments as a result of the test.

3. Seek additional game developers and publishers seeking player acquisition through having their game pre-installed on tens of thousands of devices.

Limited operating history and need for additional capital

There is limited historical financial information about us upon which to base an evaluation of our performance relating to our new business direction. We have generated little revenue. We cannot guarantee we will be successful in our business operations. Our business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources and possible cost overruns due to price and cost increases in services and products.

Results of Operations

The three and nine months ended September 30, 2024 as compared to September 30, 2023

• Working Capital

• Operating Revenues

We have generated $174 and $506 in revenue in the three and nine months ended September 30, 2024, respectively and $25 and $3,442 in revenue in the three and nine months ended September 30, 2023, respectively, which reflects an increase of $149 or 596% and a decrease of $2,936 or 85%, respectively. The increase/decrease in revenue was attributed to the decision to halt marketing in pursuit of pre-loading games onto mobile devices.

• Operating Expenses and Net Loss

Operating expenses for the three and nine months ended September 30, 2024 were $171,833 and $703,997, respectively, compared with $231,628 and $736,936, for the three and nine months ended September 30, 2023, respectively, which reflects a decrease of $59,795 or 26% and $32,939 or 4%, respectively. The decrease in expenses was attributable to reduced contract labor costs associated with the development of Galactic Acres, reduced legal fees and reduced leased employee services.

During the three and nine months ended September 30, 2024, the Company recorded a net loss of $178,269 and $853,317, respectively, compared with a net loss of $275,547 and $982,741, respectively, for the three and nine months ended September 30, 2023, which reflects a decrease of $97,278 or 35% and $129,424 or 13%, respectively. The decrease in net loss was attributed to a decrease in cost of Revenue and professional fees, offset by an increase in advertising and promotion, administrative and development fees.

• Liquidity and Capital Resources

As of September 30, 2024, the Company’s cash balance consisted of $8,302 compared to cash balance of $304,225 as of December 31, 2023. The decrease in the cash balance was attributed to the expenses paid for day to day activities and development. As of September 30, 2024, the Company had $125,391 in total assets compared to total assets of $484,394 at September 30, 2023. The decrease in total assets was attributed to cash paid for daily operations and the impairment cost associated with the digital assets.

As of September 30, 2024, the Company had total liabilities of $917,704 compared with total liabilities of $520,277 as of December 31, 2023. The increase in liabilities was attributable to the operating expenses to be paid in coming months.

As of September 30, 2024, the Company has a working capital deficit of $886,565 compared with a working capital deficit of $122,427 as of December 30, 2023. The decrease in working capital is due to a decline in cash expended for day to day activity as well as the impairment cost associated with the digital assets.

In Q3 2024, the Company faced challenges in maintaining adequate capital resources due to a significant decrease in cash and cash equivalents, resulting from lower-than-anticipated revenues and higher development costs. Despite efforts to optimize working capital management, our ability to access additional financing sources has been constrained by current market conditions. Management will utilize its existing agreement with ViaOne Services for working capital and is actively exploring alternative financing options to address these challenges and ensure sufficient liquidity for ongoing operations.

Cash flow from Operating Activities

During the nine months ended September 30, 2024, the Company used $280,007 of cash for operating activities compared to the use of cash in an amount of $714,067 for operating activities during the nine months ended September 30, 2023, which reflects a decrease of $434,060 or 61%. The decrease in the use of cash for operating activities was attributed to the company’s decrease in advertising and promotions and management fees.

Cash flow from Investing Activities

The Company used $22,263 in cash in investing activities during the nine months ended September 30, 2024 and $1,180 during the nine months ended September 30, 2023. The increase of $21,083 in cash used in investing activities was attributed to the Company’s acquisition of intangible assets.

Cash flow from Financing Activities

During the nine months ended September 30, 2024, the Company received $6,347 of proceeds from financing activities compared to $6,657 received during the nine months ended September 30, 2023, which reflects a decrease of $310. The decrease in proceeds from financing activities was due to the change in employee stock issued offset by the issuance of shares to a consultant for payment in 2024.

Going Concern

We have not attained profitable operations and are dependent upon obtaining financing to pursue any extensive acquisitions and activities. For these reasons, our auditors stated in their report on our audited financial statements that they have substantial doubt that we will be able to continue as a going concern for a period of one year from the issuance of the financial statements without further financing.

Off-Balance Sheet Arrangements

As of September 30, 2024, we had no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.

Future Financings

We will continue to rely on equity sales of our preferred shares in order to continue to fund our business operations. Issuances of additional shares will result in dilution to existing stockholders.

There is no assurance that we will achieve any additional sales of the equity securities or arrange for debt or other financing to fund our operations and other activities.

Critical Accounting Policies

Our financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

We regularly evaluate the accounting policies and estimates we use to prepare our consolidated financial statements. Management’s estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.

Evaluation of Disclosure Controls and Procedures

Based on the evaluation of our disclosure controls and procedures (as defined in Rule 13a-15e under the Securities Exchange Act of 1934 the “Exchange Act”), our principal executive officer and principal financial officer have concluded that as of the end of the three-month period ended September 30, 2024 covered by this quarterly report on Form 10-Q, such disclosure controls and procedures were not effective due to the lack of segregation of duties and lack of a formal review process that includes multiple levels of review to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms because of the identification of a material weakness in our internal control over financial reporting which we view as an integral part of our disclosure controls and procedures. The material weakness relates to the lack of segregation of duties in financial reporting, as our financial reporting and accounting functions were performed by an external consultant with no oversight by a professional with accounting expertise. Our Chief Executive Officer and Chief Financial Officer did not possess accounting expertise and our company does not have an audit committee. This weakness was due to the Company’s lack of working capital to hire additional staff. Subsequently, with the completion of transition in the management and Board, the financial management will be led by a certified public accountant with extensive accounting experience who follows the standards of U.S. generally accepted accounting principles and internal controls procedures to ensure the faithful representation of the financial statements, including the results of operations, financial position, and cash flows of the reporting entity.

Changes in Internal Control over Financial Reporting

Except as noted above, there have been no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during our third quarter of 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.