The carrying values of all of our other financial instruments, which include accounts payable and accrued liabilities, and amounts due to related parties approximate their current fair values because of their nature and respective maturity dates or durations.

Advertising Expenses

Advertising expenses are included in general and administrative expenses in the consolidated Statements of Operations and are expensed as incurred. The Company incurred $23,865$2,420 in advertising and promotion expenses in the ninethree months ended September 30, 2018.March 31, 2019.

Revenue Recognition

The companyCompany recognizes revenuerevenues when its customer obtains controlthere is persuasive evidence of promised goodsan arrangement, the product or services, in an amount that reflects the consideration which the company expects to receive in exchange for those goods or services. To determine revenue recognition for the arrangements that the company determines are within the scope of Topic 606, the company performs the following five steps: (1) identify the contract(s) with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction priceservice has been provided to the performance obligations incustomer, the contract,collection of our fees is reasonably assured and (5) recognize revenue when (or as) the entity satisfies a performance obligation.amount of fees to be paid by the customer is fixed or determinable. Revenues primarily include revenues from microtransactions whichmicrotransactions. Microtransaction revenues are derived from the sale of virtual goods to the Company’s players. Proceeds from the sales of virtual goods directly are recognized as revenues when a player uses the virtual goods.

Digital Currency Blockchain Mining

The Company derives revenue by providing transaction verification services within the digital currency networks of cryptocurrencies. The Company satisfies its performance obligation at the point in time that which the Company is awarded a unit of digital currency through its participation in the applicable network and network participants benefit from the Company’s verification service. In consideration for these services, the Company receives digital currencies which are recorded as revenue, using the closing U. S. dollar price of the related cryptocurrency on the date of receipt. The coins are recorded on the balance sheet at their fair value and re–measured at each reporting date. Revaluation gains or losses, as well as gains or losses on sale of digital currencies are recorded as a component of operating expenses in the statement of operations. Expenses associated with running the cryptocurrency mining business, such as equipment depreciation and electricity cost are recorded as a component of cost of revenues. During the nine months ended September 30, 2018, the Company recognized $30,016 in revenues and incurred $63,918 in expenses from providing transaction verification services.

There is currently no definitive guidance in U.S. GAAP or alternative accounting frameworks for the accounting for the production and mining of digital currencies. The Company has exercised significant judgement in determining appropriate accounting treatment for the recognition of revenue for mining of digital currencies. Management has examined various factors surrounding the substance of the Company’s operations and the guidance in ASC 606, Revenue from Contracts with Customers, including the transfer of control being the completion and addition of a block to a blockchain and the reliability of the measurement of the digital currency received. In the event authoritative guidance is enacted by the FASB, the Company may be required to change its policies which could result in a change in the Company’s consolidated financial statements.

Recent Accounting Pronouncements

In May 2014,February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers,2016-02, Leases (Topic 842), which was amended in 2015 and 2016.amends the existing accounting standards for leases. The new revenue recognition standard relatesrequires lessees to revenue from contracts with customersrecord a right-of-use (“ROU”) asset and will supersede nearly all current U.S. GAAP guidancea corresponding lease liability on this topic and eliminate industry-specific guidance.

The underlying principle is to use a five-step analysisthe balance sheet (with the exception of transactions to recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. Theshort-term leases). This new standard as amended, is effective for annual reporting periods beginning after December 15, 2017. The Company has implemented the ASU2018, and theinterim reporting periods within those annual reporting periods, with early adoption of thepermitted. We adopted this new standard effective January 1, 2019. Adoption did not impact our consolidated financial statements.have any effect on the Company as it does not have any leases.

The Company has implemented all other new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the consolidated financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

3. Other Assets

Property and Equipment consisted of the following:

Depreciation expense for the ninethree months ended September 30,March 31, 2019 and 2018 was $2,114 and 2017 was $28,009 and $2,688,$1,217, respectively.

In March of 2019, the Company discontinued Minecade and Olimpo servers and decided to focus on Minecraft servers. The Company recognized a loss of $17,233 on the disposal of these servers.

On February 17, 2016, the Company acquired Good Gaming’s assets including intellectual property, trademarks, software code, equipment and other from CMG Holdings Group, Inc. The Company valued the software purchased at $1,200,000. The software has a useful life of 5 years. During the three months ended March 31, 2018, the Company acquired two additional software servers for $26,250. During the 4^th Quarter of 2018, the Company assessed the useful life of the software and determined that remaining useful life was 1.25 years. As such, the Company prospectively is amortizing the software through December 31, 2019. Amortization for the ninethree months ended September 30,March 31, 2019 and 2018 was $120,000 and 2017 was $180,000 and $180,000,$60,000, respectively.

The software consisted of the following:

4. Debt

Convertible Debentures

On April 1, 2015, we entered into a transaction with Iconic Holdings (“Iconic”) whereby Iconic agreed to provide up to $600,000 through a structured convertible promissory note (the “2015 Iconic Note”), with funds to be received in tranches. The note bears interest of 10% and was due April 1, 2016. The initial proceeds of $40,000 was received on April 9, 2015, with $30,000 remitted and delivered to us, $4,000 retained by Iconic as an original issue discount, and $6,000 retained by Iconic for legal expenses. On February 17, 2016 as part of a settlement between Iconic and the Company, the 2015 Iconic Note along with a remaining balance of $8,300 from former JABRO-Asher notes were restructured to a principal amount of $25,000 with a due date of June 18, 2017 and an interest rate of 0%. Iconic is subject to strict lock-up and leak-out provisions. Additionally, as part of the February 2016 settlement with Iconic, Iconic funded $100,000 new debentures (the “$100,000 Convertible Promissory Note”) due August 2018 bearing 0% interest with the lender subject to strict lock-up and leak-out provisions. On June 27, 2017, Iconic’s $100,000 Convertible Promissory Note issued on February 18, 2016 was amended to reflect an amendment of the conversion price from $.10 cents to $.08 cents per share of common stock. On July 5, 2017, Iconic converted $15,895 of its $100,000 Convertible Promissory Note. On July 25, 2017, Iconic converted $18,950 of its $100,000 Convertible Promissory Note. On January 23, 2018, Iconic converted $65,155 of its $100,000 Convertible Promissory Note. Accordingly, the $100,000 Convertible Promissory Note issued on February 18, 2016 was fully converted into 1,250,001 shares of the Company’s common stock.

On April 15, 2015, the Company issued a convertible debenture with the principal amount of $100,000 to HGT Capital, LLC (“HGT”), a non-related party. During the quarter ended June 30, 2015, the Company received the first $50,000 in payment. The remaining $50,000 payment would be made at the request of the borrower. No additional payments have been made as of September 30, 2018. Under the terms of the debenture,debentures, the amount was unsecured and was due on October 16, 2016. The note is currently in default and bears an interest of 22% per annum. It was convertible into shares of common stock any time after the maturity date at a conversion rate of 50% of the average of the five lowest closing bid prices of the Company’s common stock for the thirty trading days ending one trading day prior to the date the conversion notice was sent by the holder to the Company. On September 21, 2018, the Company entered into a modification agreement with HGT with respect to the convertible promissory note which has a balance of $107,238. Pursuant to such modification agreement, all defaults were waived and it was agreed that such note will convert at a 25% discount to the market rather than the default rate. HGT also agreed to certain sale restrictions which limit the amount of shares that they can sell in any month for the next three months. HGT also agreed to dismiss, with prejudice, the lawsuit that it had filed against the Company.

On June 29, 2017, the Company issued to Iconic a 10% Convertible Promissory Note in the principal amount of $27,000 (the “2017 Iconic Note”). Upon the execution of such Note, the sum of $9,000 has been remitted and delivered to the Company. On August 14, 2017, Iconic remitted and delivered to the Company another $9,000. The Company is only required to repay the amount funded and the Company is not required to repay any unfunded portion of the 2017 Iconic Note. As of March 31, 2018, the Company has received a total $18,000 of the $27,000 principal amount. On April 16, 2018, the note was fully converted.

As part of the asset purchase agreement between CMG Holdings Group, Inc. (“CMG Holdings”) and the Company, the Company issued SirenGPS a 0% convertible debenture of $60,000 that matured in August 2018. The debenture is convertible into the Company’s common stock at a 20% discount to the 20-day moving average of the Company’s common stock after a period of seven months. The debt is subject to strict lock-up and leak-out provisions. SirenGPS has agreed to sell this security to the Company or to an investor of the Company’s choice at face value. Recently, ViaOne Services, LLC, a Texas Limited Liability Corporation (“ViaOne”) purchased this debenture from SirenGPS.

The Company entered into a line of credit agreement (“Line Of Credit”) with ViaOne. This Line of Credit dated as of September 27, 2018 (the “Effective Date”), was entered into by and between the Company and ViaOne. The Company had an immediate need for additional capital and has asked ViaOne to make a new loan(s) in an initial amount of $25,000 on the Effective Date (the “New Loan”). The Company may need additional capital and ViaOne has agreed pursuant to this Line of Credit to provide for additional advances, although ViaOne shall have no obligation to make any additional loans. Any further New Loans shall be memorialized in a promissory note with substantially the same terms as the New Loan and shall be secured by all of the assets of the Company. On or before the Effective Date, the Company may request in writing to ViaOne that it loan the Company additional sums of up to $250,000 and within five days of such request(s), ViaOne shall have the right, but not an obligation, to make additional loans to the Company and the Company shall in turn immediately issue a note in the amount of such loan. In consideration for making the New Loan, the Company entered into a security agreement whereby ViaOne received a senior security interest in all of the assets of the Company.

5. Derivative Liabilities

The following inputs and assumptions were used to value the convertible debentures outstanding during the nine monthsyears ended September 30, 2018March 31, 2019 and September 30, 2017:March 31, 2018:

The projected annual volatility for each valuation period was based on the historic volatility of the Company of 337.2%206.9% and 127%198.7% at September 30,March 31, 2019 and 2018, and 2017, respectively. The risk free rate was 2.57%2.43% and 1.30%2.12% at September 30,March 31, 2019 and 2018, and 2017, respectively. The expected life was one year and the dividend yield was 0% for each year.

A summary of the activity of the derivative liability is shown below:

6. Common Stock

Common StockShare Transactions for the Year Ended December 31, 2017:

On January 4, 2017, the Hillwinds Ocean Energy converted 70,000 shares of its common stock to 500 shares of Series B Preferred Stock (“Series B Preferred Shares”).

On January 5, 2017, Iconic converted $6,585 of convertible debt into 65,585 shares of the Company’s common stock.

On July 5, 2017, Iconic converted $15,895 of convertible debt into 198,688 shares of the Company’s common stock.

On July 13, 2017, a shareholder converted 1,000 shares of Series B Preferred Shares into 200,000 shares of the Company’s common stock.

On July 25, 2017, Iconic converted $18,950 of convertible debt into 236,875 shares of the Company’s common stock.

On August 11, 2017, an investor converted 1,250 Series B Preferred Shares into 250,000 shares of the Company’s common stock.

At March 31, 2017, the Company had 21,891,805 shares of common stock reserved for issuance relating to convertible debentures and Series D Preferred Stock.

Common Stock Transactions for the Nine Months Ended September 30, 2018:

On January 8, 2018, Silver Linings Management LLC converted 15,000 shares of the Company’s Series B Preferred StockShares into 3,000,000 common shares of the Company’s common stock.Company.

On January 8, 2018, Britton & Associates converted 5,000 of the Company’s Series B Preferred Shares intoin 1,000,000 common shares of the Company’s common stock.Company.

On January 9, 2018, ViaOne Services converted $200,000 of its convertible note into 8,333,333 common shares of the Company’s common stock.Company.

On January 12, 2018, SSB Trading converted 10,000 of the Company’s Series B Preferred Shares into 2,000,000 common shares of the Company’s common stock.Company.

On January 12, 2018, CMG Holdings converted 5,605 of the Company’s Series B Preferred Shares into 1,211,000 common shares of the Company.

On January 18, 2018, CMG Holdings converted 9,000 of the Company’s Series B Preferred Shares into 1,800,000 common shares of the Company’s common stock.Company.

On January 23, 2018, Iconic Holdings converted $65,155 of its convertible note into 814,438 common shares of the Company’s common stock.Company.

On January 26, 2018, Michael Tadin converted 5,000 of the Company’s Series B Preferred Shares into 1,000,000 common shares of the Company’s common stock.Company.

On February 9, 2018, Vik Grover converted 8,665 of the Company’s Series B Preferred Shares into 1,733,000 shares of common stockshares of the Company.

On April 16, 2018, Iconic converted $18,000 of a convertible note into 1,892,828 shares of the Company’s common stock.

On April 13, 2018, RedDiamond Partners, Inc. (“RedDiamond”) converted 5 shares of Series D Preferred Stock into 555,556 shares of the Company’s common stock.

On April 17, 2018, RedDiamond converted 5 shares of Series D Preferred Stock into 609,756 shares of the Company’s common stock.

On April 23, 2018, RedDiamond converted 5 shares of Series D Preferred Stock into 806,452 shares of the Company’s common stock.

On May 9, 2018, RedDiamond converted 5 shares of Series D Preferred Stock into 1,020,408 shares of the Company’s common stock.

On May 23, 2018, RedDiamond converted 5 shares of Series D Preferred Stock into 657,895 shares of the Company’s common stock.

On June 19, 2018, RedDiamond converted 5 shares of Series D Preferred Stock into 1,234,756 shares of the Company’s common stock.

On July 9, 2018, RedDiamond converted 5 shares of Series D Preferred Stock into 1,250,000 shares of the Company’s common stock.

On July 24, 2018, RedDiamond converted 5 shares of Series D Preferred Stock into 1,467,391 shares of the Company’s common stock.

7.On September 25, 2018, RedDiamond converted 6.50 shares of Series D Preferred Stock into 1,450,893 shares of the Company’s common stock.

On October 16, 2018, RedDiamond converted 6.50 shares of Series D Preferred Stock into 1,377,119 shares of the Company’s common stock.

On November 1, 2018, RedDiamond converted 6.34 shares of Series D Preferred Stock into 792,750 shares of the Company’s common stock.

On November 6, 2018, Lincoln Acquisition converted 17,314 shares of Preferred B Stock into 3,462,800 shares of the Company’s common stock.

On November 13, 2018, RedDiamond converted 6 shares of Series D Preferred Stock into 1,027,397 shares of the Company’s common stock.

On November 29, 2018, RedDiamond converted 5 shares of Series D Preferred Stock into 961,538 shares of the Company’s common stock.

On November 29, 2018, HGT converted $6,978 of a convertible note into 1,655,594 shares of the Company’s common stock.

On December 14, 2018, Lincoln Acquisition converted 20,000 shares of Preferred B Stock into 4,000,000 shares of the Company’s common stock.

On December 21, 2018, RedDiamond converted 10 shares of Series D Preferred Stock into 1,811,594 shares of the Company’s common stock.

Share Transactions for the Quarter Ended March 31, 2019:

On January 02, 2019, Lincoln Acquisition converted 200 shares of Preferred B Stock into 3,750,000 shares of the Company’s common stock

On January 10, 2019, RedDiamond converted 6 shares of Series D Preferred Stock into 520,833 shares of the Company’s common stock.

On April 8,2019, HGT Capital transferred 1,655,594 shares of the Company’s common stock to Cede & Co Fast Balance

Our Articles of Incorporation authorize us to issue up to 2,250,0002,250,350 shares of preferred stock, $0.001 par value. Of the 2,250,000 authorized shares of authorized preferred stock, the total number of shares of Series A Preferred StockShares the Company has the authority to issue is Two Million (2,000,000), par value $0.001 per share; the total number of shares of Series B Preferred Stock the Company hasCorporation shall have the authority to issue is Two Hundred Forty Nine thousand Nine Hundred and Ninety Nine (249,999), with a stated par value of $0.001 per share;share, the total number of shares of Series B Preferred Shares the Corporation shall have the authority to issue is Two Million (2,000,000), with a stated par value of $0.001 per share and the total number of shares of Series C Preferred StockShares the Company hasCorporation shall have the authority to issue is One (1), with a stated par value $0.001 per share; and the total number of shares of Series D Preferred Stock the Company has the authority to issue is three hundred and fifty (350), par value $0.001 per share. Our Board of Directors is authorized, without further action by the shareholders, to issue shares of preferred stock and to fix the designations, number, rights, preferences, privileges and restrictions thereof, including dividend rights, conversion rights, voting rights, terms of redemption, liquidation preferences and sinking fund terms. We believe that the Board of Directors’ power to set the terms of, and our ability to issue preferred stock, will provide flexibility in connection with possible financing or acquisition transactions in the future. The issuance of preferred stock, however, could adversely affect the voting power of holders of common stock and decrease the amount of any liquidation distribution to such holders. The presence of outstanding preferred stock could also have the effect of delaying, deterring or preventing a change in control of our Company.company.

As of September 30, 2018,March 31, 2019, we had 7,500 shares of our Series A Preferred Stock issued and outstanding. As of September 30, 2018, we had 106,511preferred stock, 68,997 shares of Series B Preferred Stock issued and outstanding. As of September 30, 2018, we had one (1) sharepreferred stock, 1 shares of Series C Preferred Stock, issued and outstanding. At September 30, 2018, we had 93.062 shares0 share of Series D Preferred Stock issued and outstanding.

The 7,500 issued and outstanding shares of Series A Preferred Stock are convertible into shares of common stock at a rate of 20 shares of common stockshares for each Series A Preferred Share. The 106,51168,997 issued and outstanding shares of Series B Preferred Stock are convertible into shares of the Company’s common stock at a rate of 200 shares of common stockshares for each Series B Preferred Share. If all of our Series A Preferred Stock and Series B Preferred Stock issued and outstanding as of September 30, 2018 are converted into shares of common stock, the number of issued and outstanding shares of our common stock will increase by 21,302,20013,949,400 shares.

The one (1) share1 issued and outstanding shares of Series C Preferred Stock issued and outstanding, has voting rights equivalent to 51% of all shares entitled to vote and is held by ViaOne Services LLC, a Company controlled by David Dorwart, the Company’sour CEO.

The 93.0626 issued and outstanding shares of Series D Preferred Stock as of September 30,December 31, 2018 arewere convertible into shares of common stock at a rate of 125% of the conversion amount at a price that iswas the lower of 110% of the volume weighted average pricesprice (“VWAP”) of the common stock on the closing date, the VWAP of the common stock on the conversion date or the VWAP of the common stock on the date prior to the conversion date. Series D Preferred Stock iswas convertible beginning 6 months from the issue date. At September 30, 2018, 93.062 shares of Series D Preferred Stock issued and outstanding was eligible to be converted to the Company’s common stock. The Company agreed to redeem 46.531 of the remaining 93.062 shares over the next 3 months and cancel such shares without conversion.

The 93.062 issued and outstanding shares of Series D Preferred Stock are no longer entitled to cumulative dividends at a rate of 5% of the face value of shares, or the number of shares multiplied by 1,000 as of September 21, 2018 as a result of the agreement discussed immediately below.

On September 21, 2018, RedDiamond modified the agreement with the Company. RedDiamond and the Company agreed that the Preferred Shares shall convertwere convertible into Common Stock (the “Conversion Shares”) at the lower of the Fixed Conversion Price ($.06).06 per share) or at the VWAP which shall be defined as the average of the five (5) lowest closing prices during the 20 days prior to conversion; for the avoidance of doubt, RedDiamond hashad not waived its right to the 25% Conversion Premium as defined in the COD. The Company shall havehad the obligation to redeem 46.531 of the Preferred Shares (which represents 50% of the Preferred Shares Ownedowned by RedDiamond) at 110% of the Stated Value of $46,531 by making three equal payments of $17,061.37$17,061 on October 15, 2018, November 15, 2018 and December 15, 2018. On January 10, 2019, The RedDiamond converted last 6 shares of Series D Preferred Shares shall not be entitled to a dividend going forward. On October 15, 2018,Stock into the Company made the first installment payment of $17,061.37 to Red Diamond.Company’s common stock.

AllThe holders of the Series A, Series B, Series C and Series D Preferred Stock have a liquidation preference to the common stock of the Company.shareholders.

8. Warrant

In connection with the $100,000 convertible debenture issued to HGT Capital, LLC (“HGT”), the Company issued HGT a warrant to purchase 100,000 shares of the Company’s common stock at $1.00 per share. This warrant was not exercised as of September 30, 2018,March 31, 2019, is exercisable through April 15, 2020 and had a remaining life of 1.541.04 years as of September 30, 2018.March 31, 2019. The intrinsic value of the warrant at September 30, 2018March 31, 2019 was zero as the exercise price exceeded the closing stock price.price on March 31, 2019.

On or around April 7, 2016, Silver Linings Management, LLC funded the Company $13,439.50$13,440 in the form of convertible debentures secured by certain high-powered gaming machines purchased from XIDAX. Such note bearsbore the interest at a rate of 10% per annum, payable in cash or kind at the option of the Company, and became maturematured on April 1, 2018, and iswas convertible into Series B Preferred shares at the option of the holder at any time. Such note remained outstanding as of the date of this quarterly report and the holder and the Company were negotiating the terms to extend the note.On January 08, 2019, Silver Linings Management converted their Series B Preferred share stocks into Common Stocks.

On November 30, 2016, ViaOne purchased a Secured Promissory Note inequal to a maximum initial principal amount of $150,000 issued by the Company to ViaOne. As additional advances were made by ViaOne to the Company, the principal amount of the Secured Promissory Note was increased to $225,000 and $363,000 by amendments dated January 31, 2017 and March 1, 2017, respectively.

On May 5, 2017, ViaOne delivered a default notice to the Company pursuant to Section 6 of the Note Purchase Agreement but has subsequently extended the due date of the Secured Promissory Note and has increased the funding amountup to a maximum of One Million ($1,000,000) dollars. After giving the Company a fifteen (15)-day day notice period to cure the default under the Stock Pledge Agreement, dated November 30, 2016, entered by and among the Company, CMG and ViaOne (“Pledge Agreement”), ViaOne took possession of the Series C Preferred Stock, which was subject of the Pledge Agreement.

The Secured Promissory Note as amended increased from time to time due to additional advances provided to the Company by ViaOne.

On September 1, 2017, the Company executed an amended Employee Services Agreement with ViaOne which stipulated that ViaOne would continue providing to the Company services relating to the Company’s human resources, marketing, advertising, accounting and financing for a monthly management fee of $25,000. This agreement was amended on January 1, 2018. The accrued monthly management fees, in the amount of $325,000$100,000 at September 30, 2018,December 31, 2017, are convertible by ViaOne into the Company’s common stock at a rate of 125% of the accrued fees at a conversion price of (i) $0.05 per share; or (ii) the VWAPvolume weighted adjusted price (“VWAP”) of the common stock on the 14th day of each month if the 14th of that month is a trading day. In the event the 14th day of a month falls on a Saturday, Sunday, or a trading holiday, the VWAP of the Company’s common stockCommon Stock will be valued on the last trading day before the 14th day of the month.

On September 27, 2018, the Company and ViaOne, entered into a Line of Credit Agreement (the “Agreement”“LOC Agreement”), pursuant to which the Company issued a secured promissory note with the initial principal amount of $25,000 to ViaOne in exchange for a loan of $25,000 (the “Initial Loan Amount”). In accordance with this Agreement, the Company may request ViaOne to provide loans of up to $250,000, including the Initial Loan Amount, and ViaOne has the right to decide whether it will honor such request. The Initial Loan Amount shall become due on September 30, 2019 (the “Maturity Date”) and bears an interest rate of 8.0% per annum. The unpaid principal and interest of the Promissory Note after the Maturity Date shall accrue interest at a rate of 18.0% per annum. The principal amount of the Promissory Note may increase from time to time up to $250,000 in accordance with the terms and conditions of the Agreement. In connection with the Agreement and Promissory Note, the Company and ViaOne executed a security agreement dated September 27, 2018 whereby the Company granted ViaOne a security interest in all of its assets, including without limitation, cash, inventory, account receivables, real property and intellectual properties, to secure the repayment of the loans made pursuant to the Agreement and Promissory Note.

At September 30, 2018,March 31, 2019, the total amount owed by the Company to ViaOne Services, was $1,111,394.$1,422,683.

The Company’s Chairman and Chief Executive Officer is the Chairman of ViaOne.

Prepaid expenses consist of an insurance policy with a Company controlled by the Company’s Chairman and Chief Executive Officer.

10. Income Taxes

The Company has a net operating loss carried forward of $2,199,802$2,640,180 available to offset taxable income in future years which commence expiring inuntil the end of the fiscal year of 2030.

The significant components of deferred income tax assets and liabilities at September 30,March 31, 2019 and 2018 and 2017 are as follows:

The income tax benefit has been computed by applying the weighted average income tax rates of the United States (federal and state rates) of 21% and 35%, respectively, to thea net loss before income taxes calculated for each jurisdiction. The tax effecteffects of the significant temporary differences, which comprise future tax assets and liabilities, are as follows:

11. Commitments and Contingencies

HGT had filed a lawsuit against the Company, claiming breach of contract due to a default on a $50,000 junior loan made by HGT to HDS International Corp., our predecessor, in 2015. The Company retained counsel to represent it on this matter and responded with affirmative defenses in the Supreme Court of New York. Oral argument on HGT’s motion for summary judgment was held on May 31, 2018. The Court reserved the decision. On September 21, 2018, the Company entered into a modification agreement with HGT with respect to the convertible promissory note which has a balance of $107,238. Pursuant to such modification agreement, all defaults were waived and it was agreed that such note will convert at a 25% discount to the market rather than the default rate. HGT also agreed to certain sale prohibitions which limit the amount of shares that they can sell in any month for the next three months. As a result of the modification agreement, HGT also dismissed,withdrew, with prejudice, the lawsuit that it had filed against the Company.

12. Acquisition and Discontinued Operations

On March 21, 2018, the Company announced the acquisition of Crypto Strategies Group, Inc. for consideration of $500. The Company intendsintended to diversify its business and enter into the cryptocurrency market through such acquisition. As the acquisition was between the entities under common control with the Company, the assets and liabilities were recorded at their carrying amount on the date of transfer. On the date of transfer, Crypto Strategies Group, Inc. had no assetassets or liabilities.

On December 12, 2018, the Company dissolved Crypto Strategies Group, Inc. and the net liabilities were assumed by a related party.

13. Subsequent Events

None

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

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:

There is no assurance that GMER will be profitable, be able to successfully develop, manage or market its products and services, be able to attract or retain qualified executives and personnel, be 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

The Company was incorporated on November 3, 2008 under the laws of the State of Nevada, to engage in certain business services. Our goal is to become a leading tournament gaming provider as well as an online destination, targeting over 250 million esports players and participants worldwide that want to compete at the high school or college level. We are a developmental stage business, have generated limited revenues to date and have a history of operating losses.

The Good Gaming platform was established in early 2014 by its founding members who recognized the need that millions of gamers worldwide desired to play games at competitive levels. The founders recognized that there was no structure or organization on a large scale for amateur gamers while professional esports was quickly establishing itself.

Good Gaming is effectively building the business infrastructure for the rapidly growing esports industry, similar to the high school and college athletic industry. Good Gaming is designed to be the gateway for amateur esports athletes to compete at the semi-professional level, improve their gaming skills, and interact with veteran gamers globally in a destination site and social networking framework.

Good Gaming differs from the professional level of the esports industry by focusing on more than approximately 250 million gamers that fall below the professional level but are above the casual level, classified as “amateurs.” Good Gaming distinguishes itself from its direct and indirect competitors by being the first company to offer multi-game, multi-console services at the amateur esports level. The Company is not exclusive to any particular hardware or software vendor.

On May 4, 2016, the Company announced that it had completed its first closed public beta testing of their 2.0 tournament platform to determine the functionality, speed, ease of use, and accuracy of the system and isare preparing to enter into full-blown production.

On February 18, 2016, the Company, formerly HDS International Corp., acquired the assets of Good Gaming, Inc. from CMG Holdings Group, Inc. (OTCQB: CMGO). On that date, the Company’s former CEO, Paul Rauner, resigned. The Company appointed Vikram Grover to the positions of CEO and Director of the board of directors (the “Board”). Vikram Grover is a former Wall Street analyst and investment banker with more than 20 years of experience in telecommunications, media and technology. In addition, David Dorwart was elected by the majority shareholders to the Company’s Board. Mr. Dorwart is the Co-Founder and Chairman of Assist Wireless, Inc., a provider of lifeline wireless services to tens of thousands of subscribers primarily in the Midwest.

In March 2017, the Company began exploring potential partnerships with various franchise opportunities related to both LAN centers and Virtual Reality centers. Financial analysis and research on these opportunities is ongoing.

On June 27, 2017 the Board of Directors of the Company appointed David B. Dorwart 59 years old, as the Company’s Chief Executive Officer. On June 21, 2017, Mr. Dorwart was appointed to serve as the Chairman of the Board of Directors. David B. Dorwart, Chairman and CEO of Good Gaming, Inc., brings over 31 years of start-up entrepreneurism and executive level management to the Company. Mr. Dorwart was a CoFounder and CEO of dPi Teleconnect, a prepaid wireless provider, for 10 years. During his tenure, he grew the company from a start-up to $75 million in revenues before selling the company. Over the last 9 years, he has been involved with several other successful projects including Assist Wireless, Brooklet Energy Distribution, PayGo Distributors and Britton & Associates. He is currently the Chairman and CoFounder of ViaOne Services, a company which specializes in wireless communications and provides intricate multi-faceted services for start-up companies utilizing industry experts. By virtue of their ownership of this Series C Preferred Stock, ViaOne is the Company’s principal stockholder.

On June 27, 2017, the Company also bolstered its Board of Directors with executive level professionals by adding two seasoned individuals listed below who specialize in organization and finance as well as the branding and marketing of established and emerging organizations which are poised to show significant growth.

Domenic Fontana age 38, is currently Sr. Vice President of ViaOne Services and a new board member. He is an experienced CPA and financial executive who has worked in progressively more advanced executive roles throughout his career. Having worked at Verizon, Ebay and now ViaOne Services over the last 13 years, he has developed intimate and extensive knowledge of executive level management and the telecommunications industry. He has worked in all aspects of Finance, Accounting, Treasury, and Operations.

Jordan Majkszak Axt, a new board member age 37, is a results-producing marketing professional with over 14 years of experience insuccessfully developing marketing and branding strategies. He has been consistently noted by executives, colleagues, and journalists for his specific expertise in bringing products and services online with a comprehensive digital go-to-market strategy. He has previously held executive level positions as Director of Marketing for ProfitPoint Inc. and Clutch Holdings LLC. He is currently a SeniorSr. Director of Marketing of ViaOne Services where he develops all marketing and customer acquisition strategies for 14 consumer facing brands.

On July 10, 2017, the Company’s Board of Directors elected David Dorwart as its CEO. Additionally, the Board of Directors approved the election ofto elect Domenic Fontana and Jordan Axt to the Company’s Board of Directors.

On August 8, 2017, the Boardboard of Directorsdirectors of the Company accepted Vikram Grover’s resignation as the Treasurer of the Company and as a member of the Board, effective immediately.

On August 8, 2017, the Board of the Company accepted Barbara Laken’s resignation as the Secretary of the Company and as a member on the Board, effective immediately.

On August 9, 2017, the Company announced a strategic review of its business, which prompted improvements to its business model and a reduction in expenses designed to accelerate its move to free cash flow generation.

On August 29, 2017, Eric Brown was appointed asbecame the Chief Operating Officer.

In September of 2017, the Company began focusing on its Minecraft server by enhancing the development staff and launched an offering of microtransactions after it saw the opportunity to generate revenue without adding a great deal of overhead expenses.overhead. The initial offering of microtransactions exceeded revenue expectations and the Company has continued to expand the Minecraft server offerings. The Company also began pursuing the acquisition of additional Minecraft servers that were already established to begin scaling this effort.

In March of 2017, the Company began exploring potential partnerships with various franchise opportunities related to both LAN centers and Virtual Reality centers. Financial analysis and research on these opportunities is ongoing.

On March 21, 2018, the Company acquired Crypto Strategies Group, Inc. for consideration of $500. The Company intends to diversify its business and enter into the cryptocurrency market through such acquisition.

On December 12, 2018, the Company dissolved Crypto Strategies Group, Inc.

In March of 2019, the Company discontinued Minecade and Olimpo servers and decided to focus on Minecraft servers.

Technology

In 2016, the Company completed its 2.0 tournament platform, and thereafter ran dozens of robotic internal test tournaments and held numerous free-to-play tournaments on large scales with its partner The Syndicate, the owner of the world’s longest running online gaming guild that hashad 1,200 members worldwide. Good Gaming conducted two closed public beta tournaments of hundreds of participants in May 2016 in order to fully vet the system. After making roughly 100 fixes and changes to the system, it now runs smoothly. The system is designed to scale to 512,000 concurrent competitors. The Company has updated the system to handle team tournaments, which will further expand its opportunity to popular titles that have tens of millions of active players and has recently launched titles that have the potential for cross-platform play among Gaming PC, Microsoft Xbox and Sony PlayStation.

In 2017, the Company ran hundreds of tournaments on a regular basis with a dedicated customer base of over 30,000 members. Additionally, the Company expanded its website by offering content relevant to the member base with information relating to game play strategy and game news. This generated nearly 100,000 unique visits per month. In an effort to monetize that traffic, the Company employed the use of Google display advertising and tested a subscription model. After careful evaluation of the Company’s strategy, management decided to move away from free tournaments and custom content and focus on growing and monetizing our Minecraft server, which has grown substantially in popularity. This decision was a result of comprehensive competitive analysis and evaluations made in how the esports industry was shifting in its space. Tournaments and custom content are currently suspended while the Company grows revenue and focuses on expanding its efforts with Minecraft. The Company is also aggressively evaluating several business models and acquisition opportunities to resume its previous success as it is related to tournaments.

Business Strategy

In the past, our management team’s strategy was to be a full-service company endeavoring to provide best in class tournaments, the best platform on which they are played, and content that is all about the esports world. We have looked at this strategy and have changed the way we view our business.

It’s our ambitionAs tournaments and strategyinvestment in servers were not profitable to be great at providing a place for amateurs to play. By focusing on what the gaming universe needs, it allows uscompany, we have decided to focus on the promotion of teams, leagues and competition. We intend to begin with local servers and expand organically from there. We recognize there are millions of players who desire to compete within the gaming community.

Minecraft is another business strategy.Minecraft. We have a well-established server and will continue to devote resources to developing and acquiring other Minecraft assets. We feel that we have learned how to monetize our Minecraft serverthis and will be able to continue to grow and have it as a meaningful part of our business strategy.

Offices

Our executive offices are located at 415 McFarlan Rd, Suite 108, Kennett Square, PA 19501. Our telephone number is (888) 295-7279.

Recently Issued Accounting Pronouncements

In our evaluationFebruary 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842), which amends the existing accounting standards for leases. The new standard requires lessees to record a right-of-use (“ROU”) asset and a corresponding lease liability on the balance sheet (with the exception of our current business model, weshort-term leases). This new standard is effective for annual reporting periods beginning after December 15, 2018, and interim reporting periods within those annual reporting periods, with early adoption permitted. We adopted this new standard effective January 1, 2019. Adoption did not have decidedany effect on the Company as it does not to pursuehave any leases.

The Company has implemented all other new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the operation as a tournament platform. We feelconsolidated financial statements unless otherwise disclosed, and the Company does not believe that there are too many great platformsany other new accounting pronouncements that allow complete integration via APIs to run our tournaments. These companies have spent and continued spending millions of dollars establishing their platforms. It’s what they do very well and they rely on companies such as Good Gaming to run and host tournaments.

We previously developed our own codes andbeen issued that might have a platform that is suitable to handle tournaments but needs some improvement to be commercially ready. In fact, it’s this platform that we have used up to now to run our Hearthstone tournaments. Although it is functional, the challenge is that it costs too much capital to maintain and improve the platform. At this point, it’s an asset we have and we may try to monetize at some point.

We cannot provide any assurance that our focusmaterial impact on hosting the esports tournaments will be successful and profitable in the futureits financial position or at all.results of operations.

RESULTS OF OPERATIONS

Our auditors have issued a going concern opinion on the financial statements for the year ended December 31, 2017.2018. This means that our auditors believed there was substantial doubt that we could continue as an ongoing business for the next twelve months from the date of issuance of this going concern opinion unless we obtained additional capital. We generated little revenue in the past. We have completed the development of our website, sourced out suppliers of materials for our products to sell and sourced out customers to buy our products. Accordingly, before our operations can generate substantial revenue, we need to raise cash from sources other than operations. Our other source for cash at this time is investments by others in our company and the revenue we generate from the sales of our products. We need to raise fundscash to continue our project and build our operations.

Plan of Operation – Milestones

We are at the early stage of our new business operations. Over the next twelve months, our primary target milestones include:

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

Three Months ended September 30, 2018 compared toThe three months ended September 30, 2017March 31, 2019 as compared to March 31, 2018

●Working Capital

●Operating Revenues

We have generated $53,764$20,781 in revenue in the three months ended September 30,March 31, 2018 and $7,588$34,732 in revenue in the three months ended September 30, 2017,March 31, 2018, which reflects a changedecrease of 46,176 or 609%.$13,951. Such increasedecrease in revenues in the compared periods was primarily caused by the salediscontinuation of microtransactions.Minecraft and Olimpo servers .

●Operating Expenses and Net Loss

Operating expenses for the three months ended September 30, 2018March 31, 2019 were $246,837$249,700 compared with $239,688$238,276 for the three months ended September 30, 2017. The increase in operating expenses was attributed to the increase in professional fees and depreciation and amortization expense offset by decreases in and contract labor and general and administrative expenses.

During the three months ended September 30, 2018, the Company recorded a net loss of $507,097 compared with a net income of $32,750 for the three months ended September 30, 2017. The change in net loss was attributed to the increase in revenues and the decrease in the change in value of the Company’s derivative liabilities.

Nine Months ended September 30, 2018 compared to nine months ended September 30, 2017

We generated $111,470 in revenue in the nine months ended September 30, 2018 and $15,907 in revenue in the nine months ended September 30, 2017, which reflects an increase of $95,563 or 601%. Such increase in revenues in the compared periods was primarily caused by the sale of in-game purchases.

Operating expenses for the nine months ended September 30, 2018 were $745,639 compared with $706,109 for the nine months ended September 30, 2017.March 31, 2018. The increase in operating expenses was attributed to an increase in professional fees for day to day operations offset by a decrease in contract labor.

During the ninethree months ended September 30, 2018,March 31, 2019, the Company recorded a net loss of $746,750$195,210 compared with a net lossprofit of $730,137$30,415 for the ninethree months ended September 30, 2017.March 31, 2018. The increase in net loss was attributed to the increasedecrease in revenues and the decrease in the change in value of the Company’s derivative liabilities.

●Liquidity and Capital Resources

As of September 30, 2018,March 31, 2019, the Company’s cash balance consisted of $3,662$5,927 compared to cash balance of $4,237$101,147 as of September 30, 2017.March 31, 2018. The decrease in the cash balance was attributed to the repayment ofdecrease in financing that we received for day-to-day activities. As of September 30, 2018,March 31, 2019, the Company had $749,556$347,933 in total assets compared to total assets of $825,164 as$828,881 at September 30, 2017.March 31, 2018. The decrease of $75,608 in total assets was attributable to the amortization of the assets purchased during the acquisition of Good Gaming, Inc.

As of September 30, 2018,March 31, 2019, the Company had total liabilities of $2,029,668$2,158,795 compared with total liabilities of $1,170,245$1,317,903 as of September 30, 2017.March 31, 2018. The increase of $859,423 in liabilities was attributable to an increase in financing and in derivative liabilities.

Working CapitalAs of March 31, 2019, the Company has a working capital deficit of $2,150,368 compared with a working capital deficit of $1,216,756 as of March 31, 2018 with the increase in the working capital deficit attributed to an increase in financing the Company received for general working capital purposes.

Cash flow from Operating Activities

During the ninethree months ended September 30, 2018,March 31, 2019, the Company used $546,723$112,721 of cash for operating activities compared to the use of cash in an amount of $578,491$140,195 for operating activities during the ninethree months ended September 30, 2017.March 31, 2018. The decrease in the amount of $31,768 in the use of cash for operating activities was attributed to the net decrease in derivative liabilities.

Cash flow from Investing Activities

During the nine monthsquarter ended September 30, 2018,March 31, 2019, the Company had $26,250$0 in cash used in investing activities compared to $1,552$26,250 for the nine monthsquarter ended September 30, 2017.March 31, 2018. The increase of $24,698decrease in cash used in investing activities was due to the Company’s purchase of two servers in the nine months ended September 30, 2018.decision not to buy any new servers.

Cash flow from Financing Activities

During the nine monthsyear ended September 30, 2018,March 31, 2019, the Company received $515,598$106,199 of proceeds from financing activities compared to $536,380$204,743 during the nine monthsyear ended September 30, 2017.March 31, 2018. The decrease of $20,782 in proceeds from financing activities was due to the decreasedecline in financing needs.proceeds from the sale of preferred stock and convertible debentures.

Going Concern

We have not attained profitable operations and are dependent upon obtaining financing to pursue any extensive acquisitions and activities. As such, there is substantial doubt about our ability to continue as a going concern for a period of one year from the issuance of these financial statements without further financing.

Off-Balance Sheet Arrangements

We have 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 stockshares 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.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not required for smaller reporting companies.

ITEM 4. CONTROLS AND PROCEDURES

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 nine-monththree-month period ended September 30, 2018March 31, 2019 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 leadled 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 thirdfirst quarter of 20182019 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

HGT Capital LLC (“HGT”) has filed a lawsuit against the Company, claiming breach of contract due to a default on a $50,000 junior loan made by HGT to HDS International Corp., our predecessor, in 2015. The Company has retained counsel to represent it on this matter and responded with affirmative defenses in the Supreme Court of New York. Oral argument on HGT’s motion for summary judgment was held on May 31, 2018. The Court reserved the decision. The Company vigorously contested this action. On September 21, 2018, the Company entered into a modification agreement with HGT with respect to HGT’s convertible promissory note. As part of this modification agreement, HGT dismissed,also agreed to withdraw, with prejudice, the lawsuit that it had filed against the Company.Company and the court has dismissed the case.

Item 1–A. Risk factors

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

Item 2. Unregistered sales of equity securities and use of proceeds

On April 16, 2018, IconicJanuary 2, 2019, Lincoln Acquisition converted $18,000200 shares of a convertible noteSeries B Preferred Stock into 1,892,8283,750,000 shares of the Company’s common stock

On January 10, 2019, RedDiamond converted 6 shares of Series D Preferred Stock into 520,833 shares of the Company’s common stock.

On April 13, 2018, RedDiamond Partners, Inc. (“RedDiamond”) converted 5 shares of Series D Preferred Stock into 555,556 shares of the Company’s common stock.

The issuances referenced above were made in reliance on an exemption from registration set forth in Section 4(2) of the Securities Act, as amended.

Except the issuances as listed herein, there were no unregistered sales of equity securities that have not been disclosed on the Company’s current reports during the three months ended September 30, 2018.March 31, 2019.

Item 3. Defaults upon senior securities

None.

Item 4. Mine safety disclosures

Not Applicable.

Item 5. Other information

Not applicable.Applicable.

Item 6. Exhibits

SIGNATURES

In accordance with 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.