As filed with the Securities and Exchange Commission on August 31, 2021 Registration No. |
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington,WASHINGTON, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
DITO, INC.
(Exact name of registrant as specified in its charter)
|
| (Exact name of registrant as specified in its charter) |
| Delaware |
| 7372 | 35-2675083 | |
(State or other jurisdiction of incorporation or organization) | (Primary Standard Industrial Classification Code Number) | (I.R.S. Employer Identification |
Dito,
Gaming Technologies, Inc.
413 West 14th StreetTwo Summerlin
New York, New York,Las Vegas, NV89135, USA 10014
+1 (347) (347) 983-1227
(Address, including zip code, and telephone number, including area code, of registrant'sregistrant’s principal executive offices)
Jason Drummond
Chief Executive Officer, Chief Financial Officer, Secretary and Director.
Dito,Gaming Technologies, Inc.
413 West 14th StreetTwo Summerlin
New York, New York,Las Vegas, NV 89135, USA 10014
+1 (347) 983-1227
(Name, address, including zip code, and telephone number, including area code, of agent for service)
with
With copies to:
Daniel D. NauthBarret S. DiPaolo
Sichenzia Ross Ference LLP
1185 Avenue of the Americas, 31st Floor
New York, NY 10036
Tel.: (212) 930-9700
Nauth LPC
217 Queen Street West, Suite 401
Toronto, Ontario, Canada M5V 0R2
(416) 477-6031
Approximate date of commencement of proposed sale to the public: From time to timeAs soon as practicable after thethis registration statement is declared effective date of this Registration Statement..
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box: ☒☐
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large“large accelerated filer," "accelerated” “accelerated filer," "smaller” “smaller reporting company"company,” and "emerging“emerging growth company"company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ | |
Non-accelerated filer |
| Smaller reporting company | ☒ | |
Emerging growth company | ☒ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐
CALCULATION OF REGISTRATION FEE
Title of each class of securities to be registered |
Amount to be Registered | Proposed Maximum Offering Price per Security(1) | Proposed Maximum Aggregate Offering Price | Amount of registration fee |
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Shares of Common Stock, par value $0.001, being offered for resale by selling securityholders | 8,976,999 | $2.50 | $22,442,497.50 | $2,448.47 |
Total | 8,976,999 | $2.50 | $22,442,497.50 | $2,448.47 |
| Title of Each Class of Securities to be Registered | Amount to be Registered(1) | Proposed Maximum Aggregate Offering Price | Amount of Registration Fee | |||||||||
| Common stock, par value $0.001 per share | 2,153,534 | $ | 5,383,835.0 | (2) | $ | 587.38 | ||||||
| Common stock, par value $0.001 per share | 538,694 | 1,750,755.5 | (2) | 191.01 | ||||||||
| Common stock, underlying warrants | 36,000 | 90,000 | (3) | 9.82 | ||||||||
| Common stock, underlying warrants | 40,175 | 130,568.75 | (3) | 14.25 | ||||||||
| Total | 2,769,403 | $ | 7,355,159 | $ | 802.45 | |||||||
(1) |
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| (2) | Calculated based upon the sales price of the |
| (3) | Calculated based |
The Registrantregistrant hereby amends this Registration Statementregistration statement on such date or dates as may be necessary to delay its effective date until the Registrantregistrant shall file a further amendment which specifically states that this Registration Statementregistration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statementregistration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the Registration Statementregistration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and itthe Company is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
PRELIMINARY PROSPECTUS
| PRELIMINARY PROSPECTUS | SUBJECT TO COMPLETION, DATED AUGUST 31, 2021 |
SUBJECT TO COMPLETION DATED NOVEMBER 10, 2020
8,976,9992,769,403 Shares of Common Stock Offered by the Selling Stockholders
GAMING TECHNOLOGIES, INC.
This prospectus relates to the resalepublic offering by the selling stockholders of up to 8,976,999 shares (the "Shares")2,769,403shares of our common stock, par value $0.001 per share of Gaming Technologies, Inc., a Delaware corporation (the "Common Stock") by our securityholders (the "Selling Stockholders") that primarily acquired securities in (i) our private placement consummated on February 26, 2020 (the "Private Placement"“Company”, “we”, “us”, “our”), (ii) ourwhich were issued by us in private placements to institution and accredited investors, including 36,000 shares of common stock issuable upon the exercise of warrants issued to a placement agent at an exercise price of $2.50 per share exchange transaction consummatedand 40,175 shares of common stock issuable upon the exercise of warrants issued to a placement agent at an exercise price of $3.25 per share.
The selling stockholder may sell common stock from time to time in the principal market on March 18, 2020 (the "Share Exchange"), and (iii) under a consulting agreement (the "Consulting Agreement"). Please refer towhich the section of this prospectus entitled "The Private Placement and Share Exchange" for a description ofstock is traded at the Private Placement and Share Exchange, the section entitled "Consulting Agreement" for a description of the Consulting Agreement and the section entitled "Selling Stockholders" for additional information regarding the Selling Stockholders.prevailing market price or in negotiated transactions.
We are not selling any Shares in this offering. We, therefore, will not receive any of the proceeds from the sale of the Sharescommon stock by the Selling Stockholders.
selling stockholders. We have paid and will pay the expenses incurred inof registering these shares of the Shares, including legal and accounting fees. See "Plan of Distribution."common stock.
The Selling Stockholdersselling stockholders may sell the Shares described in this prospectus inall or a numberportion of different ways and at varying prices. The prices at which the Selling Stockholders may sell the Shares in this offering will be determined by the prevailing market price for the shares of our Common Stockcommon stock beneficially owned by them and offered hereby from time to time directly or in negotiated transactions. See "Planthrough one or more underwriters, broker-dealers or agents. Please see the section entitled “Plan of Distribution"Distribution” on page 50 of this prospectus for more information. For information about howon the Selling Stockholders may sellselling stockholders, see the Shares being registered pursuant tosection entitled “Selling Stockholders” on page 22 of this prospectus. The Selling Stockholders may be deemed "underwriters" within the meaning of Section 2(a)(11) of the Securities Act of 1933, as amended. The Selling Stockholders have informed us that they do not have any agreement or understanding, directly or indirectly, with any person to distribute the Shares.
Prior to this offering, there has been no public market for our Common Stock. We intend to seek a listing of our Common Stock on the OTCQB, which is an interdealer quotation system maintained by OTC Markets Group Inc. The Shares may be sold by the Selling Securityholders on an immediate and continuing basis. The Selling Securityholders will sell at $2.50 per Share until our Common Stock
Our common stock is quoted on the OTCQB marketplace and thereafter at prevailing market prices or privately negotiated prices. We will not receive any proceeds fromunder the symbol “GMGT.” On August 30, 2021, the last reported sale price per share of these shares by the Selling Securityholders.our common stock was $4.25.
We are an "emergingemerging growth company"company under applicable federal securities lawsthe Jumpstart our Business Startups Act of 2012, or JOBS Act, and, will be subjectas such, may elect to comply with certain reduced public company reporting requirements.requirements for future filings.
Investing in our securities involves various risks.a high degree of risk. See "Risk Factors"“Risk Factors” beginning on page 810 of this prospectus. You should carefully consider these risk factors, as well as the information contained in this prospectus, for a discussion of information that should be considered in connection with an investment in our securities.before you invest.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined ifpassed upon the accuracy or adequacy of this prospectus is truthful or complete.prospectus. Any representation to the contrary is a criminal offense.
The date of this prospectus is , 2020August 31, 2021.
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Table of Contents
TABLE OF CONTENTS
As used
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You should rely only on information contained in this registration statement containing this prospectus, "we", "us", "our", "Dito"prospectus. We have not authorized anyone to provide you with additional information or "company" refers to Dito, Inc. and all of its subsidiaries and affiliated companies, including Dito UK Limited. References to the "SEC" refer to the U.S. Securities and Exchange Commission.
Informationinformation different from that contained in and that can be accessed through, our web sitewww.dito.com shall not be deemed to be partthis prospectus. Neither the delivery of this prospectus nor the sale of our securities means that the information contained in this prospectus is correct after the date of this prospectus. This prospectus is not an offer to sell or incorporated herein by referencethe solicitation of an offer to buy our securities in any circumstances under which the offer or solicitation is unlawful or in any state or other jurisdiction where the offer is not permitted.
For investors outside the United States: We have not taken any action that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and shouldobserve any restrictions relating to, the offering of the securities covered hereby and the distribution of this prospectus outside of the United States.
The information in this prospectus is accurate only as of the date on the front cover of this prospectus. Our business, financial condition, results of operations and prospects may have changed since those dates.
No person is authorized in connection with this prospectus to give any information or to make any representations about us, the securities offered hereby or any matter discussed in this prospectus, other than the information and representations contained in this prospectus. If any other information or representation is given or made, such information or representation may not be relied upon as having been authorized by us.
We have not done anything that would permit this offering or possession or distribution of this prospectus in any prospective investorsjurisdiction where action for that purpose is required, other than the purposesUnited States. You are required to inform yourself about, and to observe any restrictions relating to, this offering and the distribution of determining whether to purchase the Shares offered hereunder.this prospectus.
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CAUTIONARY NOTESTATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains in addition to historical information, certain forward-looking statements“forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, (the "Securities Act"),or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"“Exchange Act”), . Forward-looking statements discuss matters that includes information relating toare not historical facts. Because they discuss future events future financial performance, strategies, expectations, competitive environment, regulation and availability of resources. Suchor conditions, forward-looking statements may include those that express plans, anticipation, intent, contingency, goals, targetswords such as “anticipate,” “believe,” “estimate,” “intend,” “could,” “should,” “would,” “may,” “seek,” “plan,” “might,” “will,” “expect,” “anticipate,” “predict,” “project,” “forecast,” “potential,” “continue” negatives thereof or similar expressions. Forward-looking statements speak only as of the date they are made, are based on various underlying assumptions and current expectations about the future development and/or otherwiseand are not guarantees. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, level of historical fact.activity, performance or achievement to be materially different from the results of operations or plans expressed or implied by such forward-looking statements.
We cannot predict all the risks and uncertainties that may impact our business, financial condition or results of operations. Accordingly, the forward-looking statements in this prospectus should not be regarded as representations that the results or conditions described in such statements will occur or that our objectives and plans will be achieved, and we do not assume any responsibility for the accuracy or completeness of any of these forward-looking statements. These forward-looking statements are based onfound at various places throughout this prospectus and include information concerning possible or projected future results of our currentoperations, including statements about potential acquisition or merger targets, strategies or plans; business strategies; prospects; future cash flows; financing plans; plans and objectives of management; any other statements regarding future acquisitions, future cash needs, future operations, business plans and future financial results; and any other statements that are not historical facts.
These forward-looking statements represent our intentions, plans, expectations, assumptions and projectionsbeliefs about future events and they are subject to a variety of factors and risks, including, but not limited to, those set forth under “Risk Factors.”
Many of those risks and uncertainties knownfactors are outside of our control and unknown that could cause actual results and developments to differ materially from those expressed or implied in such statements.
In some cases, you can identify forward-looking statements by terminology, such as "may," "should," "would," "expect," "intend," "anticipate," "believe," "estimate," "continue," "plan," "potential" and similar expressions. Accordingly, these statements involve estimates, assumptions and uncertainties that could cause actual results to differ materially from the results expressed or implied by those expressedforward-looking statements. Considering these risks, uncertainties and assumptions, the events described in them. Anythe forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this prospectus. All subsequent written and oral forward-looking statements concerning other matters addressed in this prospectus and attributable to us or any person acting on our behalf are expressly qualified in their entirety by referencethe cautionary statements contained or referred to in this prospectus.
Except to the factors discussed throughoutextent required by law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, a change in events, conditions, circumstances or assumptions underlying such statements, or otherwise.
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PROSPECTUS SUMMARY
This summary highlights certain information appearing elsewhere in this prospectus or incorporated hereinprospectus. Because this is only a summary, it does not contain all of the information you should consider before investing in our securities and it is qualified in its entirety by, reference.
Youand should be read in conjunction with, the more detailed information included elsewhere in this prospectus. Before you make an investment decision, you should read this entire prospectus carefully, including the risks of investing in our securities discussed under the section of this prospectus entitled “Risk Factors” and similar headings. You should also carefully read our financial statements, and the documents we have filed as exhibits to the registration statement of which this prospectus is part, completelya part.
Unless otherwise stated or the context otherwise requires, “Gaming Technologies,” the “Company,” “we,” “us” and “our” refer to Gaming Technologies, Inc., and our subsidiary
Business Overview
We are a mobile games developer, publisher and operator with offices in London and Las Vegas.
We develop games, license third-party games for distribution, and operate a proprietary gaming platform that enables business-to-business (B2B) partners to establish online gambling presences. We specialize in the rapidly growing financial, gaming and entertainment sectors. We intend to license its software platform to mobile gaming operators and developers to enable rapid development of new games.
Gaming Technologies, Inc., was incorporated under the laws of the State of Delaware on July 23, 2019, under the name Dito, Inc. We entered into a share-for-share exchange transaction consummated on March 18, 2020, in which all of the existing shareholders of Dito UK Limited, an English corporation, exchanged their ordinary shares in Dito UK Limited for shares of our common stock, and Dito UK Limited became our wholly owned subsidiary.
Dito UK Limited acquired its initial assets from GameTech UK Limited, an English corporation (“GameTech”) in 2018. On May 11, 2017, GameTech entered insolvency proceedings and administrators were appointed for it, Approximately fifteen months later, on August 10, 2018, the administrators of GameTech entered into an asset sale agreement with Dito UK Limited (the “Sale Agreement”) pursuant to a court order issued by the Joint Administrators of GameTech (in administration) on May 29, 2018. GameTech’s last full year of operations was the year ended December 31, 2016, and it had nominal revenues in such year.
The Sale Agreement with GameTech included the sale of the intellectual property assets of GameTech, consisting of gaming software and a related platform. The software was acquired under the expectation that it would require significant modifications to be able to be utilized in the Company’s anticipated business model, which is gaming platform and games licensing to land-based casinos, consumer brands and media company partners. Following the acquisition of GameTech’s intellectual property assets out of receivership, we have made improvements to the core software platform. The improvements we have made include the migration of the software from physical server dependencies to cloud based deployment (via Amazon Web Services (“AWS”)) and removing the dependency on third-party applications and replacing them with AWS native alternatives. Our software also has the capability to allow games to be chained together, through a “state machine”, which allows for a wider variety of games to be created.
On December 21, 2020, we changed our name to Gaming Technologies, Inc., and on January 7, 2021, Dito UK Limited changed its name to Gaming Technologies UK Limited (“Gaming Technologies UK”).
We commenced revenue-generating operations in February 2021. We do not have positive cash flows from operations and expect to continue to be dependent on periodic infusions of equity capital to fund our operating requirements.
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Development of Our Business and Plan of Operation
We commenced revenue-generating operations in February 2021. We do not have positive cash flows from operations and expect to continue to be dependent on periodic infusions of equity capital to fund our operating requirements. We have financed our working capital requirements since inception primarily through the sale of our equity securities in private placement transactions, as well as from borrowings. In private placements to “accredited investors” (as defined in Regulation D under the Securities Act of 1933, as amended (the “Securities Act”)) or to non-U.S. persons under Regulation S under the Securities Act, between February 2020 and February 2021 we sold an aggregate of 2,656,600 shares of our common stock at a price of $2.50 per share. In March 2021, we sold 10,000 shares of our common stock for gross proceeds of $25,000 in a private placement. In August 2021, we sold 538,694 shares of common for gross proceeds of $1,750,752 in a private placement. Our activities are subject to significant risks and uncertainties, including the need for additional capital, as described below.
Big Bola/vale.mx
On November 13, 2020, we entered into an Agreement for the Provision of Online Gaming Management and Consulting Services (as subsequently amended) with Comercial de Juegos de la Frontera, S.A. de C.V., a Mexican company doing business as Big Bola, pursuant to which we provide to Big Bola consulting and management services related to their interactive online betting and gaming business in Mexico via the web site www.vale.mx, a regulated online casino and sports betting site. vale.mx operates under Big Bola’s existing license issued by the General Directorate of Games and Raffles of the Ministry of Interior (SEGOB). Big Bola is one of only14 operators legally authorized to offer legal betting and online casino services in Mexico. vale.mx has more than 500 online premium casino games available, which can be enjoyed both on mobile or via desktop. Players can receive promotions and play live roulette and blackjack, or high-definition slots from leading software providers such as NetEnt, Microgaming, Pragmatic Play, Evolution and Matrix Studios. We are responsible for player acquisition, promotion and retention for vale.mx. We manage players’ accounts and are required to ensure that the balance in players’ accounts at all times satisfies the requirements under applicable law, and we pay out winnings to players from Big Bola’s account. While Big Bola bears liability to the players as provided by the permit, as between us and Big Bola we bear the costs of this obligation. Each party indemnifies the other against certain liabilities and claims. Under the terms of the agreement, we share 60% of gross gaming revenue generated from the platform, subject to certain minimum guaranteed monthly amounts of Big Bola’s participation in the remaining gross gaming revenues. In February 2021, vale.mx began operations.
Canelo Sponsorship Agreement
On April 14, 2021, we entered into a Sponsorship Agreement (the “Canelo Agreement”) with SA Holiday, Inc. (“Holiday”), owner of the personality rights of champion professional boxer Saul Alvarez Barragan, or “Canelo,” in connection with a promotional campaign for the Corporation to sponsor a prize fight and certain other activities of Canelo, and for Canelo to promote the Corporation’s “VALE” brand and create certain promotional materials in connection therewith for the Corporation’s use in the United States, Latin America and certain countries in the Caribbean. Pursuant to the Canelo Agreement we will, among other things, pay to Holiday a cash fee of $1,600,000 and be responsible for paying certain other amounts as provided therein.
Playboy License Agreement
On May 19, 2021, we entered into a non-exclusive license agreement with Playboy Enterprises International, Inc. (“Playboy”) to use certain trademarks (including the rabbit head logo) and other intellectual property of Playboy on and in connection with the understandingdesign, creation, promotion, marketing, advertisement, sales, operation, maintenance and distribution in India of real-money game mobile apps, such as rummy, poker, fantasy sports and other games of skill approved by Playboy. We will pay Playboy as a royalty a percentage of net gaming revenue. The term of the agreement is through the end of 2025, subject to early termination upon certain events of default, which include our failure to launch a Playboy-branded game in India by November 1, 2021, or to meet certain annual minimum net gaming revenue targets. We expect to begin generating revenues under this license agreement in the third quarter of 2021, although there can be no assurance this will be the case.
Ortiz Gaming Partnership
On August 18, 2021, we entered into a software partnership with Ortiz Gaming to supply us with online Bingo gaming content. The deal initially cover Mexico and we plan to expand to other parts of Latin and South America.
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Key Performance Indicators – Business-to-Consumer (B2C) Operations
Registered Players
A registered player is a customer who has registered on our app or website and met our Know Your Customer identification requirements. During the three and six months ended June 30, 2021 we registered 17,038 and 46,301 players.
Monthly Unique Payers
Monthly Unique Payers (“MUPs”). MUPs is the average number of unique paid users (“unique payers”) that use our actual future resultsonline games on a monthly basis.
MUPs is a key indicator of the scale of our user base and awareness of our brand. We believe that year-over-year MUPs will also generally be indicative of the long-term revenue growth potential of our online casino, although MUPs in individual periods may be materially different from whatless indicative of our longer-term expectations. We expect the number of MUPs to grow as we expect. You should not assume thatattract, retain and re-engage users in new and existing jurisdictions and expand our online casino offerings to appeal to a wider audience.
We define MUPs as the information containednumber of unique payers per month who had a paid engagement (i.e., participated in this prospectus or any prospectus supplement is accurate as of any date other than the date on the front cover of those documents.
Risks, uncertainties and other factors that may cause our actual results, performance or achievements to be different from those expressed or implied in our written or oral forward-looking statements may be found in this prospectus under the heading "Risk Factors".
Forward-looking statements speak only as of the date they are made. You should not put undue reliance on any forward-looking statements. We assume no obligation to update forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information, except to the extent required by applicable securities laws. If we do updatea casino game) across one or more forward-looking statements, no inference should be drawnof our product offerings via our technology. For reported periods longer than one month, we average the MUPs for the months in the reported period.
A “unique paid user” or “unique payer” is any person who had one or more paid engagements via our B2C technology during the period (i.e., a user that we will make additional updatesparticipates in a paid engagement with respect to thoseone of our B2C product offerings counts as a single unique paid user or unique payer for the period). We exclude users who have made a deposit but have not yet had a paid engagement. Unique payers or unique paid users include users who have participated in a paid engagement with promotional incentives, which are fungible with other forward-looking statements.
New factors emerge from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impact of each factorfunds deposited in their wallets on our businesstechnology. The number of these users included in MUPs has not been material to date and a substantial majority of such users are repeat users who have had paid engagements both prior to and after receiving incentives.
During the three and six months ending June 30, 2021, our MUPs were 448 and 1,656, respectively.
Average Revenue per MUP (“ARPMUP”). ARPMUP is the average online casino revenue per MUP, and this key metric represents our ability to drive usage and monetization of our online casino offering.
During the six months ending June 30, 2021, our ARPMUP was $15.34, compared to an ARPMUP of $4.66 during the three months ended March 31, 2021. The increase of $10.68 was due to increased marketing efforts on behalf of the Company and new games that have been introduced.
We define and calculate ARPMUP as the average monthly online casino revenue for a reporting period, divided by MUPs (i.e., the average number of unique payers) for the same period.
Handle
Handle is a casino or sports betting term referring to thetotal amount of money bet. We will report the handle or cash wagering which is thetotal amount of money bet excluding all bonuses.
During the three and six months ended June 30, 2021, our handle was $1,692,128 and $2,261,365, respectively.
Hold
Hold is essentially the amount of cash that our platforms keep after paying out winning bets. The industry also refers to hold as win or revenue. During the three and six months ended June 30, 2021, our hold was $81,114 and $108,778, respectively.
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Online games are characterized by an element of chance. Our revenue is impacted by variations in the hold percentage (the ratio of net win to total amount wagered) on bets placed on, or the extentactual outcome of, games or events on which users bet. Although our product offerings generally perform within a defined statistical range of outcomes, actual outcomes may vary for any given period, and a single large bet can have a sizeable impact on our short-term financial performance. Our hold is also affected by factors that are beyond our control, such as a user’s skill, experience and behavior, the mix of games played, the financial resources of users and the volume of bets placed. As a result of variability in these factors, actual hold rates on our products may differ from the theoretical win rates we have estimated and could result in the winnings of our gaming users exceeding those anticipated. We seek to mitigate these risks through data science and analytics and rules built into our technology, as well as active management of our amounts at risk at a point in time, but may not always be able to do so successfully, particularly over short periods, which any factor, or combinationcan result in financial losses as well as revenue volatility.
During the three and six months ended June 30, 2021, our hold percentage was 4.79% and 4.81%, respectively.
Intellectual Property
We have registered the following active trademarks:
| Trademark: | NENX | DITO |
| Registered with: | EUIPO | EUIPO |
| Trademark number: | 013036207 | 013116397 |
| Type: | Word | Word |
| Registration date: | 18/11/2014 | 28/12/2016 |
| Nice Classification: | 9.41 | 9.41 |
We also own the following domains: dito.com, gametech.com, nenx.com, hilo.games, hilo.casino, megastars.net, megastars.app, megastars.uk, vale.mx and vale.net.
Listing on the Nasdaq Capital Market
Our common stock has approved for quotation on the OTCQB market under the trading symbol “GMGT.” However, trading of factors, may cause actual resultsour common stock has been extremely limited to differ materially from those containeddate, and there is as yet no established trading market for our common stock.
We intend to apply to list our common stock Nasdaq Capital Market (“Nasdaq”) under the symbol “GMGT.” If our listing application is approved, we expect to list our common stock on Nasdaq. No assurance can be given that our listing application will be approved. This offering will occur only if Nasdaq approves the listing of our common stock.
Principal Risks
We are subject to various risks discussed in any forward-looking statements.detail under “Risk Factors” below, which include risks related to the following:
| • | our limited operating history; | |
| • | our speculative business plan; | |
| • | failure of our products to achieve broad market acceptance; | |
| • | our ability to successfully protect our intellectual property rights, and claims of infringement by others; | |
| • | our ability to retain key management personnel; | |
| • | our ability to hire and retain qualified personnel; | |
| • | failure to remediate material weaknesses in internal accounting controls and failure to implement proper and effective internal controls; | |
| • | our need to raise additional capital; | |
| • | cybersecurity threats and incidents; and | |
| • | our ability to meet the initial or continuing listing requirements of the Nasdaq Capital Market. |
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Corporate Information
Our principal offices are located at Two Summerlin, Las Vegas, NV 89135, and our telephone number is +1 (347) 983-1227. Gaming Technologies UK leases office facilities in London, England which are located at 184 Shepherds Bush Road, London, England W6 7NL. All of our operations are currently conducted through Gaming Technologies UK.
Our website address is www.gametech.com. We qualify all of the information presented in this prospectus particularly our forward-looking statements, by these cautionary statements.
We qualify all the forward-looking statements contained in this prospectushave not incorporated by reference into this prospectus by the foregoing cautionary statements.information included on or linked from our website and you should not consider it to be part of this prospectus.
INDUSTRY AND MARKET DATA
This prospectus
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Summary of the Offering
The following summary of the offering contains estimatesbasic information about the offering and other statistical data made by independent partiesthe common stock and by us relatingis not intended to market size and growth and other data about our industry. We obtainedbe complete. It does not contain all the industry and market data ininformation that is important to you. For a more complete understanding of the common stock, please refer to the section of this prospectus from our own research as well as from industry and general publications, surveys and studies conducted by third parties. This data involves a numberentitled “Description of assumptions and limitations and contains projections and estimates of the future performance of the industries in which we operate that are subject to a high degree of uncertainty, including those discussed in "Risk Factors". We caution you not to give undue weight to such projections, assumptions and estimates. Further, industry and general publications, studies and surveys generally state that they have been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. While we believe that these publications, studies and surveys are reliable, we have not independently verified the data contained in them. In addition, while we believe that the results and estimates from our internal research are reliable, such results and estimates have not been verified by any independent source.Capital Stock.”
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| 2,769,403 shares of our common stock, including 36,000 shares of common stock issuable upon the exercise of placement agent warrants at
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| Offering price per share: | The selling stockholders may sell all or a portion of the shares being offered pursuant to this prospectus at fixed prices, at prevailing market prices at the time of sale, at varying prices, or at negotiated prices. | ||
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| 30,986,674 shares | |
Use of | We will not receive any proceeds from the sale of the | ||
| Plan of Distribution: | The selling stockholders may sell all or a portion of the shares of common stock beneficially owned by them and offered hereby from time to time directly or through one or more underwriters, broker-dealers or agents. Registration of the common stock covered by this See | ||
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| Risk | Investing in our securities involves a high degree of | ||
| (1) | Unless we indicate otherwise, the number of shares of our common stock outstanding is based on 30,986,674 shares of common stock outstanding on August 16, 2021, but does not include, as of that date: | |
| • | Warrants to purchase 36,000 shares of common stock at an exercise price of $2.50 per share; and | |
| • | Warrants to purchase 40,175 shares of common stock at an exercise price of $3.25 per share. | |
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7
RISK FACTORS
An
Any investment in our Common Stocksecurities involves a high degree of risk. You should consider carefully consider the risks and uncertainties described below and the otherall information contained in this Registration Statementprospectus, before investing inyou decide whether to purchase our Common Stock.securities. If any of the following risks or uncertainties actually occur,occurs, our business, operating results and financial condition, results of operations and prospects would likely suffer, possibly materially. In addition, the trading price of our common stock could suffer.decline due to any of these risks or uncertainties, and you may lose part or all of your investment.
Risks Specific to the Company
We are ahave only recently organized as an early stage company but have not yet commenced operations in our business.begun to generate operating revenues. We expect to incur operating losses for the foreseeable future.
Dito
Gaming Technologies, Inc., was incorporated on July 23, 2019, and to date havehas been involved primarily in organizationorganizational activities. DitoGaming Technologies UK, our subsidiary was formed in November 2017. We commenced revenue-generating operations in February, 2021, and have not yet commencedgenerated only minimal revenue generating operations.to date. Further, we have not yet fully developed our business plan or our management team. Accordingly, we have no way to evaluate the likelihood that our business well be successful. The likelihood of success must be considered in light of the problems, expenses, difficulties, complications and delays encountered in connection with the operations that we plan to undertake. These potential problems include, but are not limited to, unanticipated problems relating to our software and market acceptance by our intended clients. There is no operating history upon which to base any assumption as to the likelihood that we will prove successful and there is no assurance we will generate any operating revenues or ever achieve profitable operations. If we are unsuccessful in addressing these risks, our business will most likely fail.
Dito hasWe have a limited operating history which makes it difficult to accurately evaluate our business prospects.
We have a nolimited operating history upon which to base an evaluation of our business and prospects. Operating results for future periods are subject to numerous uncertainties and we cannot assure you that the Company will achieve or sustain profitability. The Company'sCompany’s prospects must be considered in light of the risks encountered by companies in the early stage of development, particularly companies in new and rapidly evolving markets. Future operating results will depend upon many factors, including, but not limited to, our success in attracting necessary financing, establishing credit or operating facilities, the success of our products, our ability to develop new products, our ability to successfully market our products and attract repeat and new customers, our ability to control operational costs, and the Company'sCompany’s ability in retaining motivated and qualified personnel, legal and regulatory developments in the jurisdictions in which we operate, as well as the general economic conditions which affect such businesses. We cannot assure you that the Company will successfully address any of these risks.risks
We do not have adequate capital to fund our business and may need additional funding to continue operations. We may not be able to raise capital when needed, if at all, which would force us to delay, reduce or eliminate our product development programs or commercialization efforts and could cause our business to fail.
We have limited capital available to us. Our entire original capital has been fully expended and if additional costs cannot be funded from borrowings or capital from other sources, then our financial condition, results of operations, and business performance would be materially adversely affected. We will require additional capital for the development of our business operations and commercialization of our planned products. We may also encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may increase our capital needs and/or cause us to spend our cash resources faster than we expect. Accordingly, we will need to obtain additional funding in order to continue our operations. We may not be able to raise needed additional capital or financing due to market conditions or for regulatory or other reasons. There can be no guarantee that the necessary funds will be available on a timely basis, on favourablefavorable terms, or at all, or that such funds, if raised, would be sufficient. Even if additional funds are raised by issuing equity securities, dilution to the then existing shareholdings would result. We cannot assure that we will have adequate capital to conduct our business. If additional funding is not obtained, we may need to reduce, defer or cancel software development efforts, sales and marketing, and overhead expenditures to the extent necessary. The failure to fund our operating and capital requirements could have a material adverse effect on our business, financial condition and results of operations.
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Our business plan is speculative.
Our business is speculative and subject to numerous risks and uncertainties. The development of products, including current products, may not succeed in a commercial setting or result in revenue due to functional failures, lack of acceptance or demand from the marketplace, technological inefficiencies, competition or for other reasons. There is no assurance that we will generate significant revenues, and even if we do generate revenues there can be no assurances that we will generate a profit.
Our cash and other sources of liquidity will not be sufficient to fund our operations beyond November 30, 2020. We may not be successful in raising additional capital necessary to meet expected increases in working capital needs. If we raise additional funding through sales of equity or equity-based securities, your shares will be diluted. If we need additional funding for operations and we are unable to raise it, we may be forced to liquidate assets and/or curtail or cease operations or seek bankruptcy protection or be subject to an involuntary bankruptcy petition.
Since inception through December 31, 2020, the Company hasdid not generatedgenerate revenues and has incurred losses and has an accumulated deficit of $1,372,558$7,966,193 as of June 30,December 31, 2020. There can be no assurances that we will be able to achieve a level of revenues adequate to generate sufficient cash flow from operations. If we are unable to raise additional funding necessary to support our working capital requirements, which we estimate to be approximately $1.2 million, management has projected that cash on hand will not be sufficient to allow us to continue operations beyond November 30, 2020. Our ability to raise additional funds through equity or debt financings or other sources may depend on the commercial success of our software and financial, economic and market conditions and other factors, some of which are beyond our control. No assurance can be given that we will be successful in raising the required capital at reasonable cost and at the required times, or at all. Further equity financings may have a dilutive effect on shareholders and any debt financing, if available, may require restrictions to be placed on our future financing and operating activities. If we require additional capital and are unsuccessful in raising that capital, we may not be able to continue our business operations and advance our growth initiatives, which could adversely impact our business, financial condition and results of operations.
Our auditors have indicated that these conditions raise substantial doubt about the Company'sCompany’s ability to continue as a going concern. We urge you to review the additional information about our liquidity and capital resources in the Management's Discussion and Analysis of Financial Condition and Results of Operations elsewhere in this document below. If our business ceases to continue as a going concern due to lack of available capital or otherwise, it could have a material adverse effect on our results of operations, financial position, and liquidity.
We have material weaknesses and other deficiencies in our internal control and accounting procedures.
Section 404 of the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”) requires annual management assessments of the effectiveness of our internal control over financial reporting. Our management assessed the effectiveness of our disclosure controls and procedures as of December 31, 20192020 and June 30, 20202019 and concluded that we had a material weakness in our internal controls due to our limited resources and therefore our disclosure controls and procedures may not be effective in providing material information required to be included in any future periodic SEC filings on a timely basis and to ensure that information required to be disclosed in any future periodic SEC filings is accumulated and communicated to our management to allow timely decisions regarding required disclosure about our internal control over financial reporting. More specifically, our internal control over financial reporting was not effective due to material weaknesses related to a segregation of duties due to our limited resources and limited staff.
In addition, as of December 31, 20192020 and June 30, 2020,2019, our management concluded that we had a material weakness in internal control over financial reporting. If we fail to comply with the rules under Sarbanes-Oxley related to disclosure controls and procedures in the future, or, if we continue to have material weaknesses and other deficiencies in our internal control and accounting procedures and disclosure controls and procedures, our stock price could decline significantly and raising capital could be more difficult. If additional material weaknesses or significant deficiencies are discovered or if we otherwise fail to address the adequacy of our internal control and disclosure controls and procedures our business may be harmed. Moreover, effective internal controls are necessary for us to produce reliable financial reports and are important to helping prevent financial fraud. If we cannot provide reliable financial reports or prevent fraud, our business and operating results could be harmed, investors could lose confidence in our reported financial information, and the trading price of our securities could drop significantly.
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Failure to develop our internal controls over financial reporting could have an adverse impact on us.
We need to develop and implement internal control systems and procedures. We are required to establish and maintain appropriate internal controls over financial reporting. Failure to establish appropriate controls, or any failure of those controls once established, could adversely impact our public disclosures regarding our business, financial condition or results of operations. In addition, management'smanagement’s assessment of internal controls over financial reporting may identify weaknesses and conditions that need to be addressed in our internal controls over financial reporting or other matters that may raise concerns for investors. Any actual or perceived weaknesses and conditions that need to be addressed in our internal control over financial reporting, disclosure of management'smanagement’s assessment of our internal controls over financial reporting or disclosure of our public accounting firm'sfirm’s attestation to or report on management'smanagement’s assessment of our internal controls over financial reporting may have an adverse impact on the price of our Common Stock.common stock.
If we were to lose the services of our key personnel, we may not be able to execute our business strategystrategy..
Our success is substantially dependent on the performance of Jason Drummond, who has significant experience in the technology and financial sectors and would be difficult to replace. The loss of Mr. Drummond would have a material adverse impact on us. Until we add additional officers and directors with the technical knowledge and financial expertise to move our business plan forward, we will be solely dependent upon Mr. Drummond for the direction, management and daily supervision of our operations. The inability to retain Mr. Drummond at this crucial juncture in our Company'sCompany’s development, and our ability to replace Mr. Drummond in a timely manner would have a material adverse effect on our business and, accordingly, would negatively impact our financial condition and operating results.
If we are unable to hire, retain or motivate qualified personnel, consultants, independent contractors, and advisors, we may not be able to grow effectivelyeffectively..
Our performance will be dependent on the talents and efforts of highly skilled individuals, including Mr. Drummond. The loss of Mr. Drummond, or one or more members of our management team or other key employees or consultants, as and when they are hired, could materially harm our business, financial condition, results of operations and prospects. Our future success depends on our continuing ability to identify, hire, develop, motivate and retain highly qualified personnel for all areas of our organization. We face competition for personnel and consultants from other companies, universities, public and private research institutions, government entities and other organizations.If we do not succeed in attracting excellent personnel or in retaining or motivating them, we may be unable to grow effectively. We cannot assure that any skilled individuals will agree to become an employee, consultant, or independent contractor of the Company. Our inability to retain their services could negatively impact our business and our ability to execute our business strategy.
Our products may not achieve broad market acceptance if we cannot compete successfully, limiting our ability to generate revenue and grow profits.
Our ability to generate significant revenue and profits depends on the acceptance of our products by customers. The market acceptance of any product depends on a number of factors, including but not limited to awareness of a product'sproduct’s availability and benefits, features, safety and security, perceptions by the industry, the price of the product, competing products, and the effectiveness of marketing and distribution efforts. To remain competitive, the Companywe must continue to innovate, further enhancing and improving the responsiveness, functionality, accessibility, and other features of itsour software platform. The success of the Companyour business depends on itsour ability to anticipate and respond to technological changes and customer preferences in a timely and cost-effective manner. Any factors preventing or limiting the market acceptance of our products could have a material adverse effect on our business, results of operations and financial condition.
If we fail to attract new customers and maintain our active customers, our growth may be impaired.
The Company's
Our future profitability and growth depends upon itsour ability to establish an active customer base in a cost-effective manner. The CompanyWe must attract and maintain clients in order to maintain and build profitability. Although the Companywe will spend resources on marketing and related expenses, there are no assurances that these efforts will be cost effective in building our B2B business model. Failure to maintain a level of active clients could have an adverse effect on the Company'sour business and operations.
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10
We operate in an intensely competitive market that includes companies that have greater financial, technical and marketing resources than us.
The Company faces
We face intense and increasing competition in the marketplace. The Company isWe are confronted by rapidly changing technology, evolving user needs and the frequent introduction of new and enhanced services by itsour competitors. Some of its existing and potential competitors, including GAN, Ltd, Evolution Gaming Group AB, and DraftKings, Inc., are better established, benefit from greater name recognition and have significantly greater financial, technical, sales, and marketing resources than the Company.us. In addition, some competitors, particularly those with a more diversified revenue base, may have greater flexibility than the Companyus to compete aggressively based on price and other contract terms. New competitors may emerge through acquisitions or through development of disruptive technologies. Strong and evolving competition could lead to a loss of the Company'sour market share or make it more difficult to grow itsour business profitably.
If we are unable to adapt to changing technologies and user preferences it may have a negative impact on player numbers and affect our business operations and financial performance.
In an industry that is characterisedcharacterized by the development of new products, technologies and end-user practices, we must invest significant resources in software development to be innovative and to enhance our technology, products and services. If we fail to adapt to changing market needs and developing opportunities, it may have an impact on our ability to attract and retain clients which could adversely impact the business operations and financial performance. As technology evolves our platform may not support new devices. Users may shift from using an iOS or Android device and require access to our products via a desktop computer or other devices. Our products may not be well-suited for use on other devices. This may have a negative impact on client numbers if our platform is not enhanced to reflect new or changing client preferences.
If we are unable to protect our intellectual property and proprietary rights, our competitive position and our business could be materially adversely affected.
The Company
We cannot be certain that the steps itwe may take in the future to protect, register and enforce theour intellectual property rights, of the Company, if any, will be adequate or that third parties will not infringe or misappropriate the Company'sour proprietary rights, if any. The Company facesWe face the risk that the use and exploitation of itsour intellectual property rights, including rights relating to its proprietary software, may infringe the intellectual property rights of a third party. The CompanyWe also facesface the risk that itsour intellectual property rights may be infringed by a third party, and there can be no assurance that the Companywe will successfully prevent or restrict any such infringing activity. The costs incurred in bringing or defending any infringement actions may be substantial, regardless of the merits of the claim, and an unsuccessful outcome for the Company may result in royalties or damages being payable and/or the Companyour being required to cease using any infringing intellectual property or embodiments of any such intellectual property (such as software).
If any of the Company'sour intellectual property is held to be infringing, there can be no assurance that the Companywe will be able to develop alternative non-infringing intellectual property. There can be no assurance that third parties will not independently develop or have not so developed similar or equivalent software to the Company'sour proprietary software, or will not otherwise gain access to the Company'sour source code, software or technology or obtain (on favourablefavorable terms or at all) alternative non-infringing intellectual property. There can be no assurance that the Company'sour intellectual property is valid, or enforceable and such intellectual property may be subject to challenge or circumvention by third parties. The Company hasWe have not registered any of itsour intellectual property rights, no assurance can be provided that any such rights are registrable, and no assurance can be given that any applications for registration made by the Companyus will be successful, as applied for or at all.
We face the risk that third parties will claim that we infringe on their intellectual property rights, which could result in costly license fees or expensive litigation.
Other companies, individuals or third parties may claim the Company isthat we are making use of or exploiting software or database design components that infringe their intellectual property rights. The costs incurred in defending any infringement actions may be substantial, regardless of the merits of the claim, and an unsuccessful outcome for us may result in royalties or damages being payable and/or the Companyour being required to cease using any infringing intellectual property or embodiments of any such intellectual property (such as software). It may also affect our relationships with current or future customers, delay or stop new sales, and divert the attention of management and other human resources. If any of our technology is held to be in breach, there can be no assurance that we will be able to develop alternative non-infringing intellectual property in a timely manner.
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11
Customer complaints regarding our products and services could hurt our businessbusiness..
From time to time, we may receive complaints from customers regarding the quality of products sold by us. We may in the future receive correspondence from customers requesting reimbursement or refunds. Certain dissatisfied customers may threaten legal action against us if no reimbursement is made. We may become subject to product liability lawsuits from customers alleging harm because of a purported defect in our products or services, claiming substantial damages and demanding payments from us. We are in the chain of title when we supply or distribute products, and therefore are subject to the risk of being held legally responsible for them. These claims may not be covered by our insurance policies. Any resulting litigation could be costly for us, divert management attention, and could result in increased costs of doing business, or otherwise have a material adverse effect on our business, results of operations, and financial condition. Any negative publicity generated as a result of customer frustration with our products or services, or with our websites, could damage our reputation and diminish the value of our brand name, which could have a material adverse effect on our business, results of operations and financial condition.
The CompanyWe may suffer losses if itsour reputation is harmed.
The Company's
Our ability to attract and retain customers and employees may be materially adversely affected to the extent itsour reputation is damaged. Issues that may give rise to reputational risk include, but are not limited to, failure of our products to perform effectively, failure to deal appropriately with legal and regulatory requirements in any jurisdiction (including as may result in the issuance of a warning notice or sanction by a regulator or the commission of an offence (whether civil, criminal, regulatory or other) by the Companyus or any of itsour officers, directors, intellectual property theft or intellectual property infringement, factually incorrect reporting, staff difficulties, fraud, technological delays or malfunctions, the inability to respond to a disaster, privacy issues, record-keeping, sales and trading practices, money-laundering, bribery and corruption, the credit, liquidity and market risks inherent in the Company'sour business and the activities of the Company'sour affiliates.
We may be subject to hacker intrusion, DDoS,distributed denial of service attacks, malicious viruses, and other cyber-crime attacks.
Our business may be adversely affected by distributed denial of service or DDoS(“DDoS”) attacks, and other forms of cyber-crime, such as attempts by computer hackers to gain access to our systems and databases that may lead to exposure of sensitive data or cause its sites to fail and/or disrupt customers'customers’ experience of its products and services. A successful attack may also attempt to extort money from the business by interfering with its ability to connect with its customers. The interference often occurs without warning resulting in a negative experience that its customers will associate with us. If our efforts to combat these DDoS attacks and other forms of cyber-crime are unsuccessful, our reputation may be harmed, and our customers'customers’ ability to access the platform may be impaired. We are also susceptible to a wide range of known, unknown and evolving malicious viruses. While we believe that our servers and production environment are adequately protected, no assurance can be given that our servers and production environment will not be impacted by malicious viruses. Any hacker intrusion, DDoS, installation of a malicious virus or cyber-crime attack could result in a decline in user traffic and associated revenues, which would have a material adverse effect on the business operations and financial performance.
Dependence on Key Suppliers and Third Parties
The Company is
We are dependent on outside suppliers for certain key services including storage, data back-up and integration with electronic wallets. While no one supplier or service provider is irreplaceable, should any of the Company'sour key suppliers fail to supply these services and the Company failswe fail to secure such services from an alternative supplier, itsour reputation and financial position could be materially and adversely affected. It may also be that any alternative suppliers will only make available their services at a significantly higher price than the Company is presently paying, thereby reducing the Company'sCompany’s ability to generate profit. In addition, we engage several providers of third-partythird- party hosting, gaming, and payment processing services. In the event that there is any interruption to the products or services provided by such third parties, or if there are problems in supplying the products or if one or more ceased to be provided or only provided on onerous terms to us, this could have an adverse effect on the business operation and performance.
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12
The Company'sOur financial results may be adversely affected by currency fluctuations.
The Company
We will generate its revenues in a variety of currencies, including the Euro, Sterling, and the US Dollar. As a result, some of the Company'sour financial assets may be denominated in these currencies and fluctuations in these currencies could adversely affect its financial results. The Company doesWe do not currently engage in any currency hedging transactions intended to reduce the effect of fluctuations in foreign currency exchange rates on its results of operations. If the Companywe were to determine that it was in itsour best interests to enter into any currency hedging transactions in the future, there can be no assurance that the Companywe will be able to do so or that such transactions, if entered into, will materially reduce the effect of fluctuations in foreign currency exchange rates on its results of operations. Currency hedging may also generate complex accounting issues. In addition, if, for any reason, exchange or price controls or other restrictions on the conversion of one currency into another currency were imposed, the Company'sour business could be adversely affected. Although exposure to currency fluctuations to date have not had a material adverse effect on the Company'sour business, there can be no assurance such fluctuations in the future will not have a material adverse effect on revenues from international sales and, consequently, the Company'sour business, operating results and financial condition.
Our business could suffer as a result of the uncertainty surrounding the U.K. withdrawal from the European Union and, if completed, the terms of such withdrawal.
The United Kingdom held a referendum on June 23, 2016 in which a majority of voters voted to exit the European Union ("Brexit") and on March 29, 2017, the United Kingdom submitted a formal notification of its intention to withdraw from the European Union pursuant to Article 50 of the Treaty of Lisbon. On January 31, 2020, the United Kingdom ceased to be a member state of the European Union. European Union law applicable to the United Kingdom continues to apply to and in the United Kingdom for the duration of a transition period, which is presently scheduled to expire on December 31, 2020 (the "Transition Period"). During the Transition Period, the European Union and the United Kingdom will negotiate the terms of their future relationship. There can be no assurances that such negotiations will be successful or certainty that European Union law will continue to apply in and to the United Kingdom following the expiration of the Transition Period. Until expiration of the Transition Period and the future relationship between the European Union and the United Kingdom is established, it is difficult to anticipate Brexit's potential impact.
The effects of Brexit will depend on any agreements the United Kingdom makes to retain access to European Union markets beyond the Transition Period. Brexit could adversely affect European and worldwide economic and market conditions and could contribute to instability in global financial and foreign exchange markets. In addition, Brexit could lead to legal uncertainty and potentially divergent national laws and regulations as the United Kingdom determines which European Union laws to replace or replicate. Any of these effects of Brexit, and others we cannot anticipate could adversely affect our business, results of operations and financial condition.
The concentration of our capital stock ownership with insiders will likely limit your ability to influence corporate matters.
Our sole executive officer and director and several stockholders together beneficially own a majority of our outstanding common stock. As a result, these stockholders, if they act together or in a block, could have significant influence over most matters that require approval by our stockholders, including the election of directors and approval of significant corporate transactions, even if other stockholders oppose them. This concentration of ownership might also have the effect of delaying or preventing a change of control of our company that other stockholders may view as beneficial.
We do not have any independent directors, nor an audit committee, a compensation committee or a corporate governance committee.
At present, we do not have any independent directors, and our board of directors does not have an audit committee, a compensation committee or a nominating/corporate governance committee. Our sole director is Jason Drummond, who is our chief executive officer and chief financial officer. Because we have no independent directors and only a single director, we do not have any checks and balances on Mr. Drummond, which may make it difficult for us to develop internal controls, to cure material weaknesses in internal controls and to raise money in the financial markets. However, prior to the closing of this offering, we intend to increase the size of the board of directors to satisfy Nasdaq’s requirement that the majority of the board of directors be independent. In addition, we intend to appoint such independent directors to serve as chairpersons of an audit committee, compensation committee and nominating committee, each of which we intend to form prior to this offering.
Jason Drummond, our sole officer and director, resides outside of the United States,US, it may be difficult for an investor to enforce any right based on U.S.US federal securities laws against Mr. Drummond, or to enforce a judgment rendered by a United StatesUS court against Mr. Drummond.
Our sole officer and director, Jason Drummond, is a non-resident of the United States.US. Therefore, it may be difficult to effect service of process on Mr. Drummond in the United States,US, and it may be difficult to enforce any judgment rendered against Mr. Drummond. Accordingly, it may be difficult or impossible for an investor to bring an action against Mr. Drummond, in the case that an investor believes that such investor'sinvestor’s rights have been infringed under the U.S.US securities laws, or otherwise. Even if an investor is successful in bringing an action of this kind, the laws may render that investor as unable to enforce a judgment against the assets of Mr. Drummond. As a result, our shareholders may have more difficulties in protecting their interests through actions against our management, director or major shareholder, compared to shareholders of a corporation whose officers and directors reside within the United States.US. Mr. Drummond'sDrummond’s principal assets are located in the United Kingdom.UK.
Jason Drummond, as our officer and sole director, may determine and award director fees and management compensation in his sole discretion.
There is currently no formal compensation agreement with our sole officer Jason Drummond, who is also our sole director. Until we have a compensation arrangement in place with Mr. Drummond and additional directors are added to our Board,board of directors (our “Board”), Mr. Drummond has the power to set his own compensation as management and distribute director fees in his sole discretion. There can be no assurance that we will enter into a formal compensation agreement with Mr. Drummond on favourablefavorable terms to the Company or any agreement at all and that additional members will be added to our Board. Any management compensation and/or director fees he awards himself could have an adverse effect on our cash reserves or net profit, if any.
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Risks Related to the Industry
Economic conditions and current economic weakness.
Any economic downturn, either globally or locally in any area in which we operate or where our customers reside, in particular the Company operates,UK and US and Mexico, may have an adverse effect on demand for the Company's products.our software platform once it is released. A more prolonged economic downturn may lead to an overall decline in the volume of the Company'sour sales, restricting the Company'sour ability to realiserealize a profit. If economic conditions remain uncertain, the Companywe might see lower levels of growth than anticipated, which might have an adverse impact on the Company'sour operations and business results.
The laws and regulations concerning data privacy and data security are continually evolving; failure to comply with these laws and regulations could harm our business.
We collect and store significant amounts of information about customers who use our technologies-bothtechnologies, including both personally identifying and non-personally identifying information. We are subject to laws from a variety of jurisdictions regarding privacy and the protection of this customer information. For example, the European Union (EU)EU has traditionally taken a broader view than the United StatesUS and certain other jurisdictions as to what is considered personal information, and has imposed greater obligations under data privacy regulations.
Data privacy protection laws are rapidly changing and likely will continue to do so for the foreseeable future. The U.S.US government, including the Federal Trade Commission and the Department of Commerce, is continuing to review the need for greater regulation over the collection of personal information and information about consumer behavior on the Internet and on mobile devices, and the EU has proposed reforms to its existing data protection legal framework. Various government and consumer agencies worldwide have also called for new regulation and changes in industry practices. In addition, in some cases, we are dependent upon our platform providers to solicit, collect and provide us with information regarding our customers that is necessary for compliance with these various types of regulations.
If we fail to comply with existing privacy-related or data protection laws and regulations, it could result in proceedings or litigation against us by governmental authorities or others, which could result in fines or judgments against us, damage our reputation, impact our financial condition and harm our business. If regulators, the media or consumers raise any concerns about our privacy and data protection or consumer protection practices, even if unfounded, this could also result in fines or judgments against us, damage our reputation, and negatively impact our financial condition and damage our business.
In the area of information security and data protection, many jurisdictions have passed laws requiring notification when there is a security breach for personal data or requiring the adoption of minimum information security standards that are often vaguely defined and difficult to implement. Our security measures and standards may not be sufficient to protect personal information and we cannot guarantee that our security measures will prevent security breaches. A security breach that compromises personal information could harm our reputation and result in a loss of customer confidence in our products and ultimately in a loss of customers, which could adversely affect our business and impact our financial condition. This could also subject us to liability under applicable security breach-related laws and regulations and could result in additional compliance costs, costs related to regulatory inquiries and investigations, and an inability to conduct our business.
Tax status and changes to regulations cancould affect the Companyour business.
The CompanyWe cannot guarantee that any tax audit or tax dispute to which itwe may be subject in the future will result in a favourable outcome for the Company.favorable outcome. There is a risk that any such audit or dispute could result in additional taxes payable by the Companyus as well as negative publicity and reputational damage. In any such case, substantial additional tax liabilities and ancillary charges could be imposed on the Companyus which could increase the Company'sour effective tax rate. The Company'sOur effective tax rate may also be affected by changes in, or the interpretation of tax laws, including those tax laws relating to the utilisationutilization of capital allowances, net operating losses and tax loss or credit carry forwards,carryforwards, as well as management'smanagement’s assessment of certain matters, such as the ability to realiserealize deferred tax assets. The Company'sCompany’s effective tax rate in any given financial year reflects a variety of factors that may not be present in the succeeding financial year or years. An increase in the Company'sour effective tax rate in future periods could have a material adverse effect on the Company'sour financial condition and results of operations.
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Systems failures, disruptive events or delays could materially harm the Company'sCompany’s business.
The Company's
Our operations will be highly dependent on the internet, mobile networks and Amazon Web Services.AWS. The efficient and uninterrupted operation of the Internet, mobile networks and Amazon Web Services,AWS, on which the Company relies,we rely, and itsour ability to provide customers with reliable, real-time access to its products,our services, is fundamental to the success of the Company'sour business. Any damage, malfunction, failure or interruption of, or to the Internet, mobile networks or Amazon Web ServicesAWS could result in a lack of confidence in the Company's productsour services and a possible loss of customers to our competitors, or could expose the Companyus to higher risk or losses, with a consequential material adverse effect on the Company'sour operations and results. If the Company'sour connection to mobile networks or the Internet is interrupted or not available, the Companywe may not be able to provide customers with itsour products and services.
The Company's
Our systems and networks may also fail because of other events, such as:
• fire, flood, or natural disasters
| • | fire, flood, or natural disasters; |
| • | power or telecommunications failure; |
| • | computer hacking activities; and |
| • | acts of war or terrorism. |
• power or telecommunications failure
• computer hacking activities
• acts of war or terrorism
Amazon Web ServicesAWS has a number of systems in place in the event of a system failure. It is important to note that the services the Company dependsthat we depend on via Amazon Web ServicesAWS are segregated from one another, and if one system fails, another replaces it automatically within minutes. It is further important to distinguish that each Amazon Web ServicesAWS deployment is relevant to each individual client, meaning that multiple Amazon Web ServicesAWS regions are used (currently available on every continent). The probability of a complete systems failure with Amazon Web ServicesAWS is unlikely but possible.
To date there has been no significant malfunctioning of the internet, mobile networks and Amazon Web Services,AWS, however, any such event could result in a lack of confidence in the Company's products,our services, and result in a loss of existing customers in addition to exposing itus to potential liabilities. Any one of these challenges could result in a material adverse effect on the Company'sour operations and financial results.
Our current operations are international in scope and expansion can create a variety of potential operational challengeschallenges..
With business operations in numerous countriesthe UK and the US and with intentions to grow, our offices, personnel and operations may be further dispersed around the world. In connection with such expansion, we may face a number of challenges, including costs associated with developing software and providing support in additional languages, varying seasonality patterns, potential adverse movement of currency exchange rates, longer payment cycles and difficulties in collecting accounts receivable in some countries, tariffs and trade barriers, a variety of regulatory or contractual limitations on our ability to operate, adverse tax events, reduced protection of intellectual property rights in some countries and a geographically and culturally diverse workforce and customer base. Failure to overcome any of these challenges could negatively affect our business and results of operations.
The outbreak of the coronavirusCOVID-19 pandemic may impact our plans and activities.
The global outbreak of COVID-19 has led to severe disruptions in general economic activities, as businesses and governments have taken broad actions to mitigate this public health crisis. Although the Company haswe have not experienced any significant disruption to its business to date, these conditions could significantly negatively impact the Company'sour business in the future. The extent to which the COVID-19 outbreak ultimately impacts the Company'sour business, future revenues, results of operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to, the duration and spread of the outbreak, its severity and longevity, the actions to curtail the virus and treat its impact (including an effective vaccine), and how quickly and to what extent normal economic and operating conditions can resume.
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Even after the COVID-19 outbreak has subsided, the Companywe may be at risk of experiencing a significant impact to itsour business as a result of the global economic impact, including any economic downturn or recession that has occurred or may occur in the future. Currently, capital markets have been disrupted by the crisis, as a result of which the availability, amount and type of financing available to the Companyus in the near future is uncertain and cannot be assured and is largely dependent upon evolving market conditions and other factors. The Company intendsWe intend to continue to monitor the situation and may adjust itsour current business plans as more information and guidance become available.
Public Company Risks or Risk related to our public listing and Common Shares
We are an "emerging“emerging growth company"company�� and "smaller“smaller reporting company"company” within the meaning of the Securities Act, and if we take advantage of certain exemptions from disclosure requirements available to emerging growth companies or smaller reporting companies, this could make our securities less attractive to investors and may make it more difficult to compare our performance with other public companies.
We are an "emerging“emerging growth company"company” within the meaning of the Securities Act, as modified by the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley, Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. As a result, our shareholders may not have access to certain information they may deem important. We could be an emerging growth company for up to five years, although circumstances could cause us to lose that status earlier, including if the market value of our shares of common stock held by non-affiliates exceeds $700 million as of the end of any second quarter of a fiscal year, in which case we would no longer be an emerging growth company as of the end of such fiscal year. We cannot predict whether investors will find our securities less attractive because we will rely on these exemptions. If some investors find our securities less attractive as a result of our reliance on these exemptions, the trading prices of our securities may be lower than they otherwise would be, there may be a less active trading market for our securities and the trading prices of our securities may be more volatile.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emergingnon- emerging growth companies but any such an election to opt out is irrevocable. We have elected not to opt out of such an extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Additionally, we are a "smaller“smaller reporting company"company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. We will remain a smaller reporting company until the last day of the fiscal year in which (1) the market value of our shares of common stock held by non-affiliates exceeds $250 million as of the end of the second fiscal quarter of that year, or (2) our annual revenues exceeded $100 million during such completed fiscal year and the market value of our shares of common stock held by non-affiliates exceeds $700 million as of the end of the second fiscal quarter of that year.
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We will incur increased costs as a result of being a public company in the United StatesUS and our management expects to devote substantial time to public company compliance programs.
As a public company in the United States,US, we will incur significant legal, insurance, accounting and other expenses that we do not incur as a private company. The Sarbanes-Oxley, Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act and other applicable securities rules and regulations impose various requirements on U.S.US public companies. The Company will need to ensure its financial and management control systems are able to meet the requirements of a public company. Areas such as financial planning and analysis, tax, corporate governance, accounting policies and procedures, internal controls, internal audit, disclosure controls and procedures and financial reporting and accounting systems will need to be compliant with reporting obligations. Our management and administrative staff will need to devote a substantial amount of time to compliance with these requirements. We may need to hire qualified personnel to address these issues. We intend to invest resources to comply with evolving laws, regulations and standards, and this investment will result in increased general and administrative expenses and may divert management'smanagement’s time and attention away from product development and other commercial activities. If for any reason our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies, regulatory authorities may initiate legal proceedings against us and our business may be harmed. We intend to obtain directors'directors’ and officers'officers’ liability insurance coverage, which will increase our insurance cost significantly. In the future, it may be more expensive for us to obtain directors'directors’ and officers'officers’ liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors could also make it more difficult for us to attract and retain qualified executive officers and qualified members of our board of directors,Board, particularly to serve on our audit committee and compensation committee.
Upon effectiveness of this Registration Statement and becoming a public company, we will be required to
We are required to make a formal assessment of the effectiveness of our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act and will require management to certify financial and other information in our annual reports and provide an annual management report on the effectiveness of our internal control over financial reporting. This assessment will need to include the disclosure of any material weaknesses in our internal control over financial reporting identified by our management or our independent registered public accounting firm. To achieve compliance with Section 404 within the prescribed period, we will be engaged in a costly and challenging process to document and evaluate our internal control over financial reporting. In this regard, we will need to continue to dedicate internal resources, potentially engage outside consultants and adopt a detailed work plan to assess and document the adequacy of our internal control over financial reporting. We will also need to continue to improve our control processes as appropriate, validate through testing that our controls are functioning as documented and implement a continuous reporting and improvement process for our internal control over financial reporting. Despite our efforts, there is a risk that we will not be able to conclude, within the prescribed timeframe or at all, that our internal control over financial reporting is effective as required by Section 404. Any material weakness could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our consolidated financial statements. Our independent registered public accounting firm will not be required to formally attest to the effectiveness of our internal control over financial reporting until the later of our second annual report or the first annual report required to be filed with the SEC following the date we are no longer an "emerging“emerging growth company"company” as defined in the JOBS Act. We cannot assure you that there will not be additional material weaknesses or significant deficiencies in our internal controls in the future.
Currently, there is no established public market for our securities, and there can be no assurances that any established public market will ever develop or thatAlthough our common stock will be quotedis approved for trading and, even if quoted, it is likely to be subject to significant price fluctuations.
Prior toon the date of this prospectus, there has not been any establishedOTCQB market, an active, liquid trading market for our common stock may not develop or be sustained. If and when an active market develops the price of our common stock may be volatile.
Our common stock is traded on the OTCQB market. Currently there is a very limited trading in our stock and there is currently no assurance that an active market will develop. In the absence of an active trading market, investors may have difficulty buying and selling or obtaining market quotations, market visibility for shares of our common stock may be limited, and a lack of visibility for shares of our common stock may have a depressive effect on the market price for shares of our common stock. The lack of an active market may also reduce the fair market value of our common stock. Trading in stocks quoted on the OTC markets is often thin and characterized by wide fluctuations in trading prices, due to many factors that may have little to do with our operations or business prospects. The securities market has from time-to-time experienced significant price and volume fluctuations that are not related to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of shares of our common stock. Moreover, the OTCQB market is not a stock exchange and is not an established public market, whatsoeverand trading of securities is often more sporadic than the trading of securities listed on a national stock exchange like Nasdaq.
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Our stock may be traded infrequently and in low volumes, so you may be unable to sell your shares at or near the quoted bid prices if you need to sell your shares.
Until our Common stock is listed on a national securities exchange such as the Nasdaq Stock Market or the New York Stock Exchange, we expect our common stock to remain eligible for our securities. A market maker has agreed to file an application with FINRAquotation on our behalf so as to be able to quotethe OTC Markets, or on another over-the-counter quotation system, or in the “pink sheets.” In those venues, however, the shares of our common stock on the OTCQB commencing upon the effectiveness of our registration statement of which this prospectus is a part. There can be no assurancemay trade infrequently and in low volumes, meaning that the market maker's application willnumber of persons interested in purchasing our common shares at or near bid prices at any given time may be accepted by FINRA nor can we estimaterelatively small or non-existent. An investor may find it difficult to obtain accurate quotations as to the time period that the application will require or that any buying of our shares will ever take place.
If our stock becomes quoted on the OTCQB, we could subsequently be removed from the OTCQB if we fail to remain current with our financial reporting requirements.
Companies trading on the OTCQB must be reporting issuers under Section 12 of the Exchange Act and must be current in their reports under Section 13, in order to maintain price quotation privileges on the OTCQB. If we become quoted on the OTCQB, but we fail to remain current in our reporting requirements, we would be removed from the OTCQB. As a result, the market liquidity of our securities could be severely adversely affected by limiting the ability of broker-dealers to trade our securities and the ability of stockholders to sell their securities in the secondary market.
Liquidity of Common Stock and price volatility.
We plan to have the Company's Common Stock traded on the OTCQB and can give no assurance that an active trading market for our Common Stock will develop, or if such a market develops, that it will be sustained. If an active trading market does not develop or is not maintained, the liquidity and trading price of our Common Stock could be adversely affected, and investors may have difficulty selling their Common Stock.
A significant number of shares are currently subject to a lock-up provision and not currently eligible for resale; however, we may waive the lock-up provision and allow the sale of those shares in our sole discretion which could negatively effect the price of our shares.
Currently, 17,750,526 shares of our outstanding common stock are subject to a lock-up provision and not currently eligible for resale by our stockholders. We may waive the lock-up provision in our sole discretion and if we elect to waive the lock-up restriction and if our stockholders whose shares are, or hereafter become, eligible for resale sell, or indicate an intention to sell, substantial amounts of our common stock in the public market, the trading price or value of our common stock could decline.
Ouror to sell his or her shares at or near bid prices or at all. In addition, if we fail to meet the criteria set forth in SEC regulations, various requirements would be imposed by law on broker-dealers who sell our securities to persons other than established customers and accredited investors. Consequently, such regulations may not become eligible to be traded electronically which would result in brokerage firms being unwilling to trade them.
If we become able to havedeter broker-dealers from recommending or selling our shares of common stock, quoted onwhich may further affect the OTCQB, we will then try, through a broker-dealer and its clearing firm,liquidity of our common stock. This would also make it more difficult for us to become eligible with the Depository Trust Company ("DTC") to permit our shares to trade electronically. If an issuer is not "DTC-eligible," then its shares cannot be electronically transferred between brokerage accounts, which, based on the realities of the marketplace as it exists today (especially the OTCQB), means that shares of a company will not be traded (technically the shares can be traded manually between accounts, but this takes days and is not a realistic option for companies relying on broker dealers for stock transactions). There are no assurances that our shares will ever become DTC-eligible or, if they do, how long it will take.raise capital.
Future sales of shares of our Common Stockcommon stock or the perception that these sales may occur, may depress our stock price.
The market price of our Common Stockcommon stock could decline significantly as a result of sales of a large number of shares of our Common Stockcommon stock in the market. In addition, if our significant stockholders sell a large number of shares, or if we issue a large number of shares, the market price of our Common Stockcommon stock could decline. Any issuance of additional Common Stock,common stock, or Common Stockcommon stock equivalents by us would result in dilution to our existing shareholders. Such issuances could be made at a price that reflects a discount to the then-current trading price of our Common Stock.common stock. Moreover, the perception in the public market that stockholders may sell shares of our stock or that we may issue additional shares of Common Stockcommon stock could depress the market for our shares and make it more difficult for us to sell equity securities at any time in the future if at all.
We may issue additional shares of Common Stockcommon stock and/or preferred stock without stockholder approval, which would dilute the current holders of our Common Stock.common stock. In addition, the exercise or conversion of securities that may be granted in the future would further dilute holders of our Common Stock.common stock.
Our Board of Directors has authority, without action or vote of our shareholders, to issue shares of common and preferred Stock.stock. We may issue shares of our common stock or preferred stock to complete a business combination or to raise capital. Such stock issuances could be made at a price that reflects a discount from the then-current trading price of our Common Stock.common stock. These issuances would dilute our stockholders'stockholders’ ownership interest, which among other things would have the effect of reducing their influence on matters on which our stockholders vote. In addition, our stockholders and prospective investors may incur additional dilution if holders of stock options and warrants, whether currently outstanding or subsequently granted, exercise their options or warrants to purchase shares of our common stock.
The rights of the holders of our Common Stockcommon stock may be impaired by the potential issuance of preferred stock.
Our certificate of incorporation gives our Board of Directors the right to create one or more new series of preferred stock. As a result, theour Board of Directors may, without stockholder approval, issue preferred stock with voting, dividend, conversion, liquidation or other rights that could adversely affect the voting power and equity interests of the holders of our common stock. Preferred stock, which could be issued with the right to more than one vote per share, would dilute the rights of our common stockholders and could be used to discourage, delay or prevent a change of control of our company, which could materially adversely affect the price of our common stock. The Company has authorized a total of 5,000,000 shares of preferred stock, par value $0.001 per share, however no preferred shares have been designated by the Company as of November 10, 2020.the date of this prospectus.
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Our Common Stockcommon stock may be subject to the "penny stock"“penny stock” rules of the SEC and the trading market in the securities is limited, which makes transactions in the stock cumbersome and may reduce the value of an investment in the stock.
Rule 3a51-1 under the Exchange Act establishes the definition of a "penny“penny stock,"” for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require: (a) that a broker or dealer approve a person'sperson’s account for transactions in penny stocks; and (b) the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased. In order to approve a person'sperson’s account for transactions in penny stocks, the broker or dealer must: (a) obtain financial information and investment experience objectives of the person; and (b) make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which, in highlight form: (a) sets forth the basis on which the broker or dealer made the suitability determination; and (b) confirms that the broker or dealer received a signed, written agreement from the investor prior to the transaction. Generally, brokers may be less willing to execute transactions in securities subject to the "penny stock"“penny stock” rules. This may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of our common stock. Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker or dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.
We do not anticipate paying dividends in the foreseeable future.
We do not currently pay dividends and do not anticipate paying any dividends for the foreseeable future. Any future determination to pay dividends will be made at the discretion of our Board, of Directors, subject to compliance with applicable laws and covenants under any future credit facility, which may restrict or limit our ability to pay dividends. Payment of dividends will depend on our financial condition, operating results, capital requirements, general business conditions and other factors that our Board of Directors may deem relevant at that time. Unless and until we declare and pay dividends, any return on your investment will only occur if our share price appreciates.
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USE OF PROCEEDS
This
We will receive no proceeds from the sale of shares of common stock by the selling stockholders. Upon the exercise of the warrants for an aggregate of 76,150 shares of common stock assuming all payments are made by cash and there is no reliance on cashless exercise provisions however, we will receive the exercise price of the warrants, or an aggregate of approximately $220,600, from warrants issued to the placement agent.
We will bear all fees and expenses incident to our obligation to register the shares of common stock. Brokerage fees, commissions and similar expenses, if any, attributable to the sale of shares offered hereby will be borne by the selling stockholder.
There is no assurance the warrants will be exercised for cash. We intend to use such proceeds, if any, for general corporate and working capital purposes.
SELLING STOCKHOLDERS
The common stock being offered by the selling stockholders are those previously issued to the selling stockholders. For additional information regarding the issuances of those shares of common stock see “Private Placement of Securities” below. We are registering the shares of common stock in order to permit the selling stockholders to offer the shares for resale from time to time.
The table below lists the selling shareholders and other information regarding the beneficial ownership of the shares of common stock by each of the selling stockholders. The second column lists the number of shares of common stock beneficially owned by each selling stockholders, based on its ownership of the shares of common stock.
The third column lists the shares of common stock being offered by this prospectus relatesby the selling stockholders.
In accordance with the terms of a registration rights agreement with the selling stockholders, this prospectus generally covers the resale of the number of shares of common stock issued to Shares thatthe selling stockholders pursuant to the purchase agreement as of the trading day immediately preceding the applicable date of determination and all subject to adjustment as provided in the registration right agreement. The fourth column assumes the sale of all of the shares offered by the selling stockholders pursuant to this prospectus.
The selling stockholders may sell all, some or none of their shares in this offering. See “Plan of Distribution.”
We have assumed all shares of common stock reflected in the table will be offered and sold from time to time in the offering covered by this prospectus. Because the selling stockholders may offer all or any portions of the shares of common stock listed in the table below, no estimate can be given as to the amount of those shares of common stock covered by this prospectus that will be held by the Selling Stockholders. We will not receive any proceedsselling stockholder upon the saletermination of Shares by the Selling Stockholders in this offering. See "PlanThe percentage of Distribution" elsewhere in this prospectus for more information.beneficial ownership is based on 30,986,674 shares of our common stock outstanding as of August 16, 2021.
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| Selling Stockholder | Number of Shares Beneficially Owned Before Offering | Number of Shares Being Offered | Number of Shares Beneficially Owned After Offering | Percentage of Shares Beneficially Owned After Offering (%) | ||||||||||||
| Alex Partners, LLC (1) | 80,000 | 80,000 | - | - | ||||||||||||
| Andrea Bonilla | 2,000 | 2,000 | - | - | ||||||||||||
| Arber Gina | 2,000 | 2,000 | - | - | ||||||||||||
| Darin Oliver | 3,600 | 3,600 | - | - | ||||||||||||
| Ernest W. Moody Recoverable Trust dated 1/14/09 | 1,050,000 | 400,000 | 650,00 | 2.09 | % | |||||||||||
| Evergreen Capital Management LLC | 30,770 | 30,770 | - | - | ||||||||||||
| FirstFire Global Opportunities Fund LLC | 76,923 | 76,923 | - | - | ||||||||||||
| Francesco Carlucci | 10,000 | 10,000 | - | - | ||||||||||||
| Ishlex Investment Corp Ltd | 200 | 200 | - | - | ||||||||||||
| Michael A. Silverman | 91,175 | 91,175 | * | |||||||||||||
| One44 Capital LLC | 2,107,692 | 307,692 | 1,800,000 | 5.81 | % | |||||||||||
| Quick Capital LLC | 15,500 | 15,500 | - | - | ||||||||||||
| Mathew David August | 92,308 | 92,308 | - | - | ||||||||||||
| SRAX, Inc. (2) | 333,334 | 333,334 | - | - | ||||||||||||
| The Del Mar Consulting Group, Inc. (3) | 120,000 | 120,000 | - | - | ||||||||||||
| Warmstream Investments LTD | 200 | 200 | - | - | ||||||||||||
| Wilura Capital Corp | 200 | 200 | - | - | ||||||||||||
| (*) | Indicates beneficial ownership of less than 1% |
| (1) | The shares held by the selling stockholder were issued in consideration for services provided to the Company. The address for Alex Partners, LLC is 250 Fortune Creek Lane, Cle Elum, WA 98922. |
| (2) | The shares held by the selling stockholder were issued in consideration for services provided to the Company. The address for SRAX, Inc. is 2629 Townsgate Road, Suite 215, Westlake Village, CA91361. |
| (3) | The shares held by the selling stockholder were issued in consideration for services provided to the Company. The address for Del Mar Consulting Group, Inc. is 2455 El Amigo Road, Del Mar, CA 92014. |
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DIVIDEND POLICY
We have never paid or declared nor paid any cash dividends on our common stock, and currently intend to retain all of our cash and any earnings for use in our business and, therefore,we do not anticipate paying any cash dividends on our common stock in the foreseeable future. We intend to retain all available funds and any future earnings to fund the development and expansion of our business. Any future determination to pay dividends will be at the discretion of our Board of Directors and will depend upon a number of factors, including our results of operations, financial condition, future prospects, contractual restrictions, restrictions imposed by applicable law and other factors our Board of Directors deems relevant.
MARKET FOR OUR COMMON STOCK
Our common stock is quoted on the OTCQB market under the trading symbol “GMGT.” At present, there is a very limited market for our common stock, and there is as yet no established trading market for our common stock. As a result, we have not set forth quarterly information with respect to the high and low prices for our common stock for the two most recent fiscal years or provided a performance graph.
The potential market for our common stock is currently extremely limited and the liquidity of our shares may be severely limited. There can be no assurance that an active market for our shares will ever be established or, if ever established, will continue. The last reported sale price of our common stock on the OTCQB on August 30 2021, was $4.25 per share. Past price performance is not indicative of future price performance.
We plan to apply to list our common stock on Nasdaq under the symbol “GMGT.” No assurance can be given that our application will be accepted.
Holders
As of August 16, 2021, we had approximately 67 shareholders of record of our common stock. The number of stockholders of record does not include certain beneficial owners of our common stock, whose shares are held in the names of various dealers, clearing agencies, banks, brokers and other fiduciaries.
Dividends
We have never paid a cash dividend on our common stock since inception. The payment of dividends may be made at the discretion of our Board, and will depend upon, but not limited to, our operations, capital requirements, and overall financial condition.
We do not anticipate paying cash dividends on our common stock in the foreseeable future. The payment of dividends on our common stock will be at the discretion of the Board of Directors and will be dependent upon our consolidateddepend on earnings, financial condition results of operations, capital requirements and other business and economic factors affecting it at such other factorstime as the Board may consider relevant. We intend to follow a policy of Directors deems relevant.retaining all of our earnings to finance the development and execution of our strategy and the expansion of our business. If we do not pay dividends, our common stock may be less valuable because a return on your investment will occur only if our stock price appreciates.
DETERMINATION OF OFFERING PRICE
Since our Common Stock is not listed or quoted on any exchange or quotation system,
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OUR BUSINESS
Business Overview
We are a mobile games developer, publisher, and operator with offices in London and New York. We develop games, license third-party games for distribution, and operate a proprietary gaming platform that enables business-to-business (B2B) partners to establish online gambling presences. We specialize in the offering pricerapidly growing financial, gaming and entertainment sectors. We intend to license its software platform to mobile gaming operators and developers to enable rapid development of new games.
Gaming Technologies, Inc., was incorporated under the laws of the sharesState of Common Stock was determined byDelaware on July 23, 2019, under the pricename Dito, Inc. We entered into a share-for-share exchange transaction consummated on March 18, 2020, in which all of the Common Stock that was sold to the Selling Securityholdersexisting shareholders of Dito UK Limited, an English corporation, exchanged their ordinary shares in the Private Placement.
The offering price of the shares of our Common Stock does not necessarily bear any relationship to our book value, assets, operating results, financial condition or any other established criteria of value. The facts considered in determining the offering price were our financial condition and prospects, our limited operating history and the general condition of the securities market.
Although our Common Stock is not listed on a public exchange, we will be filing to obtain a quotation on the OTCQB commencing upon the effectiveness of our registration statement of which this prospectus is a part. In order to be quoted on the OTCQB, a market maker must file an application on our behalf in order to make a marketDito UK Limited for our Common Stock. A market maker has agreed to file an application with FINRA so as to be able to quote the shares of our common stock, and Dito UK Limited became our wholly owned subsidiary (the “Share Exchange”).
Dito UK Limited acquired its initial assets from GameTech UK Limited, an English corporation (“GameTech”) in 2018. On May 11, 2017, GameTech entered insolvency proceedings and administrators were appointed for it, Approximately fifteen months later, on August 10, 2018, the OTCQB. There can be no assurance asadministrators of GameTech entered into an asset sale agreement with Dito UK Limited (the “Sale Agreement”) pursuant to whethera court order issued by the Joint Administrators of GameTech (in administration) on May 29, 2018. GameTech’s last full year of operations was the year ended December 31, 2016, and it had nominal revenues in such market maker's application will be accepted by FINRA nor can we estimateyear.
The Sale Agreement with GameTech included the time periodsale of the intellectual property assets of GameTech, consisting of gaming software and a related platform. The software was acquired under the expectation that will be required for the application processit would require significant modifications to be completed. Inable to be utilized in the absenceCompany’s anticipated business model, which is gaming platform and games licensing to land-based casinos, consumer brands and media company partners. Following the acquisition of quotation or listing, no market is available for investors in our common stockGameTech’s intellectual property assets out of receivership, we have made improvements to sell their shares. We cannot provide any assurance that a meaningful trading market will ever develop or that our common stock will ever be quoted or listed for trading.
In addition, there is no assurance that our Common Stock will trade at market prices in excessthe core software platform. The improvements we have made include the migration of the initial offering pricesoftware from physical server dependencies to cloud based deployment (via Amazon Web Services (“AWS”)) and removing the dependency on third-party applications and replacing them with AWS native alternatives. Our software also has the capability to allow games to be chained together, through a “state machine”, which allows for a wider variety of games to be created.
On December 21, 2020, we changed our name to Gaming Technologies, Inc., and on January 7, 2021, Dito UK Limited changed its name to Gaming Technologies UK Limited (“Gaming Technologies UK”).
We commenced revenue-generating operations in February 2021. We do not have positive cash flows from operations and expect to continue to be dependent on periodic infusions of equity capital to fund our operating requirements.
For financial reporting purposes, the Share Exchange was accounted for as prices fora combination of entities under common control, as Gaming Technologies, Inc. was formed by Gaming Technologies UK, with the Common Stock in any public market which may develop will be determinedobjective of Gaming Technologies UK becoming a wholly-owned subsidiary of Gaming Technologies, Inc., and the resultant parent company being domiciled in the marketplaceUnited States. As a result of the combination, the former stockholders of Gaming Technologies UK became the controlling shareholders of Dito, Inc., and may be influenced by many factors,the Gaming Technologies UK management and board members became the management and board members of Gaming Technologies, Inc.
Development of Our Business
Our activities are subject to significant risks and uncertainties, including the depthneed for additional capital, as described below. We do not have positive cash flows from operations, and liquidity
The Selling Stockholders will determine at what price they may sellwe expect to continue to be dependent on periodic infusions of equity capital to fund our operating requirements. We have financed our working capital requirements since inception primarily through the offered Shares (if any), and such sales may be made at prevailing market prices, or at privately negotiated prices.
THE PRIVATE PLACEMENT AND SHARE EXCHANGE
On February 26, 2020, we completed asale of its equity securities in private placement transactions, as well as from borrowings. In private placements to “accredited investors” (as defined in Regulation D under the Securities Act of 1933, as amended (the “Securities Act”)) or to non-U.S. persons forunder Regulation S under the saleSecurities Act, between February 2020 and February 2021 we sold an aggregate of 205,0002,656,600 shares of our common stock at a price of $2.50 per shareshare. In March 2021, we sold 10,000 shares of its common stock for gross proceeds of $25,000 in a private placement. In August 2021, we sold 538,694 shares of common for gross proceeds of $1,750,752 in a private placement. Our activities are subject to significant risks and uncertainties, including the need for additional capital, as described below.
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Big Bola/vale.mx
On November 13, 2020, we entered into an Agreement for the Provision of Online Gaming Management and Consulting Services (as subsequently amended) with Comercial de Juegos de la Frontera, S.A. de C.V., a Mexican company doing business as Big Bola, pursuant to Rule 903which we provide to Big Bola consulting and management services related to their interactive online betting and gaming business in Mexico via the web site www.vale.mx, a regulated online casino and sports betting site. vale.mx operates under Big Bola’s existing license issued by the General Directorate of Regulation SGames and Raffles of the Ministry of Interior (SEGOB). Big Bola is one of only14 operators legally authorized to offer legal betting and online casino services in Mexico. vale.mx has more than 500 online premium casino games available, which can be enjoyed both on mobile or via desktop. Players can receive promotions and play live roulette and blackjack, or high-definition slots from leading software providers such as NetEnt, Microgaming, Pragmatic Play, Evolution and Matrix Studios. We are responsible for player acquisition, promotion and retention for vale.mx. We manage players’ accounts and are required to ensure that the balance in players’ accounts at all times satisfies the requirements under applicable law, and we pay out winnings to players from Big Bola’s account. While Big Bola bears liability to the Securities Actplayers as provided by the permit, as between us and Big Bola we bear the costs of this obligation. Each party indemnifies the other against certain liabilities and claims. Under the terms of the agreement, we share 60% of gross gaming revenue generated from the platform, subject to certain minimum guaranteed monthly amounts of Big Bola’s participation in the remaining gross gaming revenues. In February 2021, vale.mx began operations.
Canelo Sponsorship Agreement
On April 14, 2021, we entered into a Sponsorship Agreement (the “Canelo Agreement”) with thirteen individual investorsSA Holiday, Inc. (“Holiday”), owner of the personality rights of champion professional boxer Saul Alvarez Barragan, or “Canelo,” in connection with a promotional campaign for the Corporation to sponsor a prize fight and certain other activities of Canelo, and for Canelo to promote the Corporation’s “VALE” brand and create certain promotional materials in connection therewith for the Corporation’s use in the United States, Latin America and certain countries in the Caribbean. Pursuant to the Canelo Agreement we will, among other things, pay to Holiday a cash proceedsfee of $512,500. No fees or$1,600,000 and be responsible for paying certain other costs,amounts as provided therein.
Playboy License Agreement
On May 19, 2021, we entered into a non-exclusive license agreement with Playboy Enterprises International, Inc. (“Playboy”) to use certain trademarks (including the rabbit head logo) and other than nominal legal costs, were incurredintellectual property of Playboy on and in connection with the Private Placement. design, creation, promotion, marketing, advertisement, sales, operation, maintenance and distribution in India of real-money game mobile apps, such as rummy, poker, fantasy sports and other games of skill approved by Playboy. We will pay Playboy as a royalty a percentage of net gaming revenue. The term of the agreement is through the end of 2025, subject to early termination upon certain events of default, which include our failure to launch a Playboy-branded game in India by November 1, 2021, or to meet certain annual minimum net gaming revenue targets.
Of the 205,000 shares of common stock sold, 121,000 shares were sold for a total purchase price of $302,500 prior to December 31, 2019. During January and February 2020, the remaining 84,000 shares were sold for a total purchase price of $210,000. The proceeds from the Private Placement were used for general operating purposes.
Effective MarchOrtiz Gaming Partnership
On August 18, 2020, Dito2021, we entered into a Share Exchange Agreements (the "Exchange Agreement"software partnership with Ortiz Gaming to supply us with online Bingo gaming content. The deal initially cover Mexico and we plan to expand to other parts of Latin and South America.
Key Performance Indicators – B2C Operations
Registered Players
A registered player is a customer who has registered on our app or website and met our Know Your Customer identification requirements. During the three months and six months ended June 30, 2021 we registered 17,038 and 46,301 players.
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Monthly Unique Payers
Monthly Unique Payers (“MUPs”). MUPs is the average number of unique paid users (“unique payers”) with eachthat use our online games on a monthly basis.
MUPs is a key indicator of the shareholders in Dito UK to acquire allscale of our user base and awareness of our brand. We believe that year-over-year MUPs will also generally be indicative of the outstanding ordinary shareslong-term revenue growth potential of Dito UK.our online casino, although MUPs in individual periods may be less indicative of our longer-term expectations. We expect the number of MUPs to grow as we attract, retain and re-engage users in new and existing jurisdictions and expand our online casino offerings to appeal to a wider audience.
We define MUPs as the number of unique payers per month who had a paid engagement (i.e., participated in a casino game) across one or more of our product offerings via our technology. For reported periods longer than one month, we average the MUPs for the months in the reported period.
A “unique paid user” or “unique payer” is any person who had one or more paid engagements via our B2C technology during the period (i.e., a user that participates in a paid engagement with one of our B2C product offerings counts as a single unique paid user or unique payer for the period). We exclude users who have made a deposit but have not yet had a paid engagement. Unique payers or unique paid users include users who have participated in a paid engagement with promotional incentives, which are fungible with other funds deposited in their wallets on our technology. The Exchange Agreements provided for each outstanding ordinary sharenumber of Dito UKthese users included in MUPs has not been material to be effectively converted into 25 sharesdate and a substantial majority of common stocksuch users are repeat users who have had paid engagements both prior to and after receiving incentives.
During the three and six months ending June 30, 2021our MUPs were 448 and 1,656, respectively.
Average Revenue per MUP (“ARPMUP”). ARPMUP is the average online casino revenue per MUP, and this key metric represents our ability to drive usage and monetization of Dito. Allour online casino offering.
During the six months ending June 30, 2021, our ARPMUP was $15.34, compared to an ARPMUP of $4.66 during the three months ended March 31, 2021. The increase of $10.68 was due to increased marketing efforts on behalf of the Dito shares were issuedCompany and new games that have been introduced.
We define and calculate ARPMUP as the average monthly online casino revenue for a reporting period, divided by MUPs (i.e., the average number of unique payers) for the same period.
Handle
Handle is a casino or sports betting term referring to non-U.S. persons pursuantthetotal amount of money bet. We will report the handle or cash wagering which is thetotal amount of money bet excluding all bonuses.
During the three and six months ended June 30, 2021, our handle was $1,692,128 and $2,261,365, respectively.
Hold
Hold is essentially the amount of cash that our platforms keep after paying out winning bets. The industry also refers to Rule 903hold as win or revenue. During the three and six months ended June 30, 2021, our hold was $81,114 and $108,778, respectively.
Online games are characterized by an element of Regulation S.chance. Our revenue is impacted by variations in the hold percentage (the ratio of net win to total amount wagered) on bets placed on, or the actual outcome of, games or events on which users bet. Although our product offerings generally perform within a defined statistical range of outcomes, actual outcomes may vary for any given period, and a single large bet can have a sizeable impact on our short-term financial performance. Our hold is also affected by factors that are beyond our control, such as a user’s skill, experience and behavior, the mix of games played, the financial resources of users and the volume of bets placed. As a result Dito UK becameof variability in these factors, actual hold rates on our products may differ from the theoretical win rates we have estimated and could result in the winnings of our gaming users exceeding those anticipated. We seek to mitigate these risks through data science and analytics and rules built into our technology, as well as active management of our amounts at risk at a wholly-owned subsidiary of Dito.point in time, but may not always be able to do so successfully, particularly over short periods, which can result in financial losses as well as revenue volatility.
In connection
During the three and six months ended June 30, 2021, our hold percentage was 4.79% and 4.81%, respectively.
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Intellectual Property
We have not filed for, nor do we own, patents related to our intellectual property. We have registered the following active trademarks:
| Trademark: | NENX | DITO |
| Registered with: | EUIPO | EUIPO |
| Trademark number: | 013036207 | 013116397 |
| Type: | Word | Word |
| Registration date: | 18/11/2014 | 28/12/2016 |
| Nice Classification: | 9.41 | 9.41 |
We also own the following domains: dito.com, gametech.com, nenx.com, hilo.games, hilo.casino, megastars.net, megastars.app, megastars.uk, vale.net and vale.mx.
Regulatory
We are an early stage software developer and our software platform provides third party gaming companies and gaming app developers with the Share Exchange Agreements, eachtools to build high quality products. As a B2B developer of the shareholders also entered into a lock-up agreement with us which prohibits the sale of the shares prior to the twelfth (12th) month from the date our shares are listed on and posted for trading on a tier of the Nasdaq Stock Market. We have consented to waive the lock-up provision to allow the Selling Stockholders to sell a portion of our shares andsoftware, we believe we are filing this prospectus and registration statement to facilitate such sale.
CONSULTING AGREEMENT
On August 3, 2020, the Company issued an aggregate of 2,000,000 shares of common stock valued at $2.50 per share to various parties in connection with the entry into a Consulting Agreement with Montrose Capital Partners Limited, a corporation formed under the laws of the United Kingdom. Pursuant to the terms of the Consulting Agreement, the shares of common stock issued thereunder are subject to a lock-up agreement prohibiting the sale of such shares prior to the twelfth (12th) month from the date our shares are listed on and posted for trading on a tier of the Nasdaq Stock Market.
SELLING STOCKHOLDERS
As of November 10, 2020, we had 26,727,525 shares of common stock issued and outstanding of which 17,750,526 shares of common stock remainnot subject to the lock-up agreementregulations that may affect other companies in connectionthe iGaming industry who interact directly with retail customers using the Share Exchangegaming software (i.e., companies using a B2C model). If our clients wish to sell to produce games in a regulated market, they will need to have the necessary licenses and meet the Consulting Agreement. This prospectus coversregulations within their jurisdiction. We believe the possible resale by the Selling Stockholders identified below, or its transferee(s),responsibility of a total of 8,976,999 shares of common stock. The Selling Stockholders may, from time to time, offer and sell pursuant to this prospectus the Shares that we have sold to them indicated below. The Selling Stockholders may sell some, all or none of their Shares. We do not know how long the Selling Stockholders will hold the shares before selling them, andmeeting local regulatory requirements (where applicable) rests with our clients.
Employees
As an early-stage software company, we currently have no employees or employment agreements arrangements or understandings with the Selling Stockholders regarding the sale of anyanyone. Our sole officer and director is a non-employee officer and director of the Shares.Company who works full time on Company matters.
The following table sets forth the name
Additional information
Our corporate website address is www.gametech.com. Our most current SEC filings are available free of each person who is offering for resale the Shares covered by this prospectus, the beneficial ownership of each such Selling Securityholder, the number of Shares that may be sold in this offering and the number of Shares each will own after the offering, assuming they sell all of the Shares offered. The term "Selling Securityholder" includes the securityholders listed below and their transferees. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. This information does not necessarily indicate beneficial ownership for any other purpose. In computing the number of shares of Common Stock beneficially owned by a person and the percentage ownership of that person, Common Stock subject to convertible notes, warrants, options and other convertible securities held by that person that are currently convertible or exercisable, or convertible or exercisable within 60 days of the date of this prospectus are deemed outstanding. Such shares of Common Stock, however, are not deemed outstanding for the purposes of computing the percentage ownership of any other person.
The table is basedcharge on our internal corporate records.
The following table sets forth the number of shares of the common stock beneficially owned by the Selling Stockholderswebsite as of November 10, 2020. The percentage of beneficial ownership is based on 26,727,525 shares of our common stock outstandingwell as of November 10, 2020.at www.sec.gov.
Selling Stockholder |
Beneficial Ownership Prior to the Sale of all Shares Covered by this Prospectus |
Percentage of Beneficial Ownership Prior to the Sale of all Shares Covered by this Prospectus |
Total Shares Offered By Selling Stockholder in the Offering Covered by this Prospectus |
Beneficial Ownership After the Sale of all Shares Covered by this Prospectus(1) | Percentage of Beneficial Ownership After the Sale of all Shares Covered by this Prospectus |
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Andrew Eggleston(2) | 464,025 | 1.736% | 153,128 | 310,897 | 1.751% |
Keith Gardner(3) | 38,750 | 0.145% | 12,788 | 25,962 | 0.146% |
Benjamin Jones(4) | 6,250 | 0.023% | 2,063 | 4,187 | 0.024% |
Claudio Santini(5) | 922,125 | 3.450% | 304,301 | 617,824 | 3.481% |
Julian Parge(6) | 100,000 | 0.374% | 33,000 | 67,000 | 0.377% |
Balmoral Asset Management Limited(7) | 1,071,900 | 4.010% | 353,727 | 718,173 | 4.046% |
Keeill Limited(8) | 272,475 | 1.019% | 89,917 | 182,558 | 1.028% |
Marcel Kars(9) | 1,047,550 | 3.919% | 345,692 | 701,858 | 3.954% |
Marianne Thoumsin(10) | 974,475 | 3.646% | 321,577 | 652,898 | 3.678% |
Sompassate Traore(11) | 999,075 | 3.738% | 329,695 | 669,380 | 3.771% |
Mikhail Churkin(12) | 1,096,275 | 4.102% | 361,771 | 734,504 | 4.138% |
Martin Hughes(13) | 327,125 | 1.224% | 107,951 | 219,174 | 1.235% |
Crescent 4 Limited(14) | 108,925 | 0.408% | 35,945 | 72,980 | 0.411% |
Helios G20 Fund Limited(15) | 54,625 | 0.204% | 18,026 | 36,599 | 0.206% |
Celestine Hughes(16) | 327,125 | 1.224% | 107,951 | 219,174 | 1.235% |
Numis Securities Limited(17) | 545,300 | 2.040% | 179,949 | 365,351 | 2.058% |
Mark N. Tompkins(18) | 1,834,000 | 6.862% | 605,220 | 1,228,780 | 6.922% |
Ian Jacobs(19) | 150,000 | 0.561% | 49,500 | 100,500 | 0.566% |
Sichenzia Ross Ference LLP(20) | 12,000 | 0.045% | 3,960 | 8,040 | 0.045% |
Barrett S. DiPaolo(21) | 4,000 | 0.015% | 1,320 | 2,680 | 0.015% |
Fairfax Capital BV(22) | 2,437,950 | 9.121% | 804,524 | 1,633,426 | 9.202% |
Epsilon Investments PTE(23) | 6,706,425 | 25.092% | 2,213,120 | 4,493,305 | 25.314% |
Shelby Holdings Limited(24) | 1,308,450 | 4.896% | 431,789 | 876,661 | 4.939% |
Jason Drummond(25) | 5,684,500 | 21.268% | 1,875,885 | 3,808,615 | 21.456% |
Heng Hong Investment Limited | 6,000 | 0.022% | 6,000 | - | - |
HCB Consulting Ltd. | 10,000 | 0.037% | 10,000 | - | - |
Blue Atlas Investment Holding Limited | 87,200 | 0.326% | 87,200 | - | - |
Deganstone Trading Corp. | 8,000 | 0.030% | 8,000 | - | - |
Devad Seferovic | 10,000 | 0.037% | 10,000 | - | - |
GM Holding Inc. | 53,000 | 0.198% | 53,000 | - | - |
Charles Ryan | 4,000 | 0.015% | 4,000 | - | - |
Hawkstone Holdings Ltd. | 18,000 | 0.067% | 18,000 | - | - |
John Robinson | 1,000 | 0.004% | 1,000 | - | - |
Jamie Leonard | 2,000 | 0.007% | 2,000 | - | - |
The Stone Hedge Ltd. | 8,000 | 0.030% | 8,000 | - | - |
Vanessa Ilsley | 1,000 | 0.004% | 1,000 | - | - |
Edward Johnson | 16,000 | 0.060% | 16,000 | - | - |
Simona Sorrentino | 10,000 | 0.037% | 10,000 | - | - |
TOTAL | 26,727,525 | 100% | 8,976,999 | 17,750,526 | 100% |
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PLAN OF DISTRIBUTION
We are registering the Shares previously issued to the Selling Stockholders to permit the resale of these Shares by the Selling Stockholders from time to time after the effective date of this registration statement, of which this prospectus forms a part. The Selling Stockholders may be deemed "underwriters," within the meaning of the Securities Act.
There is no public market for our common stock. Therefore, the current and potential market for our common stock is limited and the liquidity of our shares may be severely limited. A market maker has agreed to file an application with FINRA so as to be able to quote the shares of our common stock on the OTCQB commencing upon the effectiveness of our registration statement of which this prospectus is a part. There can be no assurance as to whether such market maker's application will be accepted by FINRA nor can we estimate the time period that will be required for the application process to be completed. In the absence of quotation or listing, no market is available for investors in our common stock to sell their shares. We cannot provide any assurance that a meaningful trading market will ever develop or that our common stock will ever be quoted or listed for trading.
The Selling Stockholders, or their pledges, donees, transferees, or any of its successors in interest selling Shares received from the Selling Stockholders as a gift, partnership distribution or other non-sale related transfer after the date of this prospectus, may sell all or a portion of the Shares beneficially owned by them and offered hereby from time to time directly or through one or more underwriters, broker-dealers or agents. If the shares of Common Stock are sold through underwriters or broker-dealers, the Selling Stockholders will be responsible for underwriting discounts or commissions or agent's commissions. The Shares may be sold in one or more transactions at fixed prices, at prevailing market prices at the time of the sale, at varying prices determined at the time of sale, or at negotiated prices. The Selling Stockholders will act independently of us in making decisions with respect to the timing, manner and size of each sale. These sales may be effected in transactions, which may involve crosses or block transactions:
The Selling Stockholders may also transfer the Shares by gift. The Selling Stockholders may engage brokers and dealers, and any brokers or dealers may arrange for other brokers or dealers to participate in effecting sales of the Shares. These brokers, dealers or underwriters may act as principals, or as an agent of a Selling Stockholders. Broker-dealers may agree with the Selling Stockholders to sell a specified number of the Shares at a stipulated price per security. If the broker-dealer is unable to sell the Shares acting as agent for the Selling Stockholders, it may purchase as principal any unsold Shares at the stipulated price. Broker-dealers who acquire Shares as principals may thereafter resell the Shares from time to time in transactions in any stock exchange or automated interdealer quotation system on which the Shares are then listed, at prices and on terms then prevailing at the time of sale, at prices related to the then-current market price or in negotiated transactions. Broker-dealers may use block transactions and sales to and through broker-dealers, including transactions of the nature described above.
The Selling Stockholders may also sell the Shares in accordance with Rule 144 under the Securities Act, rather than pursuant to this prospectus, regardless of whether the Shares are covered by this prospectus.
If the Selling Stockholders effects such transactions by selling Shares to or through underwriters, broker-dealers or agents, such underwriters, broker-dealers or agents may receive commissions in the form of discounts, concessions or commissions from the Selling Stockholders or commissions from purchasers of the shares of common stock for whom they may act as agent or to whom they may sell as principal (which discounts, concessions or commissions as to particular underwriters, broker-dealers or agents may be in excess of those customary in the types of transactions involved). In connection with sales of the Shares or otherwise, the Selling Stockholders may enter into hedging transactions with broker-dealers, which may in turn engage in short sales of the Shares in the course of hedging in positions they assume. The Selling Stockholders may also sell Shares short and deliver Shares covered by this prospectus to close out short positions and to return borrowed shares in connection with such short sales. The Selling Stockholders may also loan or pledge Shares to broker-dealers that in turn may sell such shares.
In addition, the Selling Stockholders may, from time to time, sell the Shares short, and, in those instances, this prospectus may be delivered in connection with the short sales and the Shares offered under this prospectus may be used to cover short sales.
The Selling Stockholders and any broker-dealer participating in the distribution of the Shares may be deemed to be "underwriters" within the meaning of the Securities Act, and any commission paid, or any discounts or concessions allowed to, any such broker-dealer may be deemed to be underwriting commissions or discounts under the Securities Act. At the time a particular offering of the Shares is made, a prospectus supplement, if required, will be distributed which will set forth the aggregate amount of Shares being offered and the terms of the offering, including the name or names of any broker-dealers or agents, any discounts, commissions and other terms constituting compensation from the Selling Stockholders and any discounts, commissions or concessions allowed or reallowed or paid to broker-dealers. The Selling Stockholders may indemnify any broker-dealer that participates in transactions involving the sale of the Shares against certain liabilities, including liabilities arising under the Securities Act.
Under the securities laws of some states, the Shares may be sold in such states only through registered or licensed brokers or dealers. In addition, in some states the Shares may not be sold unless such shares have been registered or qualified for sale in such state or an exemption from registration or qualification is available and is complied with.
There can be no assurance that the Selling Stockholders will sell any or all of the Shares registered pursuant to the registration statement, of which this prospectus forms a part.
The Selling Stockholders and any other person participating in such distribution will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, including, without limitation, Regulation M of the Exchange Act, which may limit the timing of purchases and sales of any of the shares of common stock by the Selling Stockholders and any other participating person. Regulation M may also restrict the ability of any person engaged in the distribution of the Shares to engage in market-making activities with respect to the shares of common stock. All of the foregoing may affect the marketability of the Shares and the ability of any person or entity to engage in market-making activities with respect to the Shares.
We will pay all expenses of the registration of the Shares estimated to be $82,400 in total. Once sold under the registration statement, of which this prospectus forms a part, the Shares will be freely tradable in the hands of persons other than our affiliates.
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MANAGEMENT'SMANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis of the Company'sour financial condition and results of operations should be read in conjunction with the section of this prospectus titled "Summary Selected Financial Information"consolidated audited and the Company's consolidatedcondensed unaudited financial statements and related notes appearingthereto included elsewhere in this prospectus. In addition to historical information, thisThis discussion and analysis here and throughout this prospectus contains forward-looking statements that involve risks uncertainties and assumptions. The Company'suncertainties. Our actual results maycould differ materially from those anticipated in these forward-looking statements as a result of certain factors, including,discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those set forth under "Risk Factors"identified below and those discussed in the section titled “Risk Factors” included elsewhere in this prospectus.
Overview
As a result of the transaction with GameTech UK Limited as described elsewhere in this prospectus, the
The Company is now a mobile games developer, publisher, and publisheroperator with offices in London and New York.
The Company'sCompany’s activities are subject to significant risks and uncertainties, including the need for additional capital, as described below. The Company has not yet commenced any revenue-generating operations in February 2021, does not have positive cash flows from operations, and is dependent on periodic infusions of equity capital to fund its operating requirements.
Background and Basis of Presentation
Dito,
Gaming Technologies, Inc. was incorporated in the State of Delaware on July 23, 2019.2019 under the name Dito, Inc. and on December 21, 2020 amended its name to Gaming Technologies, Inc. Effective as of March 18, 2020, Dito,Gaming Technologies, Inc. completed a Share Exchange Agreement (the "Exchange Agreement"“Exchange Agreement”) to acquire all of the outstanding ordinary shares of DitoGaming Technologies UK Limited that provided for each outstanding ordinary share of DitoGaming Technologies UK Limited to be effectively converted into 25 shares of common stock of Dito,Gaming Technologies, Inc., As a result, DitoGaming Technologies UK Limited became aour wholly-owned subsidiary of Dito, Inc. in a recapitalization transaction, as described below. DitoGaming Technologies UK Limited was originally formed on November 3, 2017, in the United Kingdom as Dito UK Limited for the purpose of software development.
For financial reporting purposes, the Exchange Agreement was accounted for as a combination of entities under common control (the "Combination"“Combination”), as Dito, IncGaming Technologies, Inc. was formed by DitoGaming Technologies UK, Limited, with the objective of DitoGaming Technologies UK Limited becoming a wholly-owned subsidiary of Dito,Gaming Technologies, Inc., and the resultant parent company being domiciled in the United States. As a result of the Combination, the former stockholders of DitoGaming Technologies UK Limited became the controlling shareholders of Dito, Inc., and the DitoGaming Technologies UK Limited management and board members became the management and board members of Dito,Gaming Technologies, Inc.
Accordingly, the consolidated financial statements presented herein for all periods are based on the historical financial statements of each of Dito, Inc. and Dito UK Limited. The stockholders' equity section of the Dito, Inc. balance sheet has been retroactively restated for all periods presented to reflect the accounting effect of the Combination. The net loss per share and weighted average common shares outstanding information presented herein also reflects this retroactive restatement for all periods presented. All costs associated with the Combination were charged to operations as incurred.
Going Concern
The Company'sCompany’s consolidated financial statements have been presented on the basis that the Company is a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. As reflected in the accompanying consolidated financial statements, the Company has had no significant operating revenues to date, and has experienced recurring net losses from operations and negative operating cash flows.
During the yearsix months ended December 31, 2019,June 30, 2021, the Company incurred a net loss of $636,033,$6,607,612 utilized cash in operating activities of $431,165,$5,119,769, and had an accumulated deficit of $754,376 as of December 31, 2019. During the six months ended June 30, 2020, the Company incurred a net loss of $618,182, utilized cash in operating activities of $423,487, and had an accumulated deficit of $1,372,558$14,573,805 as of June 30, 2020.2021. The Company has financed its working capital requirements since inception through the sale of its equity securities and from borrowings.
At December 31, 2019,June 30, 2021, the Company had cash of $320,402, which included $302,500$306,719, reflecting cash of $3,681,500 from the sale of common stock in December 2019. Subsequently, in Januarythe first quarter of 2021 and February 2020, the Company raised an additional $210,000 from the salemarketing development costs of common stock, bringing the total amount raised in this equity financing to $512,500. At June 30, 2020, the Company had cash of $56,799. The Company has limited cash resources to fund its operations and will therefore need to raise additional funds in the short-term.$3,524,643. The Company estimates that a significant amount of capital will be necessary over a sustained period of time to advance the development of the Company's business to the point at which it can become commercially viable and self-sustaining. However, there can be no assurances that the Company will be successful in this regard.
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As a result, management has concluded that there is substantial doubt about the Company's ability to continue as a going concern within one year of the date that the accompanying condensed consolidated financial statements are issued. In addition, the Company's independent registered public accounting firm, in their report on the Company's condensed consolidated financial statements for the year ended December 31, 2019,2020, has also expressed substantial doubt about the Company's ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent upon the Company's ability to raise additional funds and implement its business plan, and to ultimately achieve sustainable operating revenues and profitability. The accompanying condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
The development and expansion of the Company's business during the remainder of 2020in 2021 and thereafter will be dependent on many factors, including the capital resources available to the Company. No assurances can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company or adequate to fund the development and expansion of the Company's business to a level that is commercially viable and self-sustaining. There is also significant uncertainty as to the effectaffect that the coronavirus pandemic may have on the availability, amount and type of financing in the future.
If cash resources are insufficient to satisfy the Company's ongoing cash requirements, the Company would be required to scale back or discontinue its operations, obtain funds, if available, although there can be no certainty, through strategic alliances that may require the Company to relinquish rights to its technology, or to discontinue its operations entirely.
Concentration of Risk
The Company may periodically contract with consultants and vendors to provide services related to the Company's business development activities. Agreements for these services may be for a specific time period or for a specific project or task. The Company did not have any such formal agreements at June 30, 2020 or December 31, 2019.
Costs and expenses incurred that represented 10% or more of general and administrative costs for the six months ended June 30, 2020 consisted of accounting fees representing approximately 30% of total general and administrative costs for that period.
Critical Accounting Policies and Estimates
The following discussion and analysis of financial condition and results of operations is based upon the Company'sCompany’s condensed consolidated financial statements for the years ended December 31, 2019 and 2018 and for the six months ended June 30, 20202021 and 20192020 presented elsewhere in this prospectus, which have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP"US (“GAAP”). Certain accounting policies and estimates are particularly important to the understanding of the Company'sCompany’s financial position and results of operations and require the application of significant judgment by management or can be materially affected by changes from period to period in economic factors or conditions that are outside of the Company'sCompany’s control. As a result, these issues are subject to an inherent degree of uncertainty. In applying these policies, management uses its judgment to determine the appropriate assumptions to be used in the determination of certain estimates. Those estimates are based on the Company'sCompany’s historical operations, the future business plans and the projected financial results, the terms of existing contracts, trends in the industry, and information available from other outside sources. For a more complete description of the Company'sCompany’s significant accounting policies, see Note 2 to the condensed consolidated financial statements.
Income TaxesRevenue Recognition
The Company accountsrecognizes revenue in accordance with ASC Topic 606, Revenue From Contracts With Customers. ASC Topic 606 requires companies to recognize revenue in a manner that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for income taxes under an assetthose goods or services. In addition, the standard requires disclosures of the nature, amount, timing and liability approach for financial accountinguncertainty of revenue and reporting for income taxes. Accordingly,cash flows arising from contracts with customers. Revenue is recognized based on the Company recognizes deferred tax assets and liabilities for the expected impact of differences between the financial statements and the tax basis of assets and liabilities.following five step model:
| · | Identification of the contract with a customer |
| · | Identification of the performance obligations in the contract |
| · | Determination of the transaction price |
| · | Allocation of the transaction price to the performance obligations in the contract |
| · | Recognition of revenue when, or as, the Company satisfies a performance obligation |
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Performance Obligations
The Company recordsoperates an online betting platform allowing users to place wagers on casino and other games. Each wager placed by users create a valuation allowance to reduce its deferred tax assets to the amount that is more likely than not to be realized. In the eventsingle performance obligation for the Company was to determineadminister each event wagered. Net gaming revenue is the aggregate of gaming wins and losses based on results of each event that it would be able to realize its deferred tax assets in the future in excesscustomers wager bets on. Gross gaming revenue is split with our partners, whose share of itsgross gaming revenue is recorded amount, an adjustment to the deferred tax assets would be credited to operations in the period such determination was made. Alternatively, should the Company determine that it would not be able to realize all or part of its deferred tax assets in the future, an adjustment to the deferred tax assets would be charged to operations in the period such determination was made.
Dito US is subject to U.S. federal income taxes and income taxes of the State of New York. The Company's operations in the United States through June 30, 2020 were nominal.
Dito UK is subject to taxation in the United Kingdom. As a foreign corporation, Dito UK is not consolidated with Dito US in the Company's U.S. federal tax filings.
As the Company's net operating losses in the respective jurisdictions in which it operates have yet to be utilized, all previous tax years remain open to examination by the taxing authorities in which the Company currently operates. The Company had no unrecognized tax benefits as of June 30, 2020 or December 31, 2019 and does not anticipate any material amount of unrecognized tax benefits within the next 12 months.
The Company accounts for uncertainties in income tax law under a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of uncertain tax positions taken or expected to be taken in income tax returns as prescribed by GAAP. The tax effects of a position are recognized only if it is "more-likely-than-not" to be sustained by the taxing authority as of the reporting date. If the tax position is not considered "more-likely-than-not" to be sustained, then no benefits of the position are recognized. As of June 30, 2020, the Company had not recorded any liability for uncertain tax positions. In subsequent periods, any interest and penalties related to uncertain tax positions will be recognized as a component of income tax expense.reduction to net gaming revenue.
Stock-Based Compensation
The Company issues common stock and intends to issue stock options to officers, directors and consultants for services rendered. Options will vest and expire according to terms established at the issuance date of each grant. Stock grants, which are generally time vested, will be measured at the grant date fair value and charged to operations ratably over the vesting period.
The fair value of stock options granted as stock-based compensation will be determined utilizing the Black-Scholes option-pricing model, and can be affected by several variables, the most significant of which are the life of the equity award, the exercise price of the stock option as compared to the fair market value of the common stock on the grant date, and the estimated volatility of the common stock. Estimated volatility will be based on the historical volatility of the Company'sCompany’s common stock over an appropriate calculation period, or, if not available, by reference to the volatility of a representative sample of comparable public companies. The risk-free interest rate will be based on the U.S.US Treasury yield curve in effect at the time of grant. The fair market value of the common stock will be determined by reference to the quoted market price of the Company'sCompany’s common stock on the grant date, or, if not available, by reference to an appropriate alternative valuation methodology.
The Company will recognize the fair value of stock-based compensation awards in general and administrative costs or in software development costs, as appropriate, in the Company'sCompany’s consolidated statements of operations. The Company will issue new shares of common stock to satisfy stock option exercises.
As of June 30, 2020 and December 31, 2019,2021 the Company did not have any outstanding stock options.
Comprehensive Income (Loss)
Comprehensive income or loss is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources. Components of comprehensive income or loss, including net income or loss, unrealized gains or losses on available-for-sale securities, unrealized gains or losses on other financial investments, unrealized gains or losses on pension and retirement benefit plans, and foreign currency translation adjustments, are reported in the financial statements in the period in which they are recognized. Net income (loss) and other comprehensive income (loss) are reported net of any related tax effect to arrive at comprehensive income (loss). The Company's comprehensive income (loss) for the years ended December 31, 2019 and 2018 and for the six months ended June 30, 2020 and 2019 consists of foreign currency translation adjustments.
Software Development Costs
Due to the significant uncertainty with respect to the successful development of commercially viable products based on Company's development efforts, all software development costs incurred with respect to the Company's mobile gaming platform are charged to operations as incurred.
Intellectual Property
Intellectual property, consisting of software, is recorded at cost. Amortization of intellectual property is provided using the straight-line method over an estimated useful life of three years.
The Company recognizes amortization of intellectual property in software development costs in the Company's consolidated statement of operations.
Foreign Currency
The accompanying consolidated financial statements are presented in United States dollars ("USD"). The functional currency of Dito UK, the Company's foreign subsidiary, is the British Pound ("GBP"), the local currency in the United Kingdom. Accordingly, assets and liabilities of the foreign subsidiary are translated at the current exchange rate at the end of the period, and revenues and expenses are translated at average exchange rates during the years ended December 31, 2019 and 2018, and the six months ended June 30, 2020 and 2019. The resulting translation adjustments are recorded as a component of shareholders' equity (deficiency). Gains and losses from foreign currency transactions are included in net income (loss).
Recent Accounting Pronouncements
In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"). ASU 2016-13 significantly changes how entities measure credit losses for most financial assets, including accounts and notes receivables. ASU 2016-13 will replace the current "incurred loss" approach with an "expected loss" model, under which companies will recognize allowances based on expected rather than incurred losses. Entities will apply the provisions of ASU 2016-13 as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which ASU 2016-13 is effective. As small business filer, ASU 2016-13 will be effective for the Company for interim and annual reporting periods beginning after December 15, 2022. Management is currently in the process of assessing the impact of adopting ASU-2016-13 on the Company's financial statements and related disclosures.
In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity ("ASU 2020-06). ASU 2020-06 will simplify the accounting for convertible instruments by reducing the number of accounting models for convertible debt instruments and convertible preferred stock. Limiting the accounting models results in fewer embedded conversion features being separately recognized from the host contract as compared with current GAAP. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features that are not clearly and closely relatedSee Note 2 to the host contract, that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting and (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital. ASU 2020-06 also amends the guidance for the derivatives scope exception for contracts in an entity's own equity to reduce form-over-substance-based accounting conclusions. ASU 2020-06 will be effective for public companies for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. Management has not yet evaluated the effect that the adoption of ASU 2020-06 will have on the Company's consolidated financial statement presentation or disclosures subsequent to its adoption.
Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission, did not or are not believed by management to have a material impact on the Company's present or futurecondensed consolidated financial statements and related disclosures.for discussion of Recent Accounting Policies.
Plan of Operation
The Company specializes in the rapidly growing financial, gaming and entertainment sectors. Once development is complete, the Company intends to license its software platform to mobile gaming operators and developers to enable rapid development of new games.
On November 13, 2020, we entered into an Agreement for the Provision of Online Gaming Management and Consulting Services (as subsequently amended) with Comercial de Juegos de la Frontera, S.A. de C.V., a Mexican company doing business as Big Bola, pursuant to which we provide to Big Bola consulting and management services related to their interactive online betting and gaming business in Mexico via the web site www.vale.mx, a regulated online casino and sports betting site. vale.mx operates under Big Bola’s existing license issued by the General Directorate of Games and Raffles of the Ministry of Interior (SEGOB). Big Bola is one of only14 operators legally authorized to offer legal betting and online casino services in Mexico. vale.mx has more than 500 online premium casino games available, which can be enjoyed both on mobile or via desktop. Players can receive promotions and play live roulette and blackjack, or high-definition slots from leading software providers such as NetEnt, Microgaming, Pragmatic Play, Evolution and Matrix Studios. We are responsible for player acquisition, promotion and retention for vale.mx. We manage players’ accounts and are required to ensure that the balance in players’ accounts at all times satisfies the requirements under applicable law, and we pay out winnings to players from Big Bola’s account. While Big Bola bears liability to the players as provided by the permit, as between us and Big Bola we bear the costs of this obligation. Each party indemnifies the other against certain liabilities and claims. Under the terms of the agreement, we share 60% of gross gaming revenue generated from the platform, subject to certain minimum guaranteed monthly amounts of Big Bola’s participation in the remaining gross gaming revenues. In February 2021, vale.mx began operations.
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On April 14, 2021, we entered into a Sponsorship Agreement (the “Canelo Agreement”) with SA Holiday, Inc. (“Holiday”), owner of the personality rights of champion professional boxer Saul Alvarez Barragan, or “Canelo,” in connection with a promotional campaign for the Corporation to sponsor a prize fight and certain other activities of Canelo, and for Canelo to promote the Corporation’s “VALE” brand and create certain promotional materials in connection therewith for the Corporation’s use in the United States, Latin America and certain countries in the Caribbean. Pursuant to the Canelo Agreement we will, among other things, pay to Holiday a cash fee of US$1,600,000 and be responsible for paying certain other amounts as provided therein.
On May 19, 2021, we entered into a non-exclusive license agreement with Playboy Enterprises International, Inc. (“Playboy”) to use certain trademarks (including the rabbit head logo) and other intellectual property of Playboy on and in connection with the design, creation, promotion, marketing, advertisement, sales, operation, maintenance and distribution in India of real-money game mobile apps, such as rummy, poker, fantasy sports and other games of skill approved by Playboy. We will pay Playboy as a royalty a percentage of net gaming revenue. The term of the agreement is through the end of 2025, subject to early termination upon certain events of default, which include our failure to launch a Playboy-branded game in India by November 1, 2021, or to meet certain annual minimum net gaming revenue targets.
Key Performance Indicators – B2C Operations
Registered Players
A registered player is a customer who has registered on our app or website and met our Know Your Customer identification requirements, which include identity and address verification (“KYC requirements”). During the three and six months ended June 30, 2021 we registered 17,038 and 46,301 players.
Monthly Unique Payers
Monthly Unique Payers (“MUPs”). MUPs is the average number of unique paid users (“unique payers”) that use our online games on a monthly basis.
MUPs is a key indicator of the scale of our user base and awareness of our brand. We believe that year-over-year MUPs will also generally be indicative of the long-term revenue growth potential of our online casino, although MUPs in individual periods may be less indicative of our longer-term expectations. We expect the number of MUPs to grow as we attract, retain and re-engage users in new and existing jurisdictions and expand our online casino offerings to appeal to a wider audience.
We define MUPs as the number of unique payers per month who had a paid engagement (i.e., participated in a casino game) across one or more of our product offerings via our technology. For reported periods longer than one month, we average the MUPs for the months in the reported period.
A “unique paid user” or “unique payer” is any person who had one or more paid engagements via our B2C technology during the period (i.e., a user that participates in a paid engagement with one of our B2C product offerings counts as a single unique paid user or unique payer for the period). We exclude users who have made a deposit but have not yet had a paid engagement. Unique payers or unique paid users include users who have participated in a paid engagement with promotional incentives, which are fungible with other funds deposited in their wallets on our technology. The number of these users included in MUPs has not been material to date and a substantial majority of such users are repeat users who have had paid engagements both prior to and after receiving incentives.
During the three and six months ending June 30, 2021, our MUPs were 448 and 1,656, respectively
Average Revenue per MUP (“ARPMUP”). ARPMUP is the average online casino revenue per MUP, and this key metric represents our ability to drive usage and monetization of our online casino offering.
During the six months ending June 30, 2021, our ARPMUP was $15.34, compared to an ARPMUP of $4.66 during the three months ended March 31, 2021. The increase of $10.68 was due to increased marketing efforts on behalf of the Company and new games that have been introduced.
We define and calculate ARPMUP as the average monthly online casino revenue for a reporting period, divided by MUPs (i.e., the average number of unique payers) for the same period.
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Handle
Handle is a casino or sports betting term referring to thetotal amount of money bet. We will report the handle or cash wagering which is thetotal amount of money bet excluding all bonuses.
During the three and six months ended June 30, 2021, our handle was $1,692,128 and $2,261,365, respectively.
Hold
Hold is essentially the amount of cash that our platforms keep after paying out winning bets. The industry also refers to hold as win or revenue. During the three and six months ended June 30, 2021, our hold was $81,114 and $108,778, respectively.
Online games are characterized by an element of chance. Our revenue is impacted by variations in the hold percentage (the ratio of net win to total amount wagered) on bets placed on, or the actual outcome of, games or events on which users bet. Although our product offerings generally perform within a defined statistical range of outcomes, actual outcomes may vary for any given period, and a single large bet can have a sizeable impact on our short-term financial performance. Our hold is also affected by factors that are beyond our control, such as a user’s skill, experience and behavior, the mix of games played, the financial resources of users and the volume of bets placed. As a result of variability in these factors, actual hold rates on our products may differ from the theoretical win rates we have estimated and could result in the winnings of our gaming users exceeding those anticipated. We seek to mitigate these risks through data science and analytics and rules built into our technology, as well as active management of our amounts at risk at a point in time, but may not always be able to do so successfully, particularly over short periods, which can result in financial losses as well as revenue volatility.
During the three and six months ended June 30, 2021, our hold percentage was 4.79% and 4.81%, respectively.
Results of Operations
At
In February 2021, our online casino, vale.mx, began operations. However, as of June 30, 20202021 and December 31, 2019,2020, the Company had not yet commenced any revenue-generating operations, did not have any positive cash flows from operations and was dependent on its ability to raise equity capital to fund its operating requirements.
Revenues
The Company began generating revenue in February 2021. Revenues consist of the net gaming revenues from the Company’s vale.mx online casino based in Mexico. Total revenues were $23,321 and $0 for the three months ended June 30, 2021 and 2020 and $25,410 and $0 for the six months ended June 30, 2021 and 2020, respectively. The increase of $25,410 for the six months ended June 30, 2021 is due to the initiation of revenue producing activities in February 2021.
Cost of Revenues
The Company began generating costs of revenues in February 2021. Cost of revenues consist of the direct costs of operating vale.mx, our online casino based in Mexico. Total costs of revenues were $91,318 and $0 for the three months ended June 30, 2021 and 2020, respectively, and $273,581 for the six months ended June 30, 2021 and 2020, respectively. The increases of $91,318 and $273,581 were due to the initiation of revenue producing activities in February 2021.
Operating Expenses
The Company generally recognizes operating costs and expenses as they are incurred in two general categories, software development costs and expenses and general and administrative costs and expenses. The Company'sCompany’s operating costs and expenses also include non-cash components related to depreciation and amortization of property and equipment, and intellectual property, which are allocated, as appropriate, to software development costs and expenses and general and administrative costs and expenses.
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Software development costs and expenses consist primarily of fees paid to consultants and amortization of intellectual property. Management expects software costs and expenses to increase in the future as the Company increases its efforts to develop technology for potential future products based on its technology and research.
General and administrative costs and expenses consist of fees for directors and officers, and their affiliates, as well as legal and other professional fees, depreciation and amortization of property and equipment, lease and rent expense, and other general corporate expenses. Management expects general and administrative costs and expenses to increase in future periods as the Company adds personnel and incurs additional costs related to its operation as a public company, including higher legal, accounting, insurance, compliance, compensation and other costs.
Six Months Ended June 30, 2021 and 2020
The Company’s condensed consolidated statements of operations for the six months ended June 30, 2021 and 2020, as discussed herein, are presented below.
Six Months Ended June 30, | ||||||||
| 2021 | 2020 | |||||||
| Revenue | $ | 25,410 | $ | – | ||||
| Costs and expenses: | ||||||||
| Cost of revenues | 273,581 | – | ||||||
| Software development | 132,863 | 34,802 | ||||||
| General and administrative | ||||||||
| Officers, directors, affiliates and other related parties | 447,582 | 234,423 | ||||||
| Other | 5,778,996 | 327,072 | ||||||
| Total costs and expenses | 6,633,022 | 596,297 | ||||||
| Loss from operations | (6,607,612 | ) | (596,297 | ) | ||||
| Other expense: | ||||||||
| Interest expense | – | (2,995 | ) | |||||
| Foreign currency gain | – | (18,890 | ) | |||||
| Total other expense, net | – | (21,885 | ) | |||||
| Net loss | (6,607,612 | ) | (618,182 | ) | ||||
Revenue. The Company began generating revenue in February 2021. Revenues consist of the net gaming revenues from the Company’s vale.mx online casino based in Mexico. Total revenues were $25,410 and $0 for the six months ended June 30, 2021 and 2020. The increase of $25,410 is due to the initiation of revenue producing activities in February 2021.
Cost of Revenues: The Company began generating costs of revenues in February 2021. Cost of revenues consist of the direct costs of operating and marketing vale.mx, our online casino based in Mexico. Total costs of revenues were $273,581 and $0 for the six months ended June 30, 2021 and 2020. The increase of $273,581 was due to the initiation of revenue producing activities in February 2021.
Software Development Costs and Expenses. For the six months ended June 30, 2021 and 2020, software development costs and expenses were $132,863 and $34,802, respectively, which included amortization of intellectual property of $35,071 and $30,011 for the six months ended June 30, 2021 and 2020, respectively.
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Software development costs and expenses increased by $98,061 or 282% in 2021 as compared to 2020, primarily as a result of a new application development efforts.
General and Administrative Costs and Expenses. For the six months ended June 30, 2021, general and administrative costs and expenses were $6,226,578, which consisted of director, consulting, and professional fees to officers, directors, affiliates, and other related parties of $447,582, stock compensation expense of $1,467,335, marketing and advertising of $3,524,643, legal and accounting fees to non-related parties of $234,650, consulting fees of $413,899, depreciation and amortization of property and equipment of $6,935, lease and rent expense of $25,188, transfer agent fees of $3,060, investor relations costs of $22,169, travel expenses of $24,339, and other operating costs of $56,778.
For the six months ended June 30, 2020, general and administrative costs and expenses were $561,495, which consisted of director, consulting, and professional fees to officers, directors, affiliates, and other related parties of $234,423, legal and accounting fees to non-related parties of $261,227, consulting fees of $17,933, depreciation and amortization of property and equipment of $3,844, lease and rent expense of $23,921, and other operating costs of $20,147.
General and administrative costs increased by $5,665,083 or 1009% in 2021 as compared to 2020, primarily as a result of stock compensation expense of $1,467,335, an increase in officer compensation of $213,159, an increase in consulting fees of $395,966, and an increase in marketing and advertising of $3,524,643.
Interest Expense. For the six months ended June 30, 2021, the Company had interest expense of $0, as compared to interest expense of $2,995 for the six months ended June 30, 2020, primarily as a result of interest on notes payable in the prior period.
Foreign Currency Gain (Loss). For the six months ended June 30, 2021, the Company had a foreign currency loss of $0, as compared to a foreign currency loss of $18,890 for the six months ended June 30, 2020, as a result of a decrease in the value of the GB Pound compared to the US Dollar.
Net Loss. For the six months ended June 30, 2021, the Company incurred a net loss of $6,607,612, as compared to a net loss of $618,182 for the six months ended June 30, 2020.
Results of Operations for the Years Ended December 31, 2020 and 2019
As of December 31, 2020 and December 31, 2019, the Company had not yet commenced any revenue-generating operations, did not have any positive cash flows from operations, and was dependent on its ability to raise equity capital to fund its operating requirements.
Operating Expenses
The Company generally recognizes operating costs and expenses as they are incurred in two general categories, software development costs and expenses and general and administrative costs and expenses. The Company’s operating costs and expenses also include non-cash components related to depreciation and amortization of property and equipment, and intellectual property, which are allocated, as appropriate, to software development costs and expenses and general and administrative costs and expenses.
Software development costs and expenses consist primarily of fees paid to consultants and amortization of intellectual property. Management expects software costs and expenses to increase in the future as the Company increases its efforts to develop technology for potential future products based on its technology and research.
General and administrative costs and expenses consist of fees for directors and officers, and their affiliates, as well as legal and other professional fees, depreciation and amortization of property and equipment, lease and rent expense, and other general corporate expenses. Management expects general and administrative costs and expenses to increase in future periods as the Company adds personnel and incurs additional costs related to its operation as a public company, including higher legal, accounting, insurance, compliance, compensation and other costs.
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Years Ended December 31, 20192020 and 20182019
The Company'sCompany’s consolidated statements of operations for the years ended December 31, 20192020 and 2018,2019, as discussed herein, are presented below.
| Years Ended |
| |||||
| December 31, |
| |||||
| 2019 |
|
| 2018 |
| ||
|
|
|
|
|
| ||
Revenues | $ | - |
|
| $ | - |
|
|
|
|
|
|
|
|
|
Costs and expenses: |
|
|
|
|
|
|
|
Software development |
| 163,786 |
|
|
| 45,102 |
|
General and administrative: |
|
|
|
|
|
|
|
Officers, directors, affiliates, and other related parties |
| 289,823 |
|
|
| 45,774 |
|
Others |
| 174,989 |
|
|
| 22,818 |
|
Total costs and expenses |
| 628,598 |
|
|
| 113,694 |
|
Loss from operations |
| (628,598 | ) |
|
| (113,694 | ) |
Other income (expense): |
|
|
|
|
|
|
|
Interest expense |
| (7,958 | ) |
|
| (4,649 | ) |
Foreign currency gain |
| 523 |
|
|
| - |
|
Total other expense, net |
| (7,435 | ) |
|
| (4,649 | ) |
Net loss |
| (636,033 | ) |
|
| (118,343 | ) |
Foreign currency translation adjustment |
| (2,522 | ) |
|
| 5,288 |
|
Comprehensive loss | $ | (638,555 | ) |
| $ | (113,055 | ) |
|
|
|
|
|
|
|
|
Net loss per common share - basic and diluted | $ | (0.04 | ) |
| $ | (0.55 | ) |
|
|
|
|
|
|
|
|
Weighted average common shares outstanding - basic and diluted |
| 15,514,647 |
|
|
| 216,199 |
|
Revenues. The Company did not have any revenues for the years ended December 31, 20192020 and 2018.2019.
Software Development Costs and Expenses. For the year ended December 31, 2020, software development costs and expenses were $128,563, which consisted of development costs paid to contractors of $67,505 and amortization of intellectual property of $61,058.
For the year ended December 31, 2019, software development costs and expenses were $163,786, which consisted of development costs paid to contractors of $102,981 and amortization of intellectual property of $60,805.
Software development costs and expenses decreased by $35,223 or 22% in 2020 as compared to 2019, primarily as a result of a decrease in amortization of intellectual property as the end of the expected useful life of the underlying assets was approached.
General and Administrative Costs and Expenses. For the year ended December 31, 2018, software development2020, general and administrative costs and expenses were $45,102,$7,064,240, which consisted of development costs paiddirector, consulting, and professional fees to contractorsofficers, directors, affiliates, and other related parties of $18,622$417,094, stock compensation expense of $5,875,000, legal and accounting fees to non-related parties of $599,957, depreciation and amortization of intellectual property and equipment of $26,480.$8,936, lease and rent expense of $51,071, transfer agent fees of $28,474, consulting fees of $72,703, and other operating costs of $11,005.
Software development costs and expenses increased by $118,684 or 263.1% in 2019 as compared to 2018, primarily as a result of increases in development costs paid to contractors of $84,359 and amortization of intellectual property of $34,325.
General and Administrative Costs and Expenses. For the year ended December 31, 2019, general and administrative costs and expenses were $464,812, which consisted of director, consulting, and professional fees to officers, directors, affiliates, and other related parties of $289,823, legal and accounting fees to non-related parties of $92,898, depreciation and amortization of property and equipment of $6,590, lease and rent expense of $46,824, and other operating costs of $28,677.
For the year ended December 31, 2018, general and administrative costs and expenses were $68,592, which consisted of director, consulting, and professional fees to officers, directors, affiliates, and other related parties of $45,774, legal and accounting fees to non-related parties of $12,646, depreciation and amortization of property and equipment of $2,197, lease and rent expense of $3,738, and other operating costs of $4,237.
General and administrative costs increased by $396,220$6,599,428 or 577.6% in 2019 as compared to 2018, primarily as a result of increases in director, consulting, and professional fees to officers, directors, affiliates, and other related parties of $244,049, legal and accounting fees to non-related parties of $80,252, depreciation and amortization of property and equipment of $4,393, lease and rent expense of $43,086, and other operating costs of $24,440.
Interest Expense. For the year ended December 31, 2019, the Company had interest expense of $7,958, as compared to interest expense of $4,649 for the year ended December 31, 2018, primarily as a result of notes payable to related parties that were executed in August and October 2018 that were converted into the Company's common stock in May 2019.
Foreign Currency Gain (Loss). For the year ended December 31, 2019, the Company had a foreign currency gain of $523, as a result of borrowings made in GBP by the Company's UK subsidiary that were denominated in USD. The Company did not have a foreign currency gain or loss for the year ended December 31, 2018.
Net Loss. For the year ended December 31, 2019, the Company incurred a net loss of $636,033, as compared to a net loss of $118,343 for the year ended December 31, 2018.
Foreign Currency Translation Adjustment. For the year ended December 31, 2019, the Company had a foreign currency translation adjustment of $(2,522), as compared to a foreign currency translation adjustment of $5,288 for the year ended December 31, 2018. The foreign currency translation adjustment is a result of fluctuations between the GBP, the functional currency of the Company's UK subsidiary, and the USD, the reporting currency of the Company.
Comprehensive Loss. For the year ended December 31, 2019, the Company incurred a comprehensive loss of $638,555, as compared to a comprehensive loss of $113,055 for the year ended December 31, 2018.
Six Months Ended June 30, 2020 and 2019
The Company's condensed consolidated statements of operations for the six months ended June 30, 2020 and 2019, as discussed herein, are presented below.
| Six Months Ended | ||||||
| June 30, | ||||||
| 2020 | 2019 | |||||
| Revenues | $ | - | $ | - | ||
| Costs and expenses: | ||||||
| Software development | 34,802 | 127,794 | ||||
| General and administrative: | ||||||
| Officers, directors, affiliates, and other related parties | 234,423 | 142,197 | ||||
| Others | 327,072 | 68,849 | ||||
| Total costs and expenses | 596,297 | 338,840 | ||||
| Loss from operations | (596,297 | ) | (338,840 | ) | ||
| Other expense: | ||||||
| Interest expense | (3,081 | ) | (7,448 | ) | ||
| Interest expense subsidy | 86 | - | ||||
| Foreign currency loss | (18,890 | ) | - | |||
| Total other expense | (21,885 | (7,448 | ) | |||
| Net loss | (618,182 | ) | (346,288 | ) | ||
| Foreign currency translation adjustment | 9,976 | (1,216 | ) | |||
| Comprehensive loss | $ | (608,206 | ) | $ | (347,504 | ) |
| Net loss per common share - basic and diluted | $ | (0.03 | ) | $ | (0.05 | ) |
| Weighted average common shares outstanding - basic and diluted | 24,689,545 | 7,518,094 | ||||
Revenues. The Company did not have any revenues for the six months ended June 30, 2020 and 2019.
Software Development Costs and Expenses. For the six months ended June 30, 2020, software development costs and expenses were $34,802, which consisted of development costs paid to contractors of $4,791 and amortization of intellectual property of $30,011.
For the six months ended June 30, 2019, software development costs and expenses were $127,794, which consisted of development costs paid to contractors of $96,992 and amortization of intellectual property of $30,802.
Software development costs and expenses decreased by $92,992 or 72.8%1,420% in 2020 as compared to 2019, primarily as a result of decreases in development costs paid to contractorsstock compensation expense of $92,201.$5,875,000.
General and Administrative Costs and Expenses
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Interest Expense. For the six monthsyear ended June 30, 2020, general and administrative costs and expenses were $561,495, which consisted of director, consulting, and professional fees to officers, directors, affiliates, and other related parties of $234,423, legal and accounting fees to non-related parties of $261,227, depreciation and amortization of property and equipment of $3,844, lease and rent expense of $23,921, and other operating costs of $38,080.
For the six months ended June 30, 2019, general and administrative costs and expenses were $211,046, which consisted of director, consulting, and professional fees to officers, directors, affiliates, and other related parties of $142,197, legal and accounting fees to non-related parties of $33,044, depreciation and amortization of property and equipment of $3,133, lease and rent expense of $22,603, and other operating costs of $10,069.
General and administrative costs increased by $350,449 or 166.1% in 2020 as compared to 2019, primarily as a result of increases in director, consulting, and professional fees to officers, directors, affiliates, and other related parties of $92,226, legal and accounting fees to non-related parties of $228,183, depreciation and amortization of property and equipment of $711, lease and rent expense of $1,318, and other operating costs of $28,011.
Interest Expense. For the six months ended June 30,December 31, 2020, the Company had interest expense of $3,081,$3,046, as compared to interest expense of $7,448$7,958 for the six monthsyear ended June 30,December 31, 2019, primarily as a result of interest on notes payable to related parties that were executed in August and October 2018 and that were converted into the Company's common stock in May 2019.
Interest Expense Subsidy. For the six months ended June 30, 2020, the Company had an interest expense subsidy of $86 as a result of the Company's unsecured loan of $60,600 (equivalent to 47,600£) with Metro Bank PLC made pursuant to the Bounce Bank Loan Scheme managed by the British Business Bank on behalf of, and with the financial backing of, The Secretary of State for Business, Energy and Industrial Strategy of the Government of the United Kingdom that was entered into on June 9, 2020. The Company did not have an interest expense subsidy for the six months ended June 30, 2019.payable.
Foreign Currency Gain (Loss). For the six monthsyear ended June 30,December 31, 2020, the Company had a foreign currency loss of $18,890,$15,968, as compared to a foreign currency gain of $523 for the year ended December 31, 2019, as a result of borrowings madeA decrease in GBP by the Company's UK subsidiary that were denominated in USD. The Company did not have a foreign currency gain or loss forvalue of the six months ended June 30, 2019.GB Pound compared to the US Dollar.
Net Loss. For the six monthsyear ended June 30,December 31, 2020, the Company incurred a net loss of $618,182,$7,211,817, as compared to a net loss of $346,288$636,033 for the six monthsyear ended June 30,December 31, 2019.
Foreign Currency Translation Adjustment. For the six monthsyear ended June 30,December 31, 2020, the Company had a foreign currency translation adjustment of $9,976,$(21,512), as compared to a foreign currency translation adjustment of $(1,216)$(2,522) for the six monthsyear ended June 30,December 31, 2019. The foreign currency translation adjustment is a result of fluctuations between the GBP, the functional currency of the Company'sCompany’s UK subsidiary, and the USD, the reporting currency of the Company.
Comprehensive Loss. For the six monthsyear ended June 30,December 31, 2020, the Company incurred a comprehensive loss of $608,206,$7,233,329, as compared to a comprehensive loss of $347,504$638,555 for the six monthsyear ended June 30,December 31, 2019.
Liquidity and Capital Resources -– June 30, 20202021 and December 31, 20192020
The Company'sCompany’s condensed consolidated financial statements have been presented on the basis that the Company is a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. As reflected in the accompanying consolidated financial statements, theThe Company has had no operating revenues to date, and has experienced recurring net losses from operations and negative operating cash flows. The Company has financed its working capital requirements since inception through the sale of its equity securities and from borrowings.
As a result, management has concluded that there is substantial doubt about the Company'sCompany’s ability to continue as a going concern within one year of the date that the condensed consolidated financial statements are being issued. In addition, the Company'sCompany’s independent registered public accounting firm, in their report on the Company'sCompany’s condensed consolidated financial statements for the year ended December 31, 2019,2020, has also expressed substantial doubt about the Company'sCompany’s ability to continue as a going concern (see "Going Concern" above)“—Going Concern”).
The ability of the Company to continue as a going concern is dependent upon the Company'sCompany’s ability to raise additional funds and implement its business plan, and to ultimately achieve sustainable operating revenues and profitability. The accompanying condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
At December 31, 2019, the Company had working capital
As of $154,594, as compared to working capital of ($243,886) at December 31, 2018, reflecting an increase in working capital of $398,480 for the year ended December 31, 2019. The increase in working capital during the year ended December 31, 2019 was primarily the result of proceeds from the sale of common stock of $567,721 and the conversion of notes payable to related parties into the Company's common stock, offset by working capital being utilized to fund the Company's ongoing operating expenses.
At June 30, 2020,2021, the Company had a working capital of ($134,487)$(33,076), as compared to working capital of $154,594 at$1,586,238 as of December 31, 2019,2020, reflecting a decrease in working capital of $289,081$1,619,314 for the six months ended June 30, 2020.2021. The decrease in working capital during the six months ended June 30, 20202021, was primarily the result of net proceeds frommarketing costs incurred during the saleperiod.
As of common stock of $150,000, proceeds from a note payable to bank of $60,623, offset by the repayment of a note payable to related party of $35,508 and working capital being utilized to fund the Company's ongoing operating expenses.
At December 31, 2019,June 30, 2021, the Company had cash of $320,402,$306,719, reflecting the remaining cash derived from the proceeds of $302,500$3,681,500 from the sale of common stockCommon Stock in the first quarter of 2021. As of December 2019. At June 30,31, 2020, the Company had cash of $56,799,$1,946,232, reflecting net proceedscash of $2,628,000 from the sale of common stock of $150,000, proceeds fromCommon Stock in December 2020.
In February 2021, the Company began earning revenues, however they are not a note payablelevel sufficient to bank of $60,623, offset bysupport the repayment of a note payable to related party of $35,508 and working capital being utilized to fund the Company's ongoing operating expenses.
Company’s operations. The Company has not yet generated any revenue from operations. If the Company is unable to raise additional funding necessary to supportestimates that its working capital requirements which is estimatedfor the next twelve months to be approximately $1,200,000, management has projected that cash on hand will not be sufficient to allow it to continue operations beyond November 30, 2020.$1,800,000, or $150,000 per month.
The working capital budget of $1,200,000, or $100,000 per month, will enable the Company to support the existing monthly operating costcosts of the Company currentlyof approximately $40,000$150,000 per month, theconsisting of monthly (and quarterly) accounting and U.S.US securities filing costs estimated at $20,000 per month and a sales and marketing budget of $40,000$130,000 per month to engage in a sales and marketing campaign to sell licenses of the Company'sCompany’s software platform to third parties.parties and attach customers to its online casino based in Mexico.
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During the year ended December 31, 2020, the Company completed a series of private placements of its common stock, with proceeds totaling $2,628,000. See Item 1 (“Business—The Private Placements and Share Exchange”) in the Form 10-K. During the six months ended June 30, 2021 the Company completed another series of private placements of its common stock, with proceeds totaling $3,681,500. In August 2021, the Company closed another series of private placements of its Common Stock, with proceeds totaling $1,350,749. See “Private Placement of Common Stock” for additional information. In addition, the Company is planning additional capital raises over the remainder of the calendar year to fund operations as it ramps up revenues. The Company believes that the resulting working capital will be sufficient to fund the Company’s operations for the next twelve months
Since acquiring the software platform, the Company has successfully carried out development to port the software platform from its former physical server dependencies and reliance on third parties for hardware management and deployment to a cloud-based platform where deployment is automated through the use of infrastructure as code. To make the Company'sCompany’s software platform work for B2Bbusiness-to-business (B2B) licensees, the Company has modified the software to enable remote management by system administrators of prospective licensees. Previously, the platform was B2C-focused,business to consumer (B2C) focused, with outsourced management and deployment. As a result of this software development, the Company expects to be able to monetize its software platform by selling licenses to third parties.
The Company'sCompany’s ability to raise additional funds through equity or debt financings or other sources may depend on the stage of development of the software platform, the commercial success of the software, and financial, economic and market conditions and other factors, some of which are beyond the Company'sCompany’s control. No assurance can be given that the Company will be successful in raising the required capital at reasonable cost and at the required times, or at all. Further equity financings may have a dilutive effect on shareholders and any debt financing, if available, may require restrictions to be placed on the Company'sCompany’s future financing and operating activities. If the Company requires additional capital and is unsuccessful in raising that capital, the Company may not be able to continue the development of its software platform and continue to advance its growth initiatives, or ultimately to be able to continue its business operations, which could adversely impact the Company'sCompany’s business, financial condition and results of operations.
Operating Activities
For the six months ended June 30, 2020,2021, operating activities utilized cash of $423,487,$5,119,769, as compared to utilizingutilized cash of $227,919$423,487 for the six months ended June 30, 2019,2020, to fund the Company'sCompany’s ongoing operating expenses.
For the year ended December 31, 2019,2020, operating activities utilized cash of $431,165,$924,917, as compared to utilizingutilized cash of $64,585$431,166 for the year ended December 31, 2018,2019, to fund the Company'sCompany’s ongoing operating expenses.
Investing Activities
For the six months ended June 30, 2021, the Company’s investing activities consisted of the acquisition of intellectual property for $174,616 and property and equipment of $4,964. For the six months ended June 30, 2020, the Company'sCompany’s investing activities consisted of the acquisition of property and equipment of $5,266.
For the six monthsyear ended June 30,December 31, 2020, the Company’s investing activities consisted of the acquisition of intellectual property for $18,620. For the year ended December 31, 2019, the Company'sCompany’s investing activities consisted of the acquisition of property and equipment of $5,317 and proceeds from the sales of property and equipment of $4,253.$4,198.
Financing Activities
For the yearsix months ended December 31, 2019,June 30, 2021, the Company's investingCompany’s financing activities consisted of the acquisition of property and equipment of $5,317 andgross proceeds from the salesprivate placement of property and equipment1,616,600 shares of $4,198. For the year ended December 31, 2018, the Company's investing activities consistedCommon Stock of payments in connection the GameTech transaction of $159,558.
Financing Activities
$3,681,500. For the six months ended June 30, 2020, the Company'sCompany’s financing activities consisted of proceeds from the private placement of 84,000 shares of Common Stock of $210,000 and the repayment of $60,000 in connection with the cancellation of an investment in the private placement.
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For the year ended December 31, 2020, the Company’s financing activities consisted of gross proceeds from the private placement of 1,153,200 shares of common stock of $210,000,$2,628,000, proceeds from a note payable to bank of $60,623, offset by the repayment of a note payable to related party of $35,508, and the repayment of $60,000 in connection with the cancellation of an investment in the private placement. For the six months ended June 30, 2019, the Company's financing activities consisted of proceeds from the sale of 7,424,350 shares of common stock of $209,614 and proceeds from a note payable to a related party of $19,023.
For the year ended December 31, 2019, the Company'sCompany’s financing activities consisted of proceeds from notes payable to related parties of $50,664, proceeds from the sale of 8,549,350 shares of common stock of $265,221, proceeds from the private placement of 121,000 shares of common stock of $302,500, and $60,000 from the sale of common stock in the private placement that was subsequently cancelled, with the funds returned to the investor on March 18, 2020. For the year ended December 31, 2018, the Company's financing activities consisted of proceeds from notes payable to related parties of $300,966, and proceeds from the sale of 1,750,000 shares of common stock of $896.
Principal Commitments
Short-Term Operating Lease
The Company leases office facilities in New York, New York on a month-to-month basis at a cost of $142 per month.
Long-Term Operating Lease
The Company's wholly-owned subsidiary in the United Kingdom, Dito UK,Company leases office facilities in London, England. The Company did not have any other leases with initial terms of 12 months or more atas of June 30, 2020 or December 31, 2019. 2021.
The monthly cash payment for this operating lease is approximately $4,010 per month, and the lease term ends on March 31, 2021.
The following schedule sets forth the current portion and long-term portion of operating lease liabilities as of June 30,December 31, 2020 and December 31, 2019:
| June 30, 2020 | December 31, 2019 | |||||
| Current portion | $ | 32,827 | $ | 46,509 | ||
| Long-term portion | - | 11,627 | ||||
| Total lease liability | $ | 32,827 | $ | 58,136 |
Years Ended December 31, | ||||||||
| 2020 | 2019 | |||||||
| ($) | ||||||||
| Current portion | 11,968 | 46,509 | ||||||
| Long-term portion | – | 11,627 | ||||||
| Total lease liability | 11,968 | 58,136 | ||||||
This operating lease had a remaining term of ninesix months as of June 30,December 31, 2020. The following schedule sets forth the remaining annual future lease payments outstanding as of June 30,December 31, 2020:
| 2020 (Six months ending December 31, 2020) | $ | 24,060 | |
| 2021 | 12,030 | ||
| Total lease payments | 36,090 | ||
| Less amount representing imputed interest | (605 | ) | |
| 35,485 | |||
| Foreign currency adjustment | (2,658 | ) | |
| Present value of lease liabilities | $ | 32,827 |
| 2021 | $ | 12,030 | ||
| Total lease payments | $ | 12,030 | ||
| Less amount representing imputed interest | $ | (62 | ) | |
| $ | 11,968 | |||
| Foreign currency adjustment | – | |||
| Present value of lease liabilities | $ | 11,968 |
Contractual Commitments
The Company has retained Julian Parge as a consultant to DitoGaming Technologies UK, at the request and under the sole discretion of DitoGaming Technologies UK, at the rate of $1,549 (equivalent to 1,250£) per week up to a maximum of $77,456 (equivalent to 62,500£) per annum.
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Off-Balance Sheet Arrangements
At
As of June 30, 2020 and December 31, 2019,2021, the Company did not have any transactions, obligations or relationships that could be considered off-balance sheet arrangements.
Trends, Events and Uncertainties
Development of new software is, by its nature, unpredictable. Although the Company will undertake development efforts with commercially reasonable diligence, there can be no assurance that the Company'sCompany’s efforts to raise funds in the future will be sufficient to enable the Company to develop its technology to the extent needed to create future revenues to sustain operations as contemplated herein.
There can be no assurances that the Company'sCompany’s technology will be adopted or that the Company will ever achieve sustainable revenues sufficient to support its operations. Even if the Company is able to generate revenues, there can be no assurances that the Company will be able to achieve profitability or positive operating cash flows. There can be no assurances that the Company will be able to secure additional financing on acceptable terms or at all. If cash resources are insufficient to satisfy the Company'sCompany’s ongoing cash requirements, the Company would be required to scale back or discontinue its software development programs, or obtain funds, if available (although there can be no certainty), through strategic alliances that may require the Company to relinquish rights to certain of its potential products, or to curtail or discontinue its operations entirely.
Other than as discussed above and elsewhere in this prospectus, the Company is not currently aware of any trends, events or uncertainties that are likely to have a material effect on the Company'sCompany’s financial condition in the near term, although it is possible that new trends or events may develop in the future that could have a material effect on the Company'sCompany’s financial condition.
Impact of COVID-19 on the Company
The global outbreak of COVID-19 has led to severe disruptions in general economic activities, as businesses and governments have taken broad actions to mitigate this public health crisis. Although the Company has not experienced any significant disruption to its business to date, these conditions could significantly negatively impact the Company'sCompany’s business in the future.
The extent to which the COVID-19 outbreak ultimately impacts the Company'sCompany’s business, future revenues, results of operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to, the duration and spread of the outbreak, its severity and longevity, the actions to curtail the virus and treat its impact (including an effective vaccine), and how quickly and to what extent normal economic and operating conditions can resume. Even after the COVID-19 outbreak has subsided, the Company may be at risk of experiencing a significant impact to its business as a result of the global economic impact, including any economic downturn or recession that has occurred or may occur in the future.
Currently, capital markets have been disrupted by the crisis, as a result of which the availability, amount and type of financing available to the Company in the near future is uncertain and cannot be assured and is largely dependent upon evolving market conditions and other factors.
The Company intends to continue to monitor the situation and may adjust its current business plans as more information and guidance become available.
Other than as discussed above and elsewhere in this prospectus, the Company is not currently aware of any trends, events or uncertainties that are likely to have a material effect on the Company'sCompany’s financial condition in the near term, although it is possible that new trends or events may develop in the future that could have a material effect on the Company'sCompany’s financial condition.
BUSINESS
Business Overview
Dito is a business to business ("B2B") early stage software developer with offices in London and New York. We intend to license our software platform to mobile gaming operators and developers to enable rapid development of new games.
Dito was incorporated under the laws of the State of Delaware on July 23, 2019 under the name Dito, Inc., created for the purpose of the registration contemplated hereby, and became our holding company by way of a share-for-share exchange in which all of the existing shareholders of Dito UK Limited, an English corporation, company number 11047028 ("Dito UK"), exchanged their ordinary shares in Dito UK for shares of Common Stock in Dito, Inc.
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Our registered office in the United States is located at 413 West 14th Street, New York, New York 10014, and our telephone number is +1 (347) 983-1227.
The Company's wholly-owned subsidiary, Dito UK, leases office facilities in London, England and is located at 184 Shepherds Bush Road, London, England W6 7NL.
All of our operations are currently conducted through our wholly owned subsidiary, Dito UK.
On August 10, 2018, the Company (through Dito UK) entered into an Asset Sale Agreement (the "Sale Agreement") with GameTech UK Limited ("GameTech") pursuant to a Court Order (the "Order") issued by the Joint Administrators of GameTech UK Limited (in administration) on May 29, 2018. GameTech's last full year of operations was the year ended December 31, 2016 and it had nominal revenues in such year. On May 11, 2017, administrators were appointed for GameTech and GameTech entered insolvency proceedings. Approximately fifteen months later, the administrators of GameTech entered into the Sale Agreement with the Company (through Dito UK).
The Company (through Dito UK) acquired the intellectual property assets of GameTech, a non-operational business in insolvency proceedings, consisting of gaming software and a related technology platform. The software was acquired under the expectation that it would require significant modifications to be able to be utilized in the Company's anticipated business model, which is software licensing to mobile game operators and developers. Following the acquisition of Gametech's intellectual property assets out of receivership, Dito UK has made improvements to the core software platform. As a result, we have re-positioned ourselves as a B2B developer of gaming software which can power the games of B2C providers. The improvements we have made include the migration of the software from physical server dependencies to cloud based deployment (via Amazon Web Services) and removing the dependency on third-party applications and replacing them with AWS native alternatives. Our software also has the capability to allow games to be chained together, through a "state machine", which allows for a wider variety of games to be created on our software platform.
As a software developer (and not an operator), we believe we are not required to obtain licenses for our products. With our current software platform, all regulatory oversight and licensing responsibility falls to the B2C operator (Dito's customers). Companies who want to create games using Dito's core software platform are required to meet their own regulatory requirements (where applicable).
Our Strategy
Dito's core sales strategy will be focused on the licencing of our platform under a Platform as a Service (PaaS) model to third parties. The PaaS license is based on an installation fee and revenue share agreement. While we doe not currently have any such agreements in place, we anticipate that these agreements, once entered into, will generate revenue in three ways (i) clients would be charged an initial setup fee, (ii) clients will be charged monthly fees for use of the platform, and (iii) we would receive up to 50% of the gross gaming revenue.
Our Software Platform
Since acquiring the software platform we have successfully carried out development to port the software platform from its former physical server dependencies and reliance on third parties for hardware management and deployment, to a cloud-based platform where deployment is automated through the use of infrastructure as code. To make our software platform work for B2B licensees, we have modified the software to enable remote management by our licensees' system administrators. Previously, the platform was B2C-focused, with outsourced management and deployment. As a result of this software development Dito is now able to monetize its software platform by selling licences to third parties.
Our core software platform is entirely cloud-based and hosted on Amazon Web Services (AWS). This allows the software to be deployed in any AWS-supported region globally. These regions are currently spread over the following continents: North America, South America, Europe, Asia (including the Middle East) and Africa.
Dito has a mobile-centric development focus and we keep up to date on any significant changes in the mobile gaming sector and use this research to find ways to improve our software platform.
We prefer to use infrastructure as code using Terraform. This means that replicating the cloud-based deployment environment can be done in a matter of hours, as opposed to matter of weeks using older approaches. There are also significant advantages to Terraform beyond automation, such as infrastructure declaration, which makes learning the infrastructure a much faster and simpler process for developers.
In the software platform we have also included a management console which provides an administrative overview of all the data in the system, which is driven by MySQL tables as well as RabbitMQ messaging queues that drive the Java microservices. The management console also contains a live risk manager which allows B2C operators to detect and any suspicious traffic. Possible actions upon such detection include (for example), suspending a user or banning them. In addition, the management console also contains a kill switch to stop everything and display a custom message to any connected devices.
To provide an attractive B2B solution for gaming operators we have also focused on creating a software platform that features a comparatively low running cost for clients, relative to other options available in the market. The core product features proprietary inventions such as server-driven sentiment analysis and a server-driven certified Random Number Generator (RNG), which appeals to a broad market base of B2C clients.
Our software platform facilitates the development of:
Random Number Generator ("RNG") powered applications; and
Sentiment-driven applications
RNG-powered applications
One of the platform's key features is its Random Number Generator engine. The RNG engine's algorithm uses the "Mersenne Twister" pseudorandom number generator.
Random number generators have applications in gambling, statistical sampling, cryptography, computer simulations and a variety of other use cases where producing an unpredictable result is desirable. In the case of gambling or playing a board game with dice, you can only generate a random numerical result by physically rolling the dice. However, you cannot do that in a virtual setting (playing a game online) without an RNG algorithm to produce a number that reflects the randomness of rolling real dice.
Any application that relies on the generation of a random number can be powered by our software. The Company's RNG engine uses complex algorithms that have been independently certified by an arms-length software expert confirming our RNG engine produces a number that is truly and completely random.
Our software platform allows third party developers to easily integrate their own gaming apps and to fully utilize our RNG engine.
Sentiment-driven applications
We have also created a sentiment engine that utilises data taken from live feeds on social media platforms such as Twitter, Instagram, and Facebook in order to generate a continuously changing score for celebrities. The feed can be passed through the RNG engine to create additional volatility. Our software allows a score to be presented to players based on the date gathered from the live feeds, and players can predict whether the score of a celebrity will be higher or lower in a specific time frame.
Marketing Features
Our software platform offers our clients the ability to access various third party and internally developed data analytics tools, which can be utilized to optimise their own digital marketing campaigns and reduce their customer acquisition costs in order to maximise their profitability.
Social media
The dominant advertising channels in social media are Facebook, Instagram, Twitter, and YouTube (Google), with modern apps like TikTok becoming increasingly important. Our software platform enables the use of third-party campaign management tools to target specific customer groups and optimise hundreds of individual marketing campaigns. There are a wide range of parameters which can be applied to any campaign, thus facilitating an almost limitless number of individual campaigns.
Search engines
Google is the global market leader among search engines. Paid search is powered by a mix of ads, both text and image-based, which are initiated through bidding on specific words and phrases that consumers are expected to search for. Advertisers can target specific groups, such as age, gender, and various other demographics, which are then shown ads within third party websites and apps utilising Google AdSense. Typically, this generates high quality and "relevant" traffic. Using our software platform Google ads can be easily managed and integrated into our client's frontend apps.
Intellectual Property
The Company has not filed for, nor does it own, patents related to its intellectual property. The Company has registered the following active trademarks:
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The Company also owns the following domains: dito.com, gametech.com, nenx.com, hilo.games, hilo.casino, megastars.net, megastars.app, megastars.uk
RegulatoryMANAGEMENT AND BOARD OF DIRECTORS
We are an early stage software developer and our software platform provides third party gaming companies and gaming app developers with the tools to build high quality products. We do not create the games, sell the games or operate the games in any jurisdiction. As a B2B developer of software, we believe we are not subject to the regulations that may affect other companies in the iGaming industry who interact directly with retail customers (B2C) using the gaming software. If our clients wish to sell to produce games in a regulated market, they will need to have the necessary licenses and meet the regulations within their jurisdiction. We believe the responsibility of meeting local regulatory requirements (where applicable) rests with our clients.
Properties
The Company's address in New York is 413 West 14th Street, New York, New York 10014, and our telephone number is +1 (347) 983-1227. The Company's offices are rented under a month to month lease for approximately $142.00 per month.
The Company's wholly-owned subsidiary, Dito UK, leases office facilities in London, England and is located at 184 Shepherds Bush Road, London, England W6 7NL.
The Company did not have any other leases with initial terms of 12 months or more at December 31, 2019.
Employees
As an early stage software company, we currently have no employees or employment agreements with anyone. Our sole officer and director is a non-employee officer and director of the Company who works full time on Company matters.
Legal Proceedings
From time to time, the Company may become involved in litigation relating to claims arising out of its operations in the normal course of business. Currently there are no legal proceedings, government actions, administrative actions, investigations or claims are currently pending against us or involve the Company which, in the opinion of the management of the Company, could reasonably be expected to have a material adverse effect on its business or financial condition.
MANAGEMENT
Executive Officers and Directors
All directors of our company hold office until the next annual meeting of the stockholders or until their successors have been elected and qualified or they have resigned. The officers of our company are appointed by our Board of Directors and hold office until their death, resignation or removal from office.
The following table sets forth the name, age and position of each of our executive officers, key employees and directors as of November 10, 2020.directors.
Name | Age | Position(s) |
Jason Drummond | 51 | Chief Executive Officer, Chief Financial Officer, Secretary and Director |
Jason Drummond - Chief Executive Officer, Chief Financial Officer, Secretary and Director
Director. Mr. Jason Drummond has served as theour CEO and director of Dito since our incorporation. Mr. Drummond has founded and built several Internet and tech businesses over his career. In addition, Mr. Drummond has, as CEO, led the initial public offering of nine of his companies on various European stock exchanges:
Founder, CEO and then Chairman of Equals Group PLC (FAIRFX PLC) between November 2005 and November 2014. The Company was listed in the UK on the Alternative Investment Market (AIM) (Ticker symbol - LON: EQLS) in November 2014.
Founder, CEO and then Chairman of Virtual Internet plc, from July 1996 to February 2002. The company Listed on AIM in October 1998, and then up-listed to the Main Market of the London Stock Exchange (LSE) in April 2000 (Ticker symbol - LON: VET).
Founder, CEO and then Chairman of Coms plc, from September 2003 to September 2012. The company Listed on AIM in September 2006 (Ticker symbol - LON: COMS).
Founder, Director and Chairman of Media Corp (Gaming Corporation plc), from March 2000 to February 2012. The company Listed on AIM in April 2001 (Ticker symbol - LON: MDC).
Co-Founder and Director of Nettworx plc,from December 2005 to June 2009 (Ticker Symbol - LON: NTWX). The company listed on the AIM Market LSE in December 2005.
Co-Founder and Director of Active 24 ASA (Virtual Internet UK), from May 2003 to November 2004. The company listed on the Oslo Børs /rse Stock Exchange in November 2004.
Co-Founder and shareholder in Betex Group plc, from May 2005 to May 2010. Listed on the AIM Market in December 2005.
Co-Founder and shareholder in Internet Incubator plc, from December 1999 to June 2001. The company was listed in the UK on AIM (Ticker symbol - LON: IIP) in October 2000.
Founder Investor and Advisor to Gaming Internet PLC,from January 2000 to July 2001 (Ticker symbol - LON: GIN), listed on AIM in January 2000.
Mr. Drummond currently serves as a Boardboard member to Eight Vodka Limited and Hoot Foods Limited and has previously served on the Board'sboards of directors of Expentory Ltd., Tactu Applico Limited, Teathers Financial PLC, GametechGameTech UK Limited and Gatekeeper App Limited.
In November 2013 Mr. Drummond founded Gametech UK Limited, a UK based technology business, and served as the CEO and as a director. Mr. Drummond was also the largest shareholder owning 45.9% of GameTech's outstanding ordinary shares. Administrators were appointed in April 2017 and the company entered administration as a result of operational difficulties.
In November 2005 Mr. Drummond founded FairFX plc (Now Equals Group Plc. LON:EQLS). Equals Group Plc is in the financial services sector catering to both businesses and retail customers. Operating under an e-money licence, the company provides international payments, corporate expenses, current accounts, credit facilities, currency cards and travel cash. The business was listed on the London Stock Exchange in August 2014.
Andrew Eggleston - Chief Executive Officer (Dito UK November 2017 to June 2019)
Mr. Eggleston received his degree in Business Management from Cardiff University, and is a chartered accountant. Mr. Eggleston began his career as corporate recovery and restructuring specialist with KPMG in 2001. Since then, Mr. Eggleston has gone on to become a Partner with Sareg, which is a French based accountancy practice providing a full range of services to individuals and businesses in France. In addition, in 2006 Mr. Eggleston founded EWP, a UK based accountancy practice and in 2015 Mr. Eggleston founded EWP Ventures, which is focused on financial advice, support and capital raising for small and mid-size enterprises.
Involvement in Certain Legal Proceedings
Other than as described below, our sole director and executive officer was not
From time to time, we may become involved in anylitigation relating to claims arising out of its operations in the normal course of business. Currently there are no legal proceedings, as described in Item 401(f)government actions, administrative actions, investigations or claims are currently pending against us or that involve the Company or any of Regulation S-Kits affiliates which, in the past ten years.opinion of the management of the Company, could reasonably be expected to have a material adverse effect on its business or financial condition.
Jason Drummond was the CEO and a director of Gametech as well as the largest shareholder owning 45.9% of GameTech's outstanding ordinary shares. GameTech's last full year of operations was the year ended December 31, 2016 in which it had nominal revenues. On May 11, 2017, administrators were appointed for GameTech and GameTech entered insolvency proceedings.
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Employment Agreements
As of November 10, 2020,June 30, 2021, we had no employees under formal employment agreement or other compensation-related agreements. Mr. Drummond, our sole officer and director, is a non-employee officer that handles our day-to-day operations.
Subsequent
Corporate Governance
Director Independence
No members of our Board of Directors are independent using the definition of independence under Nasdaq Listing Rule 5605(a)(2) and the standards established by the SEC. We plan to increase the filingsize the Board of this registration statement we anticipate that we will enter into an employment agreement with Mr. Drummond. While a formal agreement has yetDirectors to be executed, we expectsatisfy Nasdaq’s requirement that the agreement will be entered into between Dito UK and Mr. Drummond. The principal terms of such agreement are expected to include the following terms:
(i) employment will be as the Chief Executive Officermajority of the Company;Board of Directors be independent.
(ii)
Committees of our Board
Audit Committee. We did not during 2020, and do not currently, have an audit committee. If and when we satisfy the other initial listing standards for listing our common stock on Nasdaq or another national exchange, we intend to establish an audit committee of the Board of Directors.
Compensation Committee. We did not during 2020, and do not currently, have a compensation committee. If and when we satisfy the other initial listing standards for listing our common stock on Nasdaq or another national exchange, we intend to establish a compensation committee of the Board of Directors.
Nominating Committee. We did not during 2020, and do not currently, have a nominating committee. If and when we satisfy the other initial listing standards for listing our common stock on Nasdaq or another national exchange, we intend to establish a nominating committee of the Board of Directors.
Term of office
All directors hold office until the next annual compensation will be £240,000;
(iii) any bonus will bemeeting of the stockholders of the company and until their successors have been duly elected and qualified. Officers are elected by and serve at the discretion of our Board.
Code of Business Conduct and Ethics
We have not adopted a Code of Business Conduct and Ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. We have at this time very limited personnel resources and only one officer. Nevertheless, we intend to work with legal counsel in order to prepare a Code of Business Conduct and Ethics appropriate to the nature of our business and the functions performed by the executive management of the Company. Upon adoption of the Code of Business Conduct and Ethics, we will file it with the SEC and post a copy on our website.
Consulting and Finder Agreements
We have entered into consulting or finder agreements with several service providers including the below:
On August 3, 2020, the Company issued an aggregate of 2,000,000 shares of common stock valued at $2.50 per share to various parties in connection with the entry into a consulting agreement with Montrose Capital Partners Limited, a corporation formed under the laws of the UK (the “Consulting Agreement”). Pursuant to the terms of the Consulting Agreement, the shares of common stock issued thereunder are subject to a lock-up agreement prohibiting the achievementsale of certain targets assuch shares prior to twelve months from the date the Company’s shares are listed on and posted for trading on a tier of the Nasdaq Stock Market.
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On November 19, 2020, the Company entered into a finder’s fee agreement with a FINRA registered broker dealer to identify and introduce the Company to accredited investors. The Company agreed to between Mr. Drummond and Company; and
(iv)pay the broker a 6 month non-compete from terminationcash fee equal to 9% of employment.
There can be no assurance that we will enter into an agreement with Mr. Drummond on favourable termsthe total purchase price paid by investors introduced to the Company by the broker, and to issue it warrants to purchase nine percent 9% of the total number of shares or options shares purchased by an investor at an exercise price of $2.50 per share, with an expiration date five years from the date of issuance. One such investor was identified and made two investments: in November 2020 $1,500,000 for 600,000 shares of our common stock, resulting in the payment of a $135,000 cash fee to the broker and the issuance of 54,000 warrants; and in February 2021 $3,000,000 for 1,200,000 shares of our common stock, resulting in the payment of a $270,000 cash fee to the broker and the issuance of 108,000 warrants. In addition, the Company paid the broker additional compensation in November 2020 in the form of 250,000 restricted shares of the Company’s common stock.
On November 30, 2020, the Company entered into a finder’s fee agreement with a FINRA registered broker dealer to identify and introduce the Company to accredited investors. The Company agreed to pay the broker a cash fee equal to 9% of the total purchase price paid by investors introduced to the Company by the broker, and to issue it warrants to purchase nine percent 9% of the total number of shares or options shares purchased by an investor at an exercise price of $2.50 per share, with an expiration date five years from the date of issuance. One such investor was identified and made two investments: in December 2020 $1,000,000 for 400,000 shares of our common stock, resulting in the payment of a $90,000 cash fee to the broker and the issuance of 36,000 warrants; and in February 2021 $1,000,000 for 400,000 shares our common stock, resulting in the payment of a $90,000 cash fee to the broker and the issuance of 36,000 warrants. In addition, the Company agreed to pay the broker additional compensation in the form of 250,000 restricted shares of the Company’s common stock if and when the broker has introduced investors to the Company who have purchased from the Company securities for at least $3,000,000.
On August 4, 2021, the Company entered into a finder’s fee agreement with a FINRA registered broker dealer to identify and introduce the Company to accredited investors. The Company agreed to pay the broker a cash fee equal to 9% of the total purchase price paid by investors introduced to the Company by the broker, and to issue it warrants to purchase nine percent 9% of the total number of shares or options shares purchased by an investor at an exercise price of $3.25 per share, with an expiration date five years from the date of issuance. Five such investors were identified and made investments in the August 2021 Private Placement of an aggregate of $1,450,749 for 446,385 shares of our common stock, resulting in the payment of an approximately $130,500 cash fee to the broker and the issuance of 40,175 warrants.
Family Relationships
There are no family relationships between any agreement at all.of our directors or executive officers.
Executive Compensation
Summary Compensation Table
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EXECUTIVE AND DIRECTOR COMPENSATION
Set forth below is information for the fiscal years indicated relating to the compensation of each person who served as our principal executive officer (and our sole officer) (the "Named“Named Executive Officer"Officer”) during the past two fiscal years.
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Compensation of Management
Currently, we have no formal employment or compensation arrangement with our sole officer Jason Drummond. Our Board of Directors determines the compensation given to our executive officers in their sole determination. Until such time as we enter into an employment or compensation arrangement with Mr. Drummond, all future compensation to be paid will be determined solely by Mr. Drummond as our sole director.
Subsequent Mr. Drummond’s current annual base salary is £240,000, which is the equivalent to $327,638 when valued using the filing of this registration statement we anticipate that we will enter into an employment agreement with Mr. Drummond. While a formal agreement has yet to be executed, we expect that the agreement will be entered into between Dito UK and Mr. Drummond. The principal terms of such are expected to include the following terms:
(i) employment will be as the Chief Executive Officer of the Company;
(ii) annual compensation will be £240,000;
(iii)exchange rate in effect on December 31, 2020; any bonus will be at the discretion of the Company, subject to the achievement of certain targets as agreed to between Mr. Drummond and Company; andCompany.
(iv) a 6 month non-compete from termination of employment.
There can be no assurance that we will enter into an agreement with Mr. Drummond on favourable terms to the Company or any agreement at all.
Director Compensation
Set forth below is information for the fiscal years indicated relating to director compensation to a director of our subsidiary during the past two fiscal years:
| Name | Year | Fees Earned or Paid in Cash ($) | Stock Awards ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total ($) | ||||||||||||||
| Jason Drummond (1) | 2019 | 180,788 | - | - | - | - | - | 180,788 | ||||||||||||||
| 2018 | 26,698 | - | - | - | - | - | 26,698 | |||||||||||||||
| Andrew Eggleston (2) | 2019 | 9,608 | - | - | - | - | - | 9,608 | ||||||||||||||
| 2018 | 3,337 | - | - | - | - | - | 3,337 |
(1) During the year ended December 31, 2019, the Company issued 3,748,150 shares of the Company's common stock valued at $117,716, reflecting an effective price per share of $0.0314, in payment of accrued director fees.
Name | Year | Fees Earned or Paid in Cash | Stock Awards | Option Awards | Non-Equity Incentive Plan Compensation | Nonqualified Deferred Compensation Earnings | All Other Compensation | Total |
| Andrew Eggleston | 2020 | — | — | — | — | — | — | — |
| 2019 | $9,608 | — | — | — | — | — | $9,608 |
(2) During the year ended December 31, 2019, the Company issued 464,025 shares of the Company's common stock valued at $13,101, reflecting an effective price per share of $0.02823, in payment of accrued director fees.
Outstanding Equity Awards at Fiscal Year-End
There are no outstanding equity awards held by Ditothe Company’s named executive officers or directors as of December 31, 2019 or June 30, 2020.
CORPORATE GOVERNANCE
Director Independence2021 Equity Incentive Plan
Our
In April 29, 2021, the Board of Directors is currently composed of one member, Jason Drummond, who does not qualify as an independent director. We are not subject to the listing requirements of any national securities exchange or national securities associationunanimously adopted, and as a result, we are not at this time required to have our Board comprisedon May 21, 2021, holders of a majority of "Independent Directors."
Committeesour common stock outstanding approved, the Company’s 2021 Equity Incentive Plan (the “2021 Plan”), pursuant to which awards covering up to 3,000,000 shares of our common stock (subject to increase as provided therein) will be available for issuance. The purpose of the Board2021 Plan is a) enable the Company and its affiliates to attract and retain the types of Directors
Since we do not have an audit or compensation committee comprisedemployees, directors and consultants who will contribute to the Company’s long range success; (b) provide incentives that align the interests of independentemployees, consultants and directors the functions that would have been performed by such committees are performed by our sole director. The Board of Directors has not established an audit committee and does not have an audit committee financial expert, nor has the board established a nominating committee. The Board is of the opinion that such committees are not necessary since the company is an early development stage company, and to date, our sole director has been performing the functions of such committees. Thus, there is a potential conflict of interest in that our sole director has the authority to determine issues concerning management compensation, nominations and audit issues that may affect management decisions until such time as we add more members to our Board and establish any such committees.
Term of office
All directors hold office until the next annual meetingwith those of the stockholders of the companyCompany; and until their successors have been duly elected(c) promote the success of the Company’s business, thus enhancing the value of the Company for the benefit of its stockholders. Awards that may be granted under the 2021 plan include: (a) incentive stock options, (b) non-qualified stock options, (c) stock appreciation rights, (d) restricted awards, (e) performance share awards, (f) cash awards, and qualified. Officers are elected(g) other equity-based awards.
The 2021 Plan has a term of ten years and will be administered by and serve ata committee, or in the Board’s sole discretion by the Board or one or more members of the Board appointed by the Board to administer the 2021 Plan, in accordance with the terms of Directors.the 2021 Plan. As of the date of this prospectus, no committee or specific members of the Board have been appointed to administer the 2021 Plan, and the Board has will administer the 2021 Plan until and unless such an appointment is made.
Code
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There have been no transactions since the beginning of Ethicsthe fiscal year of 2019, or any currently proposed transaction, in which the Company was to be a participant and the amount involved exceeded or exceeds $120,000 and in which any related person had or will have a direct or indirect material interest (other than compensation described under “Executive Compensation”).
We
Related Person Transaction Policy
Prior to this offering, we have not adoptedhad a Codeformal policy regarding approval of Ethics.
MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information
There is currently no public markettransactions with related parties. We expect to adopt a related person transaction policy that sets forth our procedures for our sharesthe identification, review, consideration and approval or ratification of common stock.
We intend to seek a listingrelated person transactions. For purposes of our common stock on the OTCQB,policy only, a related person transaction is a transaction, arrangement or relationship, or any series of similar transactions, arrangements or relationships, in which is an interdealer quotation system maintained by OTC Markets Group Inc., however, we cannot assure you that our applicationand any related person are, were or will be approved.
Shareholders
Asparticipants in which the amount involved exceeds the lesser of November 10, 2020, there were an estimated 38 holders$120,000 or 1% of recordthe average of our common stock.total assets at year-end. Transactions involving compensation for services provided to us as an employee or director are not covered by this policy. A related person is any executive officer, director or beneficial owner of more than 5% of any class of our voting securities, including any of their immediate family members and any entity owned or controlled by such persons.
Dividends
We have never paidUnder the policy, if a cash dividend ontransaction has been identified as a related person transaction, including any transaction that was not a related person transaction when originally consummated or any transaction that was not initially identified as a related person transaction prior to consummation, our common stock since inception. The payment of dividends maymanagement must present information regarding the related person transaction to our audit committee, or, if audit committee approval would be made at the discretioninappropriate, to another independent body of our Board of Directors, for review, consideration and approval or ratification. The presentation must include a description of, among other things, the material facts, the interests, direct and indirect, of the related persons, the benefits to us of the transaction and whether the transaction is on terms that are comparable to the terms available to or from, as the case may be, an unrelated third party or to or from employees generally. Under the policy, we will depend upon,collect information that we deem reasonably necessary from each director, executive officer and, to the extent feasible, significant stockholder to enable us to identify any existing or potential related-person transactions and to effectuate the terms of the policy. In addition, under our code of business conduct and ethics, our employees and directors will have an affirmative responsibility to disclose any transaction or relationship that reasonably could be expected to give rise to a conflict of interest. In considering related person transactions, our audit committee, or other independent body of our Board of Directors, will take into account the relevant available facts and circumstances including, but not limited to, our operations, capital requirements, and overall financial condition.to:
We do not anticipate paying cash dividends on our common stock in the foreseeable future. The payment of dividends on our common stock will depend on earnings, financial condition and other business and economic factors affecting it at such time
| · | the risks, costs and benefits to us; | |
| · | the impact on a director’s independence in the event that the related person is a director, immediate family member of a director or an entity with which a director is affiliated; | |
| · | the availability of other sources for comparable services or products; and | |
| · | the terms available to or from, as the case may be, unrelated third parties or to or from employees generally. |
The policy requires that, in determining whether to approve, ratify or reject a related person transaction, our audit committee, or other independent body of our Board of Directors, maymust consider, relevant. We intend to follow a policyin light of retaining allknown circumstances, whether the transaction is in, or is not inconsistent with, our best interests and those of our earnings to finance the development and executionstockholders, as our audit committee, or other independent body of our strategy and the expansionBoard of our business. If we do not pay dividends, our common stock may be less valuable because a return on your investment will occur only if our stock price appreciates.
CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
Epsilon Investments PTE
On August 6, 2018, the Company borrowed $142,000 (approximately equivalent to 110,000£) from Epsilon Investments PTE ("Epsilon"), a significant shareholder of the Company, on an unsecured basis with interest at 6% per annum. The loan agreement did not contain any provisions for conversion into Common Stock.
On October 22, 2018, the Company borrowed an additional $110,000 (approximately equivalent to 85,000£) from Epsilon on an unsecured basis with interest at 6% per annum. The loan agreement did not contain any provisions for conversion into Common Stock. As a result, total borrowings from Epsilon were $252,000 (approximately equivalent to 195,000£).
As of December 31, 2019, and 2018, accrued interest with respect to the Epsilon borrowings totaled $11,191 (approximately equivalent to 8,439£) and $4,666 (approximately equivalent to 3,662£), respectively.
On March 23, 2020, accrued interest with respect to the Epsilon borrowingsDirectors, determines in the amountgood faith exercise of $9,783 (approximately equivalent to 8,439£) was waived and recorded as a contribution to capital by a credit to additional paid-in capital.its discretion.
On May 7, 2019, principal of amount of $19,651 (approximately equivalent to 15,000£) was converted into 696,025 shares of the Company's Common Stock, representing a price per share of approximately $0.03.
On May 29, 2019, principal of $227,279 (approximately equivalent to 180,000£) was converted into 4,504,500 shares of the Company's Common Stock, representing a price per share of approximately $0.05.
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Jason DrummondSECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
On August 6, 2018, the Company borrowed a total of $52,000 (approximately equivalent to 40,000£) from CEO Jason Drummond ("Drummond"), a significant shareholder of the Company, on an unsecured basis with interest at 6% per annum. The loan did not contain any provisions for conversion into Common Stock.
On October 22, 2018, the Company issued a note payable to Drummond in the amount of $20,000 (approximately equivalent to 15,000£) on an unsecured basis at an interest rate of 6% per annum. Consideration for the note payable consisted of subsequent cash advances totaling $12,867 (approximately equivalent to 10,000£) and the payment of accrued director's fees of $6,341 (approximately equivalent to 5,000£).
As of December 31, 2019 and 2018, accrued interest with respect to the Drummond borrowings totaled $2,607 (approximately equivalent to 1,966£) and $1,257 (approximately equivalent to 986£), respectively.
As of December 31, 2018, the Company owed Mr. Drummond $25,482.
On May 29, 2019, principal of $69,459 (approximately equivalent to 55,000£) was converted into 1,376,375 shares of the Company's Common Stock, representing a price per share of approximately $0.05.
During the years ended December 31, 2019 and 2018, the Company incurred fees to Jason Drummond and MY6 Ltd. and MY8 Ltd. (each solely controlled by Mr. Drummond), and periodically advanced amounts to Mr. Drummond MY6 Ltd. and MY8 Ltd. (each solely controlled by Mr. Drummond) in anticipation of future fees. As a result of such advances, as of December 31, 2019, due from Mr. Drummond was $12,606, which was repaid in January 2020.
On March 23, 2020, accrued interest with respect to the Drummond borrowings in the amount of $2,279 (approximately equivalent to 1,966£) was waived and recorded as a contribution to capital by a credit to additional paid-in capital.
During the six months ended June 30, 2020 and 2019, the Company incurred fees to Jason Drummond and his affiliates, and periodically advanced amounts to Mr. Drummond and his affiliates in anticipation of future fees. As a result of such advances, as of June 30, 2020, due from Mr. Drummond was $64,506.
Subsequent to June 30, 2020, the amount due from Jason Drummond at such date of $64,506 (see Note 8) decreased by approximately $27,000 as a result of cash receipts and disbursements from July through September 2020.
Fairfax Capital BV
On October 29, 2019, the Company borrowed $40,338 under an agreement with Fairfax Capital BV ("Fairfax"), a significant shareholder, pursuant to an agreement to lend up to $45,000. The lending agreement was non-interest bearing but provided for the payment of a fee of 10% of the total loan value when the principal was repaid, which was repayable no later than twelve months from the date of the agreement. The 10% loan fee was recognized ratably over the term of the loan as interest expense.
During April 2020, the Company repaid the Fairfax loan, including the accrued lending fee, in full.
Julian Parge
The Company has retained Julian Parge as a consultant to Dito UK, at the request and under the sole discretion of Dito UK, at the rate of $1,658 (equivalent to 1,250£) per week up to a maximum of $82,888 (equivalent to 62,500£) per annum.
Mr. Page primarily provides general management and technical assistance to and market research for the Company.
Mr. Parge received fees of $88,577 and $13,082 as of December 31, 2019 and 2018.
Andrew Eggleston
Andrew Eggleston, a founding Director of Dito UK, received fees of $20,458 and $5,994 as of December 31, 2019 and 2018, respectively.
As of December 31, 2018, the Company owed Mr. Eggleston $3,185.
As of December 31, 2019, the Company issued 464,025 ordinary shares to Mr. Eggleston.
Issuances of Common Stock
On November 3, 2017, the Company (Dito UK) issued 25 ordinary shares to its founders at no consideration. On December 4, 2018, in a Written Resolution of the Sole Director, the Company sub-divided the 25 ordinary shares previously issued to the founder into 2,500 ordinary shares.
On November 28, 2018, the Company (Dito UK) sold 1,750,000 ordinary shares to its founders for an aggregate cash purchase price of $896.
On May 7, 2019, the Company (Dito UK) sold 7,424,350 ordinary shares to an existing shareholder for a cash purchase price of $209,614, reflecting an effective price per share of approximately $0.03
On September 25, 2019, the Company sold 1,125,000 shares of the Company's common stock to an existing shareholder for a cash purchase price of $55,606, reflecting an effective price per share of approximately $0.05.
During the year ended December 31, 2019, the Company issued 4,343,425 shares of the Company's common stock (of which 3,748,150 were issued to Jason Drummond), valued at $137,645, reflecting an effective price per share of approximately $0.03, in payment of accrued costs and expenses to officers, directors, affiliates, and other related parties.
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial ownership of our common stock as of November 10, 2020August 16, 2021 by:
each of our named executive officers;
| · | each of our named executive officers; |
each of our directors;
| · | each of our directors; |
all of our current directors and executive officers as a group; and
| · | all of our current directors and executive officers as a group; and |
each stockholder known by us to own beneficially more than five percent of our common stock.
| · | each stockholder known by us to own beneficially more than five percent of our common stock. |
Beneficial ownership is determined in accordance with the rules of the Securities and Exchange CommissionSEC and includes voting or investment power with respect to the securities. Shares of common stock that may be acquired by an individual or group within 60 days of November 10, 2020,August 16, 2021, pursuant to the exercise of options or warrants, are deemed to be outstanding for the purpose of computing the percentage ownership of such individual or group, but are not deemed to be outstanding for the purpose of computing the percentage ownership of any other person shown in the table. Percentage of ownership is based on 26,727,52530,986,674 shares of common stock outstanding on November 10, 2020.August 16, 2021.
Except as indicated in footnotes to this table, we believe that the stockholders named in this table have sole voting and investment power with respect to all shares of common stock shown to be beneficially owned by them, based on information provided to us by such stockholders. Unless otherwise indicated, the address for each director and executive officer listed is c/o Dito,Gaming Technologies, Inc., 413 West 14th Street, New York, New York, USA 10014.
Name of Beneficial Owner
| Number of | Percentage of Common Stock Beneficially Owned |
Directors and Executive Officers |
|
|
Jason Drummond | 5,684,500 | 21.27%% |
All current executive officers and directors as a group (1 person) | 5,684,500 | 21.27% |
5% or Greater Stockholders |
| |
Epsilon Investments PTE(1) | 6,706,425 | 25.09% |
Fairfax Capital BV(2) | 2,437,950 | 9.12% |
Mark N. Tompkins | 1,834,000 | 6.86% |
(1) Epsilon Investments PTE is controlled by Zainab Binte Mohamed Omar, a natural person residing in Singapore, Singapore.Two Summerlin, Las Vegas, NV 89135, USA.
(2) Fairfax Capital BV is controlled by Jason Smart, a natural person residing in Toronto, Canada.
| Name of Beneficial Owner | Number of Shares Beneficially Owned Prior to Offering | Percentage of common stock Beneficially Owned |
| Directors and Executive Officers | ||
| Jason Drummond | 5,054,500 | 16.56% |
| All current executive officers and directors as a group (1 person) | 5,054,500 | 16.56% |
| 5% or Greater Stockholders | ||
Epsilon Investments PTE 111 North Bridge Road, #21-03 Peninsula Plaza, Singapore 179098 | 6,706,425 | 21.97% |
Fairfax Capital BV Herengracht 458 1017 CA Amsterdam, Netherlands | 2,437,950 | 7.99% |
Mark N. Tompkins App. 1, Via Guidino 23 Lugano-Paradiso 6900, Switzerland | 1,854,000 | 6.07% |
One44 Capital LLC 1249 Broadway Ste. 103 Hewlett NY 11557 | 1,800,000 | 5.90% |
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DESCRIPTION OF CAPITAL STOCKSECURITIES
General
General
Authorized Capital Stock
The Company is authorized to issue 50,000,000 common shares, each with a par value of $0.001 per share, of which 45,000,000 shares shall be Common Stockare common stock and 5,000,000 shares shall beare preferred stock.
Common Stock
As of November 10, 2020,August 16, 2021, there were 26,727,52530,521,059 shares of our Common Stockcommon stock issued and outstanding. All outstanding shares of Common Stockcommon stock are of the same class and have equal rights and attributes. The holders of Common Stockcommon stock are entitled to one vote per share on all matters submitted to a vote of shareholders of the Company. All shareholders are entitled to share equally in dividends, if any, as may be declared from time to time by theour Board of Directors out of funds legally available. In the event of liquidation, the holders of the Common Stockour common stock are entitled to share rateablyratably in all assets remaining after payment of all liabilities and liquidation preferences of preferred stockholders. The Company'sCompany’s shareholders do not have cumulative or pre-emptive rights.
Preferred Stock
As of November 10, 2020,August 16, 2021, there are no preferred shares issued and outstanding. Our Certificate of Incorporation authorizes 5,000,000 shares of preferred stock, par value $0.001 per share, which may be issued by theour Board of Directors from time to time in one or more series. Our Board, of Directors, without further approval of our stockholders, is authorized to fix the dividend rights and terms, conversion rights, voting rights, redemption rights, liquidation preferences and other rights and restrictions relating to any series of preferred stock that may be issued in the future. Issuances of shares of preferred stock, while providing flexibility in connection with possible financings, acquisitions and other corporate purposes, could, among other things, adversely affect the voting power of the holders of our common stock and prior series of preferred stock then outstanding.
Warrants
As of November 10, 2020August 16, 2021 the Company had no234,000 warrants issued and outstanding or authorizedeach exercisable for one share of common stock at $2.50; and 40,175 warrants issued and outstanding each exercisable for one share of common stock at $3.25.
Options
The maximum number of shares of common stock that may be delivered pursuant to be issued.
Options
awards granted to eligible persons under the Company’s 2021 Equity Incentive Plan may not exceed 3,000,000 shares of common stock, subject to certain adjustments. As of November 10, 2020August 16, 2021 the Company had no options issued and outstanding or authorized to be issued.outstanding.
Anti-Takeover Provisions of Delaware Law, our Certificate of Incorporation and our Bylaws
We are governed by the provisions of Section 203 of the Delaware General Corporation Law. In general, Section 203 prohibits a public Delaware corporation from engaging in a "business combination"“business combination” with an "interested stockholder"“interested stockholder” for a period of three years after the date of the transaction in which the person became an interested stockholder, unless:
| - | the transaction was approved by our Board prior to the time that the stockholder became an interested stockholder; |
| - | upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding shares owned by directors who are also officers of the corporation and shares owned by employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or |
| - | at or subsequent to the time the stockholder became an interested stockholder, the business combination was approved by our Board and authorized at an annual or special meeting of the stockholders, and not by written consent, by the affirmative vote of at least two-thirds of the outstanding voting stock which is not owned by the interested stockholder. |
| 47 |
the transaction was approved by the board of directors prior to the time that the stockholder became an interested stockholder;
upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding shares owned by directors who are also officers of the corporation and shares owned by employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or
at or subsequent to the time the stockholder became an interested stockholder, the business combination was approved by the board of directors and authorized at an annual or special meeting of the stockholders, and not by written consent, by the affirmative vote of at least two-thirds of the outstanding voting stock which is not owned by the interested stockholder.
In general, Section 203 defines a "business combination"“business combination” to include mergers, asset sales and other transactions resulting in financial benefit to a stockholder and an "interested stockholder"“interested stockholder” as a person who, together with affiliates and associates, owns, or within three years did own, 15% or more of the corporation'scorporation’s outstanding voting stock. These provisions may have the effect of delaying, deferring or preventing changes in control of our company.
Our certificate of incorporation and our bylaws include a number of provisions that could deter hostile takeovers or delay or prevent changes in control of our board of directors or management team, including the following:
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is Globex Transfer, LLC. Its address
| 48 |
PRIVATE PLACEMENT OF SECURITIES
On February 3, 2021, Company entered into a Securities Purchase Agreement with certain accredited investors (“Purchase Agreement”), pursuant to which the Company sold an aggregate of 1,606,600 shares of its common stock for gross proceeds of $4,016,500 in a private placement (the February 2021 Private Placement”). The Company paid a finder’s fee to registered brokers in the amount of $360,000 in connection with these transactions resulting in net proceeds to the Company of $3,656,500. In connection with the Purchase Agreement, the Company issued to certain registered brokers warrants to purchase an aggregate of 144,000 shares of common at an exercise price of $2.50 per share, with an expiration date 5 years from the date of issuance, pursuant to the terms of certain finder’s fee agreements previously entered into by the Company and such brokers.
Under the terms of the Purchase Agreement, each investor was granted customary piggyback registration rights in the event the Company proposes to register the offer and sale of any shares of its common stock, subject to the limitations set forth in the Purchase Agreement, such as a registration statement solely relating to an offering or sale to employees or directors of the Company pursuant to employee stock plan or in connection with any dividend or distribution. The Purchase Agreement also provides the investors the option and right to participate in future capital raising transactions at the same purchase price and on the same terms and conditions as other investors participating in such transactions, for an aggregate purchase price of up to $6,000,000.
If, at any time during the twelve months following sale of the shares in the February 2021 Private Placement, the Company issues or sells shares of common stock or common stock equivalents, except for certain exempt issuances as described in the Purchase Agreement, at a price below $2.50 per share, then immediately upon such issuance or sale, the Company will deliver to the investors that number of restricted shares of common stock equal to the difference between the number of Shares purchased by the investor pursuant to this Purchase Agreement and the number of shares of common stock the investor would have received for the investor’s subscription amount at the dilutive issuance price.
In March 2021, the Company sold 10,000 shares of its common stock for gross proceeds of $25,000 in a private placement.
During August 2021, we entered into securities purchase agreements with certain institutional and accredited investor pursuant to which we sold to the investor in a private placement an aggregate of (i) 538,694 shares of common stock for gross proceeds to the Company of approximately $1,750,000 (the “August 2021 Private Placement). The purchase price for one share of common stock was $3.25.
We intend to use the net proceeds primarily for working capital and general corporate purposes.
In connection with the August 2021 Private Placement, we entered into a registration rights agreement (the “Registration Rights Agreement”) with each investor. Pursuant to the Registration Rights Agreement, we are required to file a resale registration statement with the SEC (the “Resale Registration Statement”) to register for resale of the shares purchased in the August 2021 Private Placement, by August 31, 2021, and to have such Resale Registration Statement declared effective within 120 days after the filing date, or 150 days of the filing date in the event the Resale Registration Statement is 780 Deltona Blvd., Suite 202 Deltona, FL 32725“fully” reviewed by the SEC. We will be obligated to pay certain liquidated damages to the investor if we fail to file the resale registration statement when required, fails to cause the Registration Statement to be declared effective by the SEC when required, of if we fail to maintain the effectiveness of the Registration Statement.
The Company also agreed to pay the broker a cash fee equal to 9% of the total purchase price paid by investors introduced to the Company by the broker, and to issue it warrants to purchase nine percent 9% of the total number of shares or options shares purchased by an investor at an exercise price of $3.25 per share, with an expiration date five years from the date of issuance. Five such investors were identified and made investments in the August 2021 Private Placement of an aggregate of $1,350,749 for 446,385 shares of our common stock, resulting in the payment of an approximately $130,600 cash fee to the broker and the issuance of 40,175 warrants.
| 49 |
PLAN OF DISTRIBUTION
Each selling stockholder (the “Selling Stockholders”) of the securities and any of their pledgees, assignees and successors-in-interest may, from time to time, sell any or all of their securities covered hereby on the OTCQB or any other stock exchange, market or trading facility on which the securities are traded or in private transactions. These sales may be at fixed or negotiated prices. A Selling Stockholder may use any one or more of the following methods when selling securities:
Disclosure of Commission Position on Indemnification for
The Selling Stockholders may also sell securities under Rule 144 or any other exemption from registration under the Securities Act, Liabilitiesif available, rather than under this prospectus.
Insofar
Broker-dealers engaged by the Selling Stockholders may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the Selling Stockholders (or, if any broker-dealer acts as indemnificationagent for the purchaser of securities, from the purchaser) in amounts to be negotiated, but, except as set forth in a supplement to this prospectus, in the case of an agency transaction not in excess of a customary brokerage commission in compliance with FINRA Rule 2440; and in the case of a principal transaction a markup or markdown in compliance with FINRA IM-2440.
In connection with the sale of the securities or interests therein, the Selling Stockholders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the securities in the course of hedging the positions they assume. The Selling Stockholders may also sell securities short and deliver these securities to close out their short positions, or loan or pledge the securities to broker-dealers that in turn may sell these securities. The Selling Stockholders may also enter into option or other transactions with broker-dealers or other financial institutions or create one or more derivative securities which require the delivery to such broker-dealer or other financial institution of securities offered by this prospectus, which securities such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction).
The Selling Stockholders and any broker-dealers or agents that are involved in selling the securities may be deemed to be “underwriters” within the meaning of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the securities purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. Each Selling Stockholder has informed the Company that it does not have any written or oral agreement or understanding, directly or indirectly, with any person to distribute the securities.
| 50 |
The Company is required to pay certain fees and expenses incurred by the Company incident to the registration of the securities. The Company has agreed to indemnify the Selling Stockholders against certain losses, claims, damages and liabilities, including liabilities under the Securities ActAct.
We agreed to keep this prospectus effective until the earlier of (i) the date on which the securities may be permittedresold by the Selling Stockholders without registration and without regard to officers, directorsany volume or persons controlling ourmanner-of-sale limitations by reason of Rule 144, without the requirement for the Company pursuant to be in compliance with the foregoing provisions, we have been informed that is it is the opinion ofcurrent public information under
Rule 144 under the Securities and Exchange Commission that such indemnification is against public policy as expressed in such Securities Act and is, therefore, unenforceable.
LEGAL MATTERS
The validityor any other rule of similar effect or (ii) all of the securities beinghave been sold pursuant to this prospectus or Rule 144 under the Securities Act or any other rule of similar effect. The resale securities will be sold only through registered or licensed brokers or dealers if required under applicable state securities laws. In addition, in certain states, the resale securities covered hereby may not be sold unless they have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and is complied with.
Under applicable rules and regulations under the Exchange Act, any person engaged in the distribution of the resale securities may not simultaneously engage in market making activities with respect to the common stock for the applicable restricted period, as defined in Regulation M, prior to the commencement of the distribution. In addition, the Selling Stockholders will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, including Regulation M, which may limit the timing of purchases and sales of the common stock by the Selling Stockholders or any other person. We will make copies of this prospectus available to the Selling Stockholders and have informed them of the need to deliver a copy of this prospectus to each purchaser at or prior to the time of the sale (including by compliance with Rule 172 under the Securities Act).
| 51 |
LEGAL MATTERS
Certain legal matters in connection with the securities offered by this prospectus will behave been passed upon for usthe Company by Nauth LPC, 217 Queen Street West, Suite 401, Toronto, Ontario, Canada M5V 0R2.Sichenzia Ross Ference LLP, New York, New York.
EXPERTS
TheEXPERTS
Our financial statements of Dito, Inc. as of December 31, 2020, and December 31, 2019, and 2018,have been included in this Registration Statement,reliance on the report of which this Prospectus forms a part, have been audited by Weinberg & Company, P.A., 1925 Century Park East, Suite 1120, Los Angeles, California 90067, an independent registered public accounting firm, as set forthas stated in theirits report included herein, and ishave been so included in reliance upon such report given asand upon the authority of such firm as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
This prospectus, which constitutes
We have filed with the SEC a part of the registration statement on Form S-1 that we have filed with the SEC under the Securities Act, with respect to the shares of common stock being offered by this prospectus. This prospectus does not contain all of the information in the registration statement and its exhibits. For further information with respect to us and the securitiescommon stock offered by this prospectus, we refer you should refer to the registration statement and the exhibits filed as part of that document.its exhibits. Statements contained in this prospectus as to the contents of any contract or any other document referred to are not necessarily complete, and in each instance, we refer you to the copy of the contract or other document filed as an exhibit to the registration statement. Each of these statements is qualified in all respects by this reference. All filings we make with the SEC are available on the SEC’s web site at www.sec.gov.
We are subject to the periodic reporting requirements of the Securities Exchange Act, of 1934, as amended, and we will file annual, quarterly and currentperiodic reports, proxy statements and other information with the SEC. You can read ourThese periodic reports, proxy statements and other information are available on the website of the SEC filings, including the registration statement, over the Internet at the SEC's website at http://www.sec.gov.referred to above. We also maintain a website at www.dito.com, at which you www.gametech.com. You may access these materialsour annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act with the SEC free of charge or at our website as soon as reasonably practicable after they aresuch material is electronically filed with, or furnished to, the SEC. TheWe have not incorporated by reference into this prospectus the information contained in, or that can be accessed through, our website, isand you should not consider it to be a part of this prospectus.
You may also read and copy any document we file with the SEC at its public reference facilities at 100 F Street, N.E., Room 1580, Washington, DC 20549. You may also obtain copies of these documents at prescribed rates by writing to the Public Reference Section of the SEC at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference facilities. You may also request a copy of these filings, at no cost, by telephone or writing us at: 413 West 14th Street New York, New York 10014, (347) 983-1227.
| 52 |
50
DITO,GAMING TECHNOLOGIES, INC.
AND SUBSIDIARY
INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 20192020 and 20182019
| F-1 |
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
Gaming Technologies, Inc. (Formerly Dito, Inc.)
New York, New York
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Gaming Technologies, Inc. (formerly Dito, Inc.) and subsidiary (the "Company") as of December 31, 20192020 and 2018,2019, and the related consolidated statements of operations and comprehensive loss, stockholders' equity (deficiency) and cash flows for the years then ended, and the related notes (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 20192020 and 2018,2019, and the results of its consolidated operations and its consolidated cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1, the Company has no recurring source of revenue and has experienced negative operating cash flows since inception. The Company has financed its working capital requirements since inception through the sale of its equity securities and from borrowings. These matters raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1 to the consolidated financial statements. These consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission (the "SEC") and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the Company's auditor since 2019.
/s/ Weinberg & Company, P.A.
Los Angeles, California
July 13, 2020April 15, 2021
| F-2 |
F-2
GAMING TECHNOLOGIES, INC. (FORMERLY DITO, INC.)
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
| December 31, | ||||||
| 2019 | 2018 | |||||
| ASSETS | ||||||
| Current assets: | ||||||
| Cash | $ | 320,402 | $ | 79,467 | ||
| Due from related parties | 12,606 | - | ||||
| Deposits and other current assets | 33,942 | 15,905 | ||||
| Total current assets | 366,950 | 95,372 | ||||
| Property and equipment, net | 12,132 | 17,191 | ||||
| Operating lease right of use asset, net | 58,136 | - | ||||
| Intellectual property, net | 99,968 | 156,698 | ||||
| Total assets | $ | 537,186 | $ | 269,261 | ||
| LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY) | ||||||
| Current liabilities: | ||||||
| Accounts payable and accrued expenses | $ | 51,672 | $ | 5,254 | ||
| Cancelled common stock investment payable | 60,000 | - | ||||
| Due to related parties | 1,950 | 28,667 | ||||
| Notes payable to related parties, net | 52,225 | 305,337 | ||||
| Current portion of operating lease liability | 46,509 | - | ||||
| Total current liabilities | 212,356 | 339,258 | ||||
| Operating lease liability, net of current portion | 11,627 | - | ||||
| Total liabilities | 223,983 | 339,258 | ||||
| Commitments and contingencies | ||||||
| Stockholders' equity (deficiency): | ||||||
| Preferred stock, $0.001 par value; authorized -5,000,000 shares; issued - none | - | - | ||||
| Common stock, $0.001 par value; authorized - 45,000,000 shares; issued and outstanding - 24,614,325 shares and 2,502,500 shares at December 31, 2019 and 2018, respectively | 24,614 | 2,503 | ||||
| Common stock issuable | - | 32,495 | ||||
| Additional paid-in capital | 1,040,199 | 8,060 | ||||
| Accumulated other comprehensive income | 2,766 | 5,288 | ||||
| Accumulated deficit | (754,376 | ) | (118,343 | ) | ||
| Total stockholders' equity (deficiency) | 313,203 | (69,997 | ) | |||
| Total liabilities and stockholders' equity (deficiency) | $ | 537,186 | $ | 269,261 | ||
| December 31, | ||||||||
| 2020 | 2019 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | 1,946,232 | $ | 320,402 | ||||
| Due from related parties | – | 12,606 | ||||||
| Deposits and other current assets | 37,917 | 33,942 | ||||||
| Total current assets | 1,984,149 | 366,950 | ||||||
| Property and equipment, net | 8,503 | 12,132 | ||||||
| Operating lease right of use asset, net | 11,968 | 58,136 | ||||||
| Intellectual property, net | 50,967 | 99,968 | ||||||
| Total assets | $ | 2,055,587 | $ | 537,186 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | 368,784 | $ | 51,672 | ||||
| Cancelled common stock investment payable | – | 60,000 | ||||||
| Due to related parties | 14,918 | 1,950 | ||||||
| Notes payable to related parties, net | – | 52,225 | ||||||
| Current portion of note payable, bank | 2,241 | – | ||||||
| Current portion of operating lease liability | 11,968 | 46,509 | ||||||
| Total current liabilities | 397,911 | 212,356 | ||||||
| Note payable, bank | 62,741 | – | ||||||
| Operating lease liability, net of current portion | – | 11,627 | ||||||
| Total liabilities | 460,652 | 223,983 | ||||||
| Commitments and contingencies | ||||||||
| Stockholders' equity: | ||||||||
| Preferred stock, $0.001 par value; authorized -5,000,000 shares; issued - none | – | – | ||||||
| Common stock, $0.001 par value; authorized - 45,000,000 shares; issued and outstanding - 28,367,525 shares and 24,614,325 shares at December 31, 2020 and 2019, respectively | 28,367 | 24,614 | ||||||
| Additional paid-in capital | 9,551,507 | 1,040,199 | ||||||
| Accumulated other comprehensive income | (18,746 | ) | 2,766 | |||||
| Accumulated deficit | (7,966,193 | ) | (754,376 | ) | ||||
| Total stockholders' equity | 1,594,935 | 313,203 | ||||||
| Total liabilities and stockholders' equity | $ | 2,055,587 | $ | 537,186 | ||||
See accompanying notes to consolidated financial statements.
| F-3 |
F-3
GAMING TECHNOLOGIES, INC. (FORMERLY DITO, INC.)
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
| Years Ended | ||||||
| December 31, | ||||||
| 2019 | 2018 | |||||
| Revenues | $ | - | $ | - | ||
| Costs and expenses: | ||||||
| Software development, including amortization of intellectual property of $60,805 and $26,480 in 2019 and 2018, respectively | 163,786 | 45,102 | ||||
| General and administrative: | ||||||
| Officers, directors, affiliates, and other related parties | 289,823 | 45,774 | ||||
| Others | 174,989 | 22,818 | ||||
| Total costs and expenses | 628,598 | 113,694 | ||||
| Loss from operations | (628,598 | ) | (113,694 | ) | ||
| Other income (expense): | ||||||
| Interest expense | (7,958 | ) | (4,649 | ) | ||
| Foreign currency gain | 523 | - | ||||
| Total other expense, net | (7,435 | ) | (4,649 | ) | ||
| Net loss | (636,033 | ) | (118,343 | ) | ||
| Foreign currency translation adjustment | (2,522 | ) | 5,288 | |||
| Comprehensive loss | $ | (638, 555 | ) | $ | (113,055 | ) |
| Net loss per common share - basic and diluted | $ | (0.04 | ) | $ | (0.55 | ) |
| Weighted average common shares outstanding - basic and diluted | 15,514,647 | 216,199 | ||||
| Years Ended | ||||||||
| December 31, | ||||||||
| 2020 | 2019 | |||||||
| Revenues | $ | – | $ | – | ||||
| Costs and expenses: | ||||||||
| Software development, including amortization of intellectual property of $61,058 and $60,805 in 2020 and 2019, respectively | 128,563 | 163,786 | ||||||
| General and administrative: | ||||||||
| Officers, directors, affiliates, and other related parties | 417,094 | 289,823 | ||||||
| Other (including stock compensation costs of $5,875,000 in 2020) | 6,647,146 | 174,989 | ||||||
| Total costs and expenses | 7,192,803 | 628,598 | ||||||
| Loss from operations | (7,192,803 | ) | (628,598 | ) | ||||
| Other income (expense): | ||||||||
| Interest expense | (3,046 | ) | (7,958 | ) | ||||
| Foreign currency gain | (15,968 | ) | 523 | |||||
| Total other expense, net | (19,014 | ) | (7,435 | ) | ||||
| Net loss | (7,211,817 | ) | (636,033 | ) | ||||
| Foreign currency translation adjustment | (21,512 | ) | (2,522 | ) | ||||
| Comprehensive loss | $ | (7,233,329 | ) | $ | (638, 555 | ) | ||
| Net loss per common share - basic and diluted | $ | (0.28 | ) | $ | (0.04 | ) | ||
| Weighted average common shares outstanding - basic and diluted | 25,699,190 | 15,514,647 | ||||||
See accompanying notes to consolidated financial statements.
| F-4 |
F-4
GAMING TECHNOLOGIES, INC. (FORMERLY DITO, INC.)
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
Years Ended December 31, 20192020 and 20182019
| Common Stock | Common Stock | Additional Paid-in | Accumulated Other Comprehensive Income | Accumulated | Stockholders' Equity | ||||||||||||||||
| Shares | Par Value | Issuable | Capital | Deficit | (Deficiency) | ||||||||||||||||
| Balance, December 31, 2017 | 2,500 | $ | 2 | $ | - | $ | (2 | ) | $ | - | $ | - | $ | - | |||||||
| Common stock issued to founders for cash | 1,750,000 | 1,751 | - | (855 | ) | - | - | 896 | |||||||||||||
| Value of common stock issuable in connection with GameTech transaction | - | - | 42,162 | - | - | - | 42,162 | ||||||||||||||
| Common stock issued in connection with GameTech transaction | 750,000 | 750 | (9,667 | ) | 8,917 | - | - | - | |||||||||||||
| Foreign currency translation adjustment | - | - | - | - | 5,288 | - | 5,288 | ||||||||||||||
| Net loss | - | - | - | - | - | (118,343 | ) | (118,343 | ) | ||||||||||||
| Balance, December 31, 2018 | 2,502,500 | 2,503 | 32,495 | 8,060 | 5,288 | (118,343 | ) | (69,997 | ) | ||||||||||||
| Common stock issued for cash | 8,549,350 | 8,549 | - | 256,672 | - | - | 265,221 | ||||||||||||||
| Common stock issued in payment of notes payable | 6,576,900 | 6,577 | - | 309,812 | - | - | 316,389 | ||||||||||||||
| Common stock issued in connection with GameTech transaction | 2,521,150 | 2,521 | (32,495 | ) | 29,974 | - | - | - | |||||||||||||
| Common stock issued in connection with private placement | 121,000 | 121 | - | 302,379 | - | - | 302,500 | ||||||||||||||
| Common stock issued in payment of accrued costs and expenses to officers, directors, affiliates, and other related parties | 4,343,425 | 4,343 | - | 133,302 | - | - | 137,645 | ||||||||||||||
| Foreign currency translation adjustment | - | - | - | - | (2,522 | ) | - | (2,522 | ) | ||||||||||||
| Net loss | - | - | - | - | - | (636,033 | ) | (636,033 | ) | ||||||||||||
| Balance, December 31, 2019 | 24,614,325 | $ | 24,614 | $ | - | $ | 1,040,199 | $ | 2,766 | $ | (754,376 | ) | $ | 313,203 | |||||||
| Common Stock | Common Stock | Additional Paid-in | Accumulated Other Comprehensive | Accumulated | Stockholders' Equity | |||||||||||||||||||||||
| Shares | Par Value | Issuable | Capital | Income | Deficit | (Deficiency) | ||||||||||||||||||||||
| Balance, December 31, 2018 | 2,502,500 | $ | 2,503 | $ | 32,495 | $ | 8,060 | $ | 5,288 | $ | (118,343 | ) | $ | (69,997 | ) | |||||||||||||
| Common stock issued for cash | 8,549,350 | 8,549 | – | 256,672 | – | – | 265,221 | |||||||||||||||||||||
| Common stock issued in payment of notes payable | 6,576,900 | 6,577 | – | 309,812 | – | – | 316,389 | |||||||||||||||||||||
| Common stock issued in connection with GameTech transaction | 2,521,150 | 2,521 | (32,495 | ) | 29,974 | – | – | – | ||||||||||||||||||||
| Common stock issued in connection with private placement | 121,000 | 121 | – | 302,379 | – | – | 302,500 | |||||||||||||||||||||
| Common stock issued in payment of accrued costs and expenses to officers, directors, affiliates, and other related parties | 4,343,425 | 4,343 | – | 133,302 | – | – | 137,645 | |||||||||||||||||||||
| Foreign currency translation adjustment | – | – | – | – | (2,522 | ) | – | (2,522 | ) | |||||||||||||||||||
| Net loss | – | – | – | – | – | (636,033 | ) | (636,033 | ) | |||||||||||||||||||
| Balance, December 31, 2019 | 24,614,325 | 24,614 | – | 1,040,199 | 2,766 | (754,376 | ) | 313,203 | ||||||||||||||||||||
| Common stock issued in connection with private placement, net | 1,403,200 | 1,403 | – | 2,626,597 | – | – | 2,628,000 | |||||||||||||||||||||
| Common stock issued as compensation | 2,350,000 | 2,350 | – | 5,872,650 | – | – | 5,875,000 | |||||||||||||||||||||
| Accrued interest contributed to capital by related parties | – | – | – | 12,061 | – | – | 12,061 | |||||||||||||||||||||
| Foreign currency translation adjustment | – | – | – | – | (21,512 | ) | – | (21,512 | ) | |||||||||||||||||||
| Net loss | – | – | – | – | – | (7,211,817 | ) | (7,211,817 | ) | |||||||||||||||||||
| Balance, December 31, 2020 | 28,367,525 | $ | 28,367 | $ | – | $ | 9,551,507 | $ | (18,746 | ) | $ | (7,966,193 | ) | $ | 1,594,935 | |||||||||||||
See accompanying notes to consolidated financial statements.
| F-5 |
F-5
GAMING TECHNOLOGIES, INC. (FORMERLY DITO, INC.)
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
| Years Ended December 31, | ||||||
| 2019 | 2018 | |||||
| Cash flows from operating activities: | ||||||
| Net loss | $ | (636,033 | ) | $ | (118,343 | ) |
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||
| Depreciation | 6,590 | 2,197 | ||||
| Amortization of intellectual property | 60,805 | 26,480 | ||||
| Amortization of accrued lending fee | 607 | - | ||||
| Amortization of operating lease right of use asset | 32,363 | - | ||||
| Foreign currency gain | (523 | ) | - | |||
| Changes in operating assets and liabilities: | ||||||
| (Increase) decrease in - | ||||||
| Due from related parties | 83,816 | (16,664 | ) | |||
| Deposits and other current assets | (16,745 | ) | - | |||
| Increase (decrease) in - | ||||||
| Accounts payable and accrued expenses | 46,631 | 5,505 | ||||
| Due to related parties | 16,333 | 30,035 | ||||
| Operating lease liability | (32,363 | ) | - | |||
| Accrued interest payable | 7,353 | 6,205 | ||||
| Net cash used in operating activities | (431,166 | ) | (64,585 | ) | ||
| Cash flows from investing activities: | ||||||
| Purchase of property and equipment | (5,317 | ) | - | |||
| Proceeds from sales of property and equipment | 4,198 | - | ||||
| Payments in connection with GameTech transaction | - | (159,558 | ) | |||
| Net cash used in investing activities | (1,119 | ) | (159,558 | ) | ||
| Cash flows from financing activities: | ||||||
| Proceeds from notes payable to related parties | 50,664 | 300,966 | ||||
| Proceeds from private placement of common stock | 302,500 | - | ||||
| Cancelled common stock investment payable | 60,000 | - | ||||
| Proceeds from sales of common stock to related parties | 265,221 | 896 | ||||
| Net cash provided by financing activities | 678,385 | 301,862 | ||||
| Effect of exchange rate on cash | (5,165 | ) | 1,748 | |||
| Cash: | ||||||
| Net increase | 240,935 | 79,467 | ||||
| Balance at beginning of year | 79,467 | - | ||||
| Balance at end of year | $ | 320,402 | $ | 79,467 | ||
| Years Ended December 31, | ||||||||
| 2020 | 2019 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | (7,211,817 | ) | $ | (636,033 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation | 8,943 | 6,590 | ||||||
| Amortization of intellectual property | 67,620 | 60,805 | ||||||
| Amortization of accrued lending fee | (610 | ) | 607 | |||||
| Amortization of operating lease right of use asset | 45,008 | 32,363 | ||||||
| Stock compensation | 5,875,000 | – | ||||||
| Foreign currency gain / (loss) | 15,981 | (523 | ) | |||||
| Changes in operating assets and liabilities: | ||||||||
| (Increase) decrease in - | ||||||||
| Due from related parties | 12,109 | 83,816 | ||||||
| Deposits and other current assets | (2,799 | ) | (16,745 | ) | ||||
| Increase (decrease) in - | ||||||||
| Accounts payable and accrued expenses | 312,581 | 46,631 | ||||||
| Due to related parties | (1,925 | ) | 16,333 | |||||
| Operating lease liability | (45,008 | ) | (32,363 | ) | ||||
| Accrued interest payable | – | 7,353 | ||||||
| Net cash used in operating activities | (924,917 | ) | (431,166 | ) | ||||
| Cash flows from investing activities: | ||||||||
| Purchase of intellectual property | (13,055 | ) | – | |||||
| Purchase of property and equipment | (5,266 | ) | (5,317 | ) | ||||
| Proceeds from sales of property and equipment | – | 4,198 | ||||||
| Net cash used in investing activities | (18,321 | ) | (1,119 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from notes payable | 60,623 | 50,664 | ||||||
| Proceeds from private placement of common stock | 2,628,000 | 302,500 | ||||||
| Cancelled common stock investment payable | – | 60,000 | ||||||
| Repayment of cancelled common stock subscription | (60,000 | ) | – | |||||
| Proceeds from sales of common stock to related parties | – | 265,221 | ||||||
| Repayment of notes payable to related parties | (35,508 | ) | – | |||||
| Net cash provided by financing activities | 2,593,115 | 678,385 | ||||||
| Effect of exchange rate on cash | (24,047 | ) | (5,165 | ) | ||||
| Cash: | ||||||||
| Net increase | 1,625,830 | 240,935 | ||||||
| Balance at beginning of year | 320,402 | 79,467 | ||||||
| Balance at end of year | $ | 1,946,232 | $ | 320,402 | ||||
(Continued)
| F-6 |
F-6
GAMING TECHNOLOGIES, INC. (FORMERLY DITO, INC.)
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
| Years Ended December 31, | ||||||
| 2019 | 2018 | |||||
| Supplemental disclosures of cash flow information: | ||||||
| Cash paid for - | ||||||
| Interest | $ | - | $ | - | ||
| Income taxes | $ | - | $ | - | ||
| Non-cash investing and financing activities: | ||||||
| Principal amount of notes payable to related parties converted into common stock | $ | 316,389 | $ | - | ||
| Recognition of operating lease right of use asset and operating lease liability | $ | 91,774 | $ | - | ||
| Common stock issued in payment of accrued costs and expenses to officers, directors, affiliates, and other related parties | $ | 137,645 | $ | - | ||
| Value of common stock issuable in connection with GameTech transaction | $ | - | $ | 42,162 | ||
| Value of common stock issued in connection with GameTech transaction | $ | 32,495 | $ | 9,667 | ||
| Accrued lending fee | $ | 3,667 | $ | - | ||
| Years Ended December 31, | ||||||||
| 2020 | 2019 | |||||||
| Supplemental disclosures of cash flow information: | ||||||||
| Cash paid for - | ||||||||
| Interest | $ | – | $ | – | ||||
| Income taxes | $ | – | $ | – | ||||
| Non-cash investing and financing activities: | ||||||||
| Principal amount of notes payable to related parties converted into common stock | $ | – | $ | 316,389 | ||||
| Recognition of operating lease right of use asset and operating lease liability | $ | – | $ | 91,774 | ||||
| Common stock issued in payment of accrued costs and expenses to officers, directors, affiliates, and other related parties | $ | – | $ | 137,645 | ||||
| Value of common stock issued in connection with GameTech transaction | $ | – | $ | 32,495 | ||||
| Accrued interest contributed to capital by related parties | $ | 12,061 | $ | 3,667 | ||||
See accompanying notes to consolidated financial statements.
| F-7 |
F-7
GAMING TECHNOLOGIES, INC. (FORMERLY DITO, INC.)
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 20192020 and 20182019
1. Organization and Basis of Presentation
Organization and Combination
Gaming Technologies, Inc. (formerly Dito, Inc.,) (“Gaming US”) was incorporated in the State of Delaware on July 23, 2019. Effective as of March 18, 2020, Dito, Inc.Gaming US completed a Share Exchange Agreement (the "Exchange Agreement") to acquire all of the outstanding ordinary shares of DitoGaming Technologies Limited, formerly Gaming UK Limited, (“Gaming UK”) that provided for each outstanding ordinary share of DitoGaming UK Limited to be effectively converted into 25 shares of common stock of Dito, Inc.Gaming US. As a result, DitoGaming UK Limited became a wholly-owned subsidiary of Dito, Inc.Gaming US in a recapitalization transaction as described below.(collectively, the “Company”). On December 21, 2020, the Company changed its name from Dito, Inc. to Gaming Technologies Inc.
Dito
Gaming UK Limited was originally formed as Smart Tower Limited on November 3, 2017 in the United Kingdom for the purpose of software development. On June 29, 2018, Smart Tower Limited changed its name to NENX Gaming Limited and then to DitoGaming UK Limited on July 29, 2019.2019 and to Gaming Technologies Limited on January 7, 2021.
Dito, Inc.
Gaming US maintains its principal executive offices in New York, New York, United States. DitoGaming UK Limited maintains its principal executive offices in London, England.
Basis of Presentation
For financial reporting purposes, the Exchange Agreement was accounted for as a combination of entities under common control (the "Combination"), as Dito, IncGaming US was formed by DitoGaming UK, Limited, with the objective of DitoGaming UK Limited becoming a wholly-owned subsidiary of Dito, Inc.,Gaming US, and the resultant parent company being domiciled in the United States. As a result of the Combination, the former stockholders of DitoGaming UK Limited became the controlling shareholders of Dito, Inc.,Gaming US, and the DitoGaming UK Limited management and board members became the management and board members of Dito, Inc.Gaming US.
Accordingly, the condensed consolidated financial statements presented herein for all periods are based on the historical financial statements of each of Dito, Inc.Gaming US and Dito UK Limited.Gaming UK. The stockholders' equity section of the Dito, Inc.Gaming US balance sheet has been retroactively restated for all periods presented to reflect the accounting effect of the Combination. The net loss per share and weighted average common shares outstanding information presented herein also reflects this retroactive restatement for all periods presented. All costs associated with the Combination were charged to operations as incurred.
Unless the context indicates otherwise, Dito,Gaming Technologies, Inc. ("DitoGaming US") and DitoGaming Technologies UK Limited ("DitoGaming UK") are hereinafter referred to as the "Company".
The Company's activities are subject to significant risks and uncertainties, including the need for additional capital, as described below. The Company has not yet commenced any revenue-generating operations, does not have positive cash flows from operations, and is dependent on periodic infusions of debt and equity capital to fund its operating requirements.
Business Operations
The Company is a mobile games developer and publisher with offices in London and New York. The Company intends to license its software platform to mobile gaming operators and developers to enable rapid development of new games. In addition, the Company operates an online gaming operation in Mexico through its web site vale.mx.
| F-8 |
F-8
On November 13, 2020, we entered into an Agreement for the Provision of Online Gaming Management and Consulting Services (as subsequently amended) with Comercial de Juegos de la Frontera, S.A. de C.V., a Mexican company doing business as Big Bola, pursuant to which we provide to Big Bola consulting and management services related to their interactive online betting and gaming business in Mexico via the web site www.vale.mx, a regulated online casino and sports betting site. vale.mx operates under Big Bola’s existing license issued by the General Directorate of Games and Raffles of the Ministry of Interior (SEGOB). Big Bola is one of only14 operators legally authorized to offer legal betting and online casino services in Mexico. vale.mx has more than 500 online premium casino games available, which can be enjoyed both on mobile or via desktop. Players can receive promotions and play live roulette and blackjack, or high-definition slots from leading software providers such as NetEnt, Microgaming, Pragmatic Play, Evolution and Matrix Studios. We are responsible for player acquisition, promotion and retention for vale.mx. We manage players’ accounts and are required to ensure that the balance in players’ accounts at all times satisfies the requirements under applicable law, and we pay out winnings to players from Big Bola’s account. While Big Bola bears liability to the players as provided by the permit, as between us and Big Bola we bear the costs of this obligation. Each party indemnifies the other against certain liabilities and claims. Under the terms of the agreement, we share 60% of gross gaming revenue generated from the platform, subject to certain minimum guaranteed monthly amounts of Big Bola’s participation in the remaining gross gaming revenues. This venture began operations in February 2021.
Going Concern
The Company's consolidated financial statements have been presented on the basis that the Company is a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. As reflected in the accompanying consolidated financial statements, the Company has had no operating revenues to date, and has experienced recurring net losses from operations and negative operating cash flows. During the year ended December 31, 2019,2020, the Company incurred a net loss of $636,033,$7,211,817 utilized cash in operating activities of $431,165,$924,917, and had an accumulated deficit of $754,376$7,966,193 as of December 31, 2019.2020. The Company has financed its working capital requirements since inception through the sale of its equity securities and from borrowings.
At December 31, 2019,2020, the Company had cash of $320,402,$1,946,232, reflecting cash of $302,500$2,628,000 from the sale of common stock in December 2019. Subsequently, in January and February 2020, the Company raised an additional $210,000 from the salefourth quarter of common stock, bringing the total amount raised in this equity financing to $512,500. The Company has limited cash resources available to fund its operations and will therefore need to raise additional funds in the short-term.2020. The Company estimates that a significant amount of capital will be necessary over a sustained period of time to advance the development of the Company's business to the point at which it can become commercially viable and self-sustaining. However, there can be no assurances that the Company will be successful in this regard.
As a result, management has concluded that there is substantial doubt about the Company's ability to continue as a going concern within one year of the date that the accompanying consolidated financial statements are issued. In addition, the Company's independent registered public accounting firm, in their report on the Company's consolidated financial statements for the year ended December 31, 2019,2020, has also expressed substantial doubt about the Company's ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent upon the Company's ability to raise additional funds and implement its business plan, and to ultimately achieve sustainable operating revenues and profitability. The accompanying consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
The development and expansion of the Company's business in 20202021 and thereafter will be dependent on many factors, including the capital resources available to the Company. No assurances can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company or adequate to fund the development and expansion of the Company's business to a level that is commercially viable and self-sustaining. There is also significant uncertainty as to the affect that the coronavirus pandemic may have on the availability, amount and type of financing in the future.
If cash resources are insufficient to satisfy the Company's ongoing cash requirements, the Company would be required to scale back or discontinue its operations, obtain funds, if available, although there can be no certainty, through strategic alliances that may require the Company to relinquish rights to its technology, or to discontinue its operations entirely.
2. Summary of Significant Accounting Policies
Principles of Combination
The accompanying consolidated financial statements of the Company have been prepared in accordance with United States generally accepted accounting principles ("GAAP") and include the financial statements of DitoGaming US and its wholly-owned foreign subsidiary, DitoGaming UK. Intercompany balances and transactions have been eliminated in consolidation.
| F-9 |
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole 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. Management regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly. Actual results could differ from those estimates. Significant estimates are expected to include those related to assumptions used in calculating accruals for potential liabilities, valuing equity instruments issued for services, and the realization of deferred tax assets.
Cash
The Company maintains its cash balances with financial institutions with high credit ratings. The Company has not experienced any losses to date resulting from this practice.
As of December 31, 20192020 and 2018,2019, the Company's cash balances by currency consisted of the following:
| December 31, | ||||||
| 2019 | 2018 | |||||
| GBP | £ | 32,301 | £ | 62,371 | ||
| USD | $ | 277,565 | - | |||
| December 31, | ||||||||
| 2020 | 2019 | |||||||
| GBP | £ | 49,127 | £ | 32,301 | ||||
| USD | $ | 1,879,166 | 277,565 | |||||
Cash balances in British Pounds are maintained in the United Kingdom and cash balances in United States Dollars are maintained in the United States.
Concentration of Risk
The Company may periodically contract with consultants and vendors to provide services related to the Company's business development activities. Agreements for these services may be for a specific time period or for a specific project or task. The Company did not have any agreements at December 31, 2020 or 2019.
Income Taxes
The Company accounts for income taxes under an asset and liability approach for financial accounting and reporting for income taxes. Accordingly, the Company recognizes deferred tax assets and liabilities for the expected impact of differences between the financial statements and the tax basis of assets and liabilities.
The Company records a valuation allowance to reduce its deferred tax assets to the amount that is more likely than not to be realized. In the event the Company was to determine that it would be able to realize its deferred tax assets in the future in excess of its recorded amount, an adjustment to the deferred tax assets would be credited to operations in the period such determination was made. Alternatively, should the Company determine that it would not be able to realize all or part of its deferred tax assets in the future, an adjustment to the deferred tax assets would be charged to operations in the period such determination was made.
Dito
Gaming US is subject to U.S. federal income taxes and income taxes of the State of New York. The Company's operations in the United States throughduring the years ended December 31, 2020 and 2019 were nominal.
Dito
Gaming UK is subject to taxation in the United Kingdom. As a foreign corporation, DitoGaming UK is not consolidated with Dito U.S.Gaming US in the Company's U.S. federal tax filings.
As the Company's net operating losses in the respective jurisdictions in which it operates have yet to be utilized, all previous tax years remain open to examination by the taxing authorities in which the Company currently operates. The Company had no unrecognized tax benefits as of December 31, 20192020 and 20182019 and does not anticipate any material amount of unrecognized tax benefits within the next 12 months.
| F-10 |
The Company accounts for uncertainties in income tax law under a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of uncertain tax positions taken or expected to be taken in income tax returns as prescribed by GAAP. The tax effects of a position are recognized only if it is "more-likely-than-not" to be sustained by the taxing authority as of the reporting date. If the tax position is not considered "more-likely-than-not" to be sustained, then no benefits of the position are recognized. As of December 31, 2020 and 2019, the Company had not recorded any liability for uncertain tax positions. In subsequent periods, any interest and penalties related to uncertain tax positions will be recognized as a component of income tax expense.
Stock-Based Compensation
The Company issues common stock and intends to issue stock options to officers, directors and consultants for services rendered. Options will vest and expire according to terms established at the issuance date of each grant. Stock grants, which are generally time vested, will be measured at the grant date fair value and charged to operations ratably over the vesting period.
The fair value of stock options granted as stock-based compensation will be determined utilizing the Black-Scholes option-pricing model, and can be affected by several variables, the most significant of which are the life of the equity award, the exercise price of the stock option as compared to the fair market value of the common stock on the grant date, and the estimated volatility of the common stock. Estimated volatility will be based on the historical volatility of the Company's common stock over an appropriate calculation period, or, if not available, by reference to the volatility of a representative sample of comparable public companies. The risk-free interest rate will be based on the U.S. Treasury yield curve in effect at the time of grant. The fair market value of the common stock will be determined by reference to the quoted market price of the Company's common stock on the grant date, or, if not available, by reference to an appropriate alternative valuation methodology.
The Company will recognize the fair value of stock-based compensation awards in general and administrative costs or in software development costs, as appropriate, in the Company's consolidated statements of operations. The Company will issue new shares of common stock to satisfy stock option exercises.
As of December 31, 2020 and 2019, the Company did not have any outstanding stock options.
Comprehensive Income (Loss)
Comprehensive income or loss is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources. Components of comprehensive income or loss, including net income or loss, unrealized gains or losses on available-for-sale securities, unrealized gains or losses on other financial investments, unrealized gains or losses on pension and retirement benefit plans, and foreign currency translation adjustments, are reported in the financial statements in the period in which they are recognized. Net income (loss) and other comprehensive income (loss) are reported net of any related tax effect to arrive at comprehensive income (loss). The Company's comprehensive income (loss) for the years ended December 31, 20192020 and 20182019 consists of foreign currency translation adjustments.
Earnings (Loss) Per Share
The Company's computation of earnings (loss) per share ("EPS") includes basic and diluted EPS. Basic EPS is measured as the income (loss) attributable to common stockholders divided by the weighted average common shares outstanding for the period. Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of potential common shares (e.g., convertible notes payable, convertible preferred stock, warrants and stock options) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS.
Loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the respective periods. At December 31, 2020, the Company excluded warrants to acquire 90,000 shares of common stock from its calculation of loss per share as their effect would be antidilutive. Basic and diluted loss per common share is the same for all periods presented because there is no convertible debt, convertible preferred stock,the aforementioned warrants or stock options outstanding.were antidilutive.
Weighted average common shares outstanding has been retroactively restated for all periods presented to reflect the accounting effect of the Combination (see Note 1).
| F-11 |
F-11
Fair Value of Financial Instruments
The authoritative guidance with respect to fair value established a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels and requires that assets and liabilities carried at fair value be classified and disclosed in one of three categories, as presented below. Disclosure as to transfers in and out of Levels 1 and 2, and activity in Level 3 fair value measurements, is also required.
Level 1. Observable inputs such as quoted prices in active markets for an identical asset or liability that the Company has the ability to access as of the measurement date. Financial assets and liabilities utilizing Level 1 inputs include active-exchange traded securities and exchange-based derivatives.
Level 2. Inputs, other than quoted prices included within Level 1, which are directly observable for the asset or liability or indirectly observable through corroboration with observable market data. Financial assets and liabilities utilizing Level 2 inputs include fixed income securities, non-exchange-based derivatives, mutual funds, and fair-value hedges.
Level 3. Unobservable inputs in which there is little or no market data for the asset or liability which requires the reporting entity to develop its own assumptions. Financial assets and liabilities utilizing Level 3 inputs include infrequently-traded non-exchange-based derivatives and commingled investment funds and are measured using present value pricing models.
The Company will determine the level in the fair value hierarchy within which each fair value measurement falls in its entirety, based on the lowest level input that is significant to the fair value measurement in its entirety. In determining the appropriate levels, the Company will perform an analysis of the assets and liabilities at each reporting period end.
The carrying value of financial instruments (consisting of cash and accounts payable and accrued expenses) is considered to be representative of their respective fair values due to the short-term nature of those instruments.
Property and Equipment
Property and equipment is recorded at cost. Major improvements are capitalized, while maintenance and repairs that do not improve or extend the useful life of the respective assets are charged to expense as incurred. Gains and losses from disposition of property and equipment are included in income and expense when realized. Depreciation of property and equipment is provided using the straight-line method over an estimated useful life of three years.
The Company recognizes depreciation of property and equipment in general and administrative costs in the Company's consolidated statement of operations.
Leases
Effective January 1, 2019, the Company adopted Accounting Standards Update 2016-02, Leases (Topic 842) ("ASU 2016-02"), which requires a lessee to record a right-of-use asset and a corresponding lease liability at the inception of the lease initially measured at the present value of the lease payments. ASU 2016-02 requires recognition in the statement of operations of a single lease cost that is calculated as a total cost of the lease allocated over the lease term, generally on a straight-line basis. The Company did not have any leases within the scope of ASU 2016-02 excludes short-term operating leases with a lease term of 12 months or less at December 31, 2018the commencement date, and that do not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise.
Software Development Costs
Due to the significant uncertainty with respect to the successful development of commercially viable products based on Company's development efforts, all software development costs incurred with respect to the Company's mobile gaming platform as described at Note 3 are charged to operations as incurred.
| F-12 |
Intellectual Property
Intellectual property, consisting of software, is recorded at cost. Amortization of intellectual property is provided using the straight-line method over an estimated useful life of three years.
The Company recognizes amortization of intellectual property in software development costs in the Company's consolidated statement of operations.
Long-Lived Assets
The Company reviews long-lived assets, consisting of property and equipment and intellectual property, for impairment at each fiscal year end or when events or changes in circumstances indicate the carrying value of these assets may exceed their current fair values. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the assets. Assets to be disposed of are separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell and are no longer depreciated. The Company has not historically recorded any impairment to its long-lived assets. In the future, if events or market conditions affect the estimated fair value to the extent that a long-lived asset is impaired, the Company will adjust the carrying value of these long-lived assets in the period in which the impairment occurs. As of December 31, 20192020 and 2018,2019, the Company had not deemed any long-lived assets as impaired and was not aware of the existence of any indicators of impairment at such dates.
Foreign Currency
The accompanying consolidated financial statements are presented in United States dollars ("USD"). The functional currency of DitoGaming UK, the Company's foreign subsidiary, is the British Pound ("GBP"(“GBP”), the local currency in the United Kingdom. Accordingly, assets and liabilities of the foreign subsidiary are translated at the current exchange rate at the end of the period, and revenues and expenses are translated at average exchange rates during the years ended December 31, 20192020 and 2018.2019. The resulting translation adjustments are recorded as a component of shareholders' equity (deficiency). Gains and losses from foreign currency transactions are included in net income (loss).
Translation of amounts from the local currencies of the foreign subsidiary, DitoGaming UK, into USD has been made at the following exchange rates for the respective periods:
| As of and for the Years Ended December 31, | ||||||
| 2019 | 2018 | |||||
| Period-end GBP to USD1.00 exchange rate | 1.3262 | 1.2741 | ||||
| Period-average GBP to USD1.00 exchange rate | 1.2772 | 1.3349 | ||||
| As of and for the Years Ended December 31, | ||||||||
| 2020 | 2019 | |||||||
| Period-end GBP to USD1.00 exchange rate | 1.3652 | 1.3262 | ||||||
| Period-average GBP to USD1.00 exchange rate | 1.2825 | 1.2772 | ||||||
Recent Accounting Pronouncements
In June 2016, the Financial Accounting Standards Board ("FASB"(“FASB”) issued Accounting Standards Update ("ASU"(“ASU”) 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"). ASU 2016-13 significantly changes how entities measure credit losses for most financial assets, including accounts and notes receivables. ASU 2016-13 will replace the current "incurred loss" approach with an "expected loss"“expected loss” model, under which companies will recognize allowances based on expected rather than incurred losses. Entities will apply the provisions of ASU 2016-13 as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which ASU 2016-13 is effective. As small business filer, ASU 2016-13 will be effective for the Company for interim and annual reporting periods beginning after December 15, 2022. Management is currently in the process of assessing the impact of adopting ASU-2016-13 on the Company's financial statements and related disclosures.
| F-13 |
Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company's present or future consolidated financial statements and related disclosures.
3. GameTech UK Limited Transaction
On August 10, 2018, the Company (through Dito UK) entered into an Asset Sale Agreement (the "Sale Agreement") with GameTech UK Limited ("GameTech") pursuant to a Court Order (the "Order") issued by the Joint Administrators of GameTech UK Limited (in administration) on May 29, 2018. GameTech's last full year of operations was the year ended December 31, 2016 and it had nominal revenues in such year. On May 11, 2017, administrators were appointed for GameTech and GameTech entered insolvency proceedings. Approximately fifteen months later, the administrators of GameTech entered into the Sale Agreement with the Company (through Dito UK). Jason Drummond, a related party and a current shareholder of the Company (see Notes 6 and 8), was the largest shareholder of GameTech, owning 45.9% of its outstanding ordinary shares, with no other shareholder owning more than 9.9% of its outstanding ordinary shares.
The Order granted an application previously made on April 19, 2019 for the Administrators of GameTech to sell GameTech assets which were subject to the claims of the secured creditors. The Sale Agreement was an integral part of the Order and provided for the cash payment of $148,800 (approximately equivalent to 116,500£), to be applied towards the acquisition by the Company of certain assets of GameTech, in which certain creditors of GameTech held a security interest. The Order also called for the infusion of $300,098 (equivalent to 235,000£) into the Company, and the issuance of 30% of the Company's equity to the secured creditors, for which the secured creditors would release their secured interest. Accordingly, it was determined that 3,271,150 common shares, valued at $42,162 (approximately equivalent to 33,016£), were to be issued in order to satisfy this provision. On December 4, 2018, 750,000 of such shares valued at $9,667 (approximately equivalent to 7,570£), were issued. On May 29, 2019, the remaining 2,521,150 of such shares valued at $32,495 (approximately equivalent to 25,446£) were issued.
Pursuant to ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, this transaction was considered as an acquisition of assets, rather than a purchase of a business, because the intellectual property assets of GameTech, consisting of gaming software and a related technology platform, were acquired from a non-operational business in insolvency proceedings. Furthermore, the Company did not intend to operate this gaming software under a business plan similar to that of GameTech's. Instead, the Company's plan was to modify the software and license it to mobile gaming operators and developers. This software was acquired under the expectations that it would require significant modifications to be able to be utilized in the Company's anticipated new business model. In addition, such further modifications to commercialize the software are expected to require additional time and capital, which cannot be quantified at this time until enough capital has been raised to fully implement the process, of which there can be no assurance. Accordingly, there can be no assurances that this process will ultimately result in the successful development of commercially viable software that can be utilized in the Company's new business model.
The Company allocated the purchase consideration between intellectual property assets and property and equipment based on its review of the underlying assets and their intended use in the Company's new business model, which resulted in most of the purchase consideration being allocated to intellectual property. Based on this analysis, the Company determined to amortize the intellectual property assets (as well as the nominal amount of property and equipment also acquired from GameTech) on the straight-line basis over three years from the date of acquisition.
A summary of the transaction valuation is as follows:
| Required cash infusion | $ | 300,098 | |
| Less: | |||
| Required cash payment of $148,800, reduced by $14,834 for the non-delivery of assets to be acquired | (133,966 | ) | |
| Legal costs incurred | (25,592 | ) | |
| Net capital infused | $ | 140,540 | |
| Equity percentage allocated to secured creditors | 30% | ||
| Value of 30% equity allocated to secured creditors | $ | 42,162 | |
| Number of common shares to be issued to secured creditors | 3,271,150 | ||
| Value per common share issued to secured creditors | $ | 0.012889 |
The purchase consideration was allocated as follows:
| Cash paid to GameTech | $ | 133,966 | |
| Legal costs incurred | 25,592 | ||
| Value of common stock issued to GameTech creditors | 42,162 | ||
| Total consideration | $ | 201,720 | |
| Allocation of consideration: | |||
| Property and equipment | $ | 19,434 | |
| Intellectual property | 182,286 | ||
| Total consideration | $ | 201,720 |
Information with respect to intellectual property is provided at Note 5.
Information with respect to property and equipment is provided at Note 4.
Information with respect to common shares issued is provided at Note 9.
4. Property and Equipment
Property and equipment as of December 31, 20192020 and 20182019 is summarized as follows:
| December 31, | ||||||
| 2019 | 2018 | |||||
| Computer and office equipment | $ | 21,158 | $ | 19,288 | ||
| Less accumulated depreciation | (9,026 | ) | (2,097 | ) | ||
| Computer and office equipment, net | $ | 12,132 | $ | 17,191 | ||
| December 31, | ||||||||
| 2020 | 2019 | |||||||
| Computer and office equipment | $ | 27,307 | $ | 21,158 | ||||
| Less accumulated depreciation | (18,804 | ) | (9,026 | ) | ||||
| Computer and office equipment, net | $ | 8,503 | $ | 12,132 | ||||
All of the Company's property and equipment is located in the United Kingdom. Depreciation expense for the years ended December 31, 2020 and 2019 was $8,943 and 2018 was $6,590, and $2,197, respectively. Depreciation expense is included in general and administrative costs in the Company's consolidated statement of operations.
5.
4. Intellectual Property
Intellectual property as of December 31, 20192020 and 20182019 is summarized as follows:
| December 31, | ||||||
| 2019 | 2018 | |||||
| Software | $ | 189,413 | $ | 181,972 | ||
| Less accumulated amortization | (89,445 | ) | (25,274 | ) | ||
| Software, net | $ | 99,968 | $ | 156,698 | ||
| December 31, | ||||||||
| 2020 | 2019 | |||||||
| Software | $ | 194,977 | $ | 189,413 | ||||
| Internet domain name | 13,055 | – | ||||||
| Total intellectual property | 208,032 | 189,413 | ||||||
| Less accumulated amortization | (157,065 | ) | (89,445 | ) | ||||
| Intellectual property, net | $ | 50,967 | $ | 99,968 | ||||
Amortization expense for the years ended December 31, 2020 and 2019 was $67,620 and 2018 was $60,805, and $26,480, respectively. Amortization expense is included in software development costs in the Company's consolidated statement of operations.
The following schedule sets forth the remaining amortization of intellectual property as of December 31, 2019:2020:
| 2020 | $ | 60,805 | |
| 2021 | 39,163 | ||
| Total | $ | 99,968 |
6.
| 2021 | $ | 50,967 | ||
| Total | $ | 50,967 |
| F-14 |
5. Notes Payable to Related Parties
As of December 31, 20192020 and 2018,2019, notes payable to related parties consisted of the following:
| Epsilon Investments PTE | Jason Drummond | Fairfax Capital BV | Total | |||||||||
| December 31, 2019: | ||||||||||||
| Principal amount | $ | - | $ | - | $ | 37,797 | $ | 37,797 | ||||
| Accrued interest payable | 11,191 | 2,607 | - | 13,798 | ||||||||
| Accrued lending fee | - | - | 3,780 | 3,780 | ||||||||
| Sub-total | 11,191 | 2,607 | 41,577 | 55,375 | ||||||||
| Less unamortized lending fee | - | - | (3,150 | ) | (3,150 | ) | ||||||
| Total | $ | 11,191 | $ | 2,607 | $ | 38,427 | $ | 52,225 | ||||
| December 31, 2018: | ||||||||||||
| Principal amount | $ | 248,450 | $ | 50,964 | $ | - | $ | 299,414 | ||||
| Accrued interest payable | 4,666 | 1,257 | - | 5,923 | ||||||||
| Total | $ | 253,116 | $ | 52,221 | $ | - | $ | 305,337 |
Epsilon Investments PTE
On August 6, 2018, the Company borrowed $142,000 (approximately equivalent to 110,000£) from Epsilon Investments PTE ("Epsilon"), a significant shareholder of the Company, on an unsecured basis with interest at 6% per annum. The loan agreement did not contain any provisions for conversion into common stock. The primary purpose of the loan was to partially fund the cash payment commitment associated with the GameTech transaction (see Note 3).
On October 22 2018, the Company borrowed an additional $110,000 (approximately equivalent to 85,000£) from Epsilon on an unsecured basis with interest at 6% per annum. The loan agreement did not contain any provisions for conversion into common stock.
As a result, through December 31, 2018, total borrowings from Epsilon were $252,000 (approximately equivalent to 195,000£), presented as principal amount of $248,450 at December 31, 2018 due to the impact of currency conversion adjustments.
As of December 31, 2018, accrued interest with respect to the Epsilon borrowings totaled $4,666 (approximately equivalent to 3,662£).
On May 7, 2019, principal of $19,651 (approximately equivalent to 15,000£) was converted into 696,025 shares of the Company's common stock, representing a price per share of approximately $0.03.
On May 29, 2019, principal of $227,279 (approximately equivalent to 180,000£) was converted into 4,504,500 shares of the Company's common stock, representing a price per share of approximately $0.05.
As of December 31, 2019, accrued interest with respect to the Epsilon borrowings totaled $11,191 (approximately equivalent to 8,439£).
On March 23, 2020, accrued interest with respect to the Epsilon borrowings in the amount of $9,783$9,782 (approximately equivalent to 8,439£) was waived and recorded as a contribution to capital by a credit to additional paid-in capital.
Jason Drummond
On August 6, 2018, the Company borrowed a total of $52,000 (approximately equivalent to 40,000£) from Jason Drummond ("Drummond"), a significant shareholder of the Company, on an unsecured basis with interest at 6% per annum. The loan did not contain any provisions for conversion into common stock. The primary purpose of the loan was to partially fund the cash payment commitment associated with the GameTech transaction (see Note 3).
On October 22, 2018, the Company issued a note payable to Drummond in the amount of $20,000 (approximately equivalent to 15,000£) on an unsecured basis at an interest rate of 6% per annum. Consideration for the note payable consisted of subsequent cash advances from Mr. Drummond totaling $12,867 (approximately equivalent to 10,000£) and the payment of accrued director's feesbase salary of $6,341 (approximately equivalent to 5,000£).
| F-15 |
As of December 31, 2018, accrued interest with respect to the loans from Mr. Drummond borrowings totaled $1,257 (approximately equivalent to 986£).
On May 29, 2019, principal of $69,459 (approximately equivalent to 55,000£) was converted into 1,376,375 shares of the Company's common stock, representing a price per share of approximately $0.05.
As of December 31, 2019, accrued interest with respect to the loans from Mr. Drummond borrowings totaled $2,607 (approximately equivalent to 1,996£).
On March 23, 2020, accrued interest with respect to the loans from Mr. Drummond borrowings in the amount of $2,279 (approximately equivalent to 1,966£) was waived and recorded as a contribution to capital by a credit to additional paid-in capital.
Upon the funding of the Epsilon and Drummond borrowings described above, the Company had attained the 235,000£ capital infusion stipulated in the Court Order of May 29, 2018 and had no further obligations thereunder. Additional information with respect to this matter is provided at Note 3.
Fairfax Capital BV
On October 29, 2019, the Company borrowed $40,338 under an agreement with Fairfax Capital BV ("Fairfax"), a significant shareholder, pursuant to an agreement to lend up to $45,000. The lending agreement was non-interest bearing, but provided for the payment of a fee of 10% of the total loan value when the principal was repaid, which was repayable no later than twelve months from the date of the agreement.
During April 2020, the Company repaid the Fairfax loan, including the accrued lending fee, in full.
6. Note Payable to Bank
On June 9, 2020, Gaming UK received an unsecured loan of $60,600 (equivalent to 47,600£) from Metro Bank PLC under the Bounce Bank Loan Scheme managed by the British Business Bank on behalf of, and with the financial backing of, The Secretary of State for Business, Energy and Industrial Strategy of the Government of the United Kingdom. The Government of the United Kingdom has provided a full guarantee to Metro Bank PLC with respect to the repayment of this loan. The proceeds from the loan are required to be used for working capital purposes, for investment in a company's business, and to support trading or commercial activity in the United Kingdom. The loan is for a term of 72 months and has a fixed interest rate of 2.5% per annum. Gaming UK is not required to make any payments of interest on the loan during the first 12 months of this loan, with such amount being paid by the Government of the United Kingdom under its business interruption payment program. Beginning in the 13th month after the drawdown of the loan, Gaming UK will be required to repay the loan by making 60 equal monthly payments of principal and interest aggregating $1,076 (equivalent to 845£) per month. During the year ended December 31, 2020, the Company recorded interest expense of $851 with respect to this loan, which was paid by the Government of the United Kingdom under this program. As of December 31, 2020, $64,982 was due under this note, of which, $2,241 was reflected as current portion due.
Maturities of long-term debt for each of the next five years and thereafter are as follows:
| Year ended December 31, | Amount | |||
| 2021 | $ | 2,241 | ||
| 2022 | 10,137 | |||
| 2023 | 10,137 | |||
| 2024 | 10,137 | |||
| 2025 | 10,137 | |||
| Thereafter | 22,193 | |||
| Total payments | 64,982 | |||
| Less current portion | 2,241 | |||
| $ | 62,741 | |||
| F-16 |
7. Leases
Short-Term Operating Lease
The Company leases office facilities in New York, New York on a month-to-month basis at a cost of $142 per month. Aggregate payments under this operating lease charged to general and administrative expenses in the statement of operations were $1,704 and $1,514 for the yearyears ended December 31, 2019.2020 and 2019, respectively.
Long-Term Operating Lease
The Company's wholly-owned subsidiary in the United Kingdom, DitoGaming UK, leases office facilities in London, England. The Company did not have any other leases with initial terms of 12 months or more at December 31, 2020 or 2019.
Leases with an initial term of 12 months or less are not recorded on the balance sheet; lease expense is recognized on a straight-line basis over the term of the lease. Accordingly, the initial lease was accounted for as a short-term operating lease with a term of less than 12 months at December 31, 2018.
Operating lease right-of-use assets and liabilities are recognized at the commencement date of the lease based on the present value of lease payments over the lease term. Right-of-use assets represent the Company's right to use an underlying asset for the lease term, and right-of-use lease liabilities represent the Company's obligation to make lease payments arising from the lease. Generally, the implicit rate of interest, equivalent to a discount rate, in lease arrangements is not readily determinable and the prevailing commercial property mortgage rate is utilized in determining the present value of lease payments.
The monthly cash payment for this operating lease is approximately $4,010 per month, and the lease term ends on March 31, 2021. The Company recorded right-of-use assets and liabilities of $91,774 on March 19, 2019, based on the present value of payments and an incremental borrowing rate of 4.27% per annum.
The following schedule sets forth the operating lease right of use activity for the yearyears ended December 31, 2020 and 2019:
| Capitalized present value of lease payments | $ | 91,774 | |
| Less amortization | (32,363 | ) | |
| Foreign currency adjustment | (1,275 | ) | |
| Operating lease right of use asset, net | $ | 58,136 |
| 2020 | 2019 | |||||||
| Capitalized present value of lease payments | $ | 91,774 | $ | 91,774 | ||||
| Less amortization | (77,371 | ) | (32,363 | ) | ||||
| Foreign currency adjustment | (2,435 | ) | (1,275 | ) | ||||
| Operating lease right of use asset, net | $ | 11,968 | $ | 58,136 | ||||
The following schedule sets forth the current portion and long-term portion of operating lease liabilities as of December 31, 20192020 and 2018:2019:
|
| December 31, |
| |||||
|
| 2019 |
|
| 2018 |
| ||
|
|
|
|
|
|
| ||
Current portion |
| $ | 46,509 |
|
| $ | - |
|
Long-term portion |
|
| 11,627 |
|
|
| - |
|
Total lease liability |
| $ | 58,136 |
|
| $ | - |
|
| December 31, | ||||||||
| 2020 | 2019 | |||||||
| Current portion | $ | 11,968 | $ | 46,509 | ||||
| Long-term portion | – | 11,627 | ||||||
| Total lease liability | $ | 11,968 | $ | 58,136 | ||||
| F-17 |
This operating lease had a remaining term of 1.250.25 years as of December 31, 2019.2020. The following schedule sets forth the remaining annual future lease payments outstanding as of December 31, 2019:2020:
| 2020 | $ | 48,120 | |
| 2021 | 12,030 | ||
| Total lease payments | 60,150 | ||
| Less amount representing imputed interest | (2,014 | ) | |
| Present value of lease liabilities | $ | 58,136 |
| 2021 | $ | 12,030 | ||
| Less amount representing imputed interest | (62 | ) | ||
| Present value of lease liabilities | $ | 11,968 |
Cash paid for the amounts included in the measurement of lease liabilities for the yearyears ended December 31, 2020 and 2019 was $36,090.$36,090 and $36,090, respectively. Aggregate lease expense for this operating lease charged to general and administrative expenses in the statement of operations was $55,029$52,587 and $4,485$55,029 for the years ended December 31, 2020 and 2019, and 2018, respectively.
8. Related Party Transactions
Salary and Fees to Directors, Consultants and Professionals
During the years ended December 31, 20192020 and 2018,2019, the Company incurred salary and fees to officers, directors, consultants and professionals who are also considered related parties, in the amount of $289,823$417,094 and $45,774,$289,823, respectively, as follows:
| December 31, | December 31, | |||||||||||||
| 2019 | 2018 | 2020 | 2019 | |||||||||||
| Jason Drummond | $ | 180,788 | $ | 26,698 | $ | 334,868 | $ | 180,788 | ||||||
| Julian Parge | 88,577 | 13,082 | 82,226 | 88,577 | ||||||||||
| Andrew Eggleston | 20,458 | 5,994 | – | 20,458 | ||||||||||
| Total | $ | 289,823 | $ | 45,774 | $ | 417,094 | $ | 289,823 | ||||||
Advances
During the years ended December 31, 20192020 and 2018,2019, the Company incurred feesbase salary owed to Jason Drummond, andits sole officer (paid to him or to his affiliates,affiliates), and periodically advanced amountsbase salary to Mr. Drummond and(paid to him or to his affiliatesaffiliates) in anticipation of future fees.services. As a result of such advances, as of December 31, 2019, $12,606 was due from Mr. Drummond was $12,606,, which was repaid in January 2020.
As of December 31, 2018, due to related parties consisted of $25,482 to Mr. Drummond and $3,185 to Andrew Eggleston.
Additional information with respect to notes payable to related parties and common shares issued to officers, directors, affiliates, and other related parties in payment of costs and expenses is provided at Notes 65 and 9.
9. Stockholders' Equity
Preferred Stock
The Company has authorized a total of 5,000,000 shares of preferred stock, par value $0.001 per share. No preferred shares have been designated by the Company as of December 31, 2020 and 2019.
| F-18 |
Common Stock
The Company is authorized to issue up to 45,000,000 shares of common stock, par value $0.001 per share. As of December 31, 20192020 and 2018,2019, the Company had 24,614,325 shares28,367,525 and 2,502,50024,614,325 shares of common stock issued and outstanding, respectively.
On November 3, 2017, the Company issued 25 shares
Issuances of its common stock to its founders at no consideration. On December 4, 2018, in a Written Resolutionupon conversion of the Sole Director, the Company sub-divided the 25 shares previously issued to the founder into 2,500 shares. Accordingly, share and per share amounts with respect to this subdivision presented herein have been retroactively restated to reflect the 100-for-1 stock split as if it had been effected on the first day of the earliest period presented.notes payable
On November 28, 2018, the Company sold 1,750,000 shares of the Company's common stock to its founders for an aggregate cash purchase price of $896.
On May 7, 2019, the Company sold 7,424,350 shares of the Company's common stock to an existing shareholder for a cash purchase price of $209,614, reflecting an effective price per share of approximately $0.03.
On May 7, 2019, a note payable to a related party in the principal amount of $19,651 was converted into 696,025 shares of the Company's common stock, reflecting an effective price per share of approximately $0.03.
On May 29, 2019, notes payable to related parties in the principal amount of $296,738 were converted into 5,880,875 shares of the Company's common stock, reflecting an effective price per share of approximately $0.05.
On September 25, 2019, the Company sold 1,125,000 shares of the Company's common stock to an existing shareholder for a cash purchase price of $55,606, reflecting an effective price per share of approximately $0.05.
Additional information with respect to common stock issued in connection with the conversion of notes payable is provided at Note 6.5.
Common Stock Issuable
Common
On August 10, 2018, the Company (through Gaming UK) entered into an Asset Sale Agreement (the "Sale Agreement") with GameTech UK pursuant to a Court Order (the "Order") issued by the Joint Administrators of GameTech UK Limited (in administration) on May 29, 2018. The Order granted an application previously made on April 19, 2019 for the Administrators of GameTech to sell GameTech assets which were subject to the claims of the secured creditors. Among other provisions, the Order called for the infusion of $300,000 (approximately equivalent to 235,000£) into the Company, and the issuance of 30% of the Company's equity to the secured creditors, for which the secured creditors would release their secured interest. Accordingly, it was determined that 3,271,150 common shares, valued at $42,162 (approximately equivalent to 33,016£), were to be issued in order to satisfy this provision. On December 4, 2018, 750,000 of such shares valued at $9,667 (approximately equivalent to 7,570£), were issued. At December 31, 2018, common stock issuable consistsconsisted of the value of 2,521,150 shares of the Company's common sharesstock allocated to satisfy certain provisions of the transaction with GameTech (see Note 3).UK Limited ("GameTech") as described below.
On December 31, 2018, common stock issuable consistedMay 29, 2019, the remaining 2,521,150 of 2,521,150 commonsuch shares valued at $32,495 (approximately equivalent to 24,446£25,446£), which were issued on May 29, 2019.issued.
Common Shares Issued to Officers, Directors, Affiliates and Other Related Parties in Payment of Costs and Expenses
During the year ended December 31, 2019, the Company issued 4,343,425 shares of the Company's common stock, valued at $137,645, reflecting an effective price per share of approximately $0.03, in payment of accrued costs and expenses to officers, directors, affiliates, and other related parties.
Private Placement of Common Stock
On May 7, 2019, the Company sold 7,424,350 shares of the Company's common stock to an existing shareholder for a cash purchase price of $209,614, reflecting an effective price per share of approximately $0.03. On September 25, 2019, the Company sold 1,125,000 shares of the Company's common stock to an existing shareholder for a cash purchase price of $55,606, reflecting an effective price per share of approximately $0.05.
| F-19 |
Effective as of February 26, 2020, the Company completed a private placement to non-U.S. persons for the sale of 205,000 shares of its common stock (the "Private Placement") at a price of $2.50 per share pursuant to Rule 903 of Regulation S under the Securities Act with thirteen individual investors for cash proceeds of $512,500. No fees or other costs were incurred in connection with this Private Placement.
Of the 205,000 shares of common stock sold, 121,000 shares were sold for a total purchase price of $302,500 prior to December 31, 2019. During January and February 2020, the remaining 84,000 shares were sold for a total purchase price of $210,000. The proceeds from the Private Placement were used for general operating purposes.
On March 4, 2020, the fourteenth investor elected to cancel their subscription for 24,000 shares of common stock. The subscription proceeds of $60,000, which were received in December 2019, were returned to the cancelling investor on March 18, 2020. As of December 31, 2019, the cancelled stock sale was excluded from stockholders' equity and was reflected as a cancelled common stock investment payable in the consolidated balance sheet at such date.
Share Exchange Agreement with Dito UK
Effective asDuring June 2020, the Company sold an aggregate of March 18, 2020, Dito, Inc. entered into Share Exchange Agreements (the "Exchange Agreements") and completed the acquisition of all of the outstanding ordinary shares of Dito UK Limited. The Exchange Agreements provided for each outstanding ordinary share of Dito UK Limited to be effectively converted into 2524,200 shares of common stock at $2.50 per share to 3 investors, generating gross proceeds of Dito, Inc.,$60,500.
On October 16, 2020, the Company sold 5,000 shares of common stock at $2.50 per share to an investor, generating gross proceeds of $12,500.
On November 12, 2020, the Company sold 40,000 shares of common stock at $2.50 per share to two investors, generating gross proceeds of $100,000.
On November 20, 2020, the Company sold 600,000 shares of common stock at $2.50 per share to an investor, generating gross proceeds of $1,500,000. In connection with this transaction, the Company agreed to pay a cash finder’s fee to a broker equal to nine percent (9%) of gross proceeds, equal to $135,000, and a warrant to purchase nine percent (9%) of the total shares purchased, or 54,000 shares of the Company’s common stock, at $2.50 per share, with a term of five years. In addition, the Company agreed to pay the broker additional compensation consisting of 250,000 restricted shares of common stock if and when the investor has purchased an aggregate of 1,600,000 shares of the Company’s common stock in a private placement.
On December 2, 2020, the Company sold 400,000 shares of common stock at $2.50 per share to an investor, generating gross proceeds of $1,000,000. The Company paid $90,000 in placement agent fees and $30,000 in legal fees in connection with the private placement.
Consulting Agreements
Effective August 3, 2020, the Company entered into a consulting agreement with Montrose Capital Partners Limited to provide consulting, advisory and related services to the Company for a term of two years. Consideration under this consulting agreement was paid exclusively in the form of 2,000,000 shares of the Company's common stock, which were valued at $5,000,000 based on the fair value of the Company's common stock of $2.50 per share on the effective date of the consulting agreement. The total consideration pursuant to this consulting agreement of $5,000,000 was charged to general and administrative costs in the statement of operations on the issuance date. The consulting agreement requires the Company to include such shares in any registration statement that it files with the SEC.
On October 21, 2020, the Company entered into an agreement with a consultant to serve as a result Dito UK Limited becameboard advisor. The term of the agreement is for one year and may be renewed at the end of the term. Compensation consists of the following stock grants: 50,000 shares of the Company’s common stock within seven days of the execution of the agreement, valued at $125,000; 50,000 shares of the Company’s common stock upon the quotation of the Company’s stock on OTC Markets; and 100,000 shares of the Company common stock at each of the following three renewal periods, if the agreement is renewed.
| F-20 |
On November 6, 2020, the Company entered into an agreement with a wholly-owned subsidiaryconsultant to serve as a board advisor. The term of Dito, Inc. inthe agreement is for one year and may be renewed at the end of the term. Compensation consists of the following stock grants: 50,000 shares of the Company’s common stock within seven days of the execution of the agreement, valued at $125,000; 50,000 shares of the Company’s common stock six months after the date of the agreement; 50,000 shares of the Company’s common stock upon the first renewal of the agreement and 50,000 shares of the Company’s common stock six months after the first renewal; and, 100,000 shares of the Company common stock at each of the following two renewal periods, if the agreement is renewed.
On November 25, 2020, the Company entered into an agreement with a recapitalization transaction,consultant to serve as describeda board advisor. The term of the agreement is for one year with automatic renewal for successive one-year terms unless either party elects not to renew. Compensation consists of 250,000 shares of the Company’s common stock within seven days of the execution of the agreement, valued at Note 1.$625,000.
Warrants
A summary of warrant activity for the year ended December 31, 2020 is presented below:
| Warrants | Weighted average exercise price | Weighted average remaining contractual life (years) | Aggregate intrinsic value | |||||||||||||
| Outstanding on December 31, 2019 | – | $ | – | – | $ | – | ||||||||||
| Granted | 90,000 | 2.50 | 4.89 | – | ||||||||||||
| Exercised | – | – | – | – | ||||||||||||
| Outstanding on December 31, 2020 | 90,000 | $ | 2.50 | 4.89 | $ | – | ||||||||||
10. Income Taxes
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax assets as of December 31, 20192020 and 20182019 are summarized below.
| December 31, | December 31, | |||||||||||||
| 2019 | 2018 | 2020 | 2019 | |||||||||||
| Net operating loss carryforwards - Foreign | $ | 143,000 | $ | 22,000 | $ | 1,879,000 | $ | 143,000 | ||||||
| Net operating loss carryforwards - U.S. | 1,000 | - | 421,000 | 1,000 | ||||||||||
| 144,000 | 22,000 | 2,300,000 | 144,000 | |||||||||||
| Valuation allowance | (144,000 | ) | (22,000 | ) | (2,300,000 | ) | (144,000 | ) | ||||||
| Net deferred tax assets | $ | - | $ | - | $ | – | $ | – | ||||||
In assessing the potential realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the Company attaining future taxable income during the periods in which those temporary differences become deductible. As of December 31, 20192020 and 2018,2019, management was unable to determine if it is more likely than not that the Company's deferred tax assets will be realized and has therefore recorded an appropriate valuation allowance against deferred tax assets at such dates.
No U.S. federal tax provision has been provided for DitoGaming US for the yearyears ended December 31, 2020 and 2019 due to the losses incurred during such period. No U.S. federal tax provision was provided for Dito US for the year ended December 31, 2018 because it had not been organized at such date.periods.
| F-21 |
The reconciliation below presents the difference between the income tax rate computed by applying the U.S. federal statutory rate and the effective tax rate for the years ended December 31, 20192020 and 2018.2019.
| Years Ended December 31, | ||||||
| 2019 | 2018 | |||||
| U. S. federal statutory tax rate | (21.0 | )% | (21.0 | )% | ||
| Difference between U.S. and U.K. tax rates | 2.0 | % | 2.0 | % | ||
| Change in valuation allowance | 19.0 | % | 19.0 | % | ||
| Effective tax rate | 0.0 | % | 0.0 | % | ||
| Years Ended December 31, | ||||||||
| 2020 | 2019 | |||||||
| U. S. federal statutory tax rate | (21.0)% | (21.0)% | ||||||
| Difference between U.S. and U.K. tax rates | 2.0 % | 2.0 % | ||||||
| Change in valuation allowance | 19.0 % | 19.0 % | ||||||
| Effective tax rate | 0.0 % | 0.0 % | ||||||
The Company's United Kingdom subsidiary is subject to the income tax laws of the United Kingdom. The corporate tax rate in the United Kingdom is 19% on income reported in its statutory financial statements, after appropriate tax adjustments, for the fiscal years commencing April 1, 2017, 2018, 2019, and 2019,2020 and 18% for the fiscal year commencing April 1, 2020.
At December 31, 2019,2020, the Company has available net operating loss carryforwards for U.S. federal and United Kingdom corporate income tax purposes of approximately $4,000$825,000 and $751,000,$1,912,000, respectively. U.S. federal net operating losses, if not utilized earlier, expire through 2039. United Kingdom net operating losses may be carried over indefinitely.
11. Commitments and Contingencies
Legal Contingencies
The Company may be subject to legal proceedings from time to time as part of its business activities. As of December 31, 20192020 and 2018,2019, the Company was not subject to any threatened or pending legal actions or claims.
Leases Commitments
Information with respect to operating lease commitments is provided at Note 8.
Contractual Commitments
The Company has retained Julian Parge as a consultant to DitoGaming UK, at the request and under the sole discretion of DitoGaming UK, at the rate of $1,658 (equivalent to 1,250£) per week up to a maximum of $82,888 (equivalent to 62,500£) per annum.
Impact of COVID-19 on the Company
The global outbreak of COVID-19 has led to severe disruptions in general economic activities, as businesses and governments have taken broad actions to mitigate this public health crisis. Although the Company has not experienced any significant disruption to its business to date, these conditions could significantly negatively impact the Company's business in the future.
The extent to which the COVID-19 outbreak ultimately impacts the Company's business, future revenues, results of operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to, the duration and spread of the outbreak, its severity and longevity, the actions to curtail the virus and treat its impact (including an effective vaccine), and how quickly and to what extent normal economic and operating conditions can resume. Even after the COVID-19 outbreak has subsided, the Company may be at risk of experiencing a significant impact to its business as a result of the global economic impact, including any economic downturn or recession that has occurred or may occur in the future.
| F-22 |
Currently, capital markets have been disrupted by the crisis, as a result of which the availability, amount and type of financing available to the Company in the near future is uncertain and cannot be assured and is largely dependent upon evolving market conditions and other factors.
The Company intends to continue to monitor the situation and may adjust its current business plans as more information and guidance become available.
12. Subsequent Events
The Company performed an evaluation of subsequent events through the date on which these consolidated financial statements were issued. There were no material subsequent events which affected, or could affect, the amounts or disclosures in the consolidated financial statements, other than those as described below.
Private Placement of Common Stock
Effective as of February 26, 2020,
During the three months ended March 31, 2021, the Company completed a private placement to non-U.S. persons for the sale of 205,000sold 1,614,600 shares of its common stock (the "Private Placement")to private investors for gross proceeds of $4,036,500.
Consulting Agreements
In January 2021, the Company entered into two agreements with two consultants to provide investor relation services to the Company. The agreements are for a term of one year. The Company issued 200,000 shares of its common stock in exchange for the services. The common stock was valued at $500,000 at the time the agreements were executed.
In February 2021, the Company entered into an internet advertising campaign with a priceconsultant. The contract is for a term of $2.50one year and calls for an initial non-refundable deposit of $20,000 upon the execution of the agreement and a payment of $1,000,000, payable with shares of the Company’s common stock using a value of $3.00 per share, pursuantrepresenting 333,334 shares of the Company’s common stock.
Related Party Transactions
During the three months ended March 31, 2021, the Company paid base salary and a bonus of £75,000, totaling $198,361 to Rule 903Jason Drummond, the Company’s sole director and executive officer.
Sponsorship Agreement
On April 14, 2021, we entered into a Sponsorship Agreement (the “Canelo Agreement”) with SA Holiday, Inc. (“Holiday”), owner of Regulation S under the Securities Act with thirteen individual investors for cash proceedspersonality rights of $512,500. No feeschampion professional boxer Saul Alvarez Barragan, or other costs were incurred“Canelo,” in connection with this Private Placement. Additional information with respecta promotional campaign for the Corporation to sponsor a prize fight and certain other activities of Canelo, and for Canelo to promote the Corporation’s “VALE” brand and create certain promotional materials in connection therewith for the Corporation’s use in the United States, Latin America and certain countries in the Caribbean. Pursuant to the Private Placement isCanelo Agreement we will, among other things, pay to Holiday a cash fee of US$1,600,000 and be responsible for paying certain other amounts as provided at Note 9.therein.
Share Exchange Agreement with Dito UK Limited
Effective as of March 18, 2020, Dito, Inc. entered into Share Exchange Agreements (the "Exchange Agreements") and completed the acquisition of all of the outstanding ordinary shares of Dito UK Limited. The Exchange Agreements provided for each outstanding ordinary share of Dito UK Limited to be effectively converted into 25 shares of common stock of Dito, Inc., and as a result Dito UK Limited became a wholly-owned subsidiary of Dito, Inc. in a recapitalization transaction, as described at Note 1. Additional information with respect to the Share Exchange Agreement is provided at Note 9.
| F-23 |
F-21
DITO,
GAMING TECHNOLOGIES, INC.
AND SUBSIDIARY
INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Six Months Ended June 30, 2020 and 2019
| |
| |
DITO, INC.
AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
| June 30, 2020 | December 31, 2019 | |||||
| (Unaudited) | ||||||
| ASSETS | ||||||
| Current assets: | ||||||
| Cash | $ | 56,799 | $ | 320,402 | ||
| Due from related parties | 64,506 | 12,606 | ||||
| Deposits and other current assets | 34,054 | 33,942 | ||||
| Total current assets | 155,359 | 366,950 | ||||
| Property and equipment, net | 12,575 | 12,132 | ||||
| Operating lease right of use asset, net | 32,827 | 58,136 | ||||
| Intellectual property, net | 63,917 | 99,968 | ||||
| Total assets | $ | 264,678 | $ | 537,186 | ||
| LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY) | ||||||
| Current liabilities: | ||||||
| Accounts payable and accrued expenses | $ | 241,671 | $ | 51,672 | ||
| Cancelled common stock investment repayable | - | 60,000 | ||||
| Due to related parties | 4,131 | 1,950 | ||||
| Notes payable to related parties, net | - | 52,225 | ||||
| Current portion of note payable to bank | 11,217 | - | ||||
| Current portion of operating lease liability | 32,827 | 46,509 | ||||
| Total current liabilities | 289,846 | 212,356 | ||||
| Note payable to bank, net of current portion | 47,774 | - | ||||
| Operating lease liability, net of current portion | - | 11,627 | ||||
| 337,620 | 223,983 | |||||
| Commitments and contingencies | ||||||
| Stockholders' equity (deficiency): | ||||||
| Preferred stock, $0.001 par value; authorized -5,000,000 shares; issued - none | - | - | ||||
| Common stock, $0.001 par value; authorized - 45,000,000 shares; issued and outstanding - 24,698,325 shares and 24,614,325 shares at June 30, 2020 and December 31, 2019, respectively | 24,698 | 24,614 | ||||
| Additional paid-in capital | 1,262,176 | 1,040,199 | ||||
| Accumulated other comprehensive income | 12,742 | 2,766 | ||||
| Accumulated deficit | (1,372,558 | ) | (754,376 | ) | ||
| Total stockholders' equity (deficiency) | (72,942 | ) | 313,203 | |||
| Total liabilities and stockholders' equity (deficiency) | $ | 264,678 | $ | 537,186 |
| June 30, 2021 | December 31, 2020 | |||||||
| Unaudited | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | 306,719 | $ | 1,946,232 | ||||
| Deposits and other current assets | 162,839 | 37,917 | ||||||
| Total current assets | 469,558 | 1,984,149 | ||||||
| Property and equipment, net | 8,321 | 8,503 | ||||||
| Operating lease right of use asset, net | 0 | 11,968 | ||||||
| Intellectual property, net | 190,241 | 50,967 | ||||||
| Total assets | $ | 668,120 | $ | 2,055,587 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | 476,056 | $ | 368,784 | ||||
| Due to related parties | 12,588 | 14,918 | ||||||
| Current portion of note payable, bank | 13,990 | 2,241 | ||||||
| Current portion of operating lease liability | 0 | 11,968 | ||||||
| Total current liabilities | 502,634 | 397,911 | ||||||
| Note payable, bank | 50,992 | 62,741 | ||||||
| Total liabilities | 553,626 | 460,652 | ||||||
| Commitments and contingencies | – | – | ||||||
| Stockholders' equity: | ||||||||
| Preferred stock, $ par value; authorized - shares; issued - | 0 | 0 | ||||||
| Common stock, $ par value; authorized - shares; issued and outstanding - shares and shares at June 30, 2021 and December 31, 2020, respectively | 30,521 | 28,367 | ||||||
| Additional paid-in capital | 14,698,188 | 9,551,507 | ||||||
| Accumulated other comprehensive income | (40,410 | ) | (18,746 | ) | ||||
| Accumulated deficit | (14,573,805 | ) | (7,966,193 | ) | ||||
| Total stockholders' equity | 114,494 | 1,594,935 | ||||||
| Total liabilities and stockholders' equity | $ | 668,120 | $ | 2,055,587 | ||||
See accompanying notes to condensed consolidated financial statements.
| F-24 |
F-23
DITO,
GAMING TECHNOLOGIES, INC.
AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(UNAUDITED)
(Unaudited)
| Six Months Ended | ||||||||||||||||||||||
| June 30, | Three Months Ended | Six Months Ended | ||||||||||||||||||||
| 2020 | 2019 | June 30, | June 30, | |||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
| Revenues | $ | - | $ | - | ||||||||||||||||||
| Costs and expenses: | ||||||||||||||||||||||
| Software development, including amortization of intellectual property of $30,011 and $30,802 in 2020 and 2019, respectively | 34,802 | 127,794 | ||||||||||||||||||||
| Revenue | $ | 23,321 | $ | 0 | $ | 25,410 | $ | 0 | ||||||||||||||
| Costs and Expenses: | ||||||||||||||||||||||
| Cost of revenues | 91,318 | 0 | 273,581 | 0 | ||||||||||||||||||
| Software development, including amortization of intellectual property of $15,150 and $14,697 in the three months ended June 30, 2021 and 2020, respectively and $35,071 and $30,011 in the six months ended June 30, 2021 and 2020, respectively | 114,460 | 14,697 | 132,863 | 34,802 | ||||||||||||||||||
| General and administrative: | ||||||||||||||||||||||
| Officers, directors, affiliates, and other related parties | 234,423 | 142,197 | 155,727 | 148,914 | 447,582 | 234,423 | ||||||||||||||||
| Others | 327,072 | 68,849 | ||||||||||||||||||||
| Total costs and expenses | 596,297 | 338,840 | ||||||||||||||||||||
| Other (including stock compensation costs of $ and $ in the three and six months ended June 30, 2021, respectively) | 3,888,605 | 199,942 | 5,778,996 | 327,072 | ||||||||||||||||||
| Total Costs and expenses | 4,250,110 | 363,553 | 6,633,022 | 596,297 | ||||||||||||||||||
| Loss from operations | (596,297 | ) | (338,840 | ) | (4,226,789 | ) | (363,553 | ) | (6,607,612 | ) | (596,297 | ) | ||||||||||
| Other income (expense): | ||||||||||||||||||||||
| Interest expense | (3,081 | ) | (7,448 | ) | 0 | (2,083 | ) | 0 | (2,995 | ) | ||||||||||||
| Interest expense subsidy | 86 | - | ||||||||||||||||||||
| Foreign currency loss | (18,890 | ) | - | |||||||||||||||||||
| Foreign currency gain or (loss) | 0 | (1,042 | ) | 0 | (18,890 | ) | ||||||||||||||||
| Total other expense, net | (21,885 | ) | (7,448 | ) | 0 | (3,125 | ) | 0 | (21,885 | ) | ||||||||||||
| Net loss | (618,182 | ) | (346,288 | ) | (4,226,789 | ) | (366,678 | ) | (6,607,612 | ) | (618,182 | ) | ||||||||||
| Foreign currency translation adjustment | 9,976 | (1,216 | ) | (8,491 | ) | 9,976 | (21,664 | ) | 9,976 | |||||||||||||
| Comprehensive loss | $ | (608,206 | ) | $ | (347,504 | ) | $ | (4,235,280 | ) | $ | (356,702 | ) | $ | (6,629,276 | ) | $ | (608,206 | ) | ||||
| Net loss per common share - basic and diluted | $ | (0.03 | ) | $ | (0.05 | ) | $ | (0.14 | ) | $ | (0.05 | ) | $ | (0.22 | ) | $ | (0.02 | ) | ||||
| Weighted average common shares outstanding - basic and diluted | 24,689,545 | 7,518,094 | 30,521,059 | 7,518,094 | 30,033,705 | 24,689,545 | ||||||||||||||||
See accompanying notes to condensed consolidated financial statements.
| F-25 |
F-24
DITO,
GAMING TECHNOLOGIES, INC.
AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY) (UNAUDITED)
(Unaudited)
Three and Six Months Ended June 30, 20202021 and 20192020
| Common Stock | Common Stock | Additional Paid-in | Accumulated Other Comprehensive Income | Accumulated | Stockholders' Equity | ||||||||||||||||
| Shares | Par Value | Issuable | Capital | Deficit | (Deficiency) | ||||||||||||||||
| Balance, December 31, 2019 | 24,614,325 | $ | 24,614 | $ | - | $ | 1,040,199 | $ | 2,766 | $ | (754,376 | ) | $ | 313,203 | |||||||
| Common stock issued in connection with private placement | 84,000 | 84 | - | 209,916 | - | - | 210,000 | ||||||||||||||
| Accrued interest contributed to capital by related parties | - | - | - | 12,061 | - | - | 12,061 | ||||||||||||||
| Foreign currency translation adjustment | - | - | - | - | 9,976 | - | 9,976 | ||||||||||||||
| Net loss | - | - | - | - | - | (618,182 | ) | (618,182 | ) | ||||||||||||
| Balance, June 30, 2020 | 24,698,325 | $ | 24,698 | $ | - | $ | 1,262,176 | $ | 12,742 | $ | (1,372,558 | ) | $ | (72,942 | ) | ||||||
| Balance, December 31, 2018 | 2,502,500 | $ | 2,503 | $ | 32,495 | $ | 8,060 | $ | 5,288 | $ | (118,343 | ) | $ | (69,997 | ) | ||||||
| Common stock issued for cash | 7,424,350 | 7,424 | - | 202,190 | - | - | 209,614 | ||||||||||||||
| Common stock issued in payment of notes payable | 6,576,900 | 6,577 | - | 309,812 | - | - | 316,389 | ||||||||||||||
| Common stock issued in connection with GameTech transaction | 2,521,150 | 2,521 | (32,495 | ) | 29,974 | - | - | - | |||||||||||||
| Common stock issued in payment of accrued costs and expenses to officers, directors, affiliates, and other related parties | 3,712,175 | 3,712 | - | 101,096 | - | - | 104,808 | ||||||||||||||
| Foreign currency translation adjustment | - | - | - | - | (1,216 | ) | - | (1,216 | ) | ||||||||||||
| Net loss | - | - | - | - | - | (346,288 | ) | (346,288 | ) | ||||||||||||
| Balance, June 30, 2019 | 22,737,075 | $ | 22,737 | $ | - | $ | 651,132 | $ | 4,072 | $ | (464,631 | ) | $ | 213,310 | |||||||
Three and six months ended June 30, 2021:
| Common Stock | Additional Paid-in | Accumulated Other Comprehensive | Accumulated | Stockholders' Equity | ||||||||||||||||||||
| Shares | Par Value | Capital | Income | Deficit | (Deficiency) | |||||||||||||||||||
| Balance, March 31, 2021 | 30,521,059 | $ | 30,521 | $ | 14,677,355 | $ | (31,919 | ) | $ | (10,347,016 | ) | $ | 4,328,941 | |||||||||||
| Common stock issued in connection with private placement, net | – | – | – | – | – | – | ||||||||||||||||||
| Common stock issued as compensation | – | – | 20,833 | – | – | 20,833 | ||||||||||||||||||
| Foreign currency translation adjustment | – | – | – | (8,491 | ) | – | (8,491 | ) | ||||||||||||||||
| Net loss for the three months ended June 30, 2021 | – | – | – | – | (4,226,789 | ) | (4,226,789 | ) | ||||||||||||||||
| Balance, June 30, 2021 | 30,521,059 | $ | 30,521 | $ | 14,698,188 | $ | (40,410 | ) | $ | (14,573,805 | ) | $ | 114,494 | |||||||||||
| Common Stock | Additional Paid-in | Accumulated Other Comprehensive | Accumulated | Stockholders' Equity | ||||||||||||||||||||
| Shares | Par Value | Capital | Income | Deficit | (Deficiency) | |||||||||||||||||||
| Balance, December 31, 2020 | 28,367,525 | $ | 28,367 | $ | 9,551,507 | $ | (18,746 | ) | $ | (7,966,193 | ) | $ | 1,594,935 | |||||||||||
| Common stock issued in connection with private placement, net | 1,616,600 | 1,617 | 3,679,883 | – | – | 3,681,500 | ||||||||||||||||||
| Common stock issued as compensation | 536,934 | 537 | 1,466,798 | – | – | 1,467,335 | ||||||||||||||||||
| Foreign currency translation adjustment | – | – | – | (21,664 | ) | – | (21,664 | ) | ||||||||||||||||
| Net loss for the six months ended June 30, 2021 | – | – | – | – | (6,607,612 | ) | (6,607,612 | ) | ||||||||||||||||
| Balance, June 30, 2021 | 30,521,059 | $ | 30,521 | $ | 14,698,188 | $ | (40,410 | ) | $ | (14,573,805 | ) | $ | 114,494 | |||||||||||
Three and six months ended June 30, 2020:
| Common Stock | Additional Paid-in | Accumulated Other Comprehensive | Accumulated | Stockholders' Equity | ||||||||||||||||||||
| Shares | Par Value | Capital | Income | Deficit | (Deficiency) | |||||||||||||||||||
| Balance, March 31, 2020 | 24,698,325 | $ | 24,698 | $ | 1,262,176 | $ | 10,229 | $ | (1,005,880 | ) | $ | 291,223 | ||||||||||||
| Common stock issued in connection with private placement, net | – | – | – | – | – | – | ||||||||||||||||||
| Acquisition of Game Tech | – | – | – | – | – | – | ||||||||||||||||||
| Foreign currency translation adjustment | – | – | – | 2,513 | – | 2,513 | ||||||||||||||||||
| Net loss for the three months ended June 30, 2020 | – | – | – | – | (366,678 | ) | (366,678 | ) | ||||||||||||||||
| Balance, June 30, 2020 | 24,698,325 | $ | 24,698 | $ | 1,262,176 | $ | 12,742 | $ | (1,372,558 | ) | $ | (72,942 | ) | |||||||||||
| Common Stock | Additional Paid-in | Accumulated Other Comprehensive | Accumulated | Stockholders' Equity | ||||||||||||||||||||
| Shares | Par Value | Capital | Income | Deficit | (Deficiency) | |||||||||||||||||||
| Balance, December 31, 2019 | 24,614,325 | $ | 24,614 | $ | 1,040,199 | $ | 2,766 | $ | (754,376 | ) | $ | 313,203 | ||||||||||||
| Common stock issued in connection with private placement, net | 84,000 | 84 | 209,916 | – | – | 210,000 | ||||||||||||||||||
| Acquisition of Game Tech | – | – | 12,061 | – | – | 12,061 | ||||||||||||||||||
| Foreign currency translation adjustment | – | – | – | 9,976 | – | 9,976 | ||||||||||||||||||
| Net loss for the six months ended June 30, 2020 | – | – | – | – | (618,182 | ) | (618,182 | ) | ||||||||||||||||
| Balance, June 30, 2020 | 24,698,325 | $ | 24,698 | $ | 1,262,176 | $ | 12,742 | $ | (1,372,558 | ) | $ | (72,942 | ) | |||||||||||
See accompanying notes to condensed consolidated financial statements.
| F-26 |
F-25
DITO,
GAMING TECHNOLOGIES, INC.
AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
| Six Months Ended June 30, | ||||||||
| 2021 | 2020 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | (6,607,612 | ) | $ | (618,182 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation | 5,146 | 3,844 | ||||||
| Interest expense subsidy | – | (86 | ) | |||||
| Amortization of intellectual property | 35,342 | 30,011 | ||||||
| Amortization of accrued lending fee | – | (599 | ) | |||||
| Amortization of operating lease right of use asset | 11,968 | 21,870 | ||||||
| Stock compensation | 1,467,335 | 0 | ||||||
| Foreign currency gain / (loss) | – | 18,890 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| (Increase) decrease in - | ||||||||
| Due from related parties | 0 | (53,727 | ) | |||||
| Deposits and other current assets | (124,922 | ) | (2,377 | ) | ||||
| Increase (decrease) in - | ||||||||
| Accounts payable and accrued expenses | 107,272 | 196,341 | ||||||
| Due to related parties | (2,330 | ) | 2,312 | |||||
| Operating lease liability | (11,968 | ) | (21,870 | ) | ||||
| Accrued interest payable | 0 | 86 | ||||||
| Net cash used in operating activities | (5,119,769 | ) | (423,487 | ) | ||||
| Cash flows from investing activities: | ||||||||
| Purchase of intellectual property | (174,616 | ) | 0 | |||||
| Purchase of property and equipment | (4,964 | ) | (5,266 | ) | ||||
| Net cash used in investing activities | (179,580 | ) | (5,266 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from private placement of common stock | 3,681,500 | 210,000 | ||||||
| Proceeds from note payable bank | 0 | 60,623 | ||||||
| Repayment of note payable related party | 0 | (35,508 | ) | |||||
| Repayment of cancelled common stock subscription | – | (60,000 | ) | |||||
| Net cash provided by financing activities | 3,681,500 | 175,115 | ||||||
| Effect of exchange rate on cash | (21,664 | ) | (9,965 | ) | ||||
| Cash: | ||||||||
| Net decrease | (1,639,513 | ) | (263,603 | ) | ||||
| Balance at beginning of year | 1,946,232 | 320,402 | ||||||
| Balance at end of year | $ | 306,719 | $ | 56,799 | ||||
(Continued)
| F-27 |
GAMING TECHNOLOGIES, INC.
AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Unaudited)
| Six Months Ended June 30, | ||||||
| 2020 | 2019 | |||||
| Cash flows from operating activities: | ||||||
| Net loss | $ | (618,182 | ) | $ | (346,288 | ) |
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||
| Depreciation | 3,844 | 3,133 | ||||
| Interest expense subsidy | (86 | ) | - | |||
| Amortization of intellectual property | 30,011 | 30,802 | ||||
| Amortization of accrued lending fee | (599 | ) | - | |||
| Amortization of operating lease right of use asset | 21,870 | 10,814 | ||||
| Foreign currency loss | 18,890 | - | ||||
| Changes in operating assets and liabilities: | ||||||
| (Increase) decrease in - | ||||||
| Due from related parties | (53,727 | ) | 51,760 | |||
| Deposits and other current assets | (2,377 | ) | 2,926 | |||
| Increase (decrease) in - | ||||||
| Accounts payable and accrued expenses | 196,341 | 10,234 | ||||
| Due to related parties | 2,312 | 12,064 | ||||
| Operating lease liability | (21,870 | ) | (10,814 | ) | ||
| Accrued interest payable | 86 | 7,450 | ||||
| Net cash used in operating activities | (423,487 | ) | (227,919 | ) | ||
| Cash flows from investing activities: | ||||||
| Purchase of property and equipment | (5,266 | ) | (5,317 | ) | ||
| Proceeds from sales of property and equipment | - | 4,253 | ||||
| Net cash used in investing activities | (5,266 | ) | (1,064 | ) | ||
| Cash flows from financing activities: | ||||||
| Proceeds from private placement of common stock | 210,000 | - | ||||
| Proceeds from note payable to bank | 60,623 | - | ||||
| Proceeds from note payable to related party | - | 19,023 | ||||
| Proceeds from sale of common stock to related party | - | 209,614 | ||||
| Repayment of note payable to related party | (35,508 | ) | - | |||
| Repayment of cancelled common stock investment | (60,000 | ) | - | |||
| Net cash provided by financing activities | 175,115 | 228,637 | ||||
| Effect of exchange rate on cash | (9,965 | ) | (1,941 | ) | ||
| Cash: | ||||||
| Net decrease | (263,603 | ) | (2,287 | ) | ||
| Balance at beginning of period | 320,402 | 79,467 | ||||
| Balance at end of period | $ | 56,799 | $ | 77,180 | ||
(Continued)
DITO, INC.
| Six Months Ended June 30, | ||||||||
| 2021 | 2020 | |||||||
| Supplemental disclosures of cash flow information: | ||||||||
| Cash paid for - | ||||||||
| Interest | $ | 0 | $ | 3,593 | ||||
| Income taxes | $ | 0 | $ | 0 | ||||
| Non-cash investing and financing activities: | ||||||||
| Accrued interest payable contributed to capital by related parties | $ | – | $ | 12,061 | ||||
AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Continued)
| Six Months Ended June 30, | ||||||
| 2020 | 2019 | |||||
| Supplemental disclosures of cash flow information: | ||||||
| Cash paid for - | ||||||
| Interest | $ | 3,593 | $ | - | ||
| Income taxes | $ | - | $ | - | ||
| Non-cash investing and financing activities: | ||||||
| Accrued interest payable contributed to capital by related parties | $ | 12,061 | $ | - | ||
| Principal amount of notes payable to related parties converted into common stock | $ | - | $ | 316,389 | ||
| Recognition of operating lease right of use asset and operating lease liability | $ | - | $ | 91,774 | ||
| Value of common stock issued in connection with GameTech transaction | $ | - | $ | 32,495 | ||
See accompanying notes to condensed consolidated financial statements.
| F-28 |
F-27
DITO,
GAMING TECHNOLOGIES, INC.
AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Unaudited)
Three and Six Months Ended June 30, 20202021 and 20192020
1. Organization and Basis of Presentation
The condensed consolidated financial statements of
Organization and Combination
Gaming Technologies, Inc. (formerly Dito, Inc., a Delaware corporation ("Dito US"), including its wholly-owned foreign subsidiary, Dito UK Limited ("Dito UK") (collectively, the "Company"(“Gaming US”), at June 30, 2020, and for the six months ended June 30, 2020 and 2019, are unaudited. In the opinion of management of the Company, all adjustments, including normal recurring accruals, have been made that are necessary to present fairly the financial position of the Company as of June 30, 2020, and the results of its operations for the six months ended June 30, 2020 and 2019, and its cash flows for the six months ended June 30, 2020 and 2019. Operating results for the interim periods presented are not necessarily indicative of the results to be expected for a full fiscal year. The condensed consolidated balance sheet at December 31, 2019 has been derived from the Company's audited consolidated financial statements at such date.
The condensed consolidated financial statements and related notes have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC"). Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to such rules and regulations. These condensed consolidated financial statements should be read in conjunction with the Company's audited financial statements for the year ended December 31, 2019 included elsewhere in this document.
Organization and Combination
Dito US was incorporated in the State of Delaware on July 23, 2019. Effective as of March 18, 2020, DitoGaming US completed a Share Exchange Agreement (the "Exchange Agreement") to acquire all of the outstanding ordinary shares of DitoGaming Technologies Limited, formerly Gaming UK Limited, (“Gaming UK”) that provided for each outstanding ordinary share of DitoGaming UK to be effectively converted into 25 shares of common stock of DitoGaming US. As a result, DitoGaming UK became a wholly-owned subsidiary of DitoGaming US in a recapitalization transaction as described below.(collectively, the “Company”). On December 21, 2020, the Company changed its name from Dito, Inc. to Gaming Technologies Inc.
Dito
Gaming UK was originally formed as Smart Tower Limited on November 3, 2017 in the United Kingdom for the purpose of software development. On June 29, 2018, Smart Tower Limited changed its name to NENX Gaming Limited and then to DitoGaming UK Limited on July 29, 2019.2019 and to Gaming Technologies Limited on January 7, 2021.
Dito
Gaming US maintains its principal executive offices in New York, New York,Las Vegas, Nevada, United States. DitoGaming UK maintains its principal executive offices in London, England.
Basis of Presentation
For financial reporting purposes, the Exchange Agreement was accounted for as a combination of entities under common control (the "Combination"), as Dito US was formed by Dito UK, with the objective of Dito UK becoming a wholly-owned subsidiary of Dito US, and the resultant parent company being domiciled in the United States. As a result of the Combination, the former stockholders of Dito UK became the controlling shareholders of Dito US, and the Dito UK management and board members became the management and board members of Dito US.
Accordingly, the condensed consolidated financial statements presented herein for all periods are based on the historical financial statements of each of Dito US and Dito UK. The stockholders' equity section of the Dito US balance sheet has been retroactively restated for all periods presented to reflect the accounting effect of the Combination. The net loss per share and weighted average common shares outstanding information presented herein also reflects this retroactive restatement for all periods presented. All costs associated with the Combination were charged to operations as incurred.
The Company's activities are subject to significant risks and uncertainties, including the need for additional capital, as described below. The Company has not yet commenced any revenue-generating operations, does not have positive cash flows from operations, and is dependent on periodic infusions of debt and equity capital to fund its operating requirements.
Business Operations
The Company is a mobile games developer, publisher, and publisheroperator with offices in London and New York.Las Vegas. The Company specializes in the rapidly growing financial, gaming and entertainment sectors. Once development is complete, the Company intends to license its software platform to mobile gaming operators and developers to enable rapid development of new games. In addition, the Company operates an online gaming operation in Mexico through its web site vale.mx.
On November 13, 2020, we entered into an Agreement for the Provision of Online Gaming Management and Consulting Services (as subsequently amended) with Comercial de Juegos de la Frontera, S.A. de C.V., a Mexican company doing business as Big Bola, pursuant to which we provide to Big Bola consulting and management services related to their interactive online betting and gaming business in Mexico via the web site www.vale.mx, a regulated online casino and sports betting site. vale.mx operates under Big Bola’s existing license issued by the General Directorate of Games and Raffles of the Ministry of Interior (SEGOB). Big Bola is one of only14 operators legally authorized to offer legal betting and online casino services in Mexico. vale.mx has more than 500 online premium casino games available, which can be enjoyed both on mobile or via desktop. Players can receive promotions and play live roulette and blackjack, or high-definition slots from leading software providers such as NetEnt, Microgaming, Pragmatic Play, Evolution and Matrix Studios. We are responsible for player acquisition, promotion and retention for vale.mx. We manage players’ accounts and are required to ensure that the balance in players’ accounts at all times satisfies the requirements under applicable law, and we pay out winnings to players from Big Bola’s account. While Big Bola bears liability to the players as provided by the permit, as between us and Big Bola we bear the costs of this obligation. Each party indemnifies the other against certain liabilities and claims. Under the terms of the agreement, we share 60% of gross gaming revenue generated from the platform, subject to certain minimum guaranteed monthly amounts of Big Bola’s participation in the remaining gross gaming revenues. This venture began operations in February 2021.
On May 19, 2021, we entered into a non-exclusive license agreement with Playboy Enterprises International, Inc. (“Playboy”) to use certain trademarks (including the rabbit head logo) and other intellectual property of Playboy on and in connection with the design, creation, promotion, marketing, advertisement, sales, operation, maintenance and distribution in India of real-money game mobile apps, such as rummy, poker, fantasy sports and other games of skill approved by Playboy. We will pay Playboy as a royalty a percentage of net gaming revenue. The term of the agreement is through the end of 2025, subject to early termination upon certain events of default, which include our failure to launch a Playboy-branded game in India by November 1, 2021, or to meet certain annual minimum net gaming revenue targets.
| F-29 |
Going Concern
The Company's condensed consolidated financial statements have been presented on the basis that the Company is a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. As reflected in the accompanying condensed consolidated financial statements, the Company has had no significant operating revenues to date, and has experienced recurring net losses from operations and negative operating cash flows. During the six months ended June 30, 2020,2021, the Company incurred a net loss of $618,182,$6,607,612 utilized cash in operating activities of $423,487,$5,119,769, and had an accumulated deficit of $1,372,558$14,573,805 as of June 30, 2020.2021. The Company has financed its working capital requirements since inception through the sale of its equity securities and from borrowings.
At June 30, 2020,2021, the Company had cash of $56,799. The Company has limited$306,719, reflecting cash resources to fund its operations and will therefore need to raise additional fundsof $3,681,500 from the sale of common stock in the short-term.first quarter of 2021 and marketing development costs of $3,524,643. The Company estimates that a significant amount of capital will be necessary over a sustained period of time to advance the development of the Company's business to the point at which it can become commercially viable and self-sustaining. However, there can be no assurances that the Company will be successful in this regard.
As a result, management has concluded that there is substantial doubt about the Company's ability to continue as a going concern within one year of the date that the accompanying condensed consolidated financial statements are issued. In addition, the Company's independent registered public accounting firm, in their report on the Company's condensed consolidated financial statements for the year ended December 31, 2019,2020, has also expressed substantial doubt about the Company's ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent upon the Company's ability to raise additional funds and implement its business plan, and to ultimately achieve sustainable operating revenues and profitability. The accompanying condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
The development and expansion of the Company's business during the remainder of 2020in 2021 and thereafter will be dependent on many factors, including the capital resources available to the Company. No assurances can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company or adequate to fund the development and expansion of the Company's business to a level that is commercially viable and self-sustaining. There is also significant uncertainty as to the effect that the coronavirus pandemic may have on the availability, amount and type of financing in the future.
If cash resources are insufficient to satisfy the Company's ongoing cash requirements, the Company would be required to scale back or discontinue its operations, obtain funds, if available, although there can be no certainty, through strategic alliances that may require the Company to relinquish rights to its technology, or to discontinue its operations entirely.
2. Summary of Significant Accounting Policies
Principles of Combination
The accompanying condensed consolidated financial statements of the Company have been prepared in accordance with United States generally accepted accounting principles ("GAAP") and include the financial statements of DitoGaming US and its wholly-owned foreign subsidiary, DitoGaming UK. Intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole 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. Management regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly. Actual results could differ from those estimates. Significant estimates are expected to include those related to assumptions used in calculating accruals for potential liabilities, valuing equity instruments issued for services, and the realization of deferred tax assets.
| F-30 |
Cash
The Company maintains its cash balances with financial institutions with high credit ratings. The Company has not experienced any losses to date resulting from this practice.
As of June 30, 20202021 and December 31, 2019,2020, the Company's cash balances by currency consisted of the following:
| Schedule of cash | ||||||||||||||
| June 30, 2020 | December 31, 2019 | June 30, 2021 | December 31, 2020 | |||||||||||
| GBP | £ | 35,618 | £ | 32,301 | £ | 14,297 | £ | 49,127 | ||||||
| USD | $ | 12,658 | $ | 277,565 | $ | 286,988 | $ | 1,879,166 | ||||||
Cash balances in British Pounds are maintained in the United Kingdom and cash balances in United States Dollars are maintained in the United States.
Concentration of Risk
The Company may periodically contract with consultants and vendors to provide services related to the Company's business development activities. Agreements for these services may be for a specific time period or for a specific project or task. The Company did not have any such formal agreements at June 30, 2021 or December 31, 2020.
Costs and expenses incurred that represented 10% or more of general and administrative costs for the six months ended June 30, 2020 consisted of accounting fees representing approximately 30% of total general and administrative costs for that period.
Income TaxesRevenue Recognition
The Company accountsrecognizes revenue in accordance with ASC Topic 606, Revenue From Contracts With Customers. ASC Topic 606 requires companies to recognize revenue in a manner that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for income taxes under an assetthose goods or services. In addition, the standard requires disclosures of the nature, amount, timing and liability approach for financial accountinguncertainty of revenue and reporting for income taxes. Accordingly,cash flows arising from contracts with customers. Revenue is recognized based on the Company recognizes deferred tax assets and liabilities for the expected impact of differences between the financial statements and the tax basis of assets and liabilities.following five step model:
| · | Identification of the contract with a customer |
| · | Identification of the performance obligations in the contract |
| · | Determination of the transaction price |
| · | Allocation of the transaction price to the performance obligations in the contract |
| · | Recognition of revenue when, or as, the Company satisfies a performance obligation |
The Company recordsoperates an online betting platform allowing users to place wagers on casino games. Each wager placed by users create a valuation allowancesingle performance obligation for the Company to reduce its deferred tax assetsadminister each event wagered. Net gaming revenue is the aggregate of gaming wins and losses based on results of each event that customers wager bets on. Gross gaming revenue is split with our partners, whose share of gross gaming revenue is recorded as a reduction to net gaming revenue.
Cost of Revenue
Cost of revenue consists primarily of variable costs related to our contract with Big Bola. These include mainly (i) payment processing fees and chargebacks, (ii) product taxes, (iii) technology costs, (iv) revenue share / market access arrangements, and (v) feed / provider services. The Company incurs payment processing fees on user deposits, withdrawals and deposit reversals from payment processors (“chargebacks”). Chargebacks have not been material to date. Cost of revenue also includes expenses related to the amount that is more likely than not to be realized. In the event the Company was to determine that it would be able to realize its deferred taxdistribution of our services, amortization of intangible assets in the future in excessand compensation of its recorded amount, an adjustment to the deferred tax assets would be credited to operations in the period such determination was made. Alternatively, should the Company determine that it would not be able to realize all or part of its deferred tax assets in the future, an adjustment to the deferred tax assets would be charged to operations in the period such determination was made.revenue associated personnel.
Dito US is subject to U.S. federal income taxes and income taxes of the State of New York. The Company's operations in the United States through June 30, 2020 were nominal.
Dito UK is subject to taxation in the United Kingdom. As a foreign corporation, Dito UK is not consolidated with Dito US in the Company's U.S. federal tax filings.
| F-31 |
F-30
As the Company's net operating losses in the respective jurisdictions in which it operates have yet to be utilized, all previous tax years remain open to examination by the taxing authorities in which the Company currently operates. The Company had no unrecognized tax benefits as of June 30, 2020 or December 31, 2019 and does not anticipate any material amount of unrecognized tax benefits within the next 12 months.
Stock-Based Compensation
The Company issues common stock and intends to issue stock options to officers, directors and consultants for services rendered. Options will vest and expire according to terms established at the issuance date of each grant. Stock grants, which are generally time vested, will be measured at the grant date fair value and charged to operations ratably over the vesting period.
The fair value of stock options granted as stock-based compensation will be determined utilizing the Black-Scholes option-pricing model, and can be affected by several variables, the most significant of which are the life of the equity award, the exercise price of the stock option as compared to the fair market value of the common stock on the grant date, and the estimated volatility of the common stock. Estimated volatility will be based on the historical volatility of the Company's common stock over an appropriate calculation period, or, if not available, by reference to the volatility of a representative sample of comparable public companies. The risk-free interest rate will be based on the U.S. Treasury yield curve in effect at the time of grant. The fair market value of the common stock will be determined by reference to the quoted market price of the Company's common stock on the grant date, or, if not available, by reference to an appropriate alternative valuation methodology.
The Company will recognize the fair value of stock-based compensation awards in general and administrative costs or in software development costs, as appropriate, in the Company's condensed consolidated statements of operations. The Company will issue new shares of common stock to satisfy stock option exercises.
As of June 30, 20202021 and December 31, 2019,2020, the Company did nott have any outstanding stock options.
Comprehensive Income (Loss)
Comprehensive income or loss is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources. Components of comprehensive income or loss, including net income or loss, unrealized gains or losses on available-for-sale securities, unrealized gains or losses on other financial investments, unrealized gains or losses on pension and retirement benefit plans, and foreign currency translation adjustments, are reported in the financial statements in the period in which they are recognized. Net income (loss) and other comprehensive income (loss) are reported net of any related tax effect to arrive at comprehensive income (loss). The Company's comprehensive income (loss) for the sixthree months ended June 30, 20202021 and 20192020 consists of foreign currency translation adjustments.
The Company's computation of earnings (loss) per share ("EPS") includes basic and diluted EPS. Basic EPS is measured as the income (loss) attributable to common stockholders divided by the weighted average common shares outstanding for the period. Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of potential common shares (e.g., convertible notes payable, convertible preferred stock, warrants and stock options) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS.
Loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the respective periods. At June 30, 2021 and December 31, 2020, the Company excluded warrants to acquire 234,000 shares of common stock from its calculation of loss per share as their effect would be antidilutive. Basic and diluted loss per common share is the same for all periods presented because therethe aforementioned warrants were antidilutive.
The Company has adopted ASU 2017-11, Earnings per share (Topic 260), provided that when determining whether certain financial instruments should be classified as liability or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is no convertible debt, convertible preferred stock, warrants or stock options outstanding.indexed to an entity’s own stock.
Weighted average common shares outstanding has been retroactively restated for all periods presented to reflect the accounting effect of the Combination (see Note 1).
| F-32 |
Fair Value of Financial Instruments
The authoritative guidance with respect to fair value established a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels and requires that assets and liabilities carried at fair value be classified and disclosed in one of three categories, as presented below. Disclosure as to transfers in and out of Levels 1 and 2, and activity in Level 3 fair value measurements, is also required.
Level 1. Observable inputs such as quoted prices in active markets for an identical asset or liability that the Company has the ability to access as of the measurement date. Financial assets and liabilities utilizing Level 1 inputs include active-exchange traded securities and exchange-based derivatives.
Level 2. Inputs, other than quoted prices included within Level 1, which are directly observable for the asset or liability or indirectly observable through corroboration with observable market data. Financial assets and liabilities utilizing Level 2 inputs include fixed income securities, non-exchange-based derivatives, mutual funds, and fair-value hedges.
Level 3. Unobservable inputs in which there is little or no market data for the asset or liability which requires the reporting entity to develop its own assumptions. Financial assets and liabilities utilizing Level 3 inputs include infrequently-traded non-exchange-based derivatives and commingled investment funds and are measured using present value pricing models.
The Company will determine the level in the fair value hierarchy within which each fair value measurement falls in its entirety, based on the lowest level input that is significant to the fair value measurement in its entirety. In determining the appropriate levels, the Company will perform an analysis of the assets and liabilities at each reporting period end.
The carrying value of financial instruments (consisting of cash and accounts payable and accrued expenses) is considered to be representative of their respective fair values due to the short-term nature of those instruments.
Property and Equipment
Property and equipment is recorded at cost. Major improvements are capitalized, while maintenance and repairs that do not improve or extend the useful life of the respective assets are charged to expense as incurred. Gains and losses from disposition of property and equipment are included in income and expense when realized. Depreciation of property and equipment is provided using the straight-line method over an estimated useful life of three years.
The Company recognizes depreciation of property and equipment in general and administrative costs in the Company's consolidated statement of operations.
LeasesForeign Currency
Effective January 1, 2019, the Company adopted Accounting Standards Update 2016-02, Leases (Topic 842) ("ASU 2016-02"), which requires a lessee to record a right-of-use asset and a corresponding lease liability at the inception of the lease initially measured at the present value of the lease payments. ASU 2016-02 requires recognition in the statement of operations of a single lease cost that is calculated as a total cost of the lease allocated over the lease term, generally on a straight-line basis. ASU 2016-02 excludes short-term operating leases with a lease term of 12 months or less at the commencement date, and that do not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise.
Software Development Costs
Due to the significant uncertainty with respect to the successful development of commercially viable products based on Company's development efforts, all software development costs incurred with respect to the Company's mobile gaming platform are charged to operations as incurred.
Intellectual Property
Intellectual property, consisting of software, is recorded at cost. Amortization of intellectual property is provided using the straight-line method over an estimated useful life of three years.
The Company recognizes amortization of intellectual property in software development costs in the Company's consolidated statement of operations.
Long-Lived Assets
The Company reviews long-lived assets, consisting of property and equipment and intellectual property, for impairment at each fiscal year end or when events or changes in circumstances indicate the carrying value of these assets may exceed their current fair values. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the assets. Assets to be disposed of are separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell and are no longer depreciated. The Company has not historically recorded any impairment to its long-lived assets. In the future, if events or market conditions affect the estimated fair value to the extent that a long-lived asset is impaired, the Company will adjust the carrying value of these long-lived assets in the period in which the impairment occurs. As of June 30, 2020 and December 31, 2019, the Company had not deemed any long-lived assets as impaired and was not aware of the existence of any indicators of impairment at such dates.
Foreign Currency
The accompanying condensed consolidated financial statements are presented in United States dollars ("USD"). The functional currency of DitoGaming UK, the Company's foreign subsidiary, is the British Pound ("GBP"(“GBP”), the local currency in the United Kingdom. Accordingly, assets and liabilities of the foreign subsidiary are translated at the current exchange rate at the end of the period, and revenues and expenses are translated at average exchange rates during the six months ended June 30, 20202021 and 2019.the year ended December 31, 2020. The resulting translation adjustments are recorded as a component of shareholders' equity (deficiency). Gains and losses from foreign currency transactions are included in net income (loss).
Translation of amounts from the local currencies of the foreign subsidiary, DitoGaming UK, into USD has been made at the following exchange rates for the respective periods:
| Foreign currency exchange rates table | ||||||||||||||
| As of and for the Six Months Ended June 30, | As of and for the | |||||||||||||
| 2020 | 2019 | Six months ended June 30, 2021 | Year ended December 31, 2020 | |||||||||||
| Period-end GBP to USD1.00 exchange rate | 1.2393 | 1.2697 | 1.3801 | 1.3652 | ||||||||||
| Period-average GBP to USD1.00 exchange rate | 1.2608 | 1.2940 | 1.3885 | 1.2825 | ||||||||||
| F-33 |
Recent Accounting Pronouncements
In June 2016, the Financial Accounting Standards Board ("FASB"(“FASB”) issued Accounting Standards Update ("ASU"(“ASU”) 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"). ASU 2016-13 significantly changes how entities measure credit losses for most financial assets, including accounts and notes receivables. ASU 2016-13 will replace the current "incurred loss" approach with an "expected loss"“expected loss” model, under which companies will recognize allowances based on expected rather than incurred losses. Entities will apply the provisions of ASU 2016-13 as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which ASU 2016-13 is effective. As small business filer, ASU 2016-13 will be effective for the Company for interim and annual reporting periods beginning after December 15, 2022. Management is currently in the process of assessing the impact of adopting ASU-2016-13 on the Company's financial statements and related disclosures.
In August 2020, the FASB issued ASU 2020-06, Debt -— Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Hedging—Contracts in Entity'sEntity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity'sEntity’s Own Equity ("(“ASU 2020-06). ASU 2020-06 will simplifysimplifies the accounting for convertible instrumentsdebt by reducingeliminating the numberbeneficial conversion and cash conversion accounting models. Upon adoption of accounting models forASU 2020-06, convertible debt instruments and convertible preferred stock. Limiting the accounting models results in fewerproceeds, unless issued with a substantial premium or an embedded conversion features being separately recognized from the host contract as compared with current GAAP. Convertible instrumentsfeature that continue to be subject to separation models are (1) those with embedded conversion features that areis not clearly and closely related to the host contract, that meetwill no longer be allocated between debt and equity components. This modification will reduce the definition of a derivative,issue discount and that do not qualify for a scope exception from derivative accounting and (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital.result in less non-cash interest expense in financial statements. ASU 2020-06 also amendsupdates the guidance forearnings per share calculation and requires entities to assume share settlement when the derivatives scope exception for contractsconvertible debt can be settled in an entity's own equity to reduce form-over-substance-based accounting conclusions.cash or shares. ASU 2020-06 will be effective for public companies for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years.January 1, 2024, and a cumulative-effect adjustment to the opening balance of retained earnings is required upon adoption. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020,January 1, 2021, including interim periods within those fiscal years. Management has not yet evaluated the effect that theyear. The Company adopted ASU 2020-06 effective January 1, 2021. The adoption of ASU 2020-06 willdid not have any impact on the Company'sCompany’s consolidated financial statement presentation or disclosures subsequent to its adoption.disclosures.
Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company's present or future condensed consolidated financial statements and related disclosures.
3. Property and Equipment
Property and equipment as of June 30, 20202021 and December 31, 20192020 is summarized as follows:
| Schedule of property and equipment | ||||||||||||||
| June 30, 2020 | December 31, 2019 | June 30, 2021 | December 31, 2020 | |||||||||||
| Computer and office equipment | $ | 24,789 | $ | 21,158 | $ | 32,445 | $ | 27,307 | ||||||
| Less accumulated depreciation | (12,214 | ) | (9,026 | ) | (24,124 | ) | (18,804 | ) | ||||||
| Computer and office equipment, net | $ | 12,575 | $ | 12,132 | $ | 8,321 | $ | 8,503 | ||||||
All of the Company's property and equipment is located in the United Kingdom. Depreciation expense for the six months ended June 30, 2021 and 2020 was $5,320and 2019 was $3,844 and $3,133,$3,844, respectively. Depreciation expense is included in general and administrative costs in the Company's condensed consolidated statement of operations.
4. Intellectual Property
Intellectual property as of June 30, 20202021 and December 31, 20192020 is summarized as follows:
| Schedule of intellectual property | ||||||||||||||
| June 30, 2020 | December 31, 2019 | June 30, 2021 | December 31, 2020 | |||||||||||
| Software | $ | 177,002 | $ | 189,413 | $ | 194,978 | $ | 194,978 | ||||||
| Internet domain name | 187,400 | 13,055 | ||||||||||||
| Total intellectual property | 382,378 | 208,033 | ||||||||||||
| Less accumulated amortization | (113,085 | ) | (89,445 | ) | (192,137 | ) | (157,066 | ) | ||||||
| Software, net | $ | 63,917 | $ | 99,968 | ||||||||||
| Intellectual property, net | $ | 190,241 | $ | 50,967 | ||||||||||
Amortization expense for the six months ended June 30, 2021 and 2020 was $35,071 and 2019 was $30,011 and $30,802,$30,011, respectively. Amortization expense is included in software development costs in the Company's condensed consolidated statement of operations.
The following schedule sets forth the remaining amortization of intellectual property as of June 30, 2020:
| 2020 (Six Months Ending December 31, 2020) | $ | 30,011 | |
| 2021 | 33,906 | ||
| Total | $ | 63,917 |
| F-34 |
F-34
5. Notes Payable to Related Parties
As of June 30, 2020, there were no notes payable to related parties. As of December 31, 2019, notes payable to related parties consisted of the following:
| Epsilon Investments PTE | Jason Drummond | Fairfax Capital BV | Total | |||||||||
| Principal amount | $ | — | $ | — | $ | 37,797 | $ | 37,797 | ||||
| Accrued interest payable | 11,191 | 2,607 | — | 13,798 | ||||||||
| Accrued lending fee | — | — | 3,780 | 3,780 | ||||||||
| Sub-total | 11,191 | 2,607 | 41,577 | 55,375 | ||||||||
| Less unamortized lending fee | — | — | (3,150 | ) | (3,150 | ) | ||||||
| Total | $ | 11,191 | $ | 2,607 | $ | 38,427 | $ | 52,225 |
Epsilon Investments PTE
On August 6, 2018, the Company borrowed $142,000 (approximately equivalent to 110,000£) from Epsilon Investments PTE ("Epsilon"), a significant shareholder of the Company, on an unsecured basis with interest at 6% per annum. The loan agreement did not contain any provisions for conversion into common stock.
On October 22, 2018, the Company borrowed an additional $110,000 (approximately equivalent to 85,000£) from Epsilon on an unsecured basis with interest at 6% per annum. The loan agreement did not contain any provisions for conversion into common stock.
As a result, through December 31, 2018, total borrowings from Epsilon were $252,000 (approximately equivalent to 195,000£), presented as principal amount of $248,450 at December 31, 2018 due to the impact of currency conversion adjustments.
As of December 31, 2018, accrued interest with respect to the Epsilon borrowings totaled $4,666 (approximately equivalent to 3,662£).
On May 7, 2019, principal of $19,651 (approximately equivalent to 15,000£) was converted into 696,025 shares of the Company's common stock, representing a price per share of approximately $0.03.
On May 29, 2019, principal of $227,279 (approximately equivalent to 180,000£) was converted into 4,504,500 shares of the Company's common stock, representing a price per share of approximately $0.05.
As of December 31, 2019, accrued interest with respect to the Epsilon borrowings totaled $11,191 (approximately equivalent to 8,439£).
On March 23, 2020, accrued interest with respect to the Epsilon borrowings in the amount of $9,783 (approximately equivalent to 8,439£) was waived and recorded as a contribution to capital by a credit to additional paid-in capital.
Jason Drummond
On August 6, 2018, the Company borrowed a total of $52,000 (approximately equivalent to 40,000£) from Jason Drummond ("Drummond"), a significant shareholder of the Company, on an unsecured basis with interest at 6% per annum. The loan did not contain any provisions for conversion into common stock.
On October 22 2018, the Company issued a note payable to Drummond in the amount of $20,000 (approximately equivalent to 15,000£) on an unsecured basis at an interest rate of 6% per annum. Consideration for the note payable consisted of subsequent cash advances totaling $12,867 (approximately equivalent to 10,000£) and the payment of accrued director's fees of $6,341 (approximately equivalent to 5,000£).
As of December 31, 2018, accrued interest with respect to the Drummond borrowings totaled $1,257 (approximately equivalent to 986£).
On May 29, 2019, principal of $69,459 (approximately equivalent to 55,000£) was converted into 1,376,375 shares of the Company's common stock, representing a price per share of approximately $0.05.
As of December 31, 2019, accrued interest with respect to the Drummond borrowings totaled $2,607 (approximately equivalent to 1,996£).
On March 23, 2020, accrued interest with respect to the Drummond borrowings in the amount of $2,279 (approximately equivalent to 1,966£) was waived and recorded as a contribution to capital by a credit to additional paid-in capital.
Fairfax Capital BV
On October 29, 2019, the Company borrowed $40,338 under an agreement with Fairfax Capital BV ("Fairfax"), a significant shareholder, pursuant to an agreement to lend up to $45,000. The lending agreement was non-interest bearing but provided for the payment of a loan fee of 10% of the total loan value when the principal was repaid, which was repayable no later than twelve months from the date of the agreement. The 10% loan fee was recognized ratably over the term of the loan as interest expense.
During April 2020, the Company repaid the Fairfax loan, including the accrued lending fee, in full.
6. Note Payable to Bank
On June 9, 2020, DitoGaming UK received an unsecured loan of $60,600$60,600 (equivalent to 47,600£47,600£) from Metro Bank PLC under the Bounce Bank Loan Scheme managed by the British Business Bank on behalf of, and with the financial backing of, The Secretary of State for Business, Energy and Industrial Strategy of the Government of the United Kingdom. The Government of the United Kingdom has provided a full guarantee to Metro Bank PLC with respect to the repayment of this loan. The proceeds from the loan are required to be used for working capital purposes, for investment in a company's business, and to support trading or commercial activity in the United Kingdom. The loan is for a term of 72 months and has a fixed interest rate of 2.5%2.5% per annum. DitoGaming UK is not required to make any payments of interest on the loan during the first 12 months of this loan, with such amount being paid by the Government of the United Kingdom under its business interruption payment program. Beginning in the 13th month after the drawdown of the loan, DitoGaming UK will be required to repay the loan by making 60 equal monthly payments of principal and interest aggregating $1,076 (equivalent to 845£) per month. During the six months ended June 30, 2020,2021, the Company recorded interest expense of $86$731, with respect to this loan, which was paid by the Government of the United Kingdom under this program.
7. Leases
Short-Term Operating Lease
The Company leases office facilities in New York, New York on a month-to-month basis at a cost of $142 per month. Aggregate payments under this operating lease charged to general and administrative expenses in the statement of operations were $1,057 and $0 for the six months ended June 30, 2020 and 2019, respectively.
Long-Term Operating Lease
The Company's wholly-owned subsidiary in the United Kingdom, Dito UK, leases office facilities in London, England. The Company did not have any other leases with initial terms of 12 months or more at June 30, 2020 or December 31, 2019.
Leases with an initial term of 12 months or less are not recorded on the balance sheet, with lease expense being recognized on a straight-line basis over the term of the lease.
Operating lease right-of-use assets and liabilities are recognized at the commencement date of the lease based on the present value of lease payments over the lease term. Right-of-use assets represent the Company's right to use an underlying asset for the lease term, and right-of-use lease liabilities represent the Company's obligation to make lease payments arising from the lease. Generally, the implicit rate of interest, equivalent to a discount rate, in lease arrangements is not readily determinable and the prevailing commercial property mortgage rate is utilized in determining the present value of lease payments.
The monthly cash payment for this operating lease is approximately $4,010 per month, and the lease term ends on March 31, 2021. The Company recorded right-of-use assets and liabilities of $91,774 on April 1, 2019, based on the present value of payments and an incremental borrowing rate of 4.27% per annum.
The following schedule sets forth the operating lease right of use asset activity for the six months ended June 30, 2020 and 2019:
| Six Months Ended June 30, | ||||||
| 2020 | 2019 | |||||
| Balance at beginning of period | $ | 58,136 | $ | - | ||
| Capitalized present value of lease payments | - | 91,774 | ||||
| Less amortization | (21,871 | ) | (10,814 | ) | ||
| Foreign currency adjustment | (3,438 | ) | (3,739 | ) | ||
| Balance at end of period | $ | 32,827 | $ | 77,221 | ||
The following schedule sets forth the current portion and long-term portion of operating lease liabilities as As of June 30, 20202021, $64,982 was due under this note, of which, $13,990 was reflected as current portion due.
Maturities of long-term debt for each of the next five years and December 31, 2019:
| June 30, 2020 | December 31, 2019 | |||||
| Current portion | $ | 32,827 | $ | 46,509 | ||
| Long-term portion | - | 11,627 | ||||
| Total lease liability | $ | 32,827 | $ | 58,136 |
This operating lease had a remaining term of nine monthsthereafter are as of June 30, 2020. The following schedule sets forth the remaining annual future lease payments outstanding as of June 30, 2020:
| 2020 (Six months ending December 31, 2020) | $ | 24,060 | |
| 2021 | 12,030 | ||
| Total lease payments | 36,090 | ||
| Less amount representing imputed interest | (605 | ) | |
| 35,485 | |||
| Foreign currency adjustment | (2,658 | ) | |
| Present value of lease liabilities | $ | 32,827 |
Cash paid for the amounts included in the measurement of lease liabilities for the six months ended June 30, 2020 was $24,060. Aggregate lease expense for this operating lease charged to general and administrative expenses in the statement of operations was $22,865 and $22,603 for the six months ended June 30, 2020 and 2019, respectively.follows:
8.
| Schedule of debt maturities | ||||
| Year ended December 31, | Amount | |||
| 2021 | $ | 2,241 | ||
| 2022 | 10,137 | |||
| 2023 | 10,137 | |||
| 2024 | 10,137 | |||
| 2025 | 10,137 | |||
| Thereafter | 22,193 | |||
| Total payments | 64,982 | |||
| Less current portion | 13,990 | |||
| Debt maturity, noncurrent | $ | 50,992 | ||
6. Related Party Transactions
Fees to Directors, Consultants and Professionals
During the six months ended June 30, 20202021 and 2019,2020, the Company incurred fees to directors, consultants,paid base salary, and professionals, who are also considered related parties,a bonus of $234,423£75,000, totaling $390,307 and $142,197, respectively, as follows:
| Six Months Ended June 30, | ||||||
| 2020 | 2019 | |||||
| Jason Drummond | $ | 165,081 | $ | 84,110 | ||
| Julian Parge | 51,267 | 40,161 | ||||
| Andrew Eggleston | 18,075 | 17,926 | ||||
| Total | $ | 234,423 | $ | 142,197 | ||
Advances
During the six months ended June 30, 2020 and 2019, the Company incurred fees$165,081 to Jason Drummond, the Company’s sole director and his affiliates, and periodically advanced amounts to Mr. Drummond and his affiliates in anticipation of future fees. executive officer.
As a result of such advances, as of June 30, 2020, due from Mr. Drummond was $64,506 (see Note 10). As of2021 and December 31, 2019, such2020, $12,588 and $14,918 was due to officers. The advances resulted in a due from Mr. Drummondwere unsecured, non-interest bearing with no formal terms of $12,606, which was repaid in January 2020. repayment.
Additional information with respect to notes payable to related parties and common shares issued to officers, directors, affiliates, and other related parties in payment of costs and expenses is provided at Notes 5 and 11.
9. 7. Stockholders' Equity
Preferred Stock
The Company has authorized a total of 5,000,000 shares of preferred stock, par value $0.001 per share. No preferred shares hadhave been designated by the Company as of June 30, 2020 or2021 and December 31, 2019.2020.
Common Stock
The Company is authorized to issue up to 45,000,000 shares of common stock, par value $0.001 per share. As of June 30, 20202021 and December 31, 2019,2020, the Company had 24,698,325 shares30,521,059 and 24,614,32528,367,525 shares of common stock issued and outstanding, respectively.
On May 7, 2019, the Company sold 7,424,350 shares of the Company's common stock to an existing shareholder for a cash purchase price of $209,614, reflecting an effective price per share of approximately $0.03.
On May 7, 2019, a note payable to a related party in the principal amount of $19,651 was converted into 696,025 shares of the Company's common stock, reflecting an effective price per share of approximately $0.03.
On May 29, 2019, notes payable to related parties in the principal amount of $296,738 were converted into 5,880,875 shares of the Company's common stock, reflecting an effective price per share of approximately $0.05.
| F-35 |
Additional information with respect to common stock issued in connection with the conversion of notes payable is provided at Note 5.
Common Stock Issuable
At December 31, 2018, common stock issuable consisted of the value of 2,521,150 shares of the Company's common stock allocated to satisfy certain provisions of the transaction with GameTech UK Limited ("GameTech") as described below.
On August 10, 2018, the Company (through Dito UK) entered into an Asset Sale Agreement (the "Sale Agreement") with GameTech UK pursuant to a Court Order (the "Order") issued by the Joint Administrators of GameTech UK Limited (in administration) on May 29, 2018. The Order granted an application previously made on April 19, 2019 for the Administrators of GameTech to sell GameTech assets which were subject to the claims of the secured creditors. Among other provisions, the Order called for the infusion of $300,000 (approximately equivalent to 235,000£) into the Company, and the issuance of 30% of the Company's equity to the secured creditors, for which the secured creditors would release their secured interest. Accordingly, it was determined that 3,271,150 common shares, valued at $42,162 (approximately equivalent to 33,016£), were to be issued in order to satisfy this provision. On December 4, 2018, 750,000 of such shares valued at $9,667 (approximately equivalent to 7,570£), were issued. On May 29, 2019, the remaining 2,521,150 of such shares valued at $32,495 (approximately equivalent to 25,446£) were issued.
Common Stock Issued to Officers, Directors, Affiliates and Other Related Parties in Payment of Costs and Expenses
In May 2019, the Company issued 3,712,175 shares of the Company's common stock, valued at $104,808, reflecting an effective price per share of approximately $0.03, in payment of accrued costs and expenses to officers, directors, affiliates, and other related parties.
Private Placement of Common Stock
Effective as of
On February 26, 2020,3, 2021, Gaming Technologies, Inc. (the “Company”) entered into a Securities Purchase Agreement with certain accredited investors (“Purchase Agreement”), pursuant to which the Company completedsold an aggregate of shares of its Common Stock for gross proceeds of $4,016,500 in a private placementplacement. The Company paid a finder’s fee to non-U.S. persons forregistered brokers in the amount of $360,000 in connection with these transactions resulting in net proceeds to the Company of $3,656,500. In connection with the Purchase Agreement, the Company issued to certain registered brokers warrants to purchase an aggregate of shares of common at an exercise price of $2.50 per share, with an expiration date 5 years from the date of issuance, pursuant to the terms of certain finder’s fee agreements previously entered into by the Company and such brokers.
Under the terms of the Purchase Agreement, each investor was granted customary piggyback registration rights in the event the Company proposes to register the offer and sale of 205,000any shares of its common stock, (the "Private Placement") atsubject to the limitations set forth in the Purchase Agreement, such as a priceregistration statement solely relating to an offering or sale to employees or directors of $2.50 per sharethe Company pursuant to Rule 903 of Regulation S under the Securities Act with thirteen individual investors for cash proceeds of $512,500. No feesemployee stock plan or other costs were incurred in connection with this Private Placement.any dividend or distribution. The Purchase Agreement also provides the investors the option and right to participate in future capital raising transactions at the same purchase price and on the same terms and conditions as other investors participating in such transactions, for an aggregate purchase price of up to $6,000,000.
Of
If, at any time during the 205,000twelve months following sale of the Shares, the Company issues or sells shares of common stock sold, 121,000 shares were soldor common stock equivalents, except for certain exempt issuances as described in the Purchase Agreement, at a total purchase price of $302,500 prior to December 31, 2019. During January and February 2020,below $2.50 per share, then immediately upon such issuance or sale, the remaining 84,000 shares were sold for a total purchase price of $210,000. The proceeds from the Private Placement were used for general operating purposes.
On March 4, 2020, the fourteenth investor elected to cancel their subscription for 24,000 shares of common stock. The subscription proceeds of $60,000, which were received in December 2019, were returnedCompany will deliver to the cancelling investor on March 18, 2020. Asinvestors that number of December 31, 2019, the cancelled stock sale was excluded from stockholders' equity and was reflected as a cancelled common stock investment payable in the consolidated balance sheet at such date.
Share Exchange Agreement with Dito UK
Effective as of March 18, 2020, Dito, Inc. entered into Share Exchange Agreements (the "Exchange Agreements") and completed the acquisition of all of the outstanding ordinary shares of Dito UK Limited. The Exchange Agreements provided for each outstanding ordinary share of Dito UK Limited to be effectively converted into 25restricted shares of common stock Dito, Inc.,equal to the difference between the number of Shares purchased by the investor pursuant to this Purchase Agreement and the number of shares of common stock the investor would have received for the investor’s subscription amount at the dilutive issuance price.
In March 2021, the Company sold shares of its Common Stock for gross proceeds of $25,000 in a private placement.
Consulting Agreements
On November 6, 2020, the Company entered into an agreement with a consultant to serve as a result Dito UK Limited becameboard advisor. The term of the agreement is for one year and may be renewed at the end of the term. Compensation consists of the following stock grants: shares of the Company’s common stock within seven days of the execution of the agreement which was valued at $125,000 and recorded during the year ended December 31, 2020. In addition, 50,000 shares of the Company’s common stock six months after the date of the agreement, which was May 6, 2021; 50,000 shares of the Company’s common stock upon the first renewal of the agreement and 50,000 shares of the Company’s common stock six months after the first renewal; and, 100,000 shares of the Company common stock at each of the following two renewal periods, if the agreement is renewed. The grant date fair value of $875,000 of these shares will be amortized over the service period. During the six months ended June 30, 2021, the Company amortized $125,000, representing the pro rata portion of the grant date fair value of the shares vesting during the period. As of June 30, 2021, $ of unvested stock compensation will be amortized in future periods. The Company was obligated to issue a wholly-owned subsidiarysecond tranche of Dito, Inc.50,000 shares on May 6, 2021. These shares had not yet been issued as of the date of this filing.
In January 2021, the Company entered into two agreements with two consultants to provide investor relation services to the Company. The agreements are for a term of one year. The Company issued shares of its common stock in exchange for the services. The common stock was valued at $500,000 at the time the agreements were executed.
In February 2021, the Company entered into an internet advertising campaign with a recapitalization transaction,consultant. The contract is for a term of one year 1 and calls for an initial non-refundable deposit of $20,000 upon the execution of the agreement and a payment of shares of the Company’s common stock valued at $833,335 on the date of issuance.
In March 2021, the Company issued shares of its common stock to a consultant in exchange for consulting services. The fair market value of the services was $9,000.
| F-36 |
Warrants
A summary of warrant activity for the six months ended June 30, 2021 is presented below:
| Schedule of warrant activity | ||||||||||||||||
| Warrants | Weighted average exercise price | Weighted average remaining contractual life (years) | Aggregate intrinsic value | |||||||||||||
| Outstanding on December 31, 2020 | 90,000 | $ | 2.50 | $ | 0 | |||||||||||
| Granted | 144,000 | 2.50 | 0 | |||||||||||||
| Exercised | 0 | – | – | – | ||||||||||||
| Outstanding on June 30, 2021 | 234,000 | $ | 2.50 | 4.59 | $ | 0 | ||||||||||
Stock-option plan
On May 21, 2021, the shareholders of the Company approved the Company’s 2021 Equity Incentive Plan (the “2021 Plan”). The purposes of the 2021 Plan are to (a) enable the Company to attract and retain the types of employees, consultants and directors who will contribute to the Company’s long-term success; (b) provide incentives that align the interests of employees, consultants, and directors with those of the shareholders of the Company; and (c) promote the success of the Company’s business. The persons eligible to receive awards are the employees, consultants, and directors of the Company and such other individuals designated by the 2021 Plan’s administrative committee (the Committee) who are reasonably expected to become employees, consultants, and directors after the receipt of Awards. Awards that may be granted under the Plan include: (a) Incentive Stock Options, (b) Non-qualified Stock Options, (c) Stock Appreciation Rights, (d) Restricted Awards, (e) Performance Share Awards, (f) Cash Awards, and (g) Other Equity-Based Awards. 3,000,000 shares are available for issuance under the 2021 Plan. The shares available for issuance may be increased annually by the lesser of four percent (4%) of the number of shares of common stock issued and outstanding on the immediately preceding December 31 or such number of shares of common stock as described at Note 1. determined by the Committee no later than the immediately preceding December 31.
10.
8. Commitments and Contingencies
Canelo Sponsorship Agreement
On April 14, 2021, we entered into a Sponsorship Agreement (the “Canelo Agreement”) with SA Holiday, Inc. (“Holiday”), owner of the personality rights of champion professional boxer Saul Alvarez Barragan, or “Canelo,” in connection with a promotional campaign for the Corporation to sponsor a prize fight and certain other activities of Canelo, and for Canelo to promote the Corporation’s “VALE” brand and create certain promotional materials in connection therewith for the Corporation’s use in the United States, Latin America and certain countries in the Caribbean. Pursuant to the Canelo Agreement we will, among other things, pay to Holiday a cash fee of US$1,600,000 and be responsible for paying certain other amounts as provided therein.
Playboy License Agreement
On May 19, 2021, we entered into a non-exclusive license agreement with Playboy Enterprises International, Inc. (“Playboy”) to use certain trademarks (including the rabbit head logo) and other intellectual property of Playboy on and in connection with the design, creation, promotion, marketing, advertisement, sales, operation, maintenance and distribution in India of real-money game mobile apps, such as rummy, poker, fantasy sports and other games of skill approved by Playboy. We will pay Playboy as a royalty a percentage of net gaming revenue. The term of the agreement is through the end of 2025, subject to early termination upon certain events of default, which include our failure to launch a Playboy-branded game in India by November 1, 2021, or to meet certain annual minimum net gaming revenue targets.
Legal Contingencies
The Company may be subject to legal proceedings from time to time as part of its business activities. As of June 30, 20202021 and December 31, 2019,2020, the Company was not subject to any threatened or pending legal actions or claims.
Leases Commitments
Information with respect to operating lease commitments is provided at Note 6.
Contractual Commitments
The Company has retained Julian Parge as a consultant to Dito UK, at the request and under the sole discretion of Dito UK, at the rate of $1,549 (equivalent to 1,250£) per week up to a maximum of $77,456 (equivalent to 62,500£) per annum.
Impact of COVID-19 on the Company
The global outbreak of COVID-19 has led to severe disruptions in general economic activities, as businesses and governments have taken broad actions to mitigate this public health crisis. Although the Company has not experienced any significant disruption to its business to date, these conditions could significantly negatively impact the Company's business in the future.
The extent to which the COVID-19 outbreak ultimately impacts the Company's business, future revenues, results of operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to, the duration and spread of the outbreak, its severity and longevity, the actions to curtail the virus and treat its impact (including an effective vaccine), and how quickly and to what extent normal economic and operating conditions can resume. Even after the COVID-19 outbreak has subsided, the Company may be at risk of experiencing a significant impact to its business as a result of the global economic impact, including any economic downturn or recession that has occurred or may occur in the future.
| F-37 |
F-39
Currently, capital markets have been disrupted by the crisis, as a result of which the availability, amount and type of financing available to the Company in the near future is uncertain and cannot be assured and is largely dependent upon evolving market conditions and other factors.
The Company intends to continue to monitor the situation and may adjust its current business plans as more information and guidance become available.
11.
9. Subsequent Events
The Company performed an evaluation of subsequent events through the date on which these consolidated financial statements were issued. There were no material subsequent events which affected, or could affect, the amounts or disclosures in the consolidated financial statements, other than those as described below.
Consulting Agreement
EffectiveIn August 3, 2020,2021, the Company entered into a consulting agreement with Montrose Capital Partners Limited to provide consulting, advisory and related services to the Company for a term of two years. Consideration under this consulting agreement was paid exclusively in the form of 2,000,000sold 415,615 shares of the Company's common stock, which were valued at $5,000,000 based on the fair value of the Company's common stock of $2.50 per share on the effective date of the consulting agreement. The total consideration pursuant to this consulting agreement of $5,000,000 was charged to general and administrative costs in the statement of operations on the issuance date. The consulting agreement requires the Company to include such shares in any registration statement that it files with the SEC.
Sales of Common Stock
On October 16, 2020, we completed a private placement to a non-U.S. person for the sale of 5,000 shares of our common stock at a purchase price of $2.50$3.25 per share pursuantin a private placement for gross proceeds of $1,350,749. The Company agreed with the purchasers to Rule 903 of Regulation Sfile with the SEC by August 31, 2021, a registration statement on Form S-1 or other available form to register these shares under the Securities Act for cash proceedsresale, and to use its commercially reasonable efforts to cause such registration statement to become effective within 120 days after such date (or, in the event of $12,500. Noa “full review” by the SEC staff, 150 calendar days after such date), and to keep such registration statement effective (with certain exceptions) until all such shares (i) have been sold, thereunder or pursuant to Rule 144 under the Securities Act, or (ii) may be sold without volume or manner-of-sale restrictions pursuant to Rule 144 and without the requirement for the Company to be in compliance with the current public information requirement under Rule 144. The Company will pay all expenses of such registration other than broker or similar commissions or fees or transfer taxes of any selling shareholder. The Company and each holder of such shares agreed to provide customary indemnifications to each other costs, other than legal costs, were incurred in connection with the private placement.
During September 2020,registration statement. The Company also agreed to provide to such holders “piggyback” registration rights in certain circumstances. The Company agreed to pay a licensed broker a cash fee equal to 9% of the purchase price paid by certain investors for their shares, to reimburse it for certain expenses, and to issue to the broker warrants to purchase 9.0% of the total number of shares purchased by those investors, at an exercise price of $3.25 per share with a cashless exercise feature, with an expiration date 5 years from date of issuance and with other customary terms and conditions. As a result the Company sold an aggregatepaid a cash fee to the broker of 24,200$121,567 and issued warrants to purchase 37,405 shares of common stock at $2.50 per share to 3 investors, generating gross proceedsstock.
| F-38 |
2,769,403
Shares of $60,500.Common Stock
Transactions with Jason Drummond
Subsequent to June 30, 2020, the amount due from Jason Drummond at such date of $64,506 (see Note 8) decreased by approximately $27,000 as a result of cash receipts and disbursements from July through September 2020.
DITO, INC.
8,976,999SHARES OF COMMON STOCK
PROSPECTUS
, 2020_____________________
August 31, 2021
PARTII -
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM
Item 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTIONOther Expenses of Issuance and Distribution
We estimate that
The following table sets forth an itemization of the various expenses, all of which we will pay, in connection with the issuance and distribution described in this registration statement (other than brokerage commissions, discounts or other expenses relating to the sale of the Shares by the Selling Securityholders) will be as set forth below. We will pay allsecurities being registered. All of the expenses with respect toamounts shown are estimated except the distribution,SEC Registration Fee and such amounts, with the exceptionFINRA filing fee.
| SEC Registration Fee | $ | 800 | ||
| Fees of transfer agent | 17,000 | |||
| Accounting fees | 20,000 | |||
| Legal fees and expenses | 40,000 | |||
| Miscellaneous | 5,000 | |||
| Total | $ | 82,800 |
Item 14. Indemnification of the SecuritiesDirectors and Exchange Commission registration fee, are estimates.
Accounting fees and expenses | $ | 20,000 |
|
Legal fees and expenses |
| 40,000 |
|
Transfer agent fees and expenses |
| 17,000 |
|
SEC registration fee |
| 400.00 |
|
Miscellaneous |
| 5,000 |
|
Total | $ | 82,400 |
|
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERSOfficers
The Registrant incorporated under the laws of the State of Delaware.
Section 145 of the Delaware General Corporation Law provides thatauthorizes a Delaware corporation may indemnify any persons who were, are,court to award, or are threateneda corporation’s board of directors to be made, partiesgrant, indemnity to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by ordirectors and officers in terms sufficiently broad to permit such indemnification under certain circumstances for liabilities, including reimbursement for expenses incurred, arising under the rightSecurities Act. Our certificate of such corporation), by reasonincorporation, as amended permits indemnification of the fact that such person is or was an officer, director, employee or agent of such corporation, or is or was serving at the request of such corporation as an officer, director, employee or agent of another corporation or enterprise. The indemnity may include expenses (including attorneys' fees), judgments, finesour directors, officers, employees, and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding, provided that such person acted in good faith and in a manner he or she reasonably believed to be in or not opposedother agents to the corporation's best interestsmaximum extent permitted by the Delaware General Corporation Law, and with respectour bylaws that provide that we will indemnify our directors and officers and permit us to any criminal action or proceeding, had no reasonable cause to believe that his or her conduct was illegal. A Delaware corporation may indemnify any persons who were, are, or are threatened to be made, a party to any threatened, pending or completed action or suit by orour employees and other agents, in the right of the corporation by reason of the fact that such person is or was a director, officer, employee or agent of such corporation, or is or was serving at the request of such corporation as a director, officer, employee or agent of another corporation or enterprise. The indemnity may include expenses (including attorneys' fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit provided such person acted in good faith and in a manner he or she reasonably believed to be in or not opposedeach case to the corporation's best interests except that no indemnification ismaximum extent permitted without judicial approval ifby the officer or director is adjudged to be liable to the corporation. Where an officer or director is successful on the merits or otherwise in the defense of any action referred to above, the corporation must indemnify him or her against the expenses (including attorneys' fees) actually and reasonably incurred.Delaware General Corporation Law.
The Registrant's
Our certificate of incorporation and bylaws provide for the indemnification of itsthat we are required to indemnify our directors and officers, in each case to the fullest extent permitted underby Delaware law. Our bylaws also provide that we are obligated to advance expenses incurred by a director or officer in advance of the Delaware General Corporation Law.
Except as otherwise disclosed under the heading "Legal Proceedings" in the "Business" sectionfinal disposition of this registration statement, there is at present no pending litigationany action or proceeding, involving any of the Registrant's directors or executive officers asand permit us to which indemnification is required or permitted, and the Registrant is not awaresecure insurance on behalf of any threatened litigationofficer, director, employee or proceedingother agent for any liability arising out of his, her or its actions in that may resultcapacity regardless of whether we would otherwise be permitted to indemnify him, her or it under Delaware law.
We believe that these provisions in a claim for indemnification.our certificate of incorporation and bylaws are necessary to attract and retain qualified persons as directors and officers.
The Registrant does not currently havelimitation of liability and indemnification provisions in our certificate of incorporation may discourage stockholders from bringing a lawsuit against directors for breach of their fiduciary duties. They may also reduce the likelihood of derivative litigation against directors and officers, even though an insurance policy in place that covers itsaction, if successful, might benefit us and our stockholders. A stockholder’s investment may be harmed to the extent we pay the costs of settlement and damage awards against directors and officers and directors with respectpursuant to certain liabilities, includingthese indemnification provisions. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, but intendswe have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. There is no pending litigation or proceeding naming any of our directors, officers or employees as to obtain a policywhich indemnification is being sought, nor are we aware of any pending or threatened litigation that may result in due course.claims for indemnification by any director, officer or employee.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
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Item 15. Recent Sales of Unregistered Securities
In the three years preceding the filing of this registration statement, we have issued the following securities that were not registered under the Securities Act.
On November 3, 2017, Dito UK issued 25 ordinary shares to its founders at no consideration. On December 4, 2018, in a written resolution of the sole director, the Company sub-divided the 25 ordinary shares previously issued to the founder into 2,500 ordinary shares.
On November 28, 2018, Dito UK sold 1,750,000 ordinary shares to its founders for an aggregate cash purchase price of $896.
On May 7, 2019, Dito UK sold 7,424,350 ordinary shares to an existing shareholder for a cash purchase price of $209,614, reflecting an effective price per share of approximately $0.03.
On September 25, 2019, the Company sold 1,125,000 shares of the Company’s common stock to an existing shareholder for a cash purchase price of $55,606, reflecting an effective price per share of approximately $0.05.
During the year ended December 31, 2019, the Company issued 4,343,425 shares of the Company’s common stock (of which 3,748,150 were issued to Jason Drummond), valued at $137,645, reflecting an effective price per share of approximately $0.03, in payment of accrued costs and expenses to officers, directors, affiliates, and other related parties.
During the year ended December 31, 2020, the Company issued no shares of the Company’s common stock in payment of accrued costs and expenses to officers, directors, affiliates, and other related parties.
In February 26, 2020, we completed2021, the Company sold 1,606,600 shares of its common stock for gross proceeds of $4,016,500 in a private placementplacement. The Company paid a finder’s fee to non-U.S. persons forregistered brokers in the saleamount of 205,000$360,000 in connection with these transactions.
In March 2021, the Company sold 10,000 shares of ourits common stock for gross proceeds of $25,000 in a private placement.
In August 2021, the Company sold 538,693 shares of common stock at a purchase price of $2.50$3.25 per share pursuant to Rule 903 of Regulation Sin a private placement exempt from registration under the Securities Act with thirteen individual investors for cash proceeds of $512,500. No fees or other costs, other than legal costs, were incurred in connection with the Private Placement.
Of the 205,000 shares of common stock sold, 121,000 shares were sold for a total purchase price of $302,500 prior to December 31, 2019. During January and February 2020, the remaining 84,000 shares were sold for a total purchase price of $210,000. The proceeds from the Private Placement were used for general operating purposes.
Effective March 18, 2020, Dito entered into a Share Exchange Agreements (the "Exchange Agreement") with each of the shareholders in Dito UK to acquire all of the outstanding ordinary shares of Dito UK. The Exchange Agreements provided for each outstanding ordinary share of Dito UK to be effectively converted into 25 shares of common stock of Dito. All of the Dito shares were issued to non-U.S. persons pursuant tounder Rule 903506(b) of Regulation S. As a result, Dito UK became a wholly-owned subsidiary of Dito.
On August 3, 2020, the Company issued an aggregate of 2,000,000 shares of common stock valued at $2.50 per share to various parties in connection with the entry into a consulting agreement with Montrose Capital Partners Limited, a corporation formed under the laws of the United Kingdom. The shares were issued pursuant to the exemption from registration provided by Regulation D and the exclusion from registration provided by Regulation S.
On September 14, 2020, we completed a private placement to an existing shareholder that is a non-U.S. person for the sale of 9,200 shares of our common stock at a price of $2.50 per share pursuant to Rule 903 of Regulation S under the Securities Act, for cashgross proceeds of $23,000. No fees or other costs, other than legal costs, were incurred in$1,750,750. In connection with the private placement.
On September 15, 2020,therewith, we completedissued to a private placementbroker warrants to an existing shareholder that is a non-U.S. person for the sale of 10,000purchase 41,175 shares of our common stock at awith an exercise price of $2.50$3.25 per share pursuant to Rule 903and a term of Regulation S under the Securities Act for cash proceeds of $25,000. No fees or other costs, other than legal costs, were incurred in connectionfive years.
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Item 16. Exhibits and Financial Statement Schedules
The following exhibits are filed with the private placement.this registration statement:
On September 25, 2020, we completed a private placement to a non-U.S. person for the sale of 5,000 shares of our common stock at a price of $2.50 per share pursuant to Rule 903 of Regulation S under the Securities Act for cash proceeds of $12,500. No fees or other costs, other than legal costs, were incurred in connection with the private placement.
On October 16, 2020, we completed a private placement to a non-U.S. person for the sale of 5,000 shares of our common stock at a price of $2.50 per share pursuant to Rule 903 of Regulation S under the Securities Act for cash proceeds of $12,500. No fees or other costs, other than legal costs, were incurred in connection with the private placement.INDEX TO EXHIBITS
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
* Filed herewith
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Item 17. Undertakings
| (a) | The undersigned registrant hereby undertakes: |
| (1) | To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: |
| (i) | To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; |
| (ii) | To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; |
| (iii) | To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; |
| (2) | That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
| (3) | To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. |
| (4) | That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use. |
| (5) | That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser: |
| (i) | Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424; |
| (ii) | Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant; |
| (iii) | The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and |
| (iv) | Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser. |
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| (b) | Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. |
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on the Form S-1 andregistrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in Toronto, Ontario, Canada,the City of Las Vegas, State of Nevada, on November 10, 2020.August 31, 2021.
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| /s/ Jason Drummond | ||
| Jason Drummond | ||
| President, Chief Executive Officer, Chief Financial Officer and Secretary |
Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement on Form S-1registration statement has been signed by the following persons in the capacities and on the dates indicated.indicated
Signature | Title | Date | ||
| /s/ Jason Drummond Jason Drummond | Director, President, Chief Executive Officer, Chief Financial Officer (Principal Executive Officer and |
| August 31, 2021 |