Forward-looking statements
The following discussion of the Company's historical performance and financial condition should be read together with the consolidated financial statements and related notes in "Item 8. Financial Statements and Supplemental Data" of this Report. This discussion contains forward-looking statements based on the views and beliefs of our management, as well as assumptions and estimates made by our management. These statements by their nature are subject to risks and uncertainties, and are influenced by various factors. As a consequence, actual results may differ materially from those in the forward-looking statements. See "Item 1A. Risk Factors" of this report for the discussion of risk factors and see "Cautionary Statement Regarding Forward-Looking Statements" for information the forward-looking statements included below.
Summary of the information contained in the management report and the analysis of the financial situation and operating results
Our Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is provided in addition to the accompanying audited financial statements and notes to assist readers in understanding our results of operations, financial condition, and cash flows. MD&A is organized as follows:
? Overview. Discussion of our activities and overall analysis of our financial situation and
other highlights that affect us, to provide context for the rest of
Management report.
? Results of operations. An analysis of our financial results comparing the
nine-month transition period completed
months endedOctober 31, 2020 , the twelve months endedJanuary 31, 2021 and 2020 and six months endedJanuary 31, 2020 and 2019. ? Liquidity and Capital Resources. An analysis of changes in our
consolidated balance sheets and cash flows and discussion of our financial condition
state.
? Critical accounting policies and estimates. Accounting estimates that we
believe it is important to understand the assumptions and judgments
incorporated in our reported financial results and forecasts. Overview
We derive our revenue primarily from license fees received from gaming operators located in the
The Company's goal is to expand our customer base globally and to integrate additional operators, launch additional synergistic products and appoint more distributors. Currently the Company has more than 5.3 million registered users across all gaming operators that utilize the Company's technology and is currently integrating additional operators to expand this usage. Our financial focus is on long-term, sustainable growth in revenue with the goal of marginal increases in expenses. The Company's activity is highly scalable. We are highly encouraged by recent revenue growth, clearly demonstrating the acceptance and reputation of the Company's GM-X System and its gaming content. We plan to continuously add new products to our offerings and anticipate revenue growth assuming we are successful therewith. Novel Coronavirus (COVID-19) InDecember 2019 , a novel strain of coronavirus, which causes the infectious disease known as COVID-19, was reported inWuhan, China . TheWorld Health Organization declared COVID-19 a "Public Health Emergency of International Concern" onJanuary 30, 2020 and a global pandemic onMarch 11, 2020 . In March and April, manyU.S. states and foreign jurisdictions began issuing 'stay-at-home' orders. Subsequently, and continuing through the date of this Report, the COVID-19 pandemic has adversely impacted global commercial activity, disrupted supply chains and contributed to significant volatility in financial markets. The ongoing COVID-19 pandemic could have a continued material adverse impact on economic and market conditions and trigger a period of global economic slowdown. 63 Table of Contents A significant or prolonged decrease in consumer spending on entertainment or leisure activities would likely have an adverse effect on demand for our product offerings, reducing cash flows and revenues, and thereby materially harm our business, financial condition and results of operations. In addition, a recurrence of COVID-19 cases or an emergence of additional variants or strains could cause other widespread or more severe impacts depending on where infection rates are highest. We will continue to monitor developments relating to disruptions and uncertainties caused by COVID-19. As shown in our results of operations herein, we have to date, not experienced any significant material negative impact to our operations, revenues or gross profit due to COVID-19. However, moving forward, the range of possible impacts on our business from the coronavirus pandemic could include: (i) changing demand for our products and services; (ii) rising bottlenecks in our supply chain; and (iii) increasing contraction in the capital markets. At this time, our operations have not been materially negatively impacted by the coronavirus pandemic to date; although much of the work performed by the Company was in the commuter environment, as opposed to an office setting; however, it is possible that COVID-19 and the worldwide response thereto, may have a material negative effect on our operations, cash flows and results of operations. Currently we believe that we have sufficient cash on hand, and the ability to raise additional funding, or borrow additional funding, as needed, to support our operations for the foreseeable future; however, we will continue to evaluate our business operations based on new information as it becomes available and will make changes that we consider necessary in light of any new developments regarding the pandemic. The future impact of COVID-19 on our business and operations is currently unknown. The pandemic is continuing to develop rapidly and the full extent to which COVID-19 will ultimately impact us depends on future developments, including the duration and spread of the virus, virus mutations and variants, the availability and efficacy of vaccines and boosters, and the willingness of individuals to continue to obtain vaccines and boosters, as well as potential seasonality of new outbreaks. Results of Operations Revenues
The Company currently has two separate revenue streams.
1) – Charges for the use of intellectual property.
The Company charges gaming operators for the use of its unique intellectual property (IP) and technology systems. Revenues derived from such charges were based on the usage of the systems by the clients. Total revenues recognized from the usage of our Gaming IP and technology systems for the nine months endedOctober 31, 2021 and 2020, the twelve months endedJanuary 31, 2021 and 2020, the six months endedJanuary 31, 2020 and 2019 are shown in the following table: Nine Months Nine Months Twelve Twelve Six Months Six Months Ended Ended Months Ended Months Ended Ended Ended October 31 October 31 January 31 January 31 January 31 January 31 2021 2020 2021 2020 2020 2019 (unaudited) (unaudited) (unaudited) Related
party
$ 1,087,816 $ 1,349,485 Third party 112,182 441,994 595,819 1,120,802 670,783 2,752
Total 1,637,273 2,075,696 2,844,696 3,288,575
1,758,599 1,352,237 64 Table of Contents The decrease in revenues, with regard to this category of sales, in the nine-month transition period endedOctober 31, 2021 , compared to the nine-month period endedOctober 31, 2020 , is due to the Company's shift in focus to appointing resellers of its product and services. The portion of the decrease in revenues by third-party clients can be attributed to the loss of certain major operators from our third-party customers. The decrease in revenues in the twelve-month period endedJanuary 31, 2021 , compared to the twelve-month period endedJanuary 31, 2020 , is due to a marginal decrease in revenues from our third-party customers and can be attributed to the reduced performance of certain operators.
The increase in revenue during the six months ended
2) - Resellers SinceJune 2020 , the Company has contracted with certain clients to offer third party gaming content and as such become a reseller of this gaming content. Revenues derived from the reselling of gaming content during the nine-months endedOctober 31, 2021 and 2020, and the twelve-months endedJanuary 31, 2021 and 2020, were$7,696,219 ,$1,195,957 , and$2,378,363 and$0 , respectively. There were no such revenues in the previous years or periods. The increase in this category of revenues is due to the Company's shift in focus to appoint resellers for its products and services. The Company believes its strategy to appoint resellers will allow the Company to scale its distribution more efficiently and broaden its global reach. The Company is seeking to engage additional resellers, increase its number of operators, and broaden its global market. We believe that this is also now achievable via the Company's new GM-Ag system that is more suitable for Latin American and European markets. The Company believes that there is a significant opportunity to scale this new revenue stream with low related expenses and no capital expenditures and also to expand its global reach. We believe the new revenue stream is highly scalable i.e., the running and support costs relative to the incremental revenues are low, and will reduce exponentially as a percentage of revenues as revenues grow. The Company plans to strive to roll out this new product offering to its existing client base and expects to scale up its revenues as a result. Costs of goods sold
The Company currently has two separate costs for goods sold.
1) The Company recognized the amortization of stock options granted to consultants under its 2018 Equity Incentive Plan as a cost of goods sold. This recognition is based on the fact that the stock options directly contributed to the revenues generated by the Company's GM2 Asset. The amortization expenses of the stock options granted to consultants recognized in the nine months endedOctober 31, 2021 and 2020, the twelve months endedJanuary 31, 2021 and 2020, and the six months endedJanuary 31, 2020 and 2019 are shown in the following table: Twelve Nine Months Months
Twelve months Six months
Ended Nine Months Ended Ended Ended Ended Six Months Ended October 31 October 31 January 31 January 31 January 31 January 31 2021 2020 2021 2020 2020 2019 (unaudited) (unaudited) (unaudited) Amortization of Consultants Options$ 359,419 $ 164,762$ 275,780 $ (59,280 ) $ 57,224 $ 138,502 65 Table of Contents The increase in the option amortization expenses in the nine-month transition period endedOctober 31, 2021 , compared to the nine-months endedOctober 31, 2020 , is due to new options granted during the nine-months endedOctober 31, 2021 . The increase in the share price has increased the option valuation based on the Black-Scholes valuation model and therefore increased the amortization expenses. The increase in the option amortization expense in fiscal year 2021, compared to 2020, is attributable to the options issued during the year. The increase in the share price has also increased the option valuation based on the Black-Scholes valuation model and therefore increased the amortization expenses. The negative cost of goods sold during the twelve months endedJanuary 31, 2020 was due to the adoption of new accounting standard ASU 2018-07. The decrease in the option amortization expenses in the six-month transition period ended 2020, compared to the six months endedJanuary 31, 2019 , is due to the adoption of new accounting standard update 2018-07, in which the Company was not required to re-value options at each reporting date. 2) SinceJune 2020 , due to the reselling of the gaming content, the cost of usage of the third-party content is recognized as a cost of goods sold. During nine months endedOctober 31, 2021 and 2020, and the twelve months endedJanuary 31, 2021 ,$5,691,089 ,$880,508 and$1,724,272 , respectively, of costs were recognized. There were no such costs before the twelve-month ended January
31, 2021. While the Company is focusing on appointing additional resellers in order to scale its customer base, sales and global reach, the Company's gross profit margin may be reduced. However, the Company expects a longer term benefit in the cost of goods as a result of the increase in buying power due to higher overall usage of gaming content.
General and administrative expenses
General and administrative expenses consist primarily of advertising and promotion expenses, travel expenses, website maintenance expenses, administrative expenses, commission expenses, lease expenses, gaming license expenses and amortization expenses on our intangible asset (see "NOTE 9 - INTANGIBLE ASSETS - SOFTWARE PLATFORM" to the financial statements included herein). Total general and administrative expenses in the nine months endedOctober 31, 2021 and 2020, the twelve months endedJanuary 31, 2021 and 2020, and the six months endedJanuary 31, 2020 and 2019 are shown in the following table: Twelve Nine Months Months Twelve Months Six Months Ended Nine Months Ended Ended Ended Ended Six Months Ended October 31 October 31 January 31 January 31 January 31 January 31 2021 2020 2021 2020 2020 2019 (unaudited) (unaudited) (unaudited) General & Administrative Expenses$ 1,112,986 $ 414,965$ 566,593 $ 337,140 $ 149,177 $ 133,376
The increase in the general and administrative expenses for the nine months endedOctober 31, 2021 compared to the nine months endedOctober 31, 2020 , was mainly due to a marketing fee paid to one of the Company's customers and certain new expenses which were applicable this fiscal year, but not last, including lease expenses, gaming license expenses, and amortization expenses on our intangible asset. The marketing fee is due to one customer pursuant to the Company's Software Services Agreement which stipulates benchmark targeted gross gaming revenues that the customer is required to achieve in order to obtain a marketing rebate. As such, if the customer generates the benchmark by a predetermined date, then the customer will be granted a marketing rebate of 1% of the gross gaming revenues generated by the customer. The customer has satisfied the requirement of the stipulatedJune 2021 benchmark which was4 million Euro gross gaming revenues, and as such was granted the 1% rebate. This rebate resulted in an increase in general and administrative expenses. 66 Table of Contents The increase in the general and administrative expenses in fiscal year 2021, compared to 2020, is mainly due to the marketing compensation granted to one of the Company's customers. As per the Company's Software Agreement with the customer, the customer is required to achieve benchmark targeted gross gaming revenues in order to obtain a marketing rebate. If the customer generates the benchmark by a predetermined date then the customer will be granted a marketing rebate of 1% of the gross gaming revenues generated by the customer. The customer has satisfied the requirement of the stipulatedSeptember 2020 benchmark which was2 million Euro gross gaming revenues, and as such was granted the 1% rebate. The general and administrative expenses remained relatively consistent during the six-month period endedJanuary 31, 2020 , compared to the six-month period endedJanuary 31, 2019 .
General and administrative expenses – Related parties
General and administrative expenses from related parties consist primarily of amortization expenses due to stock options granted to directors and officers, back-office expenses paid toArticulate Pty Ltd ("Articulate"), which is wholly-owned byAnthony Brian Goodman , CEO and Chairman of the Company and his wifeMarla Goodman , consulting expenses and salary expenses payable to the Company's Directors and officers. The components of general and administrative expenses from related parties in the nine months endedOctober 31, 2021 and 2020, the twelve months endedJanuary 31, 2021 and 2020, and the six months endedJanuary 31, 2020 and 2019 are shown in the following table: Nine Months Nine Months Twelve Twelve Months Six Months Ended Ended Months Ended Ended Ended Six Months Ended October 31 October 31 January 31 January 31 January 31 January 31 2021 2020 2021 2020 2020 2019 (unaudited) (unaudited) (unaudited) Amortization expenses of Directors' and Officers' stock options$ 546,560 $ 1,032,495 $ 1,630,403 $ 484,763 $ 392,101 $ 114,180 Back-office expenses 55,000 99,000 132,000 99,000 66,000 20,200 Consulting & salary expenses 380,463 181,347 288,037 160,380 81,972 68,040 Total$ 982,023 $ 1,312,842 $ 2,050,440 $ 744,143 $ 540,073 $ 202,420 During the nine-months endedOctober 31, 2021 and 2020, the directors' stock options amortization expense decreased due to the stock options granted to the Company's Chief Executive Officer (2,700,000 options) and the Chief Operating Officer (700,000 options) in addition to other options granted under the 2018 Equity Incentive Plan becoming fully vested and fully amortized; the back-office expenses decreased due to the cancellation of Back Office Services Agreement with Articulate (a related party owned by the Company's Chief Executive Officer,Anthony Brian Goodman ); the consulting & salary expense increased by$199,116 , which is principally due to increased salaries of the Company's Chief Executive Officer, the Chief Operating Officer and the addition of the Chief Financial Officer's compensation.
During the twelve-months endedJanuary 31, 2021 and 2020, the amortization expenses increased due to the stock options granted to three Independent Directors under the 2018 Equity Incentive Plan; the back office expenses (with Articulate, a related party owned by the Company's Chief Executive Officer,Anthony Brian Goodman and his wife) increased due to the increasing cost per month thereof from$5,500 to$11,000 beginning inAugust 1, 2019 ; the consulting expenses increased due to the increasing number of Directors which the Company had, and the consulting services provided by Mr.Brett Goodman , a consultant, and the son of the Company's Chief Executive Officer,who has been engaged to assist the Company with building a Peer-to-Peer gaming system. 67 Table of Contents During the six months endedJanuary 31, 2020 and 2019, the increase in stock option amortization expenses was due to the stock options granted to the Company's Chief Executive Officer (2,700,000 options) and the Chief Operating Officer (700,000 options) onSeptember 19, 2019 ; and the back-office expense increasing due to the increasing cost with Articulate (a related party owned by the Company's Chief Executive Officer,Anthony Brian Goodman ) from$2,300 to$5,500 per month beginning onDecember 1, 2018 .
Compensation expense – Acquisition cost –
Compensation expense - acquisition cost - related party was a result of an Asset Purchase Agreement entered into onFebruary 28, 2018 , with Luxor, which is wholly-owned by the Company's Chief Executive Officer,Anthony Brian Goodman . Pursuant to the Asset Purchase Agreement, the Company purchased certain intellectual property and know-how (the GM2 Asset) and agreed that 50% of the revenues generated by the GM2 Asset during the 12-month period fromMarch 1, 2018 toFebruary 28, 2019 , would be paid to Luxor. As ofJuly 31, 2018 , the Company estimated the acquisition cost at$1,242,812 .
In the nine months ended
During the twelve-months endedJanuary 31, 2021 and 2020, the acquisition cost was$0 and$6,791 . The acquisition cost for the fiscal year endedJanuary 31, 2020 was an adjustment to the estimated number.
In the six months ended
Research and development costs
Research and development expense was incurred in connection with the building of the Company's Seamless Aggregation Platform ("Aggregation Platform") acquired onMarch 1, 2021 , fromGamefish Global Pty Ltd. During the nine-months endedOctober 31, 2021 and 2020, the research and development expense increased$131,067 to$149,738 , from$18,671 , respectively, mainly due to increased development of the platform.
In the twelve months ended
Professional fees Professional fees consisted primarily ofSEC filing fees, legal fees and accounting and audit fees. The professional fees for the nine months endedOctober 31, 2021 and 2020, the twelve months endedJanuary 31, 2021 and 2020, and the six months endedJanuary 31, 2020 and 2019, are shown in the following table: Twelve Nine Months Months Twelve Months Six Months Ended Nine Months Ended Ended Ended Ended Six Months Ended October 31 October 31 January 31 January 31 January 31 January 31 2021 2020 2021 2020 2020 2019 (unaudited) (unaudited) (unaudited)
Professional fees$ 287,383 $ 110,336$ 159,091
$ 57,507 $ 26,944 $ 30,068 68 Table of Contents During the nine-months endedOctober 31, 2021 and 2020, professional fees increased by$177,047 to$287,383 , from$110,336 , respectively, mainly due to legal and accounting fees related to corporate actions, filings with theSEC , preparation of tax returns and period end audits and reviews. Legal fees increased by$112,411 (from$54,556 to$166,967 ) and accounting and audit fees increased by$53,950 (from$32,550 to$86,500 ). During the twelve-months endedJanuary 31, 2021 and 2020, professional fees increased$101,584 from$57,507 , to$159,091 , respectively, mainly due to the corporate actions and filings with theSEC during the year including the change of fiscal year, stock reverse split and fees in connection with the filing of our NASDAQ uplisting application, which is still pending.
Professional fees have remained fairly constant over the six-month period ended
Bad Debt Expense During the nine-months endedOctober 31, 2021 and 2020, bad debt expense remained unchanged at$0 and$0 , respectively. Accounts receivable are monitored regularly for impairment and all amounts are collectible except for a reserve for doubtful accounts of$168,557 .
In the twelve months ended
During the six-months endedJanuary 31, 2020 and 2019, bad debt expense was$10,839 and$0 , respectively. As ofJanuary 31, 2020 , the Company had an accounts receivable of$10,839 fromGlobaltech Software Services LLC , a Company from which the Company's Chief Executive Officer previously had an interest but does not have an interest as of this date. The relationship withGlobaltech Software Services LLC was terminated and the amount was over one year past due; therefore, the balance of$10,839 was written off to bad debt expense. 69 Table of Contents Interest Expense During the nine-months endedOctober 31, 2021 and 2020, interest expense was$0 and$10,897 , respectively. Historically, interest expense was mainly attributed to settlement payable and promissory note to Luxor, aNevada limited liability corporation, which is wholly-owned by the Company's Chief Executive Officer and Chairman,Anthony Brian Goodman . The promissory note had an original principal balance of$1,031,567 , with interest accruing on the unpaid balance at a rate of 6% per annum. The settlement payable and promissory note were paid in full as ofJanuary 31, 2021 ; therefore, no interest was incurred during the nine months endingOctober 31, 2021 .
During the twelve-months endedJanuary 31, 2021 and 2020, interest expense was$11,852 and$63,583 , respectively. The decrease of interest expense is mainly due to the decrease in the outstanding balance of the convertible debt and the promissory note with Luxor that was paid in full as ofJanuary 31, 2021 . During the six-months endedJanuary 31, 2020 and 2019, interest expense was$26,227 and$7,994 respectively. The increase in the interest expense was mainly attributable to the Luxor Promissory Note discussed above which was outstanding for the full six-month period endedJanuary 31, 2020 , compared to only a portion of the six-month period endedJanuary 31, 2019 . The interest rate for the Promissory Note was 6% per annum. Interest income
Interest income is linked to earnings on the Company’s savings account with
During the nine-months endedOctober 31, 2021 and 2020, the interest income was$201 and$1,570 , respectively. The decrease in interest income is due to the decrease in the earnings fromWells Fargo Bank . During the twelve-months endedJanuary 31, 2021 and 2020, interest income was$1,611 and$26,779 , respectively. The decrease in interest income is due to the decrease in the earnings fromWells Fargo Bank . During the six-months endedJanuary 31, 2020 and 2019, interest income was$18,659 and$0 , respectively. The interest income was from earnings on amounts held in the Company'sWells Fargo Bank savings account which the Company opened inFebruary 2019 . Foreign Exchange Gain (loss)
Some suppliers invoice the Company in euros and the exchange gain (loss) is mainly due to the fluctuation of the euro against the US dollar.
In the nine months ended
In the twelve months ended
In the six months ended
Other Expense OnAugust 25, 2021 , the Company first became aware of a default judgment entered against the Company (under its former nameSource Gold Corp. ), pursuant to an action filed against the Company byNPNC Management LLC ("NPNC"), in theEighth Judicial District Court of Clark County, Nevada (Case No: A-15-716733-C). The action was originally filed onApril 9, 2015 , with a default judgment originally granted onNovember 3, 2015 , which default judgment was renewed onAugust 24, 2021 . The default judgment was in the amount of$42,485 , plus interest at 18% per annum. The Company was unaware of the prior default judgment untilAugust 25, 2021 , and has no knowledge of any liability, contracts with, or amounts due to, NPNC. OnOctober 1, 2021 , in an effort to settle the matter, the Company paid$40,000 to NPNC in full satisfaction of amounts owed.
There were no such expenses in previous periods.
Gain (loss) on derivative liability – note conversion function
The gain (loss) on derivative liability was mainly due to the change of fair value change of derivative liabilities related to the note conversion features of convertible notes. As ofJanuary 31, 2020 , all convertible notes were settled.
In the nine months ended
70 Table of Contents During the twelve-months endedJanuary 31, 2021 and 2020, the loss on derivative liability was$0 and$3,182 , respectively. The loss on derivative liability during theJanuary 31, 2020 year was mainly due to the fair value change of derivative liabilities. The Company settled all the derivative liabilities onJanuary 31, 2020 ; therefore, no gains or losses on derivative liabilities accrued during theJanuary 31, 2021 year.
In the six months ended
Gain (loss) on extinguishment of debt
There has been no gain or loss on extinguishment of debt in the nine months ended
During the semester ended
Net Income (loss) During the nine-months endedOctober 31, 2021 and 2020, net income was$648,072 and$345,922 , respectively. The increase in net income of$302,150 is mainly due to the increase in gross profit of$1,056,601 , offset by increases in (i) general and administrative expenses of$698,021 , (ii) professional fees of$177,047 and (iii) research and development expense of$131,067 .
In the twelve months ended
is mainly due to the increase in
During the six-months endedJanuary 31, 2020 and 2019, net income was$966,774 and$753,790 , respectively. The increase in net income of$212,984 was due to the increase in revenues and the decrease in acquisition costs and costs of goods sold.
Cash and capital resources
The table below summarizes our cash and cash equivalents, working capital and shareholders’ equity as of
As of As of October 31 January 31, 2021 2021 Cash and cash equivalents$ 16,797,656 $ 11,706,349 Working capital$ 18,694,687 $ 13,261,937 Shareholders' equity$ 18,928,109 $ 13,261,937
The Company had$16,797,656 of cash on hand and total assets of$20,458,948 ($20,043,502 were current assets) atOctober 31, 2021 . The Company had total working capital of$18,694,687 as ofOctober 31, 2021 . The Company had total liabilities of$1,530,839 (of which$1,348,815 were current liabilities) as ofOctober 31, 2021 , which mainly included$105,062 of accounts payable to related parties,$1,074,786 of accounts payable and accrued liabilities,$68,635 of customer deposits, and$282,233 of operating lease liabilities related to the office lease. The accounts payable to related parties include the accrued consulting fees and salaries payable to the Directors and management of the Company and also the accounts payable to Articulate, which is wholly-owned byAnthony Brian Goodman , CEO of the Company and his wifeMarla Goodman . Accounts payable to related parties was$105,062 and$208,521 as ofOctober 31, 2021 , andJanuary 31, 2021 , respectively. The increase in cash was due to the sale of$4,047,253 in equity, and$1,271,119 in cash from operations. The accounts receivable increased due to an increase in revenues. The customer deposits decreased because of the customers' use of deposits as credits for games played. The consideration payable to related party decreased because the amount payable for the acquisition of GTG was settled. 71 Table of Contents We do not currently have any additional commitments or identified sources of additional capital from third parties or from our officers, directors or majority stockholders. Additional financing may not be available on favorable terms, if at all. In the future, we may be required to seek additional capital by selling additional debt or equity securities, or otherwise be required to bring cash flows in balance when we approach a condition of cash insufficiency. The sale of additional equity or debt securities, if accomplished, may result in dilution to our then stockholders. Financing may not be available in amounts or on terms acceptable to us, or at all. In the event we are unable to raise additional funding and/or obtain revenues sufficient to support our expenses, we may be forced to scale down our operations, which could cause our securities to decline in value. See "Note 3 - Accounts Receivable, Net", for a description of accounts receivable; "Note 4 - Accounts Receivable -Related Party ", for a description of related party accounts receivable; "Note 5 - Prepaid Expenses", for a description of prepaid expenses; "Note 9 - Intangible Assets - Software Platform", for a description of the Company's intangible assets; "Note 10- Related Party Transactions", for a description of related party transactions; each included herein under "Item 8. Financial Statements and Supplementary
Data." Nine Months Nine Months Twelve Months Twelve Months Six Months Six Months Ended October Ended October Ended January Ended January Ended Ended January 31 31 31 31 January 31 31 2021 2020 2021 2020 2020 2019 (unaudited) (unaudited) (unaudited) Cash provided by (used in) operating activities$ 1,271,119 $ 1,799,079 $ 1,878,043 $ 1,599,319 $ 986,723 $ 839,338 Cash provided by (used in) investing activities (231,314 ) - 192 - - - Cash provided by (used in) financing activities 4,051,165 1,354,412 7,971,610 (861,313 ) (861,313 ) (167,420 ) The Company generated cash from operating activities of$1,271,119 ,$1,799,079 ,$1,878,043 ,$1,599,319 ,$986,723 , and$839,338 for the nine-months endedOctober 31, 2021 and 2020, the twelve months endedJanuary 31, 2021 and 2020, and the six months endedJanuary 31, 2020 and 2019. Cash flows from operating activities include net income adjusted for certain non-cash expenses, and changes in operating assets and liabilities. The$1,271,119 of cash generated from operating activities during the nine-months endedOctober 31, 2021 was due primarily to$648,072 of net income, and non-cash expenses relating to stock-based compensation (including options issued for services and stock issued for services) which totaled$967,579 during the nine-months endedOctober 31, 2021 . The$1,799,079 cash generated from operating activities during the nine-months endedOctober 31, 2020 , was due primarily to$345,922 of net income, and non-cash expenses relating to stock-based compensation (including options issued for services and stock issued for services) which were$1,234,257 during the nine-months endedOctober 31, 2020 . Net cash provided by (used in) investment activities was$(231,314) and$192 for the nine-months endedOctober 31, 2021 and twelve-months endedJanuary 31, 2021 . During the nine-months endedOctober 31, 2021 , the$231,314 cash used in investment activities was due primarily to$115,314 for the acquisition ofGlobal Technology Group Pty Ltd (more details of which are discussed in "Note 8 - Asset Acquisition -Related Party " to the consolidated financial statements included herein under "Item 8. Financial Statements and Supplementary Data") and$116,000 for the purchase of fixed assets. There was no cash used or provided by investing activities for the nine-months endedOctober 31, 2020 . 72 Table of Contents Net cash provided by (used in) financing activities was$4,051,165 ,$1,354,412 ,$7,971,610 ,$(861,313) ,$(861,313) , and$(167,420) for the nine-months endedOctober 31, 2021 and 2020, the twelve months endedJanuary 31, 2021 and 2020, and the six months endedJanuary 31, 2020 and 2019, respectively. The$4,051,165 cash provided by financing activities during the nine-months endedOctober 31, 2021 was due primarily to the exercise of warrants inJuly 2021 which raised cash of$1,020,000 (for 170,000 shares of common stock of the Company) and a public offering inOctober 2021 which raised a net of$3,027,253 (for 496,429 shares of common stock and warrants to purchase the same number of shares of common stock of the Company) as discussed in "Note 11 - Equity" to the consolidated financial statements included herein under "Item 8. Financial Statements and Supplementary Data". The$1,354,412 of cash provided by financing activities during nine-months endedOctober 31, 2020 was due primarily to the sales of equity securities inSeptember 2020 through private placements as discussed below and in "Note 11 - Equity" to the consolidated financial statements included herein under "Item 8. Financial Statements and Supplementary Data".
Recent fundraising activities
Private Offering of Units OnAugust 20, 2020 , the Company sold, to eleven accredited investors, an aggregate of 527,029 units, with each unit consisting of one share of restricted common stock and one warrant to purchase one share of common stock, at a price of$3.40 per unit, raising cash of$1,791,863 . The units were sold pursuant to the Company's entry into subscription agreements with each investor. The subscription agreements provide the investors customary piggyback registration rights (for both the shares and the shares of common stock underlying the warrants) which remain in place for the lesser of one year following the closing of the offering and the date that the applicable investor is eligible to sell the applicable securities under Rule 144 of the Securities Act, as amended. Such piggyback registration rights agreements also provided that the Company is not required to register securities in a registration statement relating solely to an offering by the Company of securities for its own account if the managing underwriter or placement agent have advised the Company in writing that the inclusion of such securities would have a material adverse effect upon the ability of the Company to sell securities for its own account. The warrants had an exercise price of$4.10 per share (and no cashless exercise rights), and were exercisable until the earlier of (a)August 20, 2022 , and (b) the 30th day after the Company provided the holder of the warrants notice that the closing sales price of the Company's common stock has closed at or above$6.80 per share for a period of ten consecutive trading days. FromNovember 23, 2020 , toDecember 7, 2020 (ten consecutive trading days), the closing sales price of the Company's common stock closed at or above$6.80 per share, and onDecember 8, 2020 , the Company provided notice to the holders of the warrants and that they had untilJanuary 7, 2021 to exercise such warrants, or such warrants would expire pursuant to their terms. FromDecember 9, 2020 , toJanuary 7, 2021 , ten holders of warrants to purchase an aggregate of 409,029 shares of the Company's common stock exercised such warrants and paid an aggregate exercise price of$1,677,019 to the Company. In connection with such exercises the Company issued such warrant holders an aggregate of 409,029 shares of restricted common stock. Separately, effective onJanuary 7, 2021 , the Board of Directors of the Company agreed to extend the expiration date of warrants to purchase 118,000 shares of common stock, which would have otherwise expired onJanuary 7, 2021 , pursuant to the terms of the warrants, toFebruary 8, 2021 , which warrants expired unexercised. OnJanuary 20, 2021 , the Company sold an aggregate of 1,000,000 units to one investor, with each unit consisting of one share of restricted common stock and one warrant to purchase one share of common stock, at a price of$5.00 per unit. In total the Company raised cash of$4,999,982 pursuant to the private offering of the units. The units were sold pursuant to the entry into a subscription agreement with the investor. The Subscription Agreement provided the investor customary piggyback registration rights (for both the shares and the shares of common stock underlying the warrants) which remain in place for the lesser of one year following the closing of the offering and the date that the investor is eligible to sell the applicable securities under Rule 144 of the Securities Act. Such piggyback registration right agreements also provided that the Company is not required to register securities in a registration statement relating solely to an offering by the Company of securities for its own account if the managing underwriter or placement agent have advised the Company in writing that the inclusion of such securities would have a material adverse effect upon the ability of the Company to sell securities for its own account. 73 Table of Contents The warrants have an exercise price of$6.00 per share (and no cashless exercise rights), and are exercisable until the earlier of (a)January 14, 2023 , and (b) the 30th day after the Company provides the holder of the Warrants notice that the closing sales price of the Company's common stock has closed at or above$10.00 per share for a period of ten consecutive trading days. The warrants include a beneficial ownership limitation, which limits the exercise of the warrants held by the investor in the event that upon exercise such investor (and any related parties of such investor) would hold more than 4.999% of the Company's outstanding shares of common stock (which percentage may be increased to 9.999% with at least 61 days prior written notice to the Company from the investor). FromApril 26, 2021 , toMay 7, 2021 (the "Triggering Date") (ten consecutive trading days), the closing sales price of the Company's common stock closed at or above$10.00 per share. However, as the total number of shares of common stock issuable upon exercise of the Warrants would have exceeded 4.999% of the Company's common stock, and as an accommodation to the holder of the Warrants, onMay 11, 2021 , the Company agreed to provide the holder 61 days from the Triggering Date to exercise the Warrants, and as a result the holder had untilJuly 11, 2021 to exercise such Warrants. OnJuly 9, 2021 , the holder exercised a portion of the Warrants to purchase 170,000 shares of the Company's common stock at$6.00 per share and paid the Company$1,020,000 in connection with such exercise and funds were received by the Company in a total amount of$1,019,982 ($1,020,000 less$18 in bank charges) onJuly 14, 2021 . The Company issued the holder 170,000 shares of common stock in connection with such exercise. OnJuly 14, 2021 , and effective onJune 6, 2021 , the Company and the holder of the Warrants entered into an Agreement to Amend and Restate Common Stock Purchase Warrant (the "Amendment Agreement"), whereby, in consideration for the holder exercising a portion of the Warrants (warrants to purchase 170,000 shares of common stock, as described above), and as an accommodation to the holder, due to the fact that Warrants did not contemplate a situation where a Triggering Event would result in the holder holding over 4.999% of the Company's outstanding common stock, the parties agreed to enter into an Amended and Restated Common Stock Purchase Warrant, effective as ofJune 6, 2021 , amending, restating and replacing the prior Warrant Agreement, and evidencing the right of the holder to purchase 830,000 shares of common stock of the Company (the original 1,000,000 shares less the portion of the Warrants previously exercised)(the "Amended and Restated Warrants") to remove the Trigger Event and to fix the expiration date thereof as ofNovember 11, 2022 . The other terms of the prior Warrant Agreement were not changed.October 2021 Public Offering OnOctober 25, 2021 , we entered into a Securities Purchase Agreement (the "Purchase Agreement") with certain institutional investors (the "Purchasers") for the sale by the Company in a registered direct offering (the "Offering") of an aggregate of 496,429 shares of common stock of the Company (the "Shares"), together with warrants to purchase 496,429 shares of common stock (the "Warrants"), at$7.00 per combined Share and Warrant, for aggregate gross proceeds of approximately$3.475 million , before deducting the placement agent fees and related offering expenses. The Offering closed onOctober 27, 2021 . EF Hutton, division ofBenchmark Investments, LLC agreed to act as placement agent (the "Placement Agent") on a "reasonable best efforts" basis, in connection with the Offering. The Company entered into aPlacement Agency Agreement, dated as ofOctober 25, 2021 , by and between the Company and the Placement Agent (the "Placement Agency Agreement"). Pursuant to the Placement Agency Agreement, the Placement Agent will receive an aggregate cash fee of 6% of the gross proceeds of the Offering, a non-accountable expense reimbursement of 1% of the gross proceeds in the Offering, the reimbursement of certain of the Placement Agent's expenses not to exceed$60,000 , and the reimbursement of certain other expenses, in the event the Offering closes. 74 Table of Contents The Shares, Warrants and shares of common stock issuable upon exercise of the Warrants, were registered under the Securities Act, on the Company's effective shelf registration statement on Form S-3 (File No. 333-260044), filed with theSEC onOctober 5, 2021 , which was declared effective by theSEC onOctober 15, 2021 , and the base prospectus contained therein, and a prospectus supplement forming a part of the effective Registration Statement, datedOctober 25, 2021 , which was filed with the Commission onOctober 27, 2021 . The Warrants sold in the Offering have a term of three years, and an exercise price of$8.63 per share (subject to customary adjustments for stock splits, dividends and recapitalizations), the closing sales price of the Company's common stock onOctober 22, 2021 , the last trading day prior to the date that the Purchase Agreement was entered into. The Warrants provide that they may be exercised on a 'cashless exercise' basis if, at any time of exercise, there is no effective registration statement registering, or no current prospectus available for, the issuance or resale of the shares of common stock issuable upon exercise of the Warrants. The exercise of the Warrants is subject to a beneficial ownership limitation, which will prohibit the exercise thereof, if upon such exercise the holder of the Warrants, its affiliates and any other persons or entities acting as a group together with the holder or any of the holder's affiliates would hold 4.99% (or, upon election of a purchaser prior to the issuance of any shares, 9.99%) of the number of shares of the common stock outstanding immediately after giving effect to the issuance of shares of common stock issuable upon exercise of the Warrant held by the applicable holder, provided that the holders may increase or decrease the beneficial ownership limitation, provided that any increase in beneficial ownership limitation shall not be effective until 61 days following notice to us and in no event shall such beneficial ownership exceed 9.99% and such 61 day period cannot be waived. The Warrants also include anti-dilution rights, which will provide that if at any time the Warrants are outstanding, we issue (or announce any offer, sale, grant or any option to purchase or other disposition) or are deemed to have issued (which includes shares issuable upon exercise of warrants and options and conversion of convertible securities) any common stock or common stock equivalents for consideration less than the then current exercise price of the Warrants, the exercise price of such Warrants will be automatically reduced to the lowest price per share of consideration provided or deemed to have been provided for such securities, subject to certain exceptions.
Significant Events and Uncertainties
Our operating results are difficult to predict. Our prospects should be assessed in light of the risks, expenses and difficulties commonly encountered by comparable companies in the development stage.
There can be no assurance that we will be successful in meeting such risks, expenses and difficulties.
Off-balance sheet arrangements
We have no off-balance sheet arrangements, including arrangements that would affect our liquidity, capital resources, market risk support and credit risk support or other benefits.
Significant Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted inthe United States of America . The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of net sales and expenses for each period. "Note 2 -- Summary of Accounting Policies," of the notes to Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K describes the significant accounting policies and methods used in the preparation of the Company's consolidated financial statements. Management bases its estimates on historical experience and on various other assumptions it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. 75 Table of Contents Stock-Based Compensation The Company accounts for stock-based compensation to employees in accordance with Accounting Standards Codification (ASC) 718, "Compensation-Stock Compensation". ASC 718 requires companies to measure the cost of employee services received in exchange for an award of equity instruments, including stock options, based on the grant date fair value of the award and to recognize it as compensation expense over the period the employee is required to provide service in exchange for the award, usually the vesting period. Stock option forfeitures are recognized at the date of employee termination.
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