10-Q/A: Gamer Pakistan Inc. Files Amended 10-Q After Accounting Review Reveals Control Weakness

Gamer Pakistan Inc. refiles its Q3 2023 report to address a material weakness in disclosure controls and procedures after an auditor review.

Summary

• Gamer Pakistan Inc. is filing an amendment to its Q3 2023 report on Form 10-Q/A due to a review by its independent accountants, Mercurius & Associates.
• The review was initiated after the company discovered that Mercurius had not completed its review and approved the filing of the original Form 10-Q.
• The review by Mercurius did not find any errors in the balance sheets, financial statements as of and for the three and nine month periods ended September 30, 2023 and 2022, statements of stockholders equity for the nine month periods ended September 30, 2023 and 2022, or statements of cash flow for the nine month periods ended September 30, 2023 and 2022 that were included in the Original Form 10-Q.
• Changes were made to the Notes to Financial Statements, expanding Note 4 to describe certain other related party transactions and certain corrections were made in Note 6 to the descriptions of the agreements contained therein.
• Management reassessed the effectiveness of the company's internal control and implemented a new procedure to verify in writing from Mercurius for future filings of Form 10-Q that Mercurius has completed its review and approved the filing of such Form 10-Q.
• The company concluded that its disclosure controls and procedures were ineffective as of September 30, 2023, and is amending Part I, Item 4 (Controls and Procedures) in this Form 10-Q/A to update its conclusions regarding the effectiveness of its disclosure controls and procedures and its internal control over financial reporting as of September 30, 2023 as a result of the material weakness.
• As of November 20, 2023, there were 25,579,319 shares of the registrant's common stock outstanding.
• The company had cash of $71,481 as of September 30, 2023, compared to $90,277 as of December 31, 2022.
• The net loss for the nine months ended September 30, 2023, was $311,199, compared to $145,838 for the same period in 2022.
• The company raised gross proceeds of approximately $6,800,000 through its initial public offering (IPO) in October 2023, with net proceeds of approximately $5,435,000 after deducting underwriting discounts and commissions.

Sentiment

Score: 4

Explanation: The sentiment is neutral to slightly negative due to the material weakness in internal controls and increased net loss, but is offset by the successful IPO.

Positives

• The independent accountant's review did not find any errors in the balance sheets, financial statements as of and for the three and nine month periods ended September 30, 2023 and 2022, statements of stockholders equity for the nine month periods ended September 30, 2023 and 2022, or statements of cash flow for the nine month periods ended September 30, 2023 and 2022 that were included in the Original Form 10-Q.
• The company has implemented a new internal procedure to prevent future control weaknesses.
• The company successfully completed an IPO in October 2023, raising $6.8 million in gross proceeds.

Negatives

• The company identified a material weakness in its disclosure controls and procedures.
• The original Q3 2023 report was filed without proper auditor review.
• The company incurred a net loss of $311,199 for the nine months ended September 30, 2023, which is higher than the $145,838 loss for the same period in 2022.

Risks

• The company's future success depends on market acceptance of its mobile esports products and services.
• Increased competition could negatively impact the company's performance.
• Changes in political, economic, or regulatory conditions could affect the company's operations.
• The company's ability to retain and attract key employees is crucial for its success.
• The company faces risks related to protecting its intellectual property and avoiding infringement on others' rights.

Future Outlook

Management believes the net proceeds from the IPO will be sufficient to meet its cash, operational and liquidity requirements for at least 12 months after the date of this quarterly report, but anticipates needing to raise additional funds in the future.

Management Comments

• Management believes the net proceeds from the IPO will be sufficient to meet its cash, operational and liquidity requirements for at least 12 months after the date of this quarterly report.
• Management anticipates that it will be required to raise additional funds through public or private equity financings in the future to expand its business.

Industry Context

The company operates in the esports industry, which is experiencing rapid growth and increasing competition. The company's focus on the Pakistan market and its partnerships with universities could provide a competitive advantage.

Comparison to Industry Standards

• It is difficult to compare Gamer Pakistan's results to industry standards due to its early stage of development and lack of revenue.
• Other esports companies, such as Activision Blizzard and Electronic Arts, have significantly larger operations and revenue streams.
• However, Gamer Pakistan's focus on the emerging Pakistan market could provide a unique opportunity for growth.

Corporate Governance

Related Party Transactions

• In February of 2023, the Company borrowed $ 260,000 from Sports Industry of India Inc.
• The Companys Chief Executive Officer (CEO) is also the CEO of Pin Stripe Entertainment, Inc. (Pin Stripe).
• The Company made payments to the CEO and Pin Stripe totaling approximately $ 70,000 for the three and nine month periods ended September 30, 2023, which were compensation for services provided by the CEO to the Company in his role as an officer of the Company.
• The Company has an agreement for Alexander Alexandrov to serve as the Chief Technology Officer of the Company.
• Mr. Alexandrov owns Pixel Colony, LLC (see Note 6).
• Pixel Colony, LLC and Mr. Alexandrov provided services to the Company during the three and nine month periods ended September 30, 2023 and received payment from the Company totaling approximately $ 14,000 .
• The Company also paid certain shareholders of the Company for consulting and other services performed during the three and nine month periods ended September 30, 2023 totaling approximately $ 26,000 .
• The CEO of K2 Gamer owns approximately 5 % and 7 % of K2 Gamer and ESP, respectively.
• The Company paid ESP approximately $ 101,000 for services provided during the three and nine month periods ended September 30, 2023.

Stakeholder Impact

• Shareholders may be concerned about the material weakness in internal controls.
• The successful IPO provides the company with capital to execute its business plan.
• The company's future performance will impact employees, customers, and suppliers.

Next Steps

• The company intends to commence solicitation of marketing partners, advertisers and other sponsors, with the goal of beginning to generate revenue thereafter.
• The company plans to use the net proceeds from the IPO for operating expenses, marketing, event expenses, technology development, retention of additional staff in the United States and Pakistan, working capital and general corporate purposes, including perhaps acquisitions of game licenses, technology platform agreements, data development and strategic partnerships.

Key Dates

Keywords

Gamer Pakistan, esports, financial statements, internal control, IPO, Form 10-Q/A, material weakness, disclosure controls, auditor review