Indicate by check mark if the registrant is a well-known seasoned
issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted
electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
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 accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging
growth company” in Rule 12b-2 of the Exchange Act.
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 13(a) of the Exchange Act ☒
Indicate by check mark whether the registrant has filed a report on
and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section
404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
☐
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Act). Yes ☐ No ☒
Part I
Forward-Looking Statements
This Annual Report on Form 10-K (this “Annual Report”)
contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities
Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that involve substantial
risks and uncertainties. All statements other than statements of historical facts contained in this Annual Report may be forward-looking
statements. The forward-looking statements are contained principally in the sections entitled “Risk Factors,” and “Management’s
Discussion and Analysis of Financial Condition and Results of Operations”, but are also contained elsewhere in this Annual Report.
In some cases, you can identify forward-looking statements by terms such as “may,” “might,” “will,”
“should,” “expects,” “plans,” “anticipates,” “could,” “would,”
“intends,” “targets,” “projects,” “contemplates,” “believes,” “estimates,”
“predicts,” “potential” or “continue” or the negative of these terms or other similar expressions.
Forward-looking statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results,
performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the
forward-looking statements.
You should refer to the Item 1A. “Risk Factors” section
of this Annual Report for a discussion of important factors that may cause our actual results to differ materially from those expressed
or implied by our forward-looking statements, including, but not limited to, the impact of the COVID-19 outbreak on our company and our
financial condition and results of operations. The forward-looking statements in this Annual Report are only predictions, and we may not
actually achieve the plans, intentions or expectations included in our forward-looking statements. We have based these forward-looking
statements largely on our current expectations and projections about future events and financial trends that we believe may affect our
business, financial condition and results of operations. Because forward-looking statements are inherently subject to risks and uncertainties,
some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as predictions of future events.
The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ
materially from those projected in the forward-looking statements.
These forward-looking statements speak only as of the date of this
Annual Report. While we may elect to update these forward-looking statements at some point in the future, we have no current intention
of doing so except to the extent required by applicable law. You should therefore not rely on these forward-looking statements as representing
our views as of any date subsequent to the date of this Annual Report.
Item 1. Business
Mobile Global Esports Inc. (“MOGO”
or “Mogo,” or the “Company”) was organized in March of 2021 to carry on and expand an esports business (the “Business”)
started by Sports Industry of India (“SII”), in 2016. Through a series of contracts, the rights to the Business were assigned
to MOGO by SII and its affiliates beginning in October of 2021. MOGO is now building out and expanding the business created by SII, which
is focused on the rapidly-growing esports industry, with special emphasis on India and other South Asian markets. The Indian market for
esports, and particularly university esports events in India, represent, in management’s opinion, one of the largest and fastest
growing esports markets in the world.
SII is an American branding, marketing and sports
promotion company that, through subsidiaries and affiliates primarily in India and Pakistan, enters into exclusive long-term arrangements
with universities for the purpose of promoting, expanding and commercializing university sports programs, creating professional opportunities
for university athletes and alumni and developing and marketing university and event-branded merchandise. The SII esports business, which
has now been transferred to and is operated by MOGO, is the only business in India to organize and sponsor an officially-sanctioned national
championship for university esports. SII holds a 12.98% minority common share interest in MOGO, and thus has no controlling interest in
MOGO.
Esports are the competitive playing of video games
by amateur and professional teams for cash and other prizes. Esports typically take the form of organized, multiplayer video games that
include real-time strategy and competition, including virtual fights, first-person shooter and multiplayer online battle arena games.
Esports are defined as competitive games of skill, timing, knowledge, experience, practice, attention and teamwork, but not games of chance
or luck. Mobile esports are defined as esports that are streamed on an electronic esports platform and played by individuals or teams
on mobile devices, usually smartphones. Competitors participate at large in-person events, small in-person events and virtually from home
or computer cafes. Interest in esports is rapidly growing. In 2020, the global audience for gaming video content, including esports, grew
to 1.2 billion viewers, an 18 percent increase from 2019, according to Statista, as gaming streams became a popular social activity and
distraction during coronavirus-related lockdowns. A DataProt report in January 2023 placed the number of gamers at 1.7 billion.
Management believes that MOGO is the first company
specifically focused on mobile esports to become a publicly listed company in the United States.
MOGO’s esports business began in 2016 when
SII introduced esports to the Association of Indian Universities (“AIU”), an academic and sports body that represents 854
major universities. AIU sanctioned esports as a championship event in a unique and exclusive 10-year renewable agreement with SII. SII
has assigned most of its esports rights under these and other agreements involving esports to MOGO under a series of contracts between
the two companies. SII licensed to MOGO exclusive rights to develop, organize, promote and monetize mobile esports events in collaboration
with AIU and with a second major university sports association, Elite University Sports Alliance of India Pvt. Ltd. (“EUSAI”),
a for-profit subsidiary of SII. EUSAI itself has direct contracts with 92 leading Indian universities pursuant to which EUSAI is granted
exclusive rights to organize and monetize a range of sports, including esports. Although any AIU or EUSAI members may choose to not participate
in MOGO’s esports business, the combination of AIU and EUSAI’s member universities potentially gives MOGO access to students
attending these 854 Indian universities.
The first SII esports championship was held at
Lovely Professional University (LPU) in 2017, the second at Maharshi Dayanand University in 2018 and the third at SRM Institute of Science
and Technology in 2019. The 2020 championships were cancelled during the covid lockdowns. MOGO sponsored the 2021-2022 championships
at LPU in April 2022. During the period of May through December 2021, MOGO, with the help of SII and SII’s subsidiaries pursuant
to their mutual contracts, organized and commercialized a total of 27 virtual esports tournaments in India. These events included inter-
and intra-university competitions that reached an aggregate audience of over 450,000 viewers (most of whom were added in the last quarter
of calendar year 2021, reflecting recent momentum in interest in university esports), according to SII’s YouTube channel analytics.
There are 54 events that have been held or are scheduled to be held through the 2022-23 academic year, including the National University
Mobile Esports Championship.
Management expects commercialization of these
events will be similar to events in more developed esports markets, such as South Korea, China and the U.S. Revenue is expected to come
from sponsorships, advertising, subscriptions, tickets to future events, branded merchandise and fees. In addition, monetization of the
data collected through MOGO’s game platform is expected to provide additional revenues. In the past events, the viewers’ data
was collected by third-party streaming services, such as YouTube and Facebook. Once the players and viewers are routed through MOGO’s
proprietary game and social media platform, MOGO anticipates collecting the data (names, phone numbers, email addresses, university affiliation,
etc.), processing the data, combining the data with other commercially-available data sets and offering the data to the markets following
strict government privacy guidelines, particularly since a subset of our users will likely be underage first-year university students.
Management believes that the value of the data may become one of the dominant revenue elements in MOGO’s business model.
MATERIAL AGREEMENTS
The material agreements summarized below are incorporated by reference
to the Company’s Amendment 3 to Form S-1 filed on February 13, 2023. Such summaries by necessity do not include all provisions of
such agreements, but rather are intended to fairly present the terms and conditions we believe to be material from a business and operating
perspective.
The SII-MOGO Founders Agreement and Supplements Thereto
MOGO entered into a Founders Agreement (“Founders Agreement”)
dated as of July 1, 2021 with Sports Industry of India, Inc. (“SII”) and thereafter three supplements thereto with SII and
two Indian subsidiaries of SII, Elite University Sports Alliance of India Private Limited, (“EUSAI”) and ESI Sports India
Private Limited (“ESI”): a Supplement to Founders Agreement (“First Supplement”) dated as of October 15, 2021
with SII, a Second Supplement to Founders Agreement (“Second Supplement”) dated January 14, 2022 with SII, EUSAI and ESI,
and a Third Supplement to Founders Agreement dated February 22, 2022 (“Third Supplement”) with SII, EUSAI and ESI. SII, EUSAI
and ESA sometimes are collectively referred to herein as “Licensor,” the First Supplement, Second Supplement and Third Supplement
sometimes are collectively referred to herein as the “Supplements,” and the Founders Agreement, as supplemented by the Supplements,
is sometimes collectively referred to herein as the “Supplemented Founders Agreement.” Pursuant to the Supplemented Founders
Agreement, Licensor has granted to MOGO a license to commercially exploit most esports rights licensed or granted to SII by the Association
of Indian Universities (“AIU”) or by Indian universities pursuant to existing or future agreements, as more fully described
below.
The following sets forth a summary of the material terms of the Supplemented
Founders Agreement. Capitalized terms below that are not previously defined have the meanings set forth at the end of this summary.
1. Founders Agreement
Pursuant to the Founders Agreement, MOGO issued 2,650,000 restricted
common shares of MOGO to SII in consideration for the amounts expended by SII to develop and form MOGO, including the expense of providing
certain consulting services described below, the waivers and license of certain intellectual property rights described below, the grant
of certain first negotiation and refusal rights described below, and the additional price of one dollar.
Consulting Services: SII has agreed to provide consulting services
to MOGO during the term commencing March 11, 2021 through December 31, 2022 and thereafter until the first to occur of June 30, 2023 or
the date on which MOGO receives gross proceeds from financings since its formation of at least $5,000,000, with respect to: (i) esports
opportunities in the Territory (defined as India, Pakistan, Nepal, Sri Lanka, Bangladesh and Bhutan); (ii) global esports opportunities
with universities; (iii) global esports opportunities with the diaspora of individuals born in the Territory and their descendants; (iv)
how to organize, manage and promote esports tournaments and other esports events; (v) sponsorship, production and branding opportunities
in the Territory; (vi) MOGO’s administrative, corporate and organizational development; (vii) introductions to licensed investment
bankers, auditors, counsel and other professionals, including government officials and administrators in the education and sports associations;
and (viii) introductions to individuals and companies that could assist MOGO to implement its business plan. SII may provide similar services
to others. The Company raised over $5,000,000 during 2022 and thus SII is not currently required to provide consulting services to MOGO.
Waivers: On its behalf and on behalf of its subsidiaries, predecessors
and affiliates (collectively, “SportsCo”), SII waived the following rights:
1. In perpetuity, any rights it might have in and to the contributions
to MOGO’s business, financial, legal and marketing plans contributed during the period from prior to the formation of MOGO through
December 31, 2022 by Special Persons (each of Kiki Benson, Sunny Bhandarkar, Pranav Prabhu, David Pross, Muhammad Jamal Qureshi, Kenin
M. Spivak, Muzammal Khan Wazeeri, Richard Whelan and any other individual mutually agreed in writing by the parties to the Founders Agreement
to be a Special Person) or any other individuals who participate in providing SII’s consulting services to MOGO pursuant to the
Founders Agreement.
2. Until December 31, 2022, unless extended by mutual agreement, any
covenants in favor of SII are waived that might restrict the right of each Special Person to (i) consult with MOGO, (ii) serve as a member
of MOGO’s Board of Directors, and/or (iii) serve as an officer, employee or representative of MOGO. Such covenant will continue
in perpetuity for David Pross.
License: On its behalf and on behalf of its subsidiaries, SII granted
to MOGO a non-exclusive license in perpetuity to utilize the written and oral contributions made by the Special Persons or any other individuals
who participate in providing SII’s consulting services to MOGO.
First Negotiation Rights: Provided MOGO complies with the Founders
Agreement and secures any necessary financing, SII granted the following first negotiation rights to MOGO:
Until June 30, 2023, in each instance in which SII seeks to organize
individual esports games or a discrete esports tournament with universities in the Territory, SII will negotiate first with MOGO to act
as SII’s principal licensee, co-venturer or service provider with respect to organizing the foregoing, seeking sponsors, providing
all required technology and otherwise licensing and distributing program content created in connection therewith, prior to entering into
negotiations with any company to do the foregoing. This right does not pertain to “Excluded Games,” which are defined as games
or tournaments that would be transmitted or streamed by brand-name networks, such as Sony Ten, NEO Sports, ESPN, DSport, DDSports, Star
Sports, Fox Sports, Netflix, youtube.com, twitch.com or other identifiable linear or streaming networks. As to these and similar platforms,
both MOGO and SII are free to separately negotiate and stream esports games and programing, including content licensed to MOGO by SII
under these collective agreements. Rights held by SII involving competition between Pakistani and Indian teams are retained by SII, and
have not been licensed to MOGO. But MOGO is free to develop its own esports content revolving around such competition.
| 1. | With respect to a potentially broad, long-term collaboration to develop and monetize esports involving athletes, universities in the
Territory and rights pertaining to esports granted by the AIU and universities located in India to SII, commencing promptly after MOGO
secures financing of at least $3,500,000 and thereafter for a period of at least 90 days, SII and MOGO shall engage in exclusive negotiations
with respect to SII selecting MOGO to be its principal licensee, co-venturer or service provider with respect to SII’s monetization
of the foregoing rights, provided that if MOGO does not secure financing of at least $3,500,000 by December 31, 2022, SII shall have no
further obligation with respect to the foregoing. There currently are no negotiations underway between SII and MOGO related to these aforementioned
rights. The Supplements described below were entered into in accordance with this obligation. |
Refusal Right: With respect to any individual game or tournament for
which SII and MOGO do not reach an agreement pursuant to MOGO’s first negotiation rights, provided MOGO secures any necessary financing
with respect thereto, SII will not accept an offer from a third party to provide the services MOGO offered to provide if the terms thereof
are less favorable to SII than MOGO’s last written offer without first giving to MOGO a right of refusal. This refusal right will
expire on September 30, 2023, and does not pertain to Excluded Games.
Certain Restrictions on MOGO: MOGO may not directly or indirectly engage
in communications or other conduct that interferes in the rights of SII or its subsidiaries under its agreements with AIU or universities
in the Territory. In addition, until the second to occur of the completion of any games or tournaments undertaken by MOGO pursuant to
the Founders Agreement or December 31, 2023, MOGO will not, except on behalf of, at the request of, or with the approval of SII: (i) employ
or solicit the employment of any person who is then, or has been within six months prior thereto, an employee of, or advisor to, SII or
its subsidiaries, or (ii) do any act or thing to cause, bring about, or induce any interference with, disturbance to, or interruption
of any of the then-existing relationships of SII or its subsidiaries with any vendor, customer, client, partner, employee, licensee, licensor,
consultant or supplier to SII or its subsidiaries.
SII’s Reserved Rights: All rights not specifically licensed or
otherwise granted by SII to MOGO are reserved by and owned by SII.
Release: As a material inducement to the Special Persons to continue
to contribute to the development of SII or its subsidiaries and MOGO, except as specified below, to the maximum extent permitted by law,
each of SII and MOGO on its behalf and on behalf of all companies owned or controlled by such party, and on behalf of all persons claiming
through such party and such companies, and (to the extent permitted by law) on behalf of its and each of their respective owners, directors,
officers, agents, representatives, employees and spouses, forever releases and discharges the Special Persons and any companies providing
their services and their respective owners, directors, officers, agents, representatives, employees and their spouses from all claims,
rights demands, damages and causes of action whatsoever, whether known or unknown, liquidated or unliquidated, contingent or not contingent,
matured or not matured, which have arisen or may have arisen or may arise from the beginning of time through the end of time from or related
to: (i) the negotiation, drafting, execution or performance of the Founders Agreement; (ii) the negotiation, drafting or execution
of any agreement (oral or written) contemplated by the Founders Agreement; or (iii) decisions, acts or omissions that are asserted to
be the result of any conflict between that Special Person’s interests in SII and its subsidiaries and that Special Person’s
interests in MOGO. Each releasing person agrees that his or its release extends to all claims of every nature and kind, known or unknown,
suspected or unsuspected, vested or contingent.
The release does not include: (i) any conflicts that do not pertain
to matters described or referenced in the Founders Agreement; (ii) any breach of contract or duty after the date of the execution of the
Founders Agreement, other than a breach involving potential conflicts that is released above; (iii) any claim that arises from the failure
of a Person to accurately in all material respects describe that Person’s interest in the parties to the Founders Agreement, if
requested to do so by a party thereto; or (iv) any conflict that as a matter of unwaivable law may not be released.
Other: The Founders Agreement includes standard representations and
warranties, indemnification and similar provisions.
2. Supplements
With respect to Participating Universities, SII on its behalf and on
behalf of Licensor licensed to MOGO, to the extent Licensor has or acquires such rights and subject to any exceptions or limitations in
the rights granted to Licensor of which Licensor notifies MOGO: (i) during the Term, except as otherwise provided in the Supplements,
(A) the exclusive, worldwide right and license to develop, organize, create, record, finance, manufacture, license, distribute, advertise
and promote esports tournaments and games and television (including all forms of technology by which end users can hear audio and/or see
visuals with or without a display device) content based on or incorporating MOGO Games and (B) solely with respect to MOGO Products and
licensing, distribution, advertising and promotion of MOGO Products, the worldwide non-exclusive right to use Team Logos and Name and
Likeness rights, including the right to provide hosts and commentators with respect thereto; (ii) during and after the Term in perpetuity,
the exclusive rights to create derivations, compilations, remakes, edited versions, translations and the like, as well as advertising
and promotions based on or incorporating MOGO Content created during the Term; (iii) during and after the Term in perpetuity, the exclusive,
worldwide right and license to license, distribute, advertise and promote MOGO Products and to exercise Sponsorship Rights with respect
thereto; and (iv) during and after the Term, the non-exclusive right to use Team Logos and Name and Likeness for athletes who participate
in the Project (A) globally to promote MOGO Merchandise manufactured during the Term and (B) solely for corporate activities for which
there are is no charge to users, in MOGO corporate websites, investor relations and similar corporate activities of MOGO to promote MOGO.
Each initial use of Team Logos and Name and Likeness pursuant to the above is subject to Licensor’s approval.
MOGO’s rights to use Team Logos and Name and Likeness rights
is subject to Licensor having or obtaining the right to grant such rights to MOGO. The rights granted to MOGO do not include competitions
between Pakistani teams and Indian teams. But MOGO is free to develop its own esports content revolving around such competition, provided
that such development does not conflict with the rights of SII or obligations of MOGO, including without limitation the obligation of
MOGO not to interfere with SII’s relationship with Participating Universities, making any claim against any Participating University
without SII’s prior written approval, or interfering with Licensor’s relationships with its vendors, customers, clients, partners,
employees, licensees, licensor, consultant or supplier to Licensor. Nothing in the Supplements prohibits Licensor from using, licensing
or granting online rights, gaming rights or similar rights pertaining to Esports Games transmitted or streamed by brand-name networks
or virtual play on a live or delayed basis of sports events organized by or for Participating Universities or Licensor with avatars representing
the athletes who play in such events.
In addition, (i) MOGO may exercise Sponsorship Rights with respect
to MOGO Products, (ii) Sponsorship Rights with respect to Merchandise, including MOGO Merchandise, are reserved by SII, (iii) the license
to MOGO for MOGO Content is limited to MOGO Content that incorporates or is based on MOGO Games, or background stories of MOGO Games or
the athletes who participate therein, or the advertising or promotion thereof, (iv) MOGO may directly exercise any or all of the rights
licensed or granted to MOGO by the Supplements or may authorize some or all of such rights to be exercised by its licensees, distributors,
sub-distributors and other designees, and (iv) MOGO has licensed back to Licensor the right to use excerpts from MOGO Content, each not
to exceed five minutes running time for audio or visual content or 5,000 words for print or digital content, in Licensor corporate websites,
advertising, promotion, investor relations and similar corporate activities.
As between the parties: (i) Licensor owns all Team Logos and Name and
Likeness rights; (ii) Licensor owns all rights pertaining to MOGO Content it creates and MOGO Merchandise, subject to MOGO’s ownership
of its intellectual property rights used therein; (iii) MOGO owns all technology, templates and creative formats and methods it creates;
(iv) subject to Licensor’s ownership of Team Logos and Names and Likeness rights, MOGO owns the intellectual property rights in
MOGO Content; and (v) Licensor reserves all rights to license, manufacture and distribute Merchandise that includes Team Logos and Name
and Likeness. MOGO may exercise Sponsorship Rights with respect to MOGO Products. Sponsorship Rights with respect to Merchandise, including
MOGO Merchandise, are reserved by Licensor.
MOGO will pay or retain amounts equal to the Gross Receipts from the
Project in the following order on a continuing, cumulative basis:
| |
● |
First, MOGO will retain all Gross Receipts until such amount is equal to its distribution fee of 20% of all Gross Receipts through the end of the applicable accounting period. |
| |
● |
Next, MOGO will retain all further Gross receipts until the amount retained by MOGO is equal to all of its deductible costs through the end of the applicable accounting period. |
| |
● |
Next, MOGO will pay to SII an amount equal to all further Gross Receipts until such amount is equal to all of Licensor’s reimbursable costs through the end of the applicable accounting period. |
| |
● |
The balance (i.e., net proceeds) will be allocated 60% to MOGO and 40% to SII. |
The amounts payable to SII above are referred to as the “Licensor
Participation.”
In addition, SII agrees to pay MOGO a Merchandise royalty equal to
one-third (1/3) of cumulative Merchandise Net Proceeds (as defined) received from sales of MOGO Merchandise.
Licensor has obligations to account to AIU and Participating Universities
for a percentage of its profits related to its collaboration with such Participating Universities. If one or more of AIU or Participating
Universities become entitled as a result of a judgment, order, award or settlement to a participation computed on a basis that exceeds
Licensor’s actual receipts from MOGO under the Supplements, MOGO will reimburse Licensor 50% of such amount until such reimbursement
equals 20% of the Licensor Participation received for the shorter of the period of the dispute or the prior three years.
Pursuant to the Supplements, the parties have agreed to promote and
grow awareness of the Project, Team Logos and participating persons; and to develop and administer scholarship and support programs for
the Participating Universities and seek proper venues. If Participating Universities do not provide or pay for venues and related facilities,
the parties will cooperate to identify alternatives.
In connection with significant events organized by MOGO, if requested
to do so by MOGO upon sufficient advance notice, Licensor will cooperate with MOGO to provide MOGO Merchandise and Team Logos for display.
MOGO shall pay for the purchase price of such items at a 30% discount to established wholesale prices, as well as freight and storage
thereof. MOGO may sell such MOGO Merchandise on site and online and may retain the retailer’s profit for doing so, without any obligation
to account to Licensor.
Except as otherwise expressly provided or authorized by Licensor, Licensor,
at Licensor’s expense, will be the sole liaison between MOGO and the Project, on the one hand, and participating persons and government,
sports and non- profit organizations pertaining to participating persons, including AIU and the Sports Authority of India, on the other.
As between the parties, Licensor has the lead responsibility for arranging the venues for games and lodging and transportation within
the Territory for the participation of participating University athletes in tournaments that occur in the Territory.
At Licensor’s expense, Licensor shall endeavor to increase the
number of Participating Universities and to obtain the participation of Participating University teams and Athletes in MOGO Games and
promotional events arranged by MOGO and to obtain cooperation and support of participating persons with respect to the Project. Licensor
is not liable if despite endeavoring to do so, it is unable to do all or any of the foregoing. As between the Parties, Licensor is responsible
for arranging lodging and transportation within the Territory for the participation of Athletes from Participating Universities located
in the Territory in MOGO Games that occur in the Territory.
Except for Licensor’s obligations, MOGO is solely responsible
for executing the business plan, including creating, producing, recording, licensing and distribution of MOGO Games, MOGO Content and
for all advertising, promotion and other activities related to the development, execution, marketing and success of the Project.
The “Term” of the Supplements commenced on September 1,
2021 and will continue until July 2029. If MOGO secures funding of at least $5,000,000 by the end of 2022 and is not in breach of the
Founders Agreement or Supplements, at the option of either MOGO or Licensor, to be exercised no later than March 30, 2023, the Term will
continue until December 31, 2032. In any event: (i) commencing not later than one (1) year before expiration of the Term, the parties
will in good faith negotiate for a potential extension of the Term prior to negotiating for similar rights with third persons; (ii) the
Term may be terminated by mutual agreement of the parties; and (iii) the Term may be terminated by either party on 30 days’ prior
notice if the other party breaches a material provision of the Supplemented Founders Agreement and fails to cure that breach within 90
days after receipt of a cure notice describing the breach in reasonable detail.
Certain of Licensor’s agreements with universities grant to Licensor
the first right to act as manager and agent for any Athlete who contemplates becoming a professional athlete (“Management Rights”).
Pursuant to the Supplements, during the “Management Term” Licensor will sub-contract or assign to MOGO that portion of Management
Rights acquired by Licensor pursuant to current or future agreements that pertain to esports. The Management Term is from January 14,
2022 through the first to occur of (i) December 31, 2025, or (ii) the termination or expiration of the Term, provided that upon mutual
agreement of the MOGO and Licensor, the Management Term may be extended. As to any Athlete for whom MOGO enters into a management agreement,
MOGO’s rights will continue until the second to occur of seven (7) years after the commencement of the relevant management agreement,
or until the end of the Management Term, subject to any shorter period agreed with the particular Athlete.
MOGO may not seek management agreements with Athletes introduced to
MOGO pursuant to the Agreement, other than in accordance with the Second Supplement.
For any management agreement entered into by MOGO directly with an
Athlete pursuant to the Second Supplement, MOGO will pay to SII a referral fee of fifteen percent (15%) of its net revenues therefrom.
For any management agreement entered into by MOGO with Licensor, SII will pay to MOGO a services fee of eighty percent (80%) of its net
revenues derived from MOGO’s esports management services for the relevant Athlete. As between the parties, MOGO is responsible for
all costs and expenses of exercising esports Management Rights pursuant to management agreements.
The Supplements include standard representations and warranties, indemnification
and similar provisions.
For further information, please refer to the copies of the Supplemented
Founders Agreement included as Exhibits to the registration statement of which this prospectus is a part. The representations and warranties
contained in the Supplemented Founders Agreement were made solely for the benefit of the parties to such Supplemented Founders Agreement,
and should not be deemed to be a representation, warranty or covenant to you.
3. Certain Definitions
The following are certain relevant definitions used in the Supplemented
Founders Agreement and in this discussion of the Supplemented Founders Agreement:
“AIU Agreement” means the agreement dated April 5, 2016
between AIU and Elite eSports of India, Inc. (“EESI”), pursuant to which AIU exclusively granted to EESI, for and during the
term, all rights for exploitation and monetization of esports for AIU university teams and players, including the right to appoint sponsor(s)
and exercise television rights, internet rights, audio rights, mobile rights or any variants or future technologies. The rights granted
to EESI also include the right to monetize the merchandising and logos, intellectual property rights relating to the or arising out of
the exploitation by EESI of the rights licensed to EESI and from advertising, licensing, photography, use of name, photograph and likeness
(including of AIU university teams and AIU university players), the right to conduct and exploit interviews, undertake marketing, promotion
and publicity for the exercise of the foregoing rights, the right to sell products at the venues where esports game occur, or at retail
stores (including online retail stores) owned, operated or authorized by EESI or its affiliates.
| |
● |
AIU’s grant does not include any rights AIU does not have, but AIU will use its best efforts to acquire all rights described in the AIU Agreement and will cooperate with EESI to develop and implement a plan to do so. On the expiry of the term of the AIU Agreement, all licenses granted by EESI during the term remain in effect, but EESI will cease entering into further licenses. If EESI is notified that an individual has ceased involvement with the participating universities and/or AIU, EESI will cease entering into further licenses pertaining to that individual. |
| |
● |
In consideration for the rights granted, EESI must contribute per year an amount equal to 15% of the net profit from the revenues received by EESI from its advertisers and license fees from its use of the rights granted by AIU to EESI, other than from “Commercial Licenses” and 25% of the net profit from Commercial Licenses. (A “Commercial License” is a license granted by EESI to use the names, photographs, likenesses, logos and/or trademarks of AIU, the universities, players, coaches and/or other individuals who render services in connection with the rights granted to AIU as an endorsement of a product or service, excluding a license to use the names, photographs, likenesses, logos and/or trademarks as an endorsement, or otherwise in support of, the rights, parties, universities, tournaments and those distributing or exhibiting the foregoing.) |
| |
● |
EESI will promote the esports games, university teams, university players and participating universities, provide all necessary production related equipment and professionals required to broadcast the esports games, and assist AIU and the participating universities in developing business relationships with such preferred vendors. AIU will co-operate with EESI in selection of the venues for the esports games and in ensuring that participating universities provide dedicated facilities and space with adequate internet and power for the players and teams to practice and conduct the esports games, will ensure that each participating university provides an esports coach and outfits for each player, will co-operate with EESI to obtain all the required approvals and permissions, and is responsible that venues will meet specifications for power, technology and other requirements. |
| |
● |
EESI is entitled to enter into any arrangement for sub-licensing of any of its rights, provided EESI shall remain liable to AIU. EESI may assign the AIU Agreement, or any rights and obligations thereunder to any of its affiliates. Any assignment by EESI to any person other than an affiliate of EESI requires the prior written consent from AIU. |
| |
● |
The term of the AIU Agreement expires in April 2025, and is automatically extended for ten (10) years if not terminated by a party at least six (6) months prior thereto. The term also may be terminated by a party following the bankruptcy or breach of the other party. |
As permitted by the AIU Agreement, in 2017 the AIU Agreement was assigned
by EESI to SII (which at that time was known as Elite Sports India, Inc.) as part of a “C reorganization” whereby substantially
all of the assets of EESI were exchanged for stock of SII. As a result, all references above to the rights and obligations of EESI pursuant
to the AIU Agreement now refer to the rights and obligations of SII.
“Athlete” means an individual who plays Esports on behalf
of a Participating University or Participating University team, or who is a manager or coach for the foregoing individuals or a Participating
University team.
“Esports” means a form of competition using video games.
“Esports Game” means any type of Esports game or similar
event, whether physical, virtual or both, that includes players, Team Logos and/or Name and Likeness rights for which AIU or Participating
Universities have granted Licenses or other rights to SII Group. Games may include competitive play, demonstration events and other forms
of play. Esports Games do not include inter-collegiate play between Pakistani and Indian teams or players representing Participating Universities.
“Gross Receipts” means the total of all non-refundable
monies actually received by MOGO or its subsidiaries from exercising licensing, distribution, or Sponsorship Rights licensed to MOGO pursuant
to the Supplements, excluding: (i) rebates, refunds, discounts and monies held as deposits and subject to refunds; (ii) sales tax, VAT
or equivalent; (iii) credit card fees, PayPal fees and the like; and (iv) import or export duties, fees, costs or expenses and costs
of currency conversion and transfer. Without limitation, Gross Receipts includes in person admission fees, registration fees, subscription
fees, sponsorship revenue, advertising revenue, product placement revenue, concession revenue, in kind contributions and any other tangible,
intangible or virtual benefit of value arising from or pertaining to MOGO’s exercise of all or any rights in or pertaining to MOGO
Products, including licensing, distribution and Sponsorship Rights with respect thereto. Gross Receipts do not include: (x) any corporate
financings or any portion of any receipts fairly allocable to activities other than the Project; or (y) receipts from MOGO Merchandise
included in the computation of Merchandise Net Proceeds.
“Merchandise” means (i) tangible, intangible and virtual
products, goods and services, including products such as clothing, accessories, furniture, games, including online, mobile, social and
wagering games of chance, skill or otherwise, and whether digital, virtual reality, board games, toys, dolls, souvenirs, art, or otherwise;
social media; sporting equipment and other goods and services; (ii) endorsements of the foregoing or otherwise; and (iii) branding, co-branding,
and trademark use related thereto; but (iv) excluding MOGO Games and other live MOGO Esports events that are part of the Project, and
MOGO Content.
“Merchandise Net Proceeds” means the total of all non-refundable
monies actually received by Licensor from exercising licensing, distribution or sponsorship rights in MOGO Merchandise, excluding: (i)
rebates, refunds, discounts and monies held as deposits and subject to refunds; (ii) sales tax, VAT or equivalent; (iii) credit card fees,
PayPal fees and the like; (iv) import or export duties, fees, costs or expenses and costs of currency conversion and transfer, (v)
any corporate financings or any portion of any receipts fairly allocable to activities other than the Project, and (vi) all fees, costs
and expenses actually paid or reimbursed by Licensor directly in connection with: (a) creating, producing or manufacturing any MOGO Merchandise;
(b) licensing or distributing MOGO Merchandise; (c) collection of amounts due and payable, (d) royalties paid to Athletes by Licensor
to secure Name and Likeness rights for MOGO Merchandise, and (e) as reimbursement for indirect overhead, twenty percent (20%) of
the items in (a), (b) and (c). Where the distribution or license of MOGO Merchandise is combined with other brands, products, services
or goods, Licensor shall allocate its receipts on a consistent basis.
“MOGO Content” means any live or recorded audio, visual,
digital, analog, printed or other content recorded or created by MOGO or Licensor, or at their direction, that incorporates MOGO Games,
Participating Persons, Team Logos and/or Name and Likeness for Athletes who participate in the Project, or otherwise uses rights licensed
to MOGO pursuant to the First Supplement. In addition to all other requirements, MOGO Content must pertain to the Esports rights licensed
pursuant to the First Supplement.
“MOGO Game” means an Esports Game undertaken by or on behalf
of, or in cooperation with, MOGO that includes participating persons, Team Logos and/or Name and Likeness for Athletes who participate
in the Project, or otherwise uses rights licensed by Licensor or Athletes to MOGO hereunder. MOGO Games may include competitive play,
demonstration events and other forms of play and may include Athletes playing as part of a Participating University team, and/or individually
representing a Participating University, or otherwise by utilizing rights licensed from a participating person. A MOGO Game may include
players who do not represent a Participating University. In addition to all other requirements, a MOGO Game must pertain to the Esports
rights licensed pursuant to the First Supplement.
“MOGO Merchandise” means Merchandise that recognizably
includes, whether by name, as part of its advertising and/or promotion, or as the product, part of the product, embedded in the product,
included in the design elements of the product, endorsing the product, good or service, or otherwise, imagery of MOGO, MOGO Games and/or
MOGO Content. In addition to all other requirements, MOGO Merchandise must pertain to the Esports rights licensed pursuant to the First
Supplement.
“MOGO Product” means any MOGO Game or MOGO Content. MOGO
Merchandise is not a MOGO Product.
“Name and Likeness” means an Athlete’s name, sobriquet,
photographs, caricatures, pseudonyms, actual or simulated likeness, voice, signature, biography and derivations thereof and all logos,
trademarks, copyrights, trade names and other intellectual property rights associated with the Athlete’s name, voice, signature,
likeness, or any of them.
“Participating Person” means a Participating University,
an Athlete, and any student, faculty member, other employees, alumni or fans of a Participating University in that capacity, rather than
in their capacities as members of the general public.
“Participating University” means a college or university
located in the Territory during the period that college or university has an agreement with Licensor that Licenses or grants to Licensor
rights with respect to all or any of Esports, Team Logos, Name and Likeness rights or Sponsorship Rights.
“Project” means the Parties’ efforts pursuant to
the Supplements relating to MOGO Products and MOGO Merchandise.
“Sponsorship Rights” means the right to seek and secure
revenues for or related to MOGO Products or MOGO Merchandise from advertisers, marketing partners, promotion partners, cross-promotion
partners, endorsements, Name and Likeness rights, regardless of the format or form in which the foregoing is delivered and whether now
know or hereafter devised and regardless of whether the foregoing appears in, adjacent to, or separate from MOGO Products or MOGO Merchandise.
“Team Logos” means the audio and/or visual name(s), web
address/URLs, logo(s), mascot(s), designs, social media platforms and similar designs and elements now known or hereafter created associated
with a Participating University and/or its sport program or teams.
4. Allocation of Esports Revenues under the Supplemented Founders
Agreement
The following table summarizes how the esports revenue will be allocated
between MOGO and SII under the Supplemented Founders Agreement:
| REVENUE TYPE |
|
MOGO |
|
SII |
|
NOTES |
| Revenues from Indian-Pakistani university events |
|
Excluded |
|
Reserved by SII |
|
|
| |
|
|
|
|
|
|
| Revenues from esports events carried on major platforms (i.e., youtube.com) |
|
Included but not Exclusive |
|
SII can also carry esports on major platforms and/or license such rights to others |
|
|
| |
|
|
|
|
|
|
| Gross Receipts from the commercialization of university esports, all sources, except as limited below |
|
First, MOGO retains 20% of all Gross Receipts plus an amount equal to its deductible costs Thereafter, MOGO allocates the balance (i.e., net proceeds) 60% to MOGO and 40% to SII |
|
Next, MOGO reimburses SII reimbursable costs |
|
MOGO is responsible for all esports activities, except merchandising, and collects all related revenues. |
| |
|
|
|
|
|
|
| Naming, media rights |
|
Subject to Gross Receipts allocation above |
|
Subject to Gross Receipts allocation above |
|
|
| |
|
|
|
|
|
|
| Game/hardware manufacturers sponsorship |
|
Subject to Gross Receipts allocation above |
|
Subject to Gross Receipts allocation above |
|
|
| |
|
|
|
|
|
|
| In-app purchases |
|
Subject to Gross Receipts allocation above |
|
Subject to Gross Receipts allocation above |
|
|
| |
|
|
|
|
|
|
| In-app advertising |
|
Subject to Gross Receipts allocation above |
|
Subject to Gross Receipts allocation above |
|
|
| |
|
|
|
|
|
|
| Pay-per-download |
|
Subject to Gross Receipts allocation above |
|
Subject to Gross Receipts allocation above |
|
|
| |
|
|
|
|
|
|
| Subscriptions |
|
Subject to Gross Receipts allocation above |
|
Subject to Gross Receipts allocation above |
|
|
| |
|
|
|
|
|
|
| Incentive-based ads |
|
Subject to Gross Receipts allocation above |
|
Subject to Gross Receipts allocation above |
|
|
| |
|
|
|
|
|
|
| Event advertising |
|
Subject to Gross Receipts allocation above |
|
Subject to Gross Receipts allocation above |
|
|
| |
|
|
|
|
|
|
| Event sponsorships |
|
Subject to Gross Receipts allocation above |
|
Subject to Gross Receipts allocation above |
|
|
| |
|
|
|
|
|
|
| Event admission fees |
|
Subject to Gross Receipts allocation above |
|
Subject to Gross Receipts allocation above |
|
|
| |
|
|
|
|
|
|
| Team entry fees |
|
Subject to Gross Receipts allocation above |
|
Subject to Gross Receipts allocation above |
|
|
| |
|
|
|
|
|
|
| Ticket fees for streamed events |
|
Subject to Gross Receipts allocation above |
|
Subject to Gross Receipts allocation above |
|
|
| REVENUE TYPE |
|
MOGO |
|
SII |
|
NOTES |
| Streaming advertising, sponsorships and subscriptions |
|
Subject to Gross Receipts allocation above |
|
Subject to Gross Receipts allocation above |
|
|
| |
|
|
|
|
|
|
| MOGO event merchandise not university branded, sold by SII |
|
1/3 cumulative net proceeds royalty paid to MOGO |
|
SII is responsible for merchandising and collects all merchandising revenues |
|
This is merchandise that does not carry university logos, names or likenesses |
| |
|
|
|
|
|
|
| SII Merchandise university branded, sold by MOGO |
|
MOGO buys from SII at a 30% discount from wholesale prices, plus freight/storage. MOGO retains profits |
|
SII is responsible for merchandising and collects all merchandising revenues |
|
This is university logo merchandise. SII retains ownership of team logos, names and likenesses, and sole right to produce |
| |
|
|
|
|
|
|
| MOGO management agreements with Athletes |
|
MOGO pays SII a referral fee of 15% of net revenues from such agreements |
|
|
|
MOGO is responsible for all costs and expenses with respect thereto |
| |
|
|
|
|
|
|
| MOGO management agreements with Licensor |
|
SII will pay MOGO a services fee of 80% of its net revenues from such agreements |
|
|
|
MOGO is responsible for all costs and expenses with respect thereto |
Services Agreement
MOGO and EUSAI entered into a Services Agreement dated December 15,
2021 (the “Services Agreement”), pursuant to which MOGO engaged EUSAI to assist MOGO as an independent contractor to arrange,
manage and implement a series of esports tournaments in India. (The Services Agreement is separate from the Supplemented Founders Agreement.)
Under this Services Agreement, EUSAI assisted MOGO to arrange, manage
and implement on MOGO’s behalf, 14 esports events from January through April 2022, culminating in the National Esports Championship
at Lovely Professional University in April. These events included open tournaments (9 events), inter-university tournaments (2 events),
a rivalry tournament (1 event) and the divisional tournament (1 event). MOGO and EUSAI shared the costs of these events. MOGO does not
expect to realize and has not realized material net revenues from its activities in such early-stage tournaments but is building support
for it Esports program. The agreement has not been extended and there are no negotiations with EUSAI currently in process.
The completed 2022 tournaments are:
| Name |
|
Number of
Separate
Events |
|
Number
of Days
for the
Events |
|
Date(s)
of Events
(2022) |
|
Notes |
| Open Tournaments |
|
9 |
|
25 |
|
Jan 22 – Apr 30 |
|
Selected Weekends |
| Inter-University Tournaments |
|
2 |
|
3 |
|
Jan 28 – Jan 30 |
|
GLA University |
| Rivalry Tournaments |
|
1 |
|
3 |
|
Mar 10 |
|
Completed |
| Divisional Tournaments |
|
1 |
|
2 |
|
Mar 29 |
|
Completed |
| Final National Championship University Tournaments |
|
1 |
|
7 |
|
Apr 8 – Apr 9 |
|
National Esports Championship |
The parties agreed to continue to mutually develop a plan consisting
of the dates, venues and other specifications for each event (upon mutual agreement thereof, an “Event Plan”). The Event Plan
will specify the respective responsibilities of each party, with EUSAI having primary responsibility for executing the event and MOGO
having primary responsibility for arranging technology and marketing for the event. Upon agreement of an Event Plan, the parties then
will develop a budget for the event and MOGO will fund the budget. MOGO reserves the right to cancel events. MOGO will determine the amount
of prize money for an event. For each event for which EUSAI renders services pursuant to the Services Agreement, MOGO will pay EUSAI a
fee equal to the aggregate of (i) the lesser of 10% of the event budget for that event or INR 450,000, (approximately $5,537 based on
current exchange rates) plus (ii) 5% of MOGO’s share of any in person admission fees, plus (iii) 5% of MOGO’s share of any
concession income at the venue, plus (iv) a bonus based on the profitability of the tournaments as a group and EUSAI’s performance,
to be determined by MOGO in its sole discretion but targeted as up to 10% of MOGO’s net profit with respect to the tournaments (exclusive
of profits related to merchandise).
As between the parties, MOGO owns all intellectual property rights
in the tournaments, each event and all advertising and marketing related thereto and all merchandising related thereto.
The Services Agreement will terminate (i) as mutually agreed by the
Parties, (ii) for material uncured breach, or (iii) upon completion of all EUSAI services required pursuant to the Services Agreement
and the Event Plans. If a party sends the other party a notice that specifies a material breach of the Services Agreement and the other
party does not cure the breach within thirty (30) days thereafter, the non-breaching party may thereafter terminate the term of the Services
Agreement by notice to the breaching party sent before there is any cure of the breaches specified in the notice to cure.
The Services Agreement includes standard representations and warranties,
indemnification and similar provisions.
Retention of Mr. Butler, Mr. Rennert and Ms. Chang as Directors,
Technology for MOGO
On October 21, 2021, MOGO entered into a binding agreement, entitled
Memorandum of Understanding, whereby it retained the team of Gregory Butler, Anthony Rennert and Martha Chang (hereinafter the “Team”)
as consultants, to act as its Directors, Technology for MOGO.
The Team is charged with advising MOGO on developing, establishing,
operating, commercializing, marketing, promoting, and expanding MOGO’s esports business with an aim to commercialize esports tournaments,
esports sponsorships, esports advertising revenues, esports merchandise revenues, esports broadcast revenues, esports video revenues,
esports game development and marketing and distribution revenues, and all other manner of esports revenue streams for the benefit of MOGO.
The tasks and services to be accomplished under the direction of the
Team include design of product and services offerings and features, budgets, timelines, real time assessment of the marketplace, competition,
tech and user trends and direction on customer habits across social and gaming media, and methods, strategies and approaches to capture
and retain customers and users and new emerging trends in marketing and closing new customers and users.
Initial consideration paid under this Agreement consists of the issuance
of 1,000,000 Warrants to acquire Common stock of MOGO at an exercise price of $1.00 per share, exercisable on or before December 15, 2026.
250,000 of these warrants were issued to the Team and declared vested immediately, in exchange for execution of the Consulting Agreement
and for 2021 services rendered. An additional 62,500 warrants were vested on April 1, 2022, in recognition of the quarterly vesting schedule.
MOGO will consult with the Team and reach agreement on Team goals and
milestones at the beginning of each calendar quarter over the term of the Agreement.
Either party may terminate the Agreement at the end of any calendar
quarter, in which event any unvested warrants will expire, and outstanding vested warrants will also expire if not excised within 30 days
after termination of the Agreement.
The Agreement is tied to and automatically terminates upon the termination
of a separate agreement with Artemis Ave, LLC, the team’s separately owned software development and licensing company. (See below)
Licensing Software Agreement with Artemis Avenue, LLC
On December 13, 2021, MOGO entered into a software licensing agreement
with Artemis Ave, LLC, a software development and licensing company owned by the Team referenced above. Artemis has developed the software
for a live esports platform. The Software Agreement grants to MOGO a non-exclusive, non-transferable license to use the Artemis gaming
software. The software agreement calls for a $50,000 payment as a security deposit upon beginning use of the software, and a provision
for equal sharing of savings Artemis provides to MOGO as compared to costs charged by other commercially available solutions. MOGO will
pay all third-party vendors for services provided, such as cloud services, hosting services and software subscriptions. The License Software
Agreement continues for a year and automatically renews yearly thereafter, unless either party terminates the agreement.
MOGO Core Platform Agreement with Artemis Avenue, LLC
In a second agreement, entitled Memorandum of Understanding, (the “Memorandum”),
by and between MOGO and Artemis Ave, LLC, the parties agreed to use Artemis’s services to develop for MOGO a new Core Platform.
These services include ideation, architecture and development services, licensing of Artemis’ platform (see above agreement), and
integration of third-party software. The Memorandum provides that Artemis will supply integrated use of Artemis’ EVE proprietary
transcoding via its platform. EVE transcoding is a codec agnostic process that reduces file size by at least 50% with no file degradation.
This project was in progress and we have invested $1,025,000 in software-in-progress through December 31, 2022.
Experience of MOGO’s Directors of Technology
The Gregory Butler, Anthony Rennert and Martha Chang Team: Directors
of Technology for MOGO.
Gregory Butler. Mr. Butler, the CEO of ZuCasa, previously served
as the acting CEO of ROWL/ReChain, a company that has three apps covering music, ecards and reminders, serving over 12 million users.
Mr. Butler has over 20 years of experience driving strategies and partnerships for engagement and revenue related to content, media and
IP and has established partnerships across multiple verticals for new e-commerce initiatives in media and retail. In addition, Mr.
Butler has composed music for several TV series and has multiple Grammy nominations. He earned his BS in digital technology (distinction)
at the Dublin Institute of Technology and a graduate diploma at the London School of Economics.
Martha Chang. Ms. Chang, the COO of ZuCasa, is a co-founder
and managing director of Evemeta, a company that develops image and video compression algorithms, data compression algorithms, image processing
algorithms, technology platforms, mobile apps and technology solutions. As an intellectual property owner/film and television producer,
Ms. Chang is working with Lionsgate Films to develop franchisable IP such as 3 Ninjas, Barney, the Purple Dinosaur and The Last Unicorn.
She has also worked with Disney, Sony, Universal, 20th Century Fox Television and Lionsgate to develop, produce, distribute
and market IP in ancillary products such as publishing, video games and merchandising. Ms. Chang earned her BA at the University of California,
Berkeley and studied at the University of Paris.
Anthony Rennert. Mr. Rennert, the CTO of ZuCasa, is also the
CTO of Evemeta, where he developed IP including compression algorithms for images, video and data, including a process that enabled physicians
to compare images automatically and longitudinally from different modalities, image formats and time frames identifying and highlighting
changes in images over time. He has also developed an Over the Top (OTT) television offering, online advertising tools including demand
side platforms (DSP), supply side platforms (SSP), real time bidding (RTB) and data management platforms (DMP) and numerous mobile apps.
Other Consulting Agreements
MOGO has entered into the following additional Consulting Agreements:
James Knopf. Mr. Knopf is an entertainment
sales executive with over 25 years of experience negotiating and selling large-scale content distribution deals across multiple platforms.
On June 1, 2021 the Company entered into a consulting agreement with Mr. Knopf for consulting services to be rendered through May 31,
2024. The Company privately issued to Mr. Knopf 50,000 restricted shares of its common stock, vesting quarterly over three years, for
the services to be rendered, and agreed to negotiate a monthly compensation payment for consulting services to be rendered.
Kim Meltzer. Ms. Meltzer is a 30-year veteran
in the event, hotel and hospitality industry, producing more than 500 corporate, entertainment, pharmaceutical, technology and esports
events. For over ten years Ms. Meltzer has focused her career exclusively on global esports events supporting brands, the community, production,
publishers, developers, high school, college and professional players, as well as influencers. She also holds the Certified Virtual Events
Producer (CVEP) professional designation. Her Gamer Tag is “Esports Mom.” In January 2023, Ms. Meltzer became Chief Gaming
Officer of the Company. The Company became obligated to issue Ms. Meltzer a warrant to purchase 60,000 shares of the Company’s common
stock in January 2023 at an exercise price of $3.00 per share, which will vest quarterly over one year, and expire in January 2033.
Rishi Jaitly. Mr. Jaitly joined the company
as a Chief Strategic Officer in November 2022. He is a widely-known visionary with deep experience in the United States and Asia
at the intersection of technology and media. Most recently, Mr. Jaitly was the co-founder and CEO of Times Bridge, one of the leading
venture capital firms enabling international expansion for the world's best ideas. Its investment portfolio included Airbnb, Coursera,
Headspace, Stack Overflow, Uber and others. Under Mr. Jaitly's leadership, Times Bridge operationally oversaw the launch, growth and leadership
of its partner companies in India. Prior to launching Times Bridge in 2016, Mr. Jaitly was Twitter Inc's Vice President, Asia Pacific,
Middle East and North Africa, and the company's first employee in mainland Asia. He led Twitter’s entry and establishment in India
as Founding Managing Director, and subsequently helped lead the company’s expansion into the Philippines, Indonesia and beyond.
Earlier in his career, Mr. Jaitly was the Head of Public Affairs for Google and YouTube South Asia, a speechwriter and aide to Google
CEO Eric Schmidt. The Company became obligated in January 2023 to issue Mr. Jaitly a warrant to purchase 75,000 shares of the Company’s
common stock at an exercise price of $3.00 per share, which vest quarterly over one year, and expire in January 2033.
Item 1A. Risk Factors
RISK FACTORS
Investing in our Common Stock involves a high
degree of risk. Before deciding whether to invest in our Common Stock, you should consider carefully the risks and uncertainties and assumptions
discussed under the heading “Risk Factors” and elsewhere in this prospectus. There may be other unknown or unpredictable economic,
business, competitive, regulatory or other factors that could have material adverse effects on our future results. If any of these risks
occurs, our business, business prospects, financial condition or results of operations could be seriously harmed. Assuming our common
shares are publicly traded, this could cause the trading price of our Common Stock to decline, resulting in a loss of all or part of your
investment. Please also read carefully the section entitled “Cautionary Note Regarding Forward-Looking Statements.”
Risks Related to Our Business
Our business plan contemplates the expansion
and development of an existing business in the new area of mobile esports competition, or “esports gaming,” and we may not
be successful in realizing a profitable business.
Mobile sports competitions, utilizing mobile cell
phones, laptops, and tablets to gather audiences and upon which players compete, is a relatively new industry. Our Management believes
there is a great opportunity to create a large and profitable sports franchise out of this industry, generating substantial revenues from
ticket sales, live streaming video, sponsors, advertisements, sales of merchandise associated with university and professional teams,
and other revenue sources. But there is no assurance there will be market acceptance or great public interest in this new sport, or that
we can generate significant revenues and profits from esports competitions, tournaments and associated streams of revenues.
Our initial focus will be on expanding a business
to deliver mobile esports tournaments, games and activities in association with 92 Indian universities. Although interest in mobile esports
programming is growing in South Asia, university mobile esports are new to Indian sub-continent audiences and broadcasts/streaming of
our university league’s esports games and tournaments may not resonate with these audiences. As a result, we may not generate sufficient
viewership to attract advertisers and increase the value of the media rights we intend to expand and promote. You should consider our
business and prospects in light of the challenges, risks and difficulties we may encounter in this new and rapidly evolving mobile esports
content market.
We rely on information technology and other
systems and services provided by third parties, primarily by Artemis Avenue; any failures, errors, defects or disruptions in these systems
or services could diminish our brand and reputation, subject us to liability, disrupt our business and adversely affect our operating
results and growth prospects. The third-party platforms upon which these systems and software are made available could contain undetected
errors.
The challenges presented in India to deliver and
receive content for MOGO are significant for four reasons: (i) the infrastructure for both broadband and mobile bandwidth is not evenly
available; (ii) users may access our digital content on an older smart phone with lower processing power and a slower connection; (iii)
our content will often be live and may involve teams bunched together in specific geographic areas, which means that they will be accessing
content from the same place, at the same time; and (iv) the latency, or the delay between when a player does something and that action
is seen by another player or viewer, must be negligible in order to have exciting real time competition.
Our technology infrastructure is critical to the
performance of our offerings and to user satisfaction. However, the systems provided by Artemis Avenue, on which we will rely, may not
be adequately designed with the necessary reliability and redundancy to avoid performance delays or outages that could be harmful to our
business. Further, we may be subject to cyber-attacks and we may find it difficult to protect our systems, data and user information and
to prevent outages, data or information loss, fraud, security breaches. We may in the future experience website disruptions, outages and
other performance problems due to a variety of factors, including infrastructure changes, human or software errors and capacity constraints.
Such disruptions from unauthorized access, fraudulent manipulation, tampering with our computer systems and technological infrastructure,
or those of third parties, could result in a wide range of negative outcomes, each of which could materially adversely affect our business,
financial condition, results of operations and/or prospects.
We cannot be certain that our business initiatives
and operations will maintain regulatory approval, and without regulatory approval we will not be able to market and grow our business.
We believe esports to be fairly defined as competitive
games of skill, timing, knowledge, experience, practice, attention and teamwork, but not games of chance or luck. We believe that “cash-based”
tournaments involving games of skill should not be considered gambling because the generally accepted definition of gambling involves
three specific things: (i) the award of a prize, (ii) paid-in consideration (meaning entrants pay to compete) and (iii) an outcome determined
on the basis of chance.
We believe that in India and other countries our
mobile esports games, which permit players and teams to play against each other with prize money distributed to the last remaining competitors
as cash prizes, will be considered games of skill. We do not intend to offer any facility for players to wager on the outcome of the games
or events.
This is relevant because online gaming has gained
significant scrutiny in India. Games of chance in India are considered gambling and are expressly prohibited. Seven Indian states have
amended their laws to ban fantasy sports gambling and other real money gambling games. But the High Court in the Indian state of Rajasthan
dismissed a plea to ban Dream11 in October 2020 and ruled that the format of an online fantasy game is a game of mere skill and is protected
under the State’s Constitution. Rajasthan is one of 28 states and 8 union territories in India, and the other states and the national
government have not addressed this issue. It remains uncertain as to how other Indian states and the Indian national government will define
or regulate our esports games in the future, if at all. And it is uncertain whether other South Asian countries, or countries elsewhere,
will adopt laws banning or regulating our esports games despite our position that they do not involve gambling. Prospective investors
should assess this risk of government regulations or prohibition in assessing an investment in our shares, as negative government regulation
at any level could destroy our markets or severely limit operations, thereby reducing our revenues and the value of our business and the
value of your investment.
Risks to our commercialization of licensed
rights involving 92 Indian universities.
SII has granted to MOGO a license to commercially
exploit certain rights held by SII through SII’s subsidiary, EUSAI, associated with the development, organization, promotion, marketing
and distribution of esports leagues, games, tournaments, products and programing in India in participation with 92 EUSAI-member universities
with whom SII or EUSAI has contractual or correspondence relationships. We are relying on the commercialization of these rights to jumpstart
the expansion of our esports business.
However, one or more or all of such universities,
for whatever reason, could decide to withdraw from their arrangement with EUSAI and/or SII, either dropping the pursuit of esports altogether,
or nominating new third parties to assist in their development of esports leagues and teams, or placing restrictions on use of Brand Elements.
If a number of universities withdrew, it could have a significant negative impact on our Company and successful implementation of our
business plan.
The agreements with SII provide that SII is obligated
to compensate participating universities and their players, including payment of any royalties or participations, for MOGO’s use
of logos, trademarks and names and likenesses associated with the universities and their players, and SII is also obligated to pay for
lodging, food and transportation of Participating University players. Further, SII has agreed to invest capital in the manufacture, marketing,
distribution and sale of merchandise associated with esports programs. SII agreed to provide consulting services to MOGO with regard to
development of its esports business, through December 31, 2022 but this agreement has not been extended. SII is not a public company,
does not have substantial capital reserves, and conceivably could default in performance of one or more of these obligations. Any SII
default would likely have a material negative effect on our Company and our successful implementation of our business plan.
The rights assigned to MOGO by SII under
the license of rights and/or correspondence relationships by SII to MOGO associated with the 92 universities are limited; SII may support
MOGO competitors or become a competitor of MOGO in the future.
The limited License granted by SII to MOGO excludes
material areas of esports commercial exploitation that are retained by SII. SII retains all esports rights associated with games between
Indian teams and Pakistani teams. But MOGO is free to develop its own esports content revolving around such competition, provided that
such development does not conflict with the rights of SII or obligations of MOGO, including without limitation the obligation of MOGO
not to interfere with SII’s relationship with Participating Universities, making any claim against any Participating University
without SII’s prior written approval, or interfering with Licensor’s relationships with its vendors, customers, clients, partners,
employees, licensees, licensor, consultant or supplier to Licensor. For “Excluded Games,” which are defined as games or tournaments
between Indian and Pakistani teams that would be transmitted or streamed by brand-name networks, such as Sony Ten, NEO Sports, ESPN, DSport,
DDSports, Star Sports, Fox Sports, Netflix, youtube.com, twitch.com or other similar linear or streaming networks, both MOGO and SII are
free to separately negotiate and stream esports games and programing, including content licensed to MOGO by SII under collective agreements
between the parties. SII retains all rights to license, manufacture and distribute merchandise that bears university team Logos and Name
and Likeness with MOGO’s name and logos; however, MOGO is entitled to receive a merchandise royalty of one-third of profits from
sales of such merchandise. Sponsorship Rights with respect to such merchandise are retained solely by SII. There are various other limitations
on the rights assigned to MOGO under the License of Rights Agreements.
The License is limited to rights SII has or ‘obtains’
from the Association of Indian Universities (AIU) or from so-called “Participating Persons,” defined as participating universities,
esports athletes, esports competing students, faculty members, other employees, and alumni or fans of a participating university in that
capacity, rather than in their capacities as members of the general public. Although SII is obligated to use best efforts to acquire such
rights, it has no liability to the extent that AIU or Participating Persons terminate or limit such person’s grant of rights to
SII.
The License is for a limited term and expires
during July 2029.
Nothing in the Assignment of License agreement
prohibits SII from using, licensing or granting online rights, gaming rights or similar rights pertaining to Esports Games, transmitted
or streamed, by brand-name networks, or virtual play on a live or delayed basis, of sports events organized by SII or for its universities,
or with avatars representing the athletes who play in such events. SII may elect to grant such rights to competitors of MOGO. SII may
itself elect to commercially exploit such rights and thereby become a competitor of MOGO. SII has specifically retained for itself, all
esports rights associated with its universities and India-Pakistan competition and has set up a separate company to commercially exploit
this opportunity in which we have no interest. As a result, the long-term relationship with SII is uncertain and SII or its current or
future affiliates, may become significant competitors of MOGO and limit or reduce MOGO’s opportunities to expand its esports business,
thereby reducing our revenues, the value of our business and the value of your investment.
Because we are newly organized, we are a
development-stage company without significant revenues and have a limited operating history.
Mobile Global Esports (“MOGO” or “Mogo,”
or the “Company”) was organized in March of 2021 to carry on and expand an esports business (the “Business”) started
by Sports Industry of India (“SII”), in 2016. Through a series of contracts, the rights to the Business were assigned to MOGO
by SII and its affiliates beginning in August of 2021. We are in the process of expanding this Business, but to date we do not have significant
revenues. Despite some five years of operations, the Business has many of the risks of a new business because the entire industry of esports
is so new and still in many ways undefined. You should consider the Company’s prospects in light of the costs, uncertainties, delays,
and difficulties frequently encountered by companies in this early stage of development. In particular, you should consider that we cannot
provide assurance that we will be able to:
| ● | Successfully implement our
business plan and expand our esports business to develop significant streams of revenue; |
| ● | Maintain our management team; |
| ● | Maintain licensed rights associated
with SII’s universities to which we have gained access pursuant to a license of rights agreement with SII; |
| ● | Raise sufficient funds in the
capital markets in the future to implement our business plan; |
| ● | Attract, enter into and/or
maintain contracts with players and sponsors; and |
| ● | Compete effectively in the
competitive environment in which we will operate. |
If we cannot successfully accomplish these objectives, our business
and your investment are likely to be negatively impacted.
The future success we might enjoy will depend
upon many factors, several of which may be beyond our control, or which cannot be predicted at this time, and which could have a material
adverse effect upon our financial condition, business prospects and operations and the value of an investment in our company. We will
incur initial operating losses as we expand our business, and it may be some time before we achieve positive cash flow and/or profitability,
and we may never reach such goals. There is of course no assurance that significant revenues will be generated, or that gross revenues
will be sufficient to cover our out-of-pocket expenses, or that we will realize profits.
We will require additional financing if
we are successful, and cannot be certain that such additional financing will be available on reasonable terms when required, or at all.
As of December 31, 2022, we had a cash balance,
including restricted cash, of approximately $7,560,000. While management estimates this amount is sufficient to continue with operating
activities over the next 18-24 months, we will need to raise additional capital to fund our operations while we implement and execute
our business plan and expand our business.
We currently do not have any contracts or commitments
for additional financing. Any future equity financing may involve substantial dilution to existing shareholders. There can be no assurance
that such additional capital will be available on a timely basis, or on terms acceptable to the Company. If adequate funds are not available
or are not available on acceptable terms when needed, the Company may not be able to fund its business or its expansion, take advantage
of strategic acquisitions or investment opportunities or respond to competitive pressures. Such inability to obtain additional financing
when needed could have a material adverse effect on the Company’s business, results of operations, cash flow, financial condition
and prospects.
If we raise additional funds by issuing equity
or convertible debt securities, we will reduce the percentage ownership of our then-existing stockholders, and the holders of those newly-issued
equity or convertible debt securities may have rights, preferences, or privileges senior to those possessed by our then-existing stockholders
and/or note holders. Additionally, future sales of a substantial number of shares of our Common Stock or other equity-related securities
could depress the market price of our Common Stock in the public market, and could impair our current or future ability to raise capital
through the sale of additional equity or equity-linked securities or the sale of debt. We cannot predict the effect that future sales
of our Common Stock or other equity-related securities would have on the market price of our Common Stock.
The current and potential effects of the
coronavirus may impact our business, results of operations and financial condition.
In December 2019, a novel strain of coronavirus
(Covid-19) emerged in China. While initially the outbreak was largely concentrated in China and caused significant disruptions to its
economy, it has now spread and infections have been reported globally. Due to the outbreak of Covid-19, almost all major sports events
and leagues were postponed or put on hold for a significant period. Travel restrictions and border closures have materially impacted our
ability to manage and operate the day-to-day functions of our business. Management has been able to operate with less efficiency in a
virtual setting. However, if such restrictions become more severe due to a surge of virus infections, they could negatively impact those
activities in a way that would harm our business over the long term. Travel restrictions can restrain our ability to operate, but at present
we do not expect these restrictions on personal travel to be material to our business operations or financial results since the initial
esports events will be held online.
The ultimate impact of the Covid-19 pandemic on
the Company’s operations is unknown and will depend on future developments, which are highly uncertain and cannot be predicted with
confidence, including the duration of the Covid-19 outbreak, new information which may emerge concerning the severity of the Covid-19
pandemic, and any additional preventative and protective actions that governments, or the Company, may direct, which may result in an
extended period of continued business disruption and reduced operations. Any resulting financial impact cannot be reasonably estimated
at this time but may have a material adverse impact on our business, financial condition and implementation of our business plans.
Actual or threatened epidemics, pandemics, outbreaks
or other public health crises may materially and adversely impact our operations, adversely affecting the local economies where we operate
and negatively impacting our customers’ spending in the impacted regions.
The interactive entertainment industry is
intensely competitive. Mobile Global Esports faces competition from a growing number of interactive companies and, if the Company is unable
to compete effectively, its business could be negatively impacted.
The industry we are addressing is “mobile”
esports. Our market is part of a much larger interactive entertainment market. There is intense competition among Interactive Entertainment
Companies for the consumer’s dollar. There are a number of established, well-financed companies producing esports and interactive
entertainment products and systems that will compete with the products and services planned by the Company. Many of these competitors
have financial resources much greater than ours. They may spend more money and time on developing and testing product and services, undertake
more extensive marketing campaigns, adopt more aggressive pricing policies or otherwise develop more commercially successful products
and services than the Company. This could impact the Company’s ability to win new business and retain business. Furthermore, new
competitors may enter the Company’s key market areas. If the Company is unable to obtain significant market share or if it loses
market share to its competitors, the Company’s results of operations and future prospects would be materially adversely affected.
The Company’s success depends on its ability to develop new products and services, and enhance existing products and services, at
prices and on terms that attract and retain customers.
In addition, SII, which has assisted us in our
organization and has licensed to us certain commercialization rights associated with 92 universities in India, is not precluded from establishing
its own esports business once its consulting services to us are concluded. It is possible it, or its affiliates, could become significant
competitors to us in the mobile esports markets in South Asia on which we are focused.
Our revenues and profitability depend upon
many factors for which no assurance can be given.
Our ability to achieve expanded revenues will
depend, in large part, upon our ability to attract mobile esports users and viewers to our offerings, retain users and viewers, and reactivate
users and viewers in a cost-effective manner. Achieving growth may require us to increasingly engage in sophisticated and costly sales
and marketing efforts, which may not make sense in terms of return on investment. In addition, our ability to increase the number of users
and viewers of our offerings will depend on continued user adoption of mobile esports. Growth in the mobile esports industry and the level
of demand for and market acceptance of our mobile esports products and services will be subject to a high degree of uncertainty. We cannot
assure the consumer adoption of our mobile esports product and service offerings.
Further, revenues do not assure profitability.
Profitability depends upon many factors, including the ability to develop, commercialize, market, sell and maintain valuable mobile esports
products and services at reasonable profit margins, our ability to identify and obtain the rights to additional mobile esports products
and services to add to our existing lines, success and expansion of our sales programs, expansion of our player and fan bases, and obtaining
the right balance of expense levels and the overall success of our business activities.
Once, and if, we achieve profitability, we may
not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to generate sufficient revenues, or to become
and remain profitable, would depress the value of our company and could impair our ability to raise capital, expand our business, diversify
our product offerings or even continue our operations. It could result in a decline in the value of our stock and you could lose all or
part of your investment.
Litigation costs and the outcome of litigation
could have a material adverse effect on the Company’s business.
From time to time, the Company may be subject
to litigation claims through the ordinary course of its business operations regarding, but not limited to, employment matters, security
of consumer and employee personal information, contractual relations with suppliers, marketing and infringement of trademarks and other
intellectual property rights, and other matters. Litigation to defend the Company against claims by third parties, or to enforce any rights
that we may have against third parties, may be necessary, which could result in substantial costs and diversion of our resources, causing
a material adverse effect on our business, financial condition and results of operations.
The Company is not aware of any current material
legal proceedings outstanding, threatened or pending as of the date hereof by or against the Company.
If we are unable to build and enhance our
brands and reputation or if events occur that damage our brands and reputation, our ability to expand our players, university teams, sponsors
and commercial partners may be impaired.
The success of our business depends on the value
and strength of our esports media brands and the audiences who watch on television, cell phones, or stream on the internet. The strength
of our esports media brands determines our ability to expand our player and fan bases and attract sponsors and advertisers. To be successful,
we believe we must preserve, grow and leverage the value of our brands across all of our revenue streams. Unfavorable publicity regarding
our esports properties could negatively affect our brands’ reputations. Failure to respond effectively to negative publicity could
also erode our brands’ reputations. In addition, events in the industry as a whole, even if unrelated to us, may negatively affect
our brands’ reputations. A failure to build brand awareness or negative events that damage our brands’ reputations could interfere
in the growth of, or result in a decline in players, television and social media audiences, fan loyalty or corporate sponsors to support
our esports media properties. As a result, we might not be able to obtain revenues sufficient to attain profitability, or there might
be a material adverse effect on our business, results of operations, financial condition and cash flow, causing us to sustain losses.
We might not then be able to obtain the resources or time that would be needed to attempt to rebuild our brands and reputation.
Our insurance coverage may not adequately
protect us against all possible risks of loss. Further, our business exposes us to potential liabilities that may not be covered by insurance.
The operation of university athletic events, and
specifically a mobile esports league and teams, are subject to a number of risks that could expose us to substantial liability for personal
injury. We intend to purchase insurance against certain of these risks, but our insurance may not be adequate to cover our liabilities.
We do not have any business liability, disruption
or litigation insurance coverage for our operations in the US or in India. Accordingly, a business disruption, litigation or natural disaster
may result in substantial costs and divert management’s attention from our business, which could have an adverse effect on our results
of operations and financial condition.
The Company’s results of operations
could be affected by natural events in the locations in which it operates or where its customers or suppliers operate.
Mobile Global Esports, its customers and its suppliers
are expected to have operations in locations subject to natural occurrences such as severe weather and other geological events, including
monsoons, earthquakes or outbreaks of pestilence that could disrupt operations. Any serious disruption at any of the Company’s facilities
or the facilities of its customers or suppliers due to a natural disaster could have a material adverse effect on our revenues and increase
our costs and expenses.
We will need to expand our organization,
and we may experience difficulties in managing this growth, which could disrupt our operations.
As of December 31, 2022, we had 20 full-time
employees and 5 key advisors. The employees in India work a majority of their time to organize events for our operations in India. Of
the 25-member team, 10 are located in the US, 14 are located in India, and one is in Pakistan. As our company grows, we plan to expand
our employee base. In addition, we intend to grow by expanding our business, increasing market penetration and developing new products
and services. Future growth will impose significant additional responsibilities on our management, including the need to develop and
improve our existing administrative and operational systems and our financial and management controls and to identify, recruit, maintain,
motivate, train, manage and integrate additional employees, consultants and contractors. Also, our management may need to divert a disproportionate
amount of its attention away from our day-to-day activities to managing these growth activities. We may not be able to effectively manage
the expansion of our operations, which may result in weaknesses in our organization, give rise to operational mistakes, loss of business
opportunities, loss of employees and/or reduced productivity. If our management is unable to effectively manage our growth, our expenses
may increase more than expected, our ability to generate and grow revenue could be reduced, and we may not be able to implement our business
strategy. Our future financial performance and our ability to compete effectively will depend, in part, on our ability to effectively
manage the expansion of employees and manage future growth.
Risks Related to the Economy
An economic downturn and adverse economic
conditions may harm our business.
Any economic downturn and adverse conditions
in South Asian regional and global markets may negatively affect our operations. Our projected future broadcasting/streaming revenue
in part will depend on consumers’ availability of personal disposable income and on our corporate marketing and operating budgets.
Further, projected future sponsorship and commercial revenues are contingent upon the expenditures of businesses across a wide range
of industries, and if these industries cut costs in response to any economic downturn, our revenue may similarly decline. Continued weak
economic conditions could cause a reduction in our anticipated corporate sponsorships, which could have a material adverse effect on
our business, results of operations, financial condition and cash flow.
In this regard, the Covid-19 pandemic has adversely
affected our ability to generate revenues, raise capital, negotiate new business arrangements in India and adequately staff and manage
our business. The extent to which Covid-19 or some new pandemic in the future impacts our business, results of operations and financial
condition can not be assessed.
Further, in the current environment of raising
inflation and raising interest rates, disposable income is being reduced in our markets, resulting in the likelihood of reduced revenues
flowing to our business.
Risks Related to Laws, Regulations and
Offshore Operations
Regulations that may be adopted with respect
to the internet and electronic commerce may decrease the growth in the use of the internet and lead to the decrease in the demand for
the Company’s products and services.
In addition to regulations pertaining to the
esports industry in general, the Company may become subject to any number of laws and regulations that may be adopted with respect to
the internet and electronic commerce. New laws and regulations that address issues such as user privacy, pricing, online content regulation,
taxation, advertising, intellectual property, information security, and the characteristics and quality of online products and services
may be enacted. As well, current laws, which predate or are incompatible with the internet and electronic commerce, may be applied and
enforced in a manner that restricts the electronic commerce market. The application of such pre-existing laws regulating communications
or commerce in the context of the internet and electronic commerce is uncertain. Moreover, it may take years to determine the extent
to which existing laws relating to issues such as intellectual property ownership and infringement, libel and personal privacy are applicable
to the internet. The adoption of new laws or regulations relating to the internet, or particular applications or interpretations of existing
laws, could decrease the growth in the use of the internet, decrease the demand for the Company’s mobile esports products and services,
increase our cost of doing business or could otherwise have a material adverse effect on our business, revenues, operating results and
financial condition.
The risks related to international operations could negatively
affect the Company’s results.
Most all of the Company’s operations will
be conducted in foreign jurisdictions, and initially primarily in India. It is expected that the Company will derive all of its revenue
from transactions denominated in currencies other than the United States dollar, and the Company expects that receivables with respect
to foreign sales will account for all of its total accounts and receivables outstanding for some time.
As such, the Company’s operations may be
adversely affected by changes in foreign government policies and legislation or social instability and other factors which are not within
the control of the Company, including, but not limited to, recessions in foreign economies, expropriation, nationalization and limitation
or restriction on repatriation of funds, assets or earnings, longer receivables collection periods and greater difficulty in collecting
accounts receivable, changes in consumer tastes and trends, renegotiation or nullification of existing contracts or licenses, changes
in policies, regulatory requirements or the personnel administering them, currency fluctuations and devaluations, exchange controls,
economic sanctions and royalty and tax increases, risk of terrorist activities, revolution, border disputes, implementation of tariffs
and other trade barriers and protectionist practices, taxation policies, including royalty and tax increases and retroactive tax claims,
volatility of financial markets and fluctuations in foreign exchange rates, difficulties in the protection of intellectual property particularly
in countries with fewer intellectual property protections, the effects that evolving regulations regarding data privacy may have on the
Company’s online operations, adverse changes in the creditworthiness of parties with whom the Company has significant receivables
or forward currency exchange contracts, labor disputes and other risks arising out of foreign governmental sovereignty over the areas
in which the Company’s operations are conducted.
The Company’s operations may also be adversely
affected by social, political and economic instability and by laws and policies of such foreign jurisdictions affecting foreign trade,
taxation and investment. If the Company’s operations are disrupted and/or the economic integrity of its contracts is threatened,
its business would be harmed.
The Company’s international activities
may require protracted negotiations with host governments, national companies and third parties. Foreign government regulations may favor
or require the awarding of contracts to local contractors or require foreign contractors to employ citizens of, or purchase supplies
from, a particular jurisdiction. In the event of a dispute arising in connection with the Company’s operations in a foreign jurisdiction
where it conducts its business, the Company may be subject to the exclusive jurisdiction of foreign courts or may not be successful in
subjecting foreign persons to the jurisdictions of the courts of United States or enforcing American judgments in such other jurisdictions.
The Company may also be hindered or prevented from enforcing its rights with respect to a governmental instrumentality because of the
doctrine of sovereign immunity. Accordingly, the Company’s activities in foreign jurisdictions could be substantially affected
by factors beyond the Company’s control, any of which could have a material adverse effect on it. The Company believes that management’s
experience to date in commercializing other products and services may be of assistance in helping to reduce these risks. Some countries
in which the Company may operate may be considered politically and economically unstable.
The Company is subject to foreign exchange
and currency risks that could adversely affect its operations, and the Company’s ability to mitigate its foreign exchange risk
through hedging transactions may be limited.
The Company expects that it will derive all or
most of its revenues in currencies other than the United States dollar for the foreseeable future; however, a significant portion of
the Company’s operating expenses for its corporate activities are likely to be incurred in United States dollars. Fluctuations
in the exchange rate between the U.S. dollar, the rupee and other currencies may have a material adverse effect on the Company’s
business, financial condition and operating results. The Company’s financial results are affected by foreign currency exchange
rate fluctuations. Foreign currency exchange rate exposures arise from current transactions and anticipated transactions denominated
in currencies other than United States dollar and from the translation of foreign-currency-denominated balance sheet accounts into United
States dollar-denominated balance sheet accounts. The Company is exposed to currency exchange rate fluctuations because portions of its
revenue and expenses are denominated in currencies other than the United States dollar, particularly in the Indian rupee to start.
The risks of operating as an American company
in India are an issue for every foreign investor.
The risks of operating as an American company
in India are an issue for every foreign investor. The Company will mitigate some of this risk by maintaining a locally-recruited management
and staff, and relying through its relationship with SII, on SII’s political and business relationships, such as the Association
of Indian Universities (AIU), the Sports Authority of India (SAI), the SII universities, for whom the company plans to develop, promote
and commercialize mobile esports, and by the protection afforded by India’s comprehensive commercial law structure, particularly
in the areas of intellectual property law, trademark law, contract law, tax law and the uniform commercial code, and similar laws in
other South Asian jurisdictions.
Business interruptions due to terrorism
or civil unrest could adversely affect us.
Our business and our assets are planned to be
primarily located in India, a country with examples of terrorism and civil unrest, and as a result, we and our affiliates could be potential
targets of terrorism. In addition, any prolonged business interruption at any of the arenas where we host our events could result in
a decline in mobile esports revenue. We currently do not have business interruption insurance in place. If and when we do have business
interruption insurance coverage it may only cover some, but not all, of these potential events, and even for those events that are covered,
it may not be sufficient to compensate us fully for losses or damages that may occur as a result of such events, including, for example,
loss of market share and diminution of our trademarks, reputation and player and fan loyalty. Any one or more of these events could have
a material adverse effect on our business, results of operation, financial condition and/or cash flow.
Changing laws, rules and regulations and
legal uncertainties, including adverse application of tax laws and regulations, may adversely affect our business and financial performance.
Our business and financial performance could
be adversely affected by unfavorable changes in or interpretations of existing, or the promulgation of new laws, rules and regulations
applicable to us and our business, including those relating to the internet, e-commerce, consumer protection and privacy. Such unfavorable
changes could decrease demand for our services and products, increase costs and/or subject us to additional liabilities. Furthermore,
the growth and development of e-commerce may result in more stringent consumer protection laws that may impose additional burdens on
online businesses generally.
Risks Related to the Company’s Management
Failure to attract, retain and motivate
key employees may adversely affect the Company’s ability to compete and the loss of the services of key personnel could have a
material adverse effect on the Company’s business.
The Company depends on the services of a few
key executive officers. The loss of any of these key persons could have a material adverse effect on the Company’s business, results
of operations and financial condition.
The unexpected loss of services of one or more
of these individuals could also adversely affect the Company. The Company is not protected by key man or similar life insurance covering
members of senior management but is contemplating obtaining key man insurance.
The Company’s success is also highly dependent
on its continuing ability to identify, hire, train, motivate and retain highly qualified technical, marketing and management personnel.
Competition for such personnel can be intense, and the Company cannot provide assurance that it will be able to attract or retain highly
qualified technical, marketing and management personnel in the future. The Company’s inability to attract and retain the necessary
technical, marketing and management personnel may adversely affect its ability to carry forward its business plan, and may limit future
growth and profitability.
Our current management team has limited
prior experience managing university esports businesses.
Our current executive management team has limited
experience managing esports business, but does not have experience in managing university esports teams or leagues. In fact, practically
no one has such experience because this segment of the industry is so new. This lack of experience could adversely affect our ability
to run our business properly or to raise additional capital that may be necessary for our continued operations. We will endeavor to recruit
seasoned executives, as and if capital is available to fund their hiring.
Risks Related to Intellectual Property and Technology
Failure to adequately protect our intellectual
property and curb the sale of counterfeit merchandise could injure our trademarks.
We are susceptible to brand infringement such
as counterfeiting and other unauthorized uses of our intellectual property rights. However, it is not possible to detect all instances
of brand infringement in a timely manner. Additionally, where instances of brand infringement are detected, we cannot guarantee that
such instances will be prevented as there may be legal or factual circumstances which give rise to uncertainty as to the validity, scope
and enforceability of our intellectual property rights in the brand assets.
We also may license our intellectual property
rights to third parties. In an effort to protect our brands, we will try in such event to enter into licensing agreements with such third
parties which govern the use of our intellectual property and which require our licensees to abide by quality control standards with
respect to such use. Although we will make efforts to monitor our licensees’ use of our intellectual property, we cannot assure
you that these efforts will be sufficient to ensure their compliance. The failure of our licensees to comply with the terms of their
licenses could have a material adverse effect on our business, results of operations, financial condition and cash flow.
Our business will be subject to online
security risk, and loss or misuse of our stored information, including the exposure of customers’ personal information, could lead
to government enforcement action or other litigation, potential liability, or otherwise harm our business.
We will receive, process, store and use personal
information and other customer data as a part of our business. There are numerous federal, state and local laws regarding privacy and
the storing, sharing, use, processing, disclosure and protection of personal information and other data. Any failure or perceived failure
by us to comply with our privacy policies, our privacy-related obligations to customers or other third parties, or our privacy-related
legal obligations, or any compromise of security that results in the unauthorized release or transfer of personally identifiable information
or other player data, may result in governmental enforcement actions, litigation or public statements against us by consumer advocacy
groups or others and could cause our customers to lose trust in us which could have an adverse impact on our business. In the area of
information security and data protection, many jurisdictions have passed laws requiring notification to customers 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. The costs of compliance with these types of laws may increase in the future as a result of changes in interpretation or
changes in law. Any failure on our part to comply with these types of laws may subject us to significant liabilities.
We will rely on other third-party data
and live-streaming providers for real-time and accurate data and/or live streams for mobile esports events, and if such third parties
do not perform adequately or terminate their relationships with us, our costs may increase and our business, financial condition and
results of operations could be adversely affected.
We will rely on third-party sports data and live
streaming providers to obtain accurate information regarding schedules, results, performance and outcomes of mobile esports events and
the live streaming of such events. We may experience errors in this data and/or streaming feed. If we cannot adequately resolve the issue
with our end users, our end users may have a negative experience with our offerings, our brand or reputation may be negatively affected
and our users may be less inclined to continue or resume utilizing our products and services, or recommend our platform to other potential
users. As such, a failure or significant interruption in our service would harm our reputation, business and operating results.
Furthermore, once we establish a relationship
with a data and/or live streaming partner, if it terminates its relationship with us or refuses to renew its agreement with us on commercially
reasonable terms, we would need to find an alternate provider, and may not be able to secure similar terms or replace such providers
in an acceptable time frame. Any of these risks could increase our costs and adversely affect our business, financial condition and results
of operations. Further, any negative publicity related to any of our selected third-party partners, including any publicity related to
regulatory concerns, could adversely affect our reputation and brand, and could potentially lead to increased regulatory or litigation
exposure.
MOGO has partnered with Nick Venezia, the founder
and Chief Executive Officer (“CEO”) of Social Outlier, to develop MOGO’s digital assets using complex scientific formulas
and analytical mathematics to develop unique algorithms and toolsets that will create data revenue. In management’s opinion, MOGO
will be creating extremely valuable datasets that also respect individual consent and align with future privacy standards while delivering
qualified and high-value audiences.
Systems, network or telecommunications
failures or cyber-attacks may disrupt the Company’s business and have an adverse effect on the Company’s operations.
Any disruption in the Company’s network
or telecommunications services could affect the Company’s ability to operate its mobile online esports offerings, which would result
in reduced revenues and customer down time. The Company’s network and databases of players, fans, and sponsors information, including
intellectual property, trade secrets, and other proprietary business information and those of the third parties the Company utilizes,
will be susceptible to outages due to fire, floods, power loss, break-ins, cyber-attacks, hackers, network penetration, data privacy
or security breaches, denial of service attacks and similar events, including inadvertent dissemination of information due to increased
use of social media. Despite implementation of network security measures and data protection safeguards, including a disaster recovery
strategy for back-office systems, the Company’s servers and computer resources will be vulnerable to viruses, malicious software,
hacking, break-ins or theft, third-party security breaches, employee error or malfeasance, and other potential compromises. Disruptions
from unauthorized access to or tampering with the Company’s computer systems, or those of the third parties the Company utilizes,
in any such event could result in a wide range of negative outcomes, including devaluation of the Company’s intellectual property
goodwill and/or brand appeal, increased expenditures on data security, and costly litigation, and can have a material adverse effect
on the Company’s business, revenues, reputation, operating results and financial condition.
Risks Related to Our Common Stock
Our officers, directors and 5% stockholders
may exert significant influence over our affairs, including the outcome of matters requiring stockholder approval.
As of December 31, 2022, our officers, directors
and more than 5% shareholders own in the aggregate approximately 33.5% of our outstanding Common Stock. As a result, when acting together,
although such individuals will not have a controlling interest in our Company, they still will have a significant impact on the election
of our directors and in determining the outcome of any corporate action, including corporate actions requiring stockholder approval,
such as: (i) a merger or a sale of our company, (ii) a sale of all or substantially all of our assets, and (iii) amendments to our articles
of incorporation and bylaws. This concentration of voting power and influence could have a significant effect in delaying, deferring
or preventing an action that might otherwise be beneficial to our other stockholders and be disadvantageous to our stockholders with
interests different from those individuals. Certain of these individuals also have significant control over our business, policies and
affairs as officers or directors of our company. Therefore, you should not invest in reliance on your ability to have any control over
our company.
We currently do not intend to pay dividends
on our Common Stock. As a result, your only opportunity to achieve a return on your investment is if the price of our Common Stock appreciates.
We currently do not expect to declare or pay
dividends on our Common Stock. In addition, in the future we may enter into agreements that prohibit or restrict our ability to declare
or pay dividends on our Common Stock. As a result, your only opportunity to achieve a return on your investment will be if we are able
to establish a public market for our stock, the market price of our Common Stock appreciates and you sell your shares.
Shareholders will likely experience dilution
of their ownership interest due to the future issuance of additional shares of our Common Stock.
We are in a capital-intensive business and we
do not have sufficient funds to finance the growth of our business without issuing additional securities beyond the shares to be sold
in this offering, resulting in the dilution of the ownership interests of holders of our Common Stock. We are currently authorized to
issue 100,000,000 shares of Common Stock and 10,000,000 shares of Preferred Stock. Additionally, the Board may subsequently approve increases
in authorized Common Stock or Preferred Stock. The potential issuance of such additional shares of common or Preferred Stock or convertible
debt may create downward pressure on the trading price of our Common Stock in public markets. We may also issue additional shares of
Common Stock or other securities that are convertible into or exercisable for Common Stock in future public offerings or private placements
for capital-raising purposes or for other business purposes. The future issuance of a substantial number of common shares into the public
market, or the perception that such issuance could occur, could adversely affect the prevailing market price of our common shares. A
decline in the price of our common shares could make it more difficult to raise funds through future offerings of our common shares or
securities convertible into common shares.
Our amended and restated certificate of
incorporation allows for our board of directors to create new series of Preferred Stock without further approval by our stockholders,
which could have an anti-takeover effect and could adversely affect holders of our Common Stock.
Our authorized capital includes Preferred Stock
issuable in one or more series. We currently have no Preferred Stock outstanding. However, our board has the authority to issue Preferred
Stock and determine the price, designation, rights, preferences, privileges, restrictions and conditions, including voting and dividend
rights, of those shares without any further vote or action by stockholders. The rights of the holders of Common Stock will be subject
to, and may be adversely affected by, the rights of holders of any Preferred Stock that may be issued in the future. The issuance of
additional Preferred Stock, while providing desirable flexibility in connection with possible financings and acquisitions and other corporate
purposes, could make it more difficult for a third party to acquire a majority of the voting power of our outstanding voting securities,
which could deprive our holders of Common Stock of a premium that they might otherwise realize in connection with a proposed acquisition
of our company.
We expect to incur significant additional
costs as a result of being a public company, which may adversely affect our business, financial condition and results of operations.
We expect to incur costs associated with corporate
governance requirements that are applicable to us as a public company, including rules and regulations of the SEC, under the Sarbanes-Oxley
Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, and the Exchange Act, as well as the rules of the NASDAQ.
These rules and regulations are expected to significantly increase our accounting, legal and financial compliance costs and make some
activities more time-consuming. We also expect these rules and regulations to make it more expensive for us to obtain and maintain directors’
and officers’ liability insurance. As a result, it may be more difficult for us to attract and retain qualified persons to serve
on our board of directors or as executive officers. Accordingly, increases in costs incurred as a result of becoming a publicly traded
company may adversely affect our business, financial condition and results of operations.
The market price of such securities has
been and is likely to remain highly volatile and subject to wide fluctuations, and you may be unable to sell your securities at or above
the price at which you acquired them.
The stock market in general and the markets for
smaller companies in particular have experienced extreme volatility that may be unrelated to the operating performance of particular
companies. The market price for our securities may be influenced by many factors that are beyond our control.
The trading price of our shares may also decline
in reaction to events that affect other companies in our industry, even if these events do not directly affect us. These factors, among
others, could harm the value of your investment in our securities. In the past, following periods of volatility in the market, securities
class-action litigation has often been instituted against companies. Such litigation, if instituted against us, could result in substantial
costs and diversion of management’s attention and resources, which could materially and adversely affect our business, operating
results and financial condition.
Risk Our Shares may be removed from trading
on the NASDAQ Market.
On December 22, 2022, the NASDQ Staff notified
the Company that its common stock failed to maintain a minimum bid price of $1.00 over the previous 30 consecutive business days as required
by the Listing Rules of The Nasdaq Stock Market. But on January 20, 2023, NASDAQ Staff determined that for the previous 10 consecutive
business days, from January 5, 2023 to January 19, 2023, the closing bid price of the Company’s common stock had been at $1.00
per share or greater. Accordingly, the Company had re-satisfied the NASDQ minimum bid price of $1.00 per share under Listing Rule 5810(c)(3)(A).
This rule provides that a failure to meet the minimum bid price requirement exists if the deficiency continues for a period of 31 consecutive
business days.
However, our shares have recently closed again below $1.00 for 30 consecutive
days, and we received a further letter from NASDAQ on April 10, 2023, again notifying us that we failed to meet the Listing Rules of the
Nasdaq Stock Market and our common shares were at risk of being removed from the NASDAQ. If delisted, the Company would be forced to list
its shares on the Pink Sheets over the counter market and seek later to re-list on the NASDAQ Exchange. The Pink Sheets over the counter
market has significantly less liquidity than the NASDAQ Market. There is no assurance that if delisted at some point in the future from
the NASDAQ, the Company would later be able to re-list on the NASDAQ.
Anti-takeover provisions in our charter
documents and Delaware law could discourage, delay or prevent a change in control of our company and may affect the trading price of
our Common Stock and warrants.
We are a Delaware corporation and the anti-takeover
provisions of Delaware law may discourage, delay or prevent a change in control by prohibiting us from engaging in a business combination
with an interested stockholder for a period of three years after the person becomes an interested stockholder, even if a change in control
would be beneficial to our existing stockholders. In addition, our certificate of incorporation and bylaws may discourage, delay or prevent
a change in our management or control over us that some stockholders may consider favorable.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
Company employees in the US work remotely. The
Company maintains its corporate headquarters in Westport, Connecticut, where the Company rents shared workspace and has use of mail and
conference room facilities, and work stations. In India, the Company’s subsidiary leased three units in a commercial building in
Kandivali East, Mumbai.
We believe our existing leased facilities are
in good operating condition and suitable for the conduct of business for the present.
Item 3. Legal Proceedings
None.
Item 4. Mine Safety Disclosures
Not applicable.
PART III
Item 10. Directors, Executive Officers and
Corporate Governance.
Directors and Executive Officers
The following table sets
forth the names and ages of all of our directors and executive officers as of December 31, 2022. Our officers are appointed by, and serve
at the pleasure of, the Board of Directors.
| Name |
|
Age |
|
Position |
| Marco Welch |
|
|
68 |
|
Chairman |
| David Pross |
|
|
70 |
|
Co-Founder, CEO and Corporate Secretary |
| Kiki Benson |
|
|
62 |
|
Chief Financial Officer |
| Jay Madan |
|
|
56 |
|
Director |
| Jim Knopf |
|
|
58 |
|
Director |
| Willy Verhaegen |
|
|
81 |
|
Director |
| Alexander Alexandrov |
|
|
39 |
|
Director |
The following are biographical summaries of those
individuals who serve as our executive officers and directors:
Marco Welch, Chairman. Mr. Welch, age 68,
has over 30 years of investment banking experience and was the owner of the commodities firm, BD Alpha3 Corp., where he has served as
a consultant for more than the past five years. BD Alpha3 Corp is not currently active. As a specialist on the Chicago Stock Exchange,
he held Series 3, 7 and 63 licenses. In addition, he was CMO for Cabrera Capital, where he marketed a $10 billion bond deal for the State
of Illinois. This was the largest bond deal in the state’s history. Previously, he was CMO for Medtech Detect. Mr. Welch was classically
trained at The Chicago Conservatory College.
David Pross, Co-Founder, Chief Executive Officer
and Company Secretary. Mr. Pross, age 70, is an international business development specialist with experience in consumer products
and media. MOGO is his fourth new business initiative in India. For the last five years, and in fact from 2015, through April 2021, he
has been employed by SII, first as vice president, business development, and then as a senior advisor, assisting the company in developing
financial projections and business plans in India. In April of 2021 he became the Chief Executive Officer of MOGO.
After earning an MA in Near Eastern Studies from
the University of Michigan, he began his career as an assistant editor for an Arabic-language magazine and then worked as the editor of
Middle East Business in New York. Then, after earning an MBA in finance/international business at New York University, he joined Pepsi-Cola
USA, where he held several positions in the financial planning groups, including the mergers and acquisitions team. He then joined Pepsi-Cola
International, where he had planning responsibility for the Middle East region and India. Following the Indian government’s approval
of Pepsi’s investment proposal, he was a manager in Pepsi’s Indian joint venture in New Delhi.
Following his assignment in India, Mr. Pross formed
his own international business development firm. Clients included Pepsi in Bulgaria, Romania and Russia, Eastman Chemicals for a project
in Belarus and Constar for a packaging project in Brazil. He joined RJ Reynolds International (a division of RJR Nabisco), based in Geneva,
as a director of business development for the Middle East, Africa and South Asia. He led the company’s market entry initiative for
the Indian market, which was the last major consumer market not yet developed by multinational tobacco companies. After the Indian government
rejected RJRI’s initial proposal, he was able to gain the first and only new foreign investment in India’s tobacco industry
in over 80 years. He served as general manager in India and was the joint venture’s managing director. Mr. Pross also opened the
market in Pakistan for RJR International by creating a joint venture with a Karachi-based consumer products company and purchasing a manufacturing
facility in Mardan, in the North-West Frontier Province, now known as Khyber Pakhtunkhwa.
Prior to earning his MA and MBA degrees, Mr. Pross
earned his BA in political science/international relations from the College of Wooster and studied at the American University of Beirut.
He has lived in Lahore, Cairo, Beirut, New Delhi and Geneva.
Kiki Benson, Chief Financial Officer. Ms.
Benson, age 62, is an experienced financial professional with a diverse background as controller of Temenos USA, a bank software company,
as an accountant with Newgistics, an e-commerce development company, and Nanogen, an advanced microelectronics and molecular biology platform
company. Ms. Benson was also a division controller with NEC Technologies, a provider of software-based enterprise telecommunications.
Ms. Benson was the corporate controller for LUSA Holdings from January 2013 to January 2020, a financial operations consultant for Bridgepoint
Consulting from January 2020 to January 2021 and is currently the statutory controller of the North American region since August 2020
for Temenos, Inc. Ms. Benson earned her BS and MBA (finance/accounting) at Northern Illinois University.
Jay Madan, Director. Mr. Madan, age 56,
is an advisor, board member and operational executive with 30 years combined top-management consulting and C-suite experience in the biotechnology,
life sciences and technology industries. Mr. Madan founded Innovate Biopharmaceuticals, Inc. in 2012, where he served as president and
chief business officer, took the company public in 2018 (Nasdaq: INNT) and merged it with RDD Pharma in 2020 to create the GI-focused
9 Meters Biopharma, Inc. (Nasdaq: NMTR). At Innovate Biopharmaceuticals, Mr. Madan was also the interim principal accounting officer
and principal financial officer from March 2018 through June 2020. Mr. Madan served on the board of directors of Innovate
Biopharmaceuticals from January 2018 through April 2020. Since May 2020, Mr. Madan has been an advisor to OakLabs GmbH, a
Berlin-based precision medicine company, and the CEO of OakLife Ai Biopharma, Inc, a spin-off from OakLabs. He holds a BS in chemical
engineering from the University of Mumbai and pursued an MS in chemical engineering from Washington State University.
Jim Knopf, Director. Mr. Knopf, age 58,
is an entertainment sales executive with over 25 years of experience negotiating and selling large-scale content distribution deals across
multiple platforms (TV, digital, mobile and OTT).
For the past seven years Mr. Knopf has been the
founder/CEO of his own entertainment and media consulting firm called Pinstripe Entertainment Consulting. The firm works with studios,
networks and production companies to help monetize their content for broadcast television, cable TV, digital media, mobile and connected
television (CTV and OTT). Mr. Knopf and his firm also worked with ESPN to produce the first-ever NCAA College Esports Championship in
2019 that was streamed on ESPN3. Mr. Knopf earned his BS in sports management from the University of Massachusetts and completed
two semesters of his MBA at the University of Colorado.
Willy Verhaegen, Director. Mr. Verhaegen,
age 81, officially retired as a financial advisor in Antwerp, Belgium in 2000. Mr. Verhaegen is a non-resident Belgian citizen. He started
his career as a private banker and then founded his own financial consulting company, W. P. Verhaegen & Associates. The company became
one of the leading financial consulting firms in Belgium, specializing in niche financial markets and real estate investments in Spain,
Switzerland, the Canary Islands, Canada and the United States. He also founded ROGIB, which was the largest real estate investment trust
in Belgium. In his retirement, Mr. Verhaegen continues to serve as a managing director for a privately-owned real estate company, Arboo
BV, and consults on an informal basis on current political, economic and financial trends with long-time contacts in his business network.
He earned a degree in finance and economics from the University of Antwerp.
Alexander Alexandrov, Director. Mr. Alexandrov,
age 39, is a Los-Angeles based director and cinematographer with a global clientele, including Lexus, Harley-Davidson, Ford, Land Rover
Toyota, DeLorean, Tiffany, Vogue, Nikon, Sony, Nike SB, Columbia, UniQlo, Marc Jacobs, Alexander McQueen, Smirnoff, Beats by Dre, Amazon,
Mercedes-Benz and many others. He has been self-employed as director and cinematographer since 2008.
Several of these clients have focused their campaigns
on esports events. Feature films in which Mr. Alexandrov was the director of photography have premiered at TIFF, Tribeca, SXSW and the
LA Film Festival. Alexander Alexandrov earned a Bachelor of Science degree in Math and Computer Science Magna Cum Laude in 2003 from Alcorn
State University. From 2003 through 2006, he developed a web IT system for Moveable Cubicle, which rented shipping containers and was
headquartered in Youngsville, (Raleigh) North Carolina. In November, 2006 Alex founded PeopleJar Inc. PeopleJar Inc. was a start-up software
and website development company.
During 2022, we paid Messrs. Welch, Madan, Alexandrov and Knopf $9,000
each, which consisted of cash compensation for their board service for the fourth quarter of 2022 and for the first quarter of 2023.
Director Independence
The rules of the Nasdaq
Stock Market, or the Nasdaq Rules, require a majority of a listed company’s board of directors to be composed of independent directors
within one year of listing. In addition, the Nasdaq Rules require that, subject to specified exceptions, each member of a listed company’s
audit, compensation and nominating and governance committees be independent. Under the Nasdaq Rules, a director will only qualify as an
independent director if, in the opinion of our board of directors, that person does not have a relationship that would interfere with
the exercise of independent judgment in carrying out the responsibilities of a director. The Nasdaq Rules also require that audit committee
members satisfy independence criteria set forth in Rule 10A-3 under the Securities Exchange Act of 1934, as amended, or the Exchange Act.
In order to be considered independent for purposes of Rule 10A-3, a member of an audit committee of a listed company may not, other than
in his or her capacity as a member of the audit committee, the board of directors, or any other board committee, accept, directly or indirectly,
any consulting, advisory, or other compensatory fee from the listed company or any of its subsidiaries or otherwise be an affiliated person
of the listed company or any of its subsidiaries. In considering the independence of compensation committee members, the Nasdaq Rules
require that our board of directors must consider additional factors relevant to the duties of a compensation committee member, including
the source of any compensation we pay to the director and any affiliations with the Company.
Our board of directors
undertook a review of the composition of our board of directors and its committees and the independence of each director. Based upon information
requested from and provided by each director concerning his background, employment and affiliations, including family relationships, our
board of directors has determined that each of our directors are independent as defined under the Nasdaq Rules.
Committees of the Board of Directors
Prior to the effectiveness
of the registration statement of which this prospectus forms a part, our board of directors will establish an audit committee, a compensation
committee and a nominating and governance committee. Each of these committees will operate under a charter that will be approved by our
board of directors, as set forth below.
Audit Committee. Our audit committee
consists of three independent members. The members of the audit committee are Mr. Madan, Mr. Welch and Mr. Verhaegen. Mr. Verhaegen is
the chairperson of the audit committee. The audit committee consists exclusively of directors who are financially literate.
The audit committee responsibilities
include:
| ● | Overseeing
the compensation and work of and performance by our independent auditor and any other registered public accounting firm performing audit,
review or attestation services for us; |
| ● | Engaging,
retaining and terminating our independent auditor and determining the terms thereof; |
| ● | Assessing
the qualifications, performance and independence of the independent auditor; |
| ● | Evaluating
whether the provision of permitted non-audit services is compatible with maintaining the auditor’s independence; |
| ● | Reviewing
and discussing the audit results, including any comments and recommendations of the independent auditor and the responses of management
to such recommendation; |
| ● | Reviewing
and discussing the annual and quarterly financial statements with management and the independent auditor; |
| ● | Producing
a committee report for inclusion in applicable SEC filings; |
| ● | Reviewing
the adequacy and effectiveness of internal controls and procedures; |
| |
● |
Establishing procedures regarding the receipt, retention and treatment of complaints received regarding the accounting, internal accounting controls or auditing matters and conducting or authorizing investigations into any matters within the scope of the responsibility of the audit; and |
| |
● |
Reviewing transactions with related persons for potential conflict of interest situations. |
Compensation Committee.
Our compensation committee consists of three independent directors. The members of the compensation committee are Mr. Knopf, Mr. Alexandrov
and Mr. Verhaegen. Mr. Alexandrov is the chairperson of the compensation committee. The committee has primary responsibility for:
| ● | Reviewing
and recommending all elements and amounts of compensation for each executive officer, including any performance goals applicable to those
executive officers; |
| ● | Reviewing
and recommending for approval the adoption, any amendment and termination of all cash and equity-based incentive compensation plans; |
| ● | Once
required by applicable law, causing to be prepared a committee report for inclusion in applicable SEC filings; |
| ● | Approving
any employment agreements, severance agreements or change of control agreements that are entered into with the CEO and certain executive
officers; and |
| ● | Reviewing
and recommending the level and form of non-employee director compensation and benefits. |
Nominating and
Governance Committee. The nominating and governance committee consists of three independent directors. The members of the nominating
and governance committee are Mr. Welch, Mr. Alexandrov and Mr. Knopf. Mr. Knopf is the chairperson of the nominating and governance committee.
The committee’s responsibilities include:
| ● | Recommending
persons for election as directors by the stockholders; |
| ● | Recommending
persons for appointment as directors to the extent necessary to fill any vacancies or newly-created directorships; |
| ● | Reviewing
annually the skills and characteristics required of directors and each incumbent director’s continued service on the board; |
| ● | Reviewing
any stockholder proposals and nominations for directors; |
| ● | Advising
the board of directors on the appropriate structure and operations of the board and its committees; |
| ● | Reviewing
and recommending standing board committee assignments; |
| ● | Developing
and recommending to the board Corporate Governance Guidelines, a Code of Business Conduct and Ethics and other corporate governance policies
and programs and reviewing such guidelines, code and any other policies and programs at least annually; |
| ● | Making
recommendations to the board as to the determination of director independence; and |
| ● | Making
recommendations to the board regarding corporate governance based upon developments, trends and best practices. |
The Nominating and Governance
Committee will consider stockholder recommendations for candidates for the board of directors.
Our bylaws provide that,
in order for a stockholder’s nomination of a candidate for the board to be properly brought before an annual meeting of the stockholders,
the stockholder’s nomination must be delivered to the Secretary of the Company no later than 120 days prior to the one-year anniversary
date of the prior year’s annual meeting.
Code of Business Conduct and Ethics
We have adopted a written code of business conduct and ethics that
applies to our directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions. A copy of the code of business conduct and ethics will be made available
on the Corporate Governance section of our website, which is located at www.mogoesports.com.
SECTION 16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange
Act of 1934, as amended, requires our directors and executive officers, and persons who own more than ten percent of a registered class
of our equity securities, to file with the Securities and Exchange Commission initial reports of ownership and reports of changes in ownership
of our Common Stock and other equity securities.
Based upon a review of the copies of such reports
furnished to us during fiscal year 2022 and written representations from our executive officers and directors, we believe that during
the 2022 fiscal year, the officers, directors and holders of more than 10% of our Common Stock complied with all Section 16(a)
filing requirements other than a late Form 4 filing for our CEO for the purchase of $456 worth of Common Stock by his wife on December
21, 2022, which she sold for $1,210 in January 2023. Our CEO’s wife has her own money and makes her own investment decisions without
consultation with her husband, as such, our CEO disclaims beneficial ownership of these shares.
Item 11. Executive Compensation.
We are a “smaller reporting company”
and the following compensation disclosure is intended to comply with the requirements applicable to smaller reporting companies.
During 2022, we paid our Chief Executive Officer
(“CEO”), Mr. Pross, and our Chief Financial Officer (“CFO”), Ms. Benson pro-rated salaries. The five-month salary
for Mr. Pross was $62,500 and the five-month salary for Ms. Benson was $25,000. There was no additional compensation paid to either Mr.
Pross or Ms. Benson. There was no compensation paid to Mr. Pross or Ms. Benson in 2021. There were no other Named Executive Officers of
the Company in 2022 or 2021.
Employment Agreements with our Named Executive
Officers
David Pross
On August 31, 2022, we entered into an executive
employment agreement with Mr. Pross for the position of Chief Executive Officer for a term of three years. Mr. Pross is entitled to receive
an annual base salary of $150,000 (which became effective as of August 1, 2022), subject to periodic increase as we may determine, and
is generally eligible to participate in employee benefit and bonus programs established by us from time to time that may be applicable
to our executives. If we terminate the executive employment agreement other than for “Cause”, then Mr. Pross is entitled to
receive his salary and bonuses for a period of one year following the termination without Cause, and any and all benefits for which he
is entitled for a period of one year following the date of the termination without Cause. Upon the establishment of an equity incentive
plan in the future, we intend to grant an equity award to Mr. Pross.
Kiki Benson
On August 31, 2022, we entered into an executive
employment agreement with Ms. Benson for the position of Chief Financial Officer for a term of three years. Ms. Benson is entitled to
receive an annual base salary of $60,000 (which became effective as of August 1, 2022), subject to periodic increase as we may determine,
and is generally eligible to participate in employee benefit and bonus programs established by us from time to time that may be applicable
to our executives. If we terminate the executive employment agreement other than for “Cause”, then Ms. Benson is entitled
to receive her salary and bonuses for a period of one year following the termination without Cause, and any and all benefits for which
she is entitled for a period of one year following the date of the termination without Cause. Upon the establishment of an equity incentive
plan in the future, we intend to grant an equity award to Ms. Benson.
Item 12. Security Ownership of Certain Beneficial
Owners
The following table sets forth information, as of April 13, 2023, or
as otherwise set forth below, with respect to the beneficial ownership of our common stock (i) all persons known to us to be the beneficial
owners of more than 5% of the outstanding shares of our common stock, (ii) each of our directors and our executive officers. As of April
13, 2023, we had 20,421,593 shares of common stock outstanding.
Unless otherwise stated, the mailbox address for
our executive officers and directors is in care of our company, Mobile Global Esports Inc., 500 Post Road East, Westport, Connecticut.
Except as otherwise indicated, and subject to applicable community property laws, except to the extent authority is shared by both spouses
under applicable law, the Company believes the persons named in the table have sole voting and investment power with respect to all shares
of common stock held by them.
| Name of Beneficial Owner | |
Shares
Beneficially
Owned | | |
Percent
Ownership | |
| Principal Stockholders: | |
| | |
| |
| Armistice Capital Master Fund, Ltd.** | |
| 1,886,793 | | |
| 9.2 | % |
| William Brown | |
| 1,025,000 | | |
| 5.0 | % |
| Sports Industry of India | |
| 2,650,000 | | |
| 13.0 | % |
| Directors and Named Executive Officers: | |
| | | |
| | |
| David Pross, CEO and Secretary | |
| 650,000 | | |
| 3.2 | % |
| Kiki Benson, CFO | |
| 100,000 | | |
| * | |
| Marco Welch, Chairman, Director | |
| 20,000 | | |
| * | |
| Jay Madan, Director | |
| 300,000 | | |
| 1.5 | % |
| James Knopf, Director | |
| 50,000 | | |
| * | |
| Willy Verhaegen, Director | |
| 140,000 | | |
| * | |
| Alexander Alexandrov, Director | |
| 20,000 | | |
| * | |
| | |
| | | |
| | |
| All directors and executive officers as a group (7 persons) | |
| 1,280,000 | | |
| 6.3 | % |
| * | Represents beneficial ownership of less than 1% of the shares of common stock outstanding |
| ** | Armistice Capital Master Fund, Ltd. (the “Master Fund”), is a Cayman Islands exempted
company, and may be deemed to be indirectly beneficially owned by Armistice Capital, LLC (“Armistice”), as the
investment manager of the Master Fund; and (ii) Steven Boyd, as the Managing Member of Armistice. Armistice and Steven Boyd disclaim
beneficial ownership of the reported securities except to the extent of their respective pecuniary interest therein. |
Equity Compensation Plan Information
We do not currently have an Equity Compensation
Plan established.
Item 13. Certain Relationships and Related
Transactions, and Director Independence
Related Person Transaction Policy and Procedures
The Board has adopted a written related person
transaction policy setting forth the policies and procedures for the review and approval or ratification of related person transactions.
This policy covers, with certain exceptions set forth in Item 404 of Regulation S-K, any transaction, arrangement or relationship, or
any series of similar transactions, arrangements or relationships, in which we were or are to be a participant, in which the amount involved
exceeds $120,000 in any fiscal year and a related person had, has or will have a direct or material interest, including without limitation,
purchases of goods and services by of from the related person or entities in which the related person has a material interest, indebtedness,
guarantees of indebtedness and employment by us of a related person. In reviewing and approving such transactions, our audit committee
is tasked to consider all relevant facts and circumstances, including, but not limited to, whether the transaction is on terms comparable
to those that could be obtained in an arm’s length transaction and the extent of the related person’s interest in the transaction.
Notwithstanding anything therein to the contrary, the policy is to be interpreted only in such a manner as to comply with Item 404 of
Regulation S-K.
Certain Related Party Transactions
Set forth below is information on each related party transaction since
the incorporation of the Company, and each currently proposed transaction, in which the amount involved exceeds 1% of the average of our
total assets at December 31, 2022 and 2021:
|
1. |
On June 1, 2021, in connection with the acquisition by MOGO of the
esports business conducted by Sports Industry of India, Inc. (“SII”), MOGO issued 2,650,000 shares of its common stock to
SII, in consideration for SII’s execution of the Founders Agreement discussed at length under “Material Agreements”
above, assigning certain rights to MOGO and essentially transferring the bulk of SII’s esports business to MOGO, subject to retention
by SII of certain esports rights and SII’s right to receive certain continuing fees and royalties from MOGO associated with the
esports business. This Agreement was supplemented with a series of Supplemental Agreements. (See “Material Agreements”) The
issuance of the shares was booked by MOGO as the sale of common stock at a purchase price of $0.0001per share. The terms of the transaction
were deemed fair and approved by the Board of Directors of both MOGO and SII.
MOGO also entered into a Services Agreement with Elite University Sports
Alliance of India Private Limited (“EUSAI”), a wholly-owned subsidiary of SII, dated December 15, 2021 (the “Services
Agreement”) pursuant to which MOGO engaged EUSAI to act as MOGO’s independent contractor to arrange, manage and implement
a series of esports tournaments in India, subject to MOGO’s control and approvals. (See “Material Agreements” for a
discussion of the terms of this Agreement.) The terms of the Services Agreement were deemed fair and approved by the Board of Directors
of both MOGO and EUSAI. |
| |
|
| |
SII currently owns 13.0% of the outstanding shares of MOGO. SII’s officers and directors are Richard Whelan (Director and CEO), Sunday Zeller (Director and Co-CEO), and Keith Fredriksen (Director). They thereby, as directors, control SII, although in the aggregate they do not own a controlling interest in SII (more than 50%). No shareholder of SII owns a controlling interest (more than 50%) in SII’s outstanding capital stock. |
| 2. |
In April through August of 2021, MOGO consummated a private placement
of its 11,509,800 shares of restricted common stock at a cash purchase price of $0.03 per share to a limited number of accredited and/or
sophisticated persons.
Marco A. Welch, the son of Marco Welch, the Chairman of the Board of
Directors, participated in this private placement and acquired 150,000 restricted shares of common stock for $4,500, at a price of $0.03
per share. Both father and son have represented they act separately with respect to their MOGO common share holdings, and have no agreement
to act or vote their shares in concert.
The following individuals who are either officers or directors of MOGO,
or who currently own more than 5% of its outstanding common stock, participated in the private placement and acquired restricted common
shares of MOGO as follows: |
Name
and Address of Beneficial Owner | |
Shares
Purchased
@
$0.03/Share | | |
Cash
Purchase
Price | |
David Pross, CEO and Secretary, 73 Blue Spruce Circle,
Weston, CT 06883 | |
| 200,000 | | |
$ | 6,000 | |
| | |
| | | |
| | |
| Jay Madan, Director, 1008 Andiron Lane, Raleigh, NC 27614 | |
| 250,000 | | |
$ | 7,500 | |
| | |
| | | |
| | |
| Aggregate Number of Shares as a Group | |
| 450,000 | | |
$ | 13,500 | |
During 2022, MOGO wired payments totaling $134,000 to SII’s operating
subsidiary in India, Elite Sports India Pvt. Ltd., to cover MOGO’s share of the expenses to organize and promote certain university
esports events in India conducted by MOGO with SII’s assistance under the provisions of the licensing and consulting agreements
between MOGO and SII. These expenses included social media coverage, prize pool, event host, judging, recording and staff expenses,
and represented expenditures in the ordinary course of business. As of December 31, 2022 and 2021, MOGO Pvt Ltd owed SII approximately
$18,000 and $30,000, respectively.
Director Independence
The rules of the NASDAQ Stock Market, or the
NASDAQ Rules, require a majority of a listed company’s board of directors to be composed of independent directors within one
year of listing. In addition, the NASDAQ Rules require that, subject to specified exceptions, each member of a listed
company’s audit, compensation and nominating and governance committees be independent. Under the NASDAQ Rules, a director will
only qualify as an independent director if, in the opinion of our board of directors, that person does not have a relationship that
would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. The NASDAQ Rules also
require that audit committee members satisfy independence criteria set forth in Rule 10A-3 under the Securities Exchange Act of
1934, as amended, or the Exchange Act. In order to be considered independent for purposes of Rule 10A-3, a member of an audit
committee of a listed company may not, other than in his or her capacity as a member of the audit committee, the board of directors,
or any other board committee, accept, directly or indirectly, any consulting, advisory, or other compensatory fee from the listed
company or any of its subsidiaries or otherwise be an affiliated person of the listed company or any of its subsidiaries. In
considering the independence of compensation committee members, the NASDAQ Rules require that our board of directors must
consider additional factors relevant to the duties of a compensation committee member, including the source of any compensation we
pay to the director and any affiliations with the Company.
Our board of directors undertook a review of the composition of our board of directors and its committees and the independence of each
director. Based upon information requested from and provided by each director concerning his background, employment and affiliations,
including family relationships, our board of directors has determined that each of our directors are independent as defined under the
NASDAQ Rules.
Item 14. Principal Accountant Fees and Services
The Company paid its auditor, Mercurius &
Associates LLP (formerly “AJSH & Co LLP”) aggregate fees including expenses of $146,635 in 2022. There were no fees or
expenses paid to Mercurius & Associates LLP in 2021. The fees paid were for professional services rendered for the audit and reviews
of the consolidated financial statements of the Company, professional services rendered for the issuance of consents and review of documents
filed with the Securities and Exchange Commission (“SEC”).
The Audit Committee has adopted procedures for
pre-approving all audit and non-audit services provided by the independent registered public accounting firm, including the fees and terms
of such services. There procedures include reviewing detailed back-up documentation for audit and permitted non-audit services. The documentation
includes a description of, and a budgeted amount for, particular categories of non-audit services that are recurring in nature and therefore
anticipated at the time that the budget is submitted. Audit Committee approval is required to exceed the pre-approved amount for a particular
category of non-audit services and to engage the independent registered public accounting firm for any non-audit services not included
in those pre-approved amounts. For both types of pre-approval, the Audit Committee considers whether such services are consistent with
the rules on auditor independence promulgated by the SEC and the Public Company Accounting Oversight Board (“PCAOB”). The
Audit Committee also considers whether the independent registered public accounting firm is best positioned to provide the most effective
and efficient service, based on such reasons as the auditor’s familiarity with our business, people, culture, accounting systems,
risk profile, and whether the services enhance our ability to manage or control risks, and improve audit quality. The Audit Committee
may form and delegate pre-approval authority to subcommittees consisting of one or more members of the Audit Committee, and such subcommittees
must report any pre-approval decisions to the Audit Committee at its next scheduled meeting. All of the services provided by the independent
registered public accounting firm were pre-approved by the Audit Committee.
The accompanying footnotes
are an integral part of these consolidated financial statements.
The accompanying footnotes are an integral part of these consolidated
financial statements.
The accompanying footnotes are an integral part
of these consolidated financial statements.
The accompanying footnotes are an integral part
of these consolidated financial statements.
Mobile Global Esports Inc. (“MOGO Inc”)
was incorporated on March 11, 2021 under the laws of the State of Delaware. The Company was originally named Elite Esports, Inc. but changed
its name to Mobile Global Esports Inc. on April 21, 2021. MOGO Inc has been assigned certain limited rights to commercialize university
esports events for 92 universities in India. The unique advantage of esports is that the events can be virtual, and virtual events bypass
any Covid-19 restrictions on in-person events.
During July 2022, MOGO Esports Private Limited
(“MOGO Pvt Ltd”) was established and incorporated in India by certain shareholders of MOGO Inc. During November 2022, MOGO
Inc acquired approximately 99% of MOGO Pvt Ltd. Prior to October 2022, MOGO Pvt Ltd had limited activity. During October 2022, MOGO Pvt
Ltd increased its activity and began operating for the benefit of the Company. The Company determined that MOGO Pvt Ltd was a variable
interest entity and it was the primary beneficiary of MOGO Pvt Ltd prior to acquiring 99% of MOGO Pvt Ltd in November 2022. Therefore,
the Company has included the results of MOGO Pvt Ltd in its consolidated financial statements from July 13, 2022 (inception of MOGO Pvt
Ltd) through December 31, 2022. MOGO Pvt Ltd comprised approximately 1.4% of the Company’s total assets as of December 31, 2022
and 4.2% of the Company’s net loss for the year ended December 31, 2022.
The accompanying consolidated financial statements
were prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The
consolidated financial statements include the accounts of MOGO Inc and MOGO Pvt Ltd (collectively, the “Company”). MOGO Inc
owns a 99% controlling interest in MOGO Pvt Ltd. The value of the non-controlling interest in MOGO Pvt Ltd is immaterial.
The functional currency of MOGO Pvt Ltd is the
Indian Rupee (“INR”). The assets and liabilities of MOGO Pvt Ltd are translated to United States Dollars (“USD”)
at period end exchange rates, while statements of operations accounts are translated at the average exchange rate during the period. The
effects of foreign currency translation adjustments are included in other comprehensive loss, which is a component of accumulated other
comprehensive loss in stockholders’ equity. All significant intercompany accounts and transactions have been eliminated in consolidation.
The Company’s business
could be adversely impacted by the effects of the Coronavirus (COVID-19) and/or similar pandemics. In addition to global macroeconomic
effects, the COVID-19 outbreak and/or similar outbreaks or other adverse public health developments could cause disruption to our operations.
COVID-19 or other disease outbreaks could in the short-run and may over the longer term adversely affect the economies and financial markets
of many countries, resulting in an economic downturn that could impact the Company’s operating results. Although the magnitude of
the impact of the COVID-19 outbreak on the Company’s business and operations remains uncertain, the continued spread of COVID-19
or the occurrence of other epidemics and the imposition of related public health measures and travel and business restrictions could adversely
impact the Company’s business, financial condition, operating results and cash flows. In addition, the Company could experience
disruptions to its business operations resulting from quarantines, self-isolations, or other movement and restrictions on the ability
of its employees to perform their jobs that may impact the Company’s ability to develop and grow its business.
The preparation of consolidated financial statements
in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues
and expenses during the reporting period. The Company regularly evaluates estimates and assumptions. The Company bases its estimates and
assumptions on current facts, historical experience and various other factors that 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 and the accrual of costs
and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and
adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results,
future results of operations will be affected. Significant estimates in the accompanying consolidated financial statements include the
valuation allowance on deferred tax assets and the estimated value of warrants issued for services.
For the purpose of the statement of cash flows,
cash equivalents include time deposits, certificate of deposits, amounts held in escrow and all highly-liquid debt instruments with original
maturities of three months or less. As December 31, 2022 and 2021, the Company did not have any cash equivalents.
As of December 31, 2022, the Company has $20,000 of the funds received
from the initial public offering held in an escrow account, which is included in Restricted Cash on the consolidated balance sheet.
Property and equipment, net, is stated at cost.
Depreciation is computed over the estimated useful lives of the assets, generally three to five years, using the straight-line method.
Expenditures for maintenance and repairs are charged to operations; major expenditures for renewals and betterments are capitalized and
depreciated over their useful lives. Leasehold improvements are amortized over the lesser of the asset life or the life of the lease.
The Company leases office space in India under
non-cancelable lease arrangements through MOGO Pvt Ltd. The Company applies the accounting guidance in Accounting Standards Codification
(“ASC”) 842, Leases. As such, the Company assesses all arrangements, that convey the right to control the use of property
and equipment, at inception, to determine if it is, or contains, a lease based on the unique facts and circumstances present in that arrangement.
For those leases identified, the Company determines the lease classification, recognition, and measurement at the lease commencement date.
Fixed lease payments on operating leases are recognized
over the expected term of the lease on a straight-line basis. Variable lease expenses that are not considered fixed are expensed as incurred.
Fixed and variable lease expense on operating leases is recognized within operating expenses within the accompanying consolidated statements
of operations and comprehensive loss.
The interest rate implicit in the Company’s
lease contracts is typically not readily determinable and as such, the Company uses its incremental borrowing rate based on the information
available at the lease commencement date, which represents an internally developed rate that would be incurred to borrow, on a collateralized
basis, over a similar term, an amount equal to the lease payments in a similar economic environment.
The Company reviews long-lived assets for realizability
on an ongoing basis. Changes in depreciation and amortization, generally accelerated depreciation and variable amortization, are determined
and recorded when estimates of the remaining useful lives or residual values of long-term assets change. The Company also reviews for
impairment when conditions exist that indicate the carrying amount of the assets may not be fully recoverable. In those circumstances,
the Company performs undiscounted operating cash flow analyses to determine if an impairment exists. When testing for asset impairment,
the Company groups assets and liabilities at the lowest level for which cash flows are separately identifiable. Any impairment loss is
calculated as the excess of the asset’s carrying value over its estimated fair value. Fair value is estimated based on the discounted
cash flows for the asset group over the remaining useful life or based on the expected cash proceeds for the asset less costs of disposal.
Any impairment losses would be recorded in the consolidated statements of operations. To date, no such impairments have occurred.
For certain of the Company’s financial instruments,
including cash, accounts payable and accrued expenses, related party payable, and notes payable, the carrying amounts approximate their
fair values due to their short maturities.
The Company analyzes all financial instruments
with features of both liabilities and equity under ASC Topic 480, Distinguishing Liabilities from Equity, and ASC Topic 815, Derivatives
and Hedging. The Company has determined that the warrants issued to date are freestanding financial instruments that are properly
classified as equity.
As of December 31, 2022 and December 31, 2021,
the Company did not identify any assets or liabilities required to be presented on the balance sheet at fair value.
Financial instruments, which potentially subject
the Company to concentrations of credit risk, consist of cash and cash equivalents and restricted cash. The Company places its cash with
high quality financial institutions and at times may exceed the Federal Deposit Insurance Corporation $250,000 insurance limit. The Company
has not and does not anticipate incurring any losses related to this credit risk.
Under ASC 740, a tax position is recognized as
a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination
being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized
on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. The Company has
no material uncertain tax positions for any of the reporting periods presented.
The Company has one reportable segment, which
is the development of esports. As of December 31, 2022, 98.6% of the Company’s consolidated total assets are located within the
United States of America.
In December 2019, the Financial Accounting Standards
Board (“FASB”) issued ASU 2019-12, Simplifying the Accounting for Income Taxes which amends ASC 740 Income Taxes
(ASC 740). This update is intended to simplify accounting for income taxes by removing certain exceptions to the general principles
in ASC 740 and amending existing guidance to improve consistent application of ASC 740. This update is effective for fiscal years beginning
after December 15, 2021. The guidance in this update has various elements, some of which are applied on a prospective basis and others
on a retrospective basis with earlier application permitted. The Company adopted this standard as of January 1, 2022 and the adoption
did not have a material effect on the Company’s financial statements and related disclosures.
Certain 2021 balances have been reclassified to
conform to the 2022 presentation. These reclassifications had no impact on the total consolidated net assets of the Company.
Other current assets consist of $480,000 paid
to a party as advance payment for potential future services. No services had been provided by the party as of December 31, 2022, and the
amounts paid are refundable if services are not performed on our behalf in the future.
Deferred offering costs are amounts incurred that are directly related
to the offering of the Company’s common stock and approximated $63,000 as of December 31, 2021. Upon the consummation of the Company’s
initial public offering in July 2022, these costs and additional costs of approximately $53,000 were offset against the proceeds from
the Company’s equity offering and included as part of the total IPO stock issuance costs of approximately $1,435,000.
Depreciation expense was $35 for the year ended
December 31, 2022.
As of December 31, 2022, the Company paid funds
to a supplier for the development of a software platform, which is still under development and has not been placed in service.
The Company has office leases in India that are
classified as operating leases. These leases commenced in October 2022 and have a term of three years. The Company used its expected incremental
borrowing rate of 10.0% in determining the value of the right-of-use asset and lease liability associated with these leases. The cash
paid for operating leases for the year ended December 31, 2022 approximated $3,600 and the operating lease cost recorded in the Consolidated
Statements of Operations and Comprehensive Loss approximated $5,000. The weighted average remaining lease term for the operating leases
was 2.8 years and the weighted average discount rate was 10.0%.
The maturities of the operating lease liabilities
as of December 31, 2022 are as follows:
Included in related party payable at December
31, 2022 and in accounts payable and accrued expenses at December 31, 2021 is $17,763 and $30,000, respectively, due to Sports Industry
of India, Inc., a stockholder of the Company.
During the year ended December 31, 2022, the Company
paid its Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) compensation totaling $87,500. The
CEO and CFO are shareholders of the Company.
During the year ended December 31, 2022, the Company
paid its Board of Directors a total of $18,000 for their board stipend for services provided in the fourth quarter of 2022 and an advance
of $18,000 for their board stipend for services to be performed in the first quarter of 2023. The payment for the first quarter of 2023
is included in prepaid expenses and other assets as of December 31, 2022.
During July 2022, the Company entered into an
agreement with a financing institution for payment of certain of the Company’s insurance policies. The financing agreement is payable
over a twelve-month period ending June 2023 with monthly payments of principal and interest totaling $15,848 per month. As of December
31, 2022, approximately $92,000 of principal is outstanding under this agreement, and the same amount is included in prepaid expenses.
The Company has authorized the issuance of 10,000,000
shares of $0.0001 par value preferred stock. At December 31, 2022 and December 31, 2021, there were nil shares issued and outstanding.
The Company has authorized the issuance of 100,000,000
shares of $0.0001 par value common stock. At December 31, 2022 and December 31, 2021, there were 20,421,593 and 16,809,800 shares issued
and outstanding.
During the period from March 11, 2021 (Inception)
to December 31, 2021, the Company had the following transactions in its common stock:
During the year ended December 31, 2022, the Company
had the following transactions in its common stock:
The 1,886,793 PIPE Warrants have an exercise price
of $2.90 per share, expire 5 years from the date of issuance, and are fully exercisable upon issuance. The estimated fair value of the
PIPE Warrants approximated $2,093,000. Additionally, 339,623 warrants (“Placement Agent Warrants”) were issued to the placement
agent as a part of their fee. The Placement Agent warrants have an exercise price of $2.915 per share, expire 5 years from the date of
issuance, and are fully exercisable upon issuance. The estimated fair value of the Placement Agent Warrants approximated $516,000. The
Placement Agent Warrants are recorded as stock issuance costs but the net impact to the Company’s equity from the issuance of these
warrants is nil since these warrants are classified as equity.
The IPO Warrants, PIPE Warrants and Placement
Agent Warrants also include certain anti-dilution adjustments and potential adjustments upon the occurrence of certain change of control
transactions.
In October 2021, the Company issued an aggregate
of 1,000,000 warrants (“Consultant Warrants”) to three individuals (“Consultants”) that are advising the Company
on developing, establishing, operating, commercializing, marketing, promoting, and expanding the Company’s esports business with
an aim to commercialize esports tournaments, esports sponsorships, esports advertising revenues, esports merchandise revenues, esports
broadcast revenues, esports video revenues, esports game development and marketing and distribution revenues, and all other manner of
esports revenue streams for the benefit of the Company. The Consultant Warrants have an exercise price of $1.00 share and expire in five
years with 250,000 of these warrants vested immediately and the balance of 750,000 warrants having provisions making the vesting contingent
on the Consultants’ performance in meeting goals and milestones set quarterly by the Company. Specifically, the Company will consult
with the Consultants and reach agreement on the Consultants’ goals and milestones at the beginning of each calendar quarter. Out
of the 750,000 unvested warrants, 62,500 warrants vest at the end of each quarter, beginning with the quarter ended March 31, 2022, provided
in the Company’s judgement the Consultants have made satisfactory progress over the course of the quarter in meeting set goals and
milestones. 62,500 of these warrants vested on March 31, 2022, 62,500 warrants vested on June 30, 2022, 62,500 of these warrants vested
on September 30, 2022 and 62,500 of these warrants vested on December 31, 2022. Consultant Warrants not vested on their designated end
of quarter vesting date expire.
The fair value of the Consultant Warrants is being
amortized to expense over the vesting period. The Company recorded an expense of approximately $186,000 for the year ended December 31,
2022 and for the period from March 11, 2021 (Inception) to December 31, 2021. At December 31, 2022, the unamortized warrant expense was
approximately $372,000, which will be amortized into expense through December 2024.
The exercise price for all warrants outstanding
and exercisable at December 31, 2022 :
The Company utilized the Black-Scholes option-pricing
model to value the warrants issued.
The following table summarizes the assumptions
used for estimating the fair value of the IPO Warrants issued in 2022:
The following table summarizes the assumptions
used for estimating the fair value of the PIPE Warrants and Placement Agent Warrants issued in 2022 and the Consultant Warrants issued
in 2021:
Deferred income taxes are provided based on the
provisions of ASC Topic 740, “Accounting for Income Taxes”, to reflect the tax consequences in future years of differences
between the tax basis of assets and liabilities and their financial reporting amounts based on enacted tax laws and statutory tax rates
applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary
to reduce deferred tax assets to the amount expected to be realized.
Income taxes computed at the statutory federal income tax rate of 21%
are reconciled to the provision for income taxes as follows:
The Company periodically evaluates the likelihood of the realization
of deferred tax assets, and adjusts the carrying amount of the deferred tax assets by the valuation allowance to the extent the future
realization of the deferred tax assets is not judged to be more likely than not. The Company considers many factors when assessing the
likelihood of future realization of its deferred tax assets, including its recent cumulative earnings experience by taxing jurisdiction,
expectations of future taxable income or loss, the carryforward periods available to the Company for tax reporting purposes, and other
relevant factors.
At December 31, 2022 and 2021, the Company has provided a full valuation
allowance against its net deferred assets in the United States (“U.S.”) and India tax jurisdictions, since realization of
these benefits is not more likely than not. The valuation allowance increased approximately $270,600 from the prior year. At December
31, 2022, the Company had U.S. federal net operating loss carryforwards of approximately $1,175,000, which will carry forward indefinitely.
At December 31, 2022, the Company had U.S. state net operating loss carryforwards of approximately $1,175,000, which will begin to expire
in 2041.
The Company had no unrecognized tax benefits as of December 31, 2022
and 2021. The Company does not anticipate a significant change in total unrecognized tax benefits within the next 12 months. Tax year
2021 remains open to examination by the major taxing jurisdictions to which the Company is subject.
From time to time, the Company may be involved
in various litigation matters, which arise in the ordinary course of business. There is currently no litigation that management
believes will have a material impact on the financial position of the Company.
The Company entered into a commitment with a supplier
for the development of an Esports Platform for total cost of $1,200,000. As of December 31, 2022, the Company had paid the supplier $1,025,000,
with the remaining $175,000 due periodically until the expected completion date in 2023. As of December 31, 2022, the supplier had not
completed the work on the software and the payments have been recorded as advance to supplier.
General and administrative costs are expensed
as incurred and primarily include personnel costs in the U.S. and India, public filing fees, advertising expense, contractor fees, and
professional fees. The Company expenses advertising costs as incurred. Advertising expense was approximately $49,000 for the year ended
December 31, 2022.
Basic net loss per common share is computed by
dividing net loss attributable to common stockholders by the weighted-average number of common shares outstanding during the periods.
Fully diluted net loss per common share is computed using the weighted-average number of common and dilutive common equivalent shares
outstanding during the periods. Common equivalent shares consist of warrants that are computed using the treasury stock method.
At December 31, 2022 and December 31, 2021, there were 3,398,916 and
1,000,000 warrants outstanding. Due to the net loss incurred potentially dilutive instruments would be anti-dilutive. Accordingly, diluted
net loss per share is the same as basic net loss per share for all periods presented.