The accompanying notes are an integral part of these consolidated financial statements
The
accompanying notes are an integral part of these consolidated financial statements
The accompanying notes are an integral part of these consolidated financial statements
EMPIRE GLOBAL GAMING, INC.
Notes to Consolidated Financial Statements (Unaudited)
NOTE 1 – ORGANIZATION
Empire Global Gaming, Inc. (“EGG”)
was incorporated in the State of Nevada on May 11, 2010 in order to actively engage in the gaming and collectible industries. The Company
develops a wide variety of public and casino grade gaming products and currently has the rights to a portfolio of over 28 patented casino
games.
On March 3, 2021 the Company created two new subsidiaries,
Empire Mobile Apps, Inc. and Empire IP, Inc (collectively with EGG, the “Company”).
Empire IP, Inc. currently maintains, enhances
and develops the Company’s portfolio of intellectual property.
Empire Mobile Apps, Inc., digitizes and markets
games for mobile and online use. The company proprietary game, Blackjack Plus, is currently available on the Apple App Store since 2021.
Empire Mobile Apps, Inc. recently acquired a blockchain based company that develops Non-Fungible Tokens and blockchain based games (see
Note 5 – Acquisition of HTech11).
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
BASIS OF PRESENTATION
The accompanying unaudited consolidated financial
statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim
financial information and with Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required
by accounting principles generally accepted in the United States of America for annual financial statements. In the opinion of management,
all adjustments, consisting of normal recurring accruals considered necessary for a fair presentation, have been included, operating results
for the three and nine months ended September 30, 2022 are not necessarily indicative of the results that may be expected for the year
ending December 31, 2022 or any other period. For further information, refer to the financial statements and footnotes thereto, included
in the Company’s Annual Report on Form 10-K for the year ending December 31, 2021, filed with the SEC on April 15, 2022.
USE OF ESTIMATES
The preparation of financial statements in conformity
with accounting principles generally accepted in the United States requires management to make estimates and assumptions which affect
the reporting of assets and liabilities as of the dates of the financial statements and revenues and expenses during the reporting period.
These estimates primarily relate to the sales recognition, allowance for doubtful accounts, inventory obsolescence and asset valuations.
Actual results could differ from these estimates. Management’s estimates and assumptions are reviewed periodically, and the effects
of revisions are reflected in the unaudited consolidated financial statements in the periods they are determined to be necessary.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Generally Accepted Accounting Principles (“GAAP”)
requires certain disclosures regarding the fair value of financial instruments. The fair value of financial instruments is made as of
a specific point in time, based on relevant information about financial markets and specific financial instruments. As these estimates
are subjective in nature, involving uncertainties and matters of significant judgment, they cannot be determined with precision. Changes
in assumptions can significantly affect estimated fair values.
GAAP defines fair value as the price that would
be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement
date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the
Company considers the principal, or most advantageous market in which it would transact, and it considers assumptions that market participants
would use when pricing the asset or liability.
EMPIRE GLOBAL GAMING, INC.
Notes to Consolidated Financial Statements (Unaudited)
GAAP establishes a fair value hierarchy that requires
an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial
instrument’s categorization within the fair value hierarchy is based upon the degree of subjectivity that is necessary to estimate the
fair value of a financial instrument. GAAP establishes three levels of inputs that may be used to measure fair value:
Level 1 – Level 1 applies to assets or liabilities
for which there are quoted prices in active markets for identical assets or liabilities.
Level 2 – Level 2 applies to assets or liabilities
for which there are inputs other than quoted prices included within Level 1 that are observable for the asset or liability such as quoted
prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient
volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can
be derived principally from, or corroborated by, observable market data.
Level 3 – Level 3 applies to assets or liabilities
for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the
assets or liabilities.
The estimated fair value of certain financial
instruments, including cash, accrued expenses, notes payable and convertible notes payable are carried at historical cost basis, which
approximates fair values because of the short-term maturing of these instruments. We have no financial assets or liabilities measured
at fair value on a recurring basis.
NEW ACCOUNTING PRONOUNCEMENTS
In August 2020, the Financial Accounting Standards
Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Debt—Debt with Conversion and Other
Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40). This ASU simplifies
the accounting for convertible instruments by reducing the number of accounting models for convertible debt instruments and convertible
preferred stock. This will result in more convertible debt instruments being accounted for as a single liability instrument and more convertible
preferred stock being accounted for as a single equity instrument with no separate accounting for embedded conversion features. The ASU
also simplifies the diluted earnings per share calculation in certain areas. The Company adopted this standard on January 1, 2022. There
has been no effect on the consolidated financial statements as a result.
From time to time new accounting pronouncements
are issued by the Financial Accounting Standards Board or other standard setting bodies that may have an impact on the Company’s
accounting and reporting. The Company believes that such recently issued accounting pronouncements and other authoritative guidance for
which the effective date is in the future will not have an impact on its accounting or reporting or that such impact will not be material
to its financial position, results of operations and cash flows when implemented.
CASH
The Company considers highly liquid investments
with original maturities of three months or less when purchased as cash equivalents. The Company had no cash equivalents as of September
30, 2022 and December 31, 2021. At times throughout the year, the Company might maintain bank balances that may exceed Federal Deposit
Insurance Corporation insured limits. Periodically, the Company evaluates the credit worthiness of the financial institutions, and has
not experienced any losses in such accounts. At September 30, 2022 and December 31, 2021, the Company had $0 over the insurable limit.
EMPIRE GLOBAL GAMING, INC.
Notes to Consolidated Financial Statements (Unaudited)
CONVERTIBLE INSTRUMENTS
The Company evaluates and accounts for conversion
options embedded in its convertible instruments in accordance with professional standards for FASB Accounting Standards Codification (“ASC”)
815, Derivatives and Hedging (“ASC 815”).
Professional standards generally provide three
criteria that, if met, require companies to bifurcate conversion options from their host instruments and account for them as free standing
derivative financial instruments. These three criteria include circumstances in which (a) the economic characteristics and risks of the
embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b)
the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under
otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a
separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. Professional
standards also provide an exception to this rule when the host instrument is deemed to be conventional as defined under professional standards
as “The Meaning of Conventional Convertible Debt Instrument”.
The Company accounts for convertible instruments
(when it has determined that the embedded conversion options should not be bifurcated from their host instruments) in accordance with
professional standards when “Accounting for Convertible Securities with Beneficial Conversion Features,” as those professional
standards pertain to “Certain Convertible Instruments.” Accordingly, the Company records, when necessary, discounts to convertible
notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of
the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt
discounts under these arrangements are amortized over the term of the related debt to their earliest date of redemption. The Company also
records when necessary deemed dividends for the intrinsic value of conversion options embedded in preferred shares based upon the differences
between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price
embedded in the note.
ASC 815 provides that, among other things, generally,
if an event is not within the entity’s control could or require net cash settlement, then the contract shall be classified as an
asset or a liability.
INCOME TAXES
The Company is deemed a corporation and thus is
a taxable entity. No provision for income taxes was reflected in the accompanying unaudited consolidated financial statements, as the
Company did not have income through September 30, 2022. There were no uncertain tax positions that would require recognition in the unaudited
consolidated financial statements through September 30, 2022.
Generally, federal, state and local authorities
may examine the Company’s tax returns for three years from the date of filing, and the current and prior three years remain subject
to examination as of December 31, 2021.
The Company’s conclusions regarding uncertain
tax positions may be subject to review and adjustment at a later date based upon ongoing analyses of tax laws, regulations and interpretations
thereof as well as other factors.
EMPIRE GLOBAL GAMING, INC.
Notes to Consolidated Financial Statements (Unaudited)
The Company accounts for income taxes under ASC
740-10-30, Income Taxes. Deferred income tax assets and liabilities are determined based upon differences between the financial
reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is
more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected
to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred
tax assets and liabilities of a change in tax rates is recognized in the statements of operations in the period that includes the enactment
date.
INTANGIBLE ASSETS
The Company’s intangible assets represent
definite lived intangible assets, which will be amortized on a straight- line basis over their estimated useful life of three years. The
Company periodically evaluates the remaining useful lives of its finite-lived intangible assets to determine whether events and circumstances
warrant a revision to the remaining period of amortization.
REVENUE RECOGNITION
The Company recognizes revenue under ASC 606,
Revenue from Contracts with Customers (“ASC 606”). The core principle of this standard is that a company should recognize
revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company
expects to be entitled in exchange for those goods or services.
ASC 606 prescribes a five step process to achieve
its core principle. The Company recognizes revenue from product sales as follows:
| I. | Identify the contract with the customer. |
| II. | Identify the contractual performance obligations. |
| III. | Determine the amount of consideration/price for the transaction. |
| IV. | Allocate the determined amount of consideration/price to the
contractual obligations. |
| V. | Recognize revenue when or as the performing party satisfies
performance obligations. |
The consideration/price for the transaction (performance
obligation(s)) is determined as per the invoice for the products.
The Company derives its revenue from sale of gaming
products and from fees earned for the use of its online lottery number selecting application. The Company recognizes revenue from product
sales only when there is persuasive evidence of an arrangement, delivery has occurred, the sale price is determinable and collectability
is reasonably assured and from fees as paid for in an online transaction.
STOCK BASED COMPENSATION
The Company follows FASB ASC 718, Compensation
– Stock Compensation, which prescribes accounting and reporting standards for all share-based payment transactions. Transactions
include incurring liabilities, or issuing or offering to issue shares, options, and other equity instruments such as employee stock ownership
plans and stock appreciation rights. Share-based payments to employees and non-employees, including grants of employee stock options,
are recognized as compensation expense in the unaudited consolidated financial statements based on their fair values. That expense is
recognized over the period during which an employee or non-employee is required to provide services in exchange for the award, known as
the requisite service period (usually the vesting period).
For the three and nine months ended September
30, 2022 and 2021, the Company had no stock based compensation.
EMPIRE GLOBAL GAMING, INC.
Notes to Consolidated Financial Statements (Unaudited)
NOTE 3 – GOING CONCERN
The Company’s unaudited consolidated financial
statements have been prepared using generally accepted accounting principles in the United States of America applicable to a going concern
which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has incurred
net losses of $284,525 during the nine months ended September 30, 2022. Cash on hand will not be sufficient to cover debt repayments,
operating expenses and capital expenditure requirements for at least twelve months from the unaudited balance sheet date. As of September
30, 2022, the Company had an accumulated deficit of $1,689,587 and a working capital deficit of $437,694. These factors among others raise
substantial doubt about the Company’s ability to continue as a going concern for a reasonable period of time. The accompanying financial
statements do not include any adjustments that might result from the outcome of this uncertainty. In order to continue as a going concern,
the Company will need, among other things, additional capital resources. Management’s plan is to seek equity and/or debt financing.
However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans.
There are no assurances that the Company will
be able to either (1) achieve a level of revenues adequate to generate sufficient cash flow from operations; or (2) obtain additional
financing through either private placements, public offerings and/or bank financing necessary to support the Company’s working capital
requirements. To the extent that funds generated from operations, any private placements, public offerings and/or bank financing are insufficient,
the Company will have to raise additional working capital. No assurance can be given that additional financing will be available, or if
available, will be on terms acceptable to the Company.
The ability of the Company to continue as a going
concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure
other sources of financing and attain profitable operations. The accompanying consolidated financial statements do not include any adjustments
that might be necessary if the Company is unable to continue as a going concern.
NOTE 4 – LOSS PER SHARE
The Company utilizes the guidance per ASC 260,
Earnings Per Share. Basic earnings per share is calculated on the weighted effect of all common shares issued and outstanding,
and is calculated by dividing net income available to common stockholders by the weighted average shares outstanding during the period.
Diluted earnings per share, which is calculated by dividing net income available to common stockholders by the weighted average number
of common shares used in the basic earnings per share calculation, plus the number of common shares that would be issued assuming conversion
of all potentially dilutive securities outstanding, is not presented separately as of September 30, 2022 as it is anti-dilutive. Such
securities, shown below, presented on a common share equivalent basis and outstanding as of periods ended September 30, 2022 and 2021
have been excluded from the per share computations:
| | |
September 30, | |
| | |
2022 | | |
2021 | |
| Convertible notes payable | |
| 193,235,190 | | |
| 162,706,400 | |
| | |
| | | |
| | |
| Total diluted shares | |
| 193,235,190 | | |
| 162,706,400 | |
NOTE 5 – ACQUISTION OF HTECH11, INC.
On February 15, 2022 Empire Mobile Apps (“EMA”)
entered into a merger agreement with HTech11, Inc. (“HTech”) whereby EMA will receive 100% of the common stock of HTech in
exchange for 1,000,000 shares of EMA’s Series A Preferred Stock. Both EMA and HTech have limited activities before the merger. Subsequent
to the merger, the Series A shareholders have the right to require EMA be spun out of the Company into its own public company. Upon a
spinout, the Company will retain 10% of the equity to be distributed to shareholders. Each share of Series A Preferred Stock (i) pays
no dividends, but should EMA decide to pay dividends, the holders of the Series A Preferred Stock shall first receive dividends before
all other classes of capital, (ii) is convertible into one share of the EMA’s common stock, (iii) has a liquidation preference of
$0.01 per share plus accrued and unpaid dividends, (iv) may be redeemed by EMA only if a Deemed Liquidation Event occurs for $0.01 per
share plus accrued and unpaid dividends, and (v) is equal to one common share of voting rights.
EMPIRE GLOBAL GAMING, INC.
Notes to Consolidated Financial Statements (Unaudited)
NOTE 6 – ASSETS HELD FOR SALE
In January 2021, the Company invested $30,000
to develop a mobile gaming application Blackjack Plus, which is currently available on the Apple iStore. During the nine months ended
September 30, 2022, the Company initiated the sale of the Blackjack Plus application to its former CEO for a $30,000 reduction in his
note, along with an agreement to license and market the application. The Company is currently in the process of finalizing the transaction.
Before the Blackjack Plus application was sold
to the Company’s former CEO, it was exclusively owned by the Company and the Company recorded this as an intangible asset and has
determined a useful life of three years for this asset. As of September 30, 2022, the Company reclassified this Blackjack Plus application
from intangible assets and recorded it as assets held for sale on the accompanying unaudited consolidated balance sheet.
NOTE 7 – CONVERTIBLE NOTES
On December 1, 2018, the Company issued a grid
note payable to a third party for $13,500 which was used for audit and legal fees. The note bears interest at 10% per annum and is due
on December 31, 2019. This note was extended to December 31, 2020. Through December 31, 2020, the Company borrowed an additional $102,255
relating to this note payable. On November 20, 2020 the Company received a forbearance letter amending the terms of the grid promissory
note by adding a conversion feature to the note, thereby making the note a convertible note. The amended note is due on December 31, 2022,
bearing interest at 10% per annum. The holder has the option to lend additional amounts to the borrower from time to time in the future,
on the terms set forth in this agreement. From December 1, 2018 to September 30, 2022 the Company borrowed a total of $180,755 under this note
payable. This grid promissory note contains a provision for conversion at the holder’s option of any outstanding principal balance including
accrued interest, into the Company’s common stock at a conversion price equal to par value, $0.001 per share. The Company analyzed if
the changes to this note were considered a modification or an extinguishment of debt, and determined it was an extinguishment of debt.
The Company recognized there was a beneficial conversion feature associated with this note and recorded a debt discount of $180,755 and
$115,755 as of September 30, 2022 and December 31, 2021, respectively. As of September 30, 2022 and December 31, 2021, unamortized debt
discount for this note was $26,167 and $35,784, respectively, and for the nine months ended September 30, 2022 and 2021, amortization
of the debt discount associated with this note was $60,617 and $38,326, respectively.
On March 24, 2021 the note holder converted $12,500
of principal from their convertible note into 12,500,000 shares of common stock at a rate of $0.001 per share in accordance with the terms
of the convertible note. On December 13, 2021 the note holder converted $14,000 of principal from their convertible note into 14,000,000
shares of common stock at a rate of $0.001 per share in accordance with the terms of the convertible note. On March 14, 2022 the note
holder converted $14,000 of principal from their convertible note into 14,000,000 shares of common stock at a rate of $0.001 per share
in accordance with the terms of the convertible note. The principal amount of the note at September 30, 2022 and December 31, 2021 is
$140,255 and $89,255 and the related accrued interest is $20,459 and $11,278, respectively.
On June 1, 2019, the Company issued a grid note
payable to a third party for $10,118 which was used for audit and filing fees. The note bears interest at 10% per annum and is due on
December 31, 2019. This note was extended to December 31, 2020. Through December 31, 2020, the Company borrowed an additional $32,600
relating to this note payable. On November 20, 2020 the Company received a forbearance letter amending the terms of the grid promissory
note by adding a conversion feature to the note, thereby making the note a convertible note. The amended note is due on December 31, 2022,
bearing interest at 10% per annum. The holder has the option to lend additional amounts to the borrower from time to time in the future,
on the terms set forth in this agreement. From June 1, 2019 to September 30, 2022, the Company borrowed total of $54,718 under this note payable.
This grid promissory note contains a provision for conversion at the holder’s option of any outstanding principal balance including accrued
interest, into the Company’s common stock at a conversion price equal to par value, $0.001 per share. The Company analyzed if the changes
to this note were considered a modification or an extinguishment of debt, and determined it was an extinguishment of debt. The Company
recognized there was a beneficial conversion feature associated with this note, and recorded a debt discount of $54,718 for all the borrowings
under this note. As of September 30, 2022 and December 31, 2021, unamortized debt discount for this note was $3,399 and $29,749, and for
the nine months ended September 30, 2022 and 2021, amortization of the debt discount associated with this note was $14,065 and $16,622,
respectively.
EMPIRE GLOBAL GAMING, INC.
Notes to Consolidated Financial Statements (Unaudited)
The Company made a payment of $30,000 towards
the principal balance of this note in April 2022. The principal amount of the note at September 30, 2022 and December 31, 2021 is $24,718
and $54,718, and the related accrued interest is $7,803 and $5,215, respectively.
On March 11, 2022, EMA issued six separate convertible
promissory notes totaling $59,999, among which $34,999 was received by March 31, 2022, and $25,000 received in April and May 2022. These
notes are due on March 11, 2024, bear interest of 1% per annum and are convertible into shares of EMA common stock at a rate of $0.00174
per share. As of September 30, 2022 the principal amount of these notes is $59,999 and the related accrued interest is $302, of which $10,000 principal has been classified as long term portion
of convertible notes payable – related parties on the accompanying unaudited consolidated balance sheet as the convertible note
was issued to a company owned by the President of EMA.
NOTE 8 – NOTES PAYABLE – RELATED PARTIES
The Company had notes payable to a stockholder
who was our former chief executive officer. The note bears interest at 4% per annum and is due on December 31, 2018. This note was extended
to December 31, 2021. As of September 30, 2022, the Company is in the process of selling its BlackJack Plus application to this noteholder
for a $30,000 reduction in the principal of this note and for an extension of due date to December 31, 2022. The note payable had an unpaid
balance of $167,393 and $167,393 as of September 30, 2022 and December 31, 2021, respectively.
The Company recorded interest expense of $5,008
and $5,008 for the nine months ended September 30, 2022 and 2021, respectively, for this notes payable. Accrued interest related to the
remaining note payable was $43,372 and $38,364 as of September 30, 2022 and December 31, 2021, respectively.
NOTE 9 – LOANS PAYABLE – RELATED
PARTIES
The Company received loans from a company owned
by the President of EMA for working capital purposes totaling $20,000 during the period ending September 30, 2022. These loans are non
interest bearing, have no terms and are due on demand.
NOTE 10 – COMMITMENTS AND CONTINGENCIES
The Company evaluates contingencies on an ongoing
basis and is not currently a party to any legal proceeding that management believes could have a material adverse effect on our results
of operations.
NOTE 11 – EQUITY
Common Stock
On March 24, 2021 a note holder converted $12,500
of principal from their convertible note into 12,500,000 shares of common stock at a rate of $0.001 per share in accordance with the terms
of their convertible note.
On December 13, 2021 a note holder converted $14,000
of principal from their convertible note into 14,000,000 shares of common stock at a rate of $0.001 per share in accordance with the terms
of their convertible note.
On March 14, 2022 a note holder converted $14,000
of principal from their convertible note into 14,000,000 shares of common stock at a rate of $0.001 per share in accordance with the terms
of their convertible note.
As of September 30, 2022 and December 31, 2021,
the Company has 980,000,000 authorized shares of common stock, par value $0.001, of which 298,001,000 and 270,001,000 shares are issued
and outstanding, respectively.
NOTE 12 – SUBSEQUENT EVENTS
Management has evaluated all transactions and
events after the balance sheet date through the date on which these financials were available to be issued, and has determined that no
additional disclosures are required.