Notes to Consolidated Financial Statements (Unaudited)
NOTE
1 – ORGANIZATION
Empire
Global Gaming, Inc. (the “Company”) 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 months ended March 31, 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 March 31, 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 March 31, 2022 and December 31, 2021, the Company
had $0 over the insurable limit.
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 provides 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”.
EMPIRE GLOBAL GAMING, INC.
Notes to Consolidated Financial Statements (Unaudited)
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 March 31, 2022. There were no uncertain tax positions that would require recognition in the unaudited
consolidated financial statements through March 31, 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.
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.
EMPIRE GLOBAL GAMING, INC.
Notes to Consolidated Financial Statements (Unaudited)
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 months ended March 31, 2022 and 2021, the Company had no stock based compensation.
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 $97,200 during the three months ended March 31, 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 March 31, 2022, the Company had an accumulated deficit of $1,502,262 and a working capital deficit of $280,383.
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 March 31, 2022 as it is anti-dilutive. Such securities,
shown below, presented on a common share equivalent basis and outstanding as of periods ended March 31, 2022 and 2021 have been excluded
from the per share computations:
| | |
March 31, | |
| | |
2022 | | |
2021 | |
| Convertible notes payable | |
| 214,946,110 | | |
| 155,187,200 | |
| | |
| | | |
| | |
| Total diluted shares | |
| 214,946,110 | | |
| 155,187,200 | |
EMPIRE
GLOBAL GAMING, INC.
Notes to Consolidated Financial Statements (Unaudited)
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 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.
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 three months ended
March 31, 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 March 31, 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 March 31, 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 March 31, 2022
and December 31, 2021, respectively. As of March 31, 2022 and December 31, 2021, unamortized debt discount for this note was $78,587
and $35,784, respectively, and for the three months ended March 31, 2022 and 2021, amortization of the debt discount associated with
this note was $8,196 and $13,697, 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 March 31, 2022 and December 31, 2021 is $140,255 and $89,255 and the related accrued interest is $13,409 and $11,278, respectively.
EMPIRE GLOBAL GAMING, INC.
Notes to Consolidated Financial Statements (Unaudited)
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 March 31, 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 March 31, 2022 and December 31, 2021, unamortized debt discount for this note was $22,408 and $29,749, and for
the three months ended March 31, 2022 and 2021, amortization of the debt discount associated with this note was $7,342 and $5,480, respectively.
The
principal amount of the note at March 31, 2022 and December 31, 2021 is $54,718 and the related accrued interest is $6,564 and $5,215,
respectively.
On March 11, 2022, EMA issued four separate convertible
promissory notes totaling $34,999. 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 March 31, 2022, the principal amount of these notes is $34,999 and the related
accrued interest is $19.
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 March 31, 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 March 31, 2022 and December 31, 2021, respectively.
The Company recorded interest expense of $1,651
and $1,651 for the three months ended March 31, 2022 and 2021, respectively, for this notes payable. Accrued interest related to the remaining
note payable was $40,015 and $38,364 as of March 31, 2022 and December 31, 2021, respectively.
NOTE
9 – 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.
EMPIRE
GLOBAL GAMING, INC.
Notes to Consolidated Financial Statements (Unaudited)
NOTE
10 – 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 March 31, 2022 and December 31, 2021, the Company has 980,000,000 authorized shares of common stock, par value $0.001, of which 284,001,000
and 270,001,000 shares are issued and outstanding, respectively.
NOTE
11 – 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.