Mobile Global Esports, Inc. SEC 10-Q Report

Mobile Global Esports, Inc. (MOGO), a company focused on the rapidly-growing esports industry in India and other South Asian markets, has released its Form 10-Q report for the quarter ended June 30, 2024. The report provides a comprehensive overview of the company's financial performance, business operations, strategic initiatives, and the challenges it faces.

Financial Highlights

• Revenue: $0 million. The company did not generate any revenue for the three and six months ended June 30, 2024, and 2023.
• Gross Profit: Not provided. The company did not report gross profit as there was no revenue generated.
• Operating Income: $(1.11) million. The company reported a loss from operations of $1.11 million for the six months ended June 30, 2024, compared to a loss of $1.73 million for the same period in 2023, indicating a reduction in operating expenses.
• Net Income: $(1.12) million. The company reported a net loss of $1.12 million for the six months ended June 30, 2024, compared to a net loss of $1.70 million for the same period in 2023, reflecting a decrease in net loss.
• Net Income Per Share: $(0.05). The net loss per share attributable to common stockholders was $0.05 for the six months ended June 30, 2024, compared to $0.08 for the same period in 2023, showing an improvement in per-share loss.

Business Highlights

• Company Overview: Mobile Global Esports Inc. (MOGO) was organized in March 2021 to expand an esports business started by Sports Industry of India (SII) in 2016. MOGO focuses on the rapidly-growing esports industry, particularly in India and other South Asian markets.
• Esports Business Development: MOGO has exclusive rights to develop, organize, promote, and monetize mobile esports events in collaboration with the Association of Indian Universities (AIU) and Elite University Sports Alliance of India Pvt. Ltd. (EUSAI).
• University Esports Events: MOGO has organized and commercialized 27 virtual esports tournaments in India, reaching an aggregate audience of over 450,000 viewers. The company sponsored the 2021-2022 championships at Lovely Professional University (LPU) in April 2022.
• Recent Events: In September 2023, MOGO produced the MOGO National Championship 2.0 event at LPU, featuring competitive play from 16 teams representing four geographic regions within India. Team MOGO Esports secured victories in two competitions held in October and November 2023.
• Operational Challenges: The company faces challenges such as the need for additional financing, attracting mobile esports users and viewers, establishing a business in India, and reliance on key management members.
• Management Turnover: MOGO has experienced significant management turnover in the past year, which could impact its ability to achieve strategic goals. The company has a new Chief Executive Officer and is working with consultants and its board of directors to operate the company.
• Future Outlook: Management believes that the current team has the necessary experience to achieve its goals. The company expects to generate revenue from sponsorships, advertising, subscriptions, tickets to events, branded merchandise, and data monetization.
• Liquidity and Going Concern: MOGO had $2.0 million of cash and an accumulated deficit of $9.4 million as of June 30, 2024. Management believes that the current cash on hand combined with projected cash flows will be sufficient to continue operations for at least the next 12 months, although there is substantial doubt about the company's ability to continue as a going concern.
• Geographical Performance: At June 30, 2024, 87.9% of the company’s consolidated total assets are located within the United States of America, with the remaining assets in India.
• New Lease Agreements: The company entered into a new lease agreement for additional space for its esports team members, commencing on July 1, 2024, with a term of 24 months. The May 2024 lease was terminated in September 2024 without any termination penalty.

Strategic Initiatives

• Strategic Expansion: Mobile Global Esports Inc. (MOGO) has been actively working on expanding its esports business, particularly in India. The company has organized and commercialized multiple esports tournaments and events, including the MOGO National Championship 2.0. MOGO has also entered into new lease agreements to support its operations and esports team members.
• Capital Management: MOGO has been managing its capital through various financing activities, including the issuance of common stock and warrants. In July 2022, the company raised $6.9 million through an initial public offering (IPO) and an additional $5 million through a private equity placement (PIPE) in September 2022. The company has also been repaying its note payable and managing its operating lease liabilities. As of June 30, 2024, MOGO had $2.0 million in cash, down from $3.2 million at the end of 2023. The company has been using its cash for operating expenses, marketing, event expenses, and other general corporate purposes.
• Future Outlook: MOGO anticipates the need for additional funding to meet its operational and liquidity requirements for at least the next 12 months. The company plans to use the proceeds from its IPO and PIPE for various purposes, including operating expenses, marketing, event expenses, and strategic partnerships. MOGO's management believes that the current team has the necessary experience to achieve its goals, but acknowledges the risks and uncertainties associated with establishing a new business in India. The company is also focused on monetizing data collected through its game platform, which is expected to become a significant revenue element in its business model.

Challenges and Risks

• Liquidity and Capital Resources: The company had a cash balance of approximately $2,033,000 as of June 30, 2024, down from $3,175,000 as of December 31, 2023. Management believes additional funding may be needed to meet cash, operational, and liquidity requirements for at least 12 months after the date of this quarterly report. The company currently does not have any contracts or commitments for additional financing, which poses a significant risk to its ability to continue operations and fund its business or expansion plans.
• Nasdaq Delisting: On April 9, 2024, the Nasdaq Listing Qualifications Staff notified the company that it had not regained compliance with the minimum bid price requirement, leading to the delisting of its common stock from the Nasdaq Capital Market. The stock now trades on the OTC Pink Sheets, which may impact the company's ability to raise capital and its stock liquidity.
• Revenue Generation: The company has not generated any significant revenue to date. The future revenue is expected to come from sponsorships, advertising, subscriptions, tickets to events, branded merchandise, and data monetization. However, the company’s ability to generate revenue is uncertain and poses a risk to its financial stability.
• General and Administrative Expenses: The company reported a decrease in general and administrative expenses for the three and six months ended June 30, 2024, compared to the same periods in 2023. This decrease was primarily driven by reductions in professional and consulting fees, compensation to U.S. personnel, and travel expenses. However, expenses incurred by MOGO Pvt Ltd. increased, which could impact overall cost management.
• Additional Financing Requirements: The company will require additional financing to implement and execute its business plan. There is no certainty that such financing will be available on reasonable terms when required, or at all. Failure to obtain adequate funds could have a material adverse effect on the company’s business, results of operations, cash flow, financial condition, and prospects.
• Equity Financing Risks: Future equity financing may involve substantial dilution to existing shareholders. Additionally, future sales of a substantial number of shares of common stock or other equity-related securities could depress the market price of the common stock and impair the company’s ability to raise capital.
• Market Risks: The company faces risks related to the market acceptance of its mobile esports products and services. Increased levels of competition, changes in political, economic, or regulatory conditions, and the ability to retain and attract senior management and other key employees are significant risks.
• Data Monetization: The company plans to monetize data collected through its game platform. However, this involves processing and combining data with other commercially-available data sets, which must comply with strict government privacy guidelines. The ability to effectively monetize this data while adhering to privacy regulations is uncertain and poses a risk.
• Regulatory Compliance: The company must navigate complex regulatory environments, particularly in India, where it operates. Changes in regulations or failure to comply with existing regulations could adversely affect the company’s operations and financial condition.
• Operational Risks: The company’s operations are subject to risks such as failure to protect trade secrets or other proprietary rights, and the potential for others to infringe on the company’s proprietary rights. These risks could impact the company’s competitive position and financial performance.
• Management’s Strategies to Address Risks: The company intends to use the net proceeds from its IPO and PIPE for operating expenses, marketing, event expenses, streaming, retention of additional staff, working capital, and general corporate purposes, including potential acquisitions and strategic partnerships. Management is focused on commercializing esports events similar to those in more developed markets, with revenue expected from various streams such as sponsorships, advertising, and data monetization. The company is working on routing players and viewers through its proprietary game and social media platform to collect and monetize data, while ensuring compliance with privacy guidelines.

SEC Filing: Mobile Global Esports, Inc. [ MGAM ] - 10-Q - Oct. 16, 2024