Company Overview
GAMER PAKISTAN INC. (GPAK) is a development-stage interactive esports event promotion and product marketing company, founded in November 2021. The company's initial focus has been on creating college, inter-college, inter-university, and professional esports events for men's and women's teams, particularly in Pakistan. While creating sports opportunities involving colleges and universities in Pakistan will likely remain GPAK's primary focus for at least the next 12 months, the company intends to gradually expand the range of its esports offerings, enter new markets, and potentially consider live sports over time.
Corporate Structure and Operations
GPAK operates in Pakistan through its 90% owned subsidiary, K2 Gamer, and its affiliate, Elite Sports Pakistan (ESP). The company was incorporated on November 23, 2021, under the laws of the State of Delaware. From its inception through 2022, GPAK focused on having K2 Gamer and ESP enter into agreements with universities in Pakistan to undertake esports tournaments endorsed by the universities. The purpose of these initial tournaments was to refine GPAK's logistics and technology, demonstrate competence to universities, and provide a showcase to potential marketing partners, advertisers, and other sponsors. However, GPAK did not generate any significant income during this period, nor did its subsidiaries.
Acquisition of K2 Gamer
In November 2022, GPAK acquired a 90% ownership stake in K2 Gamer, subject to required approval by the Securities and Exchange Commission of Pakistan (SECP), which was granted in July 2023. This allowed K2 Gamer to become GPAK's operating subsidiary in Pakistan. Prior to the acquisition, GPAK determined that K2 Gamer was a variable interest entity and that it was the primary beneficiary of K2 Gamer, even though the activity in K2 Gamer was immaterial before July 2023. The results of K2 Gamer have only been included in GPAK's results since that time.
Business Strategy and Development
From its inception in November 2021 through the present, GPAK has focused on having K2 Gamer and/or ESP enter into agreements with universities to undertake esports tournaments endorsed by the universities, in which their students will participate. The company has also been building the necessary infrastructure for its business and conducting initial tournaments, with the purpose of refining its logistics and technology, demonstrating its competence to universities, and providing a showcase to potential marketing partners, advertisers, and other sponsors. However, GPAK has not yet generated any significant income, nor have K2 Gamer or ESP.
Future Plans
During 2024, GPAK anticipated organizing or co-organizing approximately 12 or more tournaments and intended to commence solicitation of marketing partners, advertisers, and other sponsors, with the goal of beginning to generate revenue thereafter. There is no assurance, however, that the company will succeed in this endeavor, achieve revenues, achieve revenues that exceed the cost of the tournaments, or generate a profit, based on its selling, general, and administrative expenses.
Initial Public Offering and Funding
In October 2023, GPAK raised gross proceeds of approximately $6.80 million through its initial public offering (IPO), with net proceeds of approximately $5.83 million after deducting underwriting discounts and commissions. The company used the IPO proceeds to fund its operations and expand its business, including marketing, events, and the retention of additional staff in Pakistan. Management believes the net proceeds from the IPO will be sufficient to meet the company's cash, operational, and liquidity requirements for at least the next 12 to 15 months. However, GPAK anticipates that it will be required to raise additional funds through public or private equity financings in the future to expand its business.
Financials
For the fiscal year 2023, GPAK reported revenue of $733, with a net loss of $2.05 million. The company's operating cash flow and free cash flow were both negative $2.11 million.
In the most recent quarter (Q3 2024), GPAK generated revenue of $205, with a net loss of $500,654. The company had minimal revenue-generating operations in both Q3 2023 and Q3 2024, making year-over-year growth comparisons insignificant.
The company's general and administrative expenses were approximately $507,540 for the three months ended September 30, 2024, compared with $166,170 for the three months ended September 30, 2023. The increase was primarily driven by an increase in consulting fees, professional, accounting, legal, and business development fees, payroll, board stipend and insurance fees, and expenses in Pakistan, offset by a decrease in public filing fees.
For the nine months ended September 30, 2024, GPAK's general and administrative expenses were approximately $1.97 million, compared with $297,750 for the nine months ended September 30, 2023. The increase was primarily due to higher consulting fees, professional, accounting, legal and business development fees, payroll, public filing fees, board stipend and insurance fees, and expenses in Pakistan.
Liquidity
As of September 30, 2024, GPAK had a cash balance of $1.22 million. The company does not have any outstanding debt, resulting in a debt-to-equity ratio of 0. GPAK's current ratio and quick ratio are both 42.27, indicating strong short-term liquidity.
While management estimates this amount is sufficient to continue with operating activities over the next 12 months, the company likely will need to raise additional capital to fund its operations while it implements and executes its business plan and expands its business.
The company's net loss for the three months ended September 30, 2024 was $500,830, compared to a net loss of $171,410 for the three months ended September 30, 2023. For the nine months ended September 30, 2024, GPAK's net loss was $1.95 million, compared to a net loss of $311,550 for the nine months ended September 30, 2023.
NASDAQ Delisting Issues
In June 2024, NASDAQ notified GPAK that unless the company timely requested a hearing before a Hearings Panel, its securities would be delisted from The NASDAQ Stock Market. The company timely requested a hearing, which was held on July 18, 2024. NASDAQ granted GPAK's request that any trading suspension or delisting action be stayed through the hearing date. However, there can be no assurance that the Panel will grant the company an additional extension or that GPAK will be able to regain compliance by the end of any additional extension period.
Separately, in April and May 2024, NASDAQ notified GPAK that since it failed to file the Form 10-K for the year ended December 31, 2023 and the Form 10-Q for the period ended March 31, 2024, the company no longer met the filing requirement for continued listing on The NASDAQ Stock Market. As a result, these matters are an additional and separate basis for delisting GPAK's securities from NASDAQ.
Recent Developments
On August 5, 2024, GPAK was delisted from the NASDAQ Stock Market due to the aforementioned issues. Subsequently, due to the ongoing political and economic uncertainty in Pakistan, the company has decided to cease operations in Pakistan and reduce overhead expenses wherever possible while it continues to seek alternative opportunities.
Key Risks and Challenges
GPAK faces several key risks, including failure of future market acceptance of its mobile esports products and services, increased levels of competition, changes in political, economic or regulatory conditions in Pakistan and other markets, the ability to retain and attract senior management and other key employees, and the ability to protect its trade secrets and proprietary rights. The company's substantial capital requirements and going concern uncertainty also pose significant risks.
Conclusion
Despite the challenges, GPAK remains committed to navigating the evolving esports landscape and exploring new avenues for growth and value creation. The company's management team is focused on prudently managing its resources, optimizing its operations, and pursuing strategic opportunities that align with its long-term objectives. Investors will need to closely monitor GPAK's progress as it navigates the road ahead.