Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Feb. 29, 2020 | Apr. 14, 2020 | |
Document And Entity Information | ||
Entity Registrant Name | SIMPLICITY ESPORTS & GAMING Co | |
Entity Central Index Key | 0001708410 | |
Document Type | 10-Q | |
Document Period End Date | Feb. 29, 2020 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --05-31 | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business Flag | true | |
Entity Emerging Growth Company | true | |
Entity Ex Transition Period | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 7,863,975 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2020 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Feb. 29, 2020 | May 31, 2019 |
Current Assets | ||
Cash and cash equivalents | $ 235,679 | $ 1,540,158 |
Accounts receivable | 95,644 | |
Inventory | 22,822 | |
Prepaid expenses | 10,133 | |
Total Current Assets | 364,278 | 1,540,158 |
Other Assets | ||
Goodwill | 5,107,141 | 4,456,250 |
Intangible assets, net | 2,246,223 | 1,528,441 |
Deferred brokerage fees | 189,682 | |
Property and equipment | 252,966 | 117,231 |
Right of use asset, operating lease | 210,602 | 100,146 |
Security deposits | 14,885 | 12,317 |
Due from related party | 12,699 | |
Deferred equity issuance costs | 74,198 | |
Total Other Assets | 8,108,396 | 6,214,385 |
TOTAL ASSETS | 8,472,674 | 7,754,543 |
Current Liabilities | ||
Loan payable- related party | 93,761 | |
Accounts payable | 69,048 | |
Accrued expenses | 548,307 | 691,940 |
Convertible note payable | 1,000,000 | 1,000,000 |
Operating lease obligation, current | 56,869 | 32,045 |
Common stock payable | 50,000 | |
Total Current Liabilities | 1,724,224 | 1,817,746 |
Operating lease obligation, net of current portion | 153,732 | 68,876 |
Deferred revenues | 371,711 | |
Total Liabilities | 2,249,667 | 1,886,622 |
Commitments | ||
Stockholders' Equity | ||
Preferred stock - $0.0001 par value, 1,000,000 shares authorized; no shares issued and outstanding | ||
Common stock - $0.0001 par value; 20,000,000 shares authorized; 7,858,975 and 7,003,975 shares issued and outstanding as of February 29, 2020 and May 31, 2019, respectively | 786 | 700 |
Additional paid-in capital | 11,034,952 | 9,442,027 |
Accumulated deficit | (4,825,730) | (3,574,806) |
Total Simplicity Esports and Gaming Company Stockholders' Equity | 6,210,008 | 5,867,921 |
Non-Controlling Interest | 12,999 | |
Total Equity | 6,223,007 | 5,867,921 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 8,472,674 | $ 7,754,543 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Feb. 29, 2020 | May 31, 2019 |
Statement of Financial Position [Abstract] | ||
Preferred stock, par value | $ 0.0001 | $ 0.0001 |
Preferred stock, authorized | 1,000,000 | 1,000,000 |
Preferred stock, issued | ||
Preferred stock, outstanding | ||
Common stock, par value | $ 0.0001 | $ 0.0001 |
Common stock, authorized | 20,000,000 | 20,000,000 |
Common stock, issued | 7,858,975 | 7,003,975 |
Common stock, outstanding | 7,858,975 | 7,003,975 |
Consolidated Statements of Oper
Consolidated Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Feb. 29, 2020 | Feb. 28, 2019 | Feb. 29, 2020 | Feb. 28, 2019 | |
Revenue | ||||
Total Revenue | $ 380,801 | $ 14,070 | $ 700,792 | $ 14,070 |
Cost of Goods Sold | (214,444) | (348,313) | ||
Gross Margin | 166,357 | 14,070 | 352,479 | 14,070 |
Operating Expenses | ||||
General and Administrative Expenses | (567,953) | (430,010) | (1,692,341) | (3,811,612) |
Loss from Operations | (401,596) | (415,940) | (1,339,862) | (3,797,542) |
Other Income (Expense) | ||||
Debt Forgiveness Income | 300,000 | 93,761 | 300,000 | |
Interest Expense | (6,675) | (20,025) | ||
Interest Income | 70 | 164 | 3,031 | 401,582 |
Rebate Income | 1,116 | 1,116 | ||
Total Other Income (Expense) | (5,489) | 300,164 | 77,883 | 701,582 |
Loss Before Provision for Income Taxes | (407,085) | (115,776) | (1,261,979) | (3,095,960) |
Provision for Income Taxes | ||||
Net loss attributable to noncontrolling interest | 2,883 | 11,055 | ||
Net loss available to common shareholders | $ (404,202) | $ (115,776) | $ (1,250,924) | $ (3,095,960) |
Basic and diluted net loss per share | $ (0.05) | $ (0.02) | $ (0.16) | $ (0.87) |
Basic and diluted weighted average number of common shares outstanding | 7,858,975 | 5,790,781 | 7,653,355 | 3,575,419 |
Franchise Royalties and License Fees [Member] | ||||
Revenue | ||||
Total Revenue | $ 140,209 | $ 387,221 | ||
Franchise Termination Revenue [Member] | ||||
Revenue | ||||
Total Revenue | 44,984 | 44,984 | ||
Company Owned Stores Sales [Member] | ||||
Revenue | ||||
Total Revenue | 105,070 | 154,713 | ||
Esports Revenue [Member] | ||||
Revenue | ||||
Total Revenue | $ 90,538 | $ 14,070 | $ 113,874 | $ 14,070 |
Consolidated Statements of Chan
Consolidated Statements of Changes in Stockholders' Equity (Unaudited) - USD ($) | Common Stock [Member] | Common Stock Issuable [Member] | Additional Paid-In Capital [Member] | Non-Controlling Interest [Member] | Accumulated Deficit [Member] | Total |
Beginning balance at May. 31, 2018 | $ 225 | $ 5,009,310 | $ (9,534) | $ 5,000,001 | ||
Beginning balance, shares at May. 31, 2018 | 2,252,743 | |||||
Shares issued for advisory services | 4,311 | 4,311 | ||||
Shares issued for advisory services, shares | 423 | |||||
Net loss | (4,311) | (4,311) | ||||
Ending balance at Aug. 31, 2018 | $ 225 | 5,013,621 | (13,845) | 5,000,001 | ||
Ending balance, shares at Aug. 31, 2018 | 2,253,166 | |||||
Beginning balance at May. 31, 2018 | $ 225 | 5,009,310 | (9,534) | 5,000,001 | ||
Beginning balance, shares at May. 31, 2018 | 2,252,743 | |||||
Net loss attributable to noncontrolling interest | ||||||
Net loss | (3,095,960) | |||||
Ending balance at Feb. 28, 2019 | $ 586 | $ 203 | 7,472,123 | (3,105,494) | 4,367,418 | |
Ending balance, shares at Feb. 28, 2019 | 5,861,475 | 2,030,000 | ||||
Beginning balance at May. 31, 2018 | $ 225 | 5,009,310 | (9,534) | 5,000,001 | ||
Beginning balance, shares at May. 31, 2018 | 2,252,743 | |||||
Ending balance at May. 31, 2019 | $ 700 | 9,442,027 | (3,574,806) | 5,867,921 | ||
Ending balance, shares at May. 31, 2019 | 7,003,975 | |||||
Beginning balance at Aug. 31, 2018 | $ 225 | 5,013,621 | (13,845) | 5,000,001 | ||
Beginning balance, shares at Aug. 31, 2018 | 2,253,166 | |||||
Shares issued for advisory services | $ 21 | 2,120,668 | 2,120,689 | |||
Shares issued for advisory services, shares | 207,577 | |||||
Common stock subject to redemption | $ 11 | 11 | ||||
Common stock subject to redemption, shares | 112,497 | |||||
Common stock redemption | $ (45) | (6,635,207) | (6,635,252) | |||
Common stock redemption, shares | (451,563) | |||||
Common stock issued to Smaaash Founders | $ 200 | 200 | ||||
Common stock issued to Smaaash Founders, shares | 2,000,000 | |||||
Rights shares | $ 54 | 383,161 | 383,215 | |||
Rights shares, shares | 546,150 | |||||
Net loss | (2,975,873) | (2,975,873) | ||||
Ending balance at Nov. 30, 2018 | $ 466 | 882,243 | (2,989,718) | (2,107,009) | ||
Ending balance, shares at Nov. 30, 2018 | 4,667,827 | |||||
Common shares issued in acquisition | $ 100 | 6,089,900 | 6,090,000 | |||
Common shares issued in acquisition, shares | 1,000,000 | |||||
Common shares issuable from acquisition | $ 200 | 200 | ||||
Common shares issuable from acquisition, shares | 2,000,000 | |||||
Common shares issuable from employment agreements | $ 3 | 3 | ||||
Common shares issuable from employment agreements, shares | 30,000 | |||||
Common shares issued for convertible note | $ 20 | 499,980 | 500,000 | |||
Common shares issued for convertible note, shares | 193,648 | |||||
Net loss attributable to noncontrolling interest | ||||||
Net loss | (115,776) | (115,776) | ||||
Ending balance at Feb. 28, 2019 | $ 586 | $ 203 | 7,472,123 | (3,105,494) | 4,367,418 | |
Ending balance, shares at Feb. 28, 2019 | 5,861,475 | 2,030,000 | ||||
Beginning balance at May. 31, 2019 | $ 700 | 9,442,027 | (3,574,806) | 5,867,921 | ||
Beginning balance, shares at May. 31, 2019 | 7,003,975 | |||||
Shares issued for PLAYlive Nation acquisition | $ 75 | 1,439,925 | 1,440,000 | |||
Shares issued for PLAYlive Nation acquisition, shares | 750,000 | |||||
Vesting of Common Shares | 27,000 | 27,000 | ||||
Net loss | (283,393) | (283,393) | ||||
Ending balance at Aug. 31, 2019 | $ 775 | 10,908,952 | (3,858,199) | 7,051,528 | ||
Ending balance, shares at Aug. 31, 2019 | 7,753,975 | |||||
Beginning balance at May. 31, 2019 | $ 700 | 9,442,027 | (3,574,806) | 5,867,921 | ||
Beginning balance, shares at May. 31, 2019 | 7,003,975 | |||||
Common shares issued in acquisition | 1,440,000 | |||||
Compensation to officer for shares issued for past services | 90,000 | |||||
Net loss attributable to noncontrolling interest | (11,055) | |||||
Net loss | (1,250,924) | |||||
Ending balance at Feb. 29, 2020 | $ 786 | 11,034,952 | 12,999 | (4,825,730) | 6,223,007 | |
Ending balance, shares at Feb. 29, 2020 | 7,858,975 | |||||
Beginning balance at Aug. 31, 2019 | $ 775 | 10,908,952 | (3,858,199) | 7,051,528 | ||
Beginning balance, shares at Aug. 31, 2019 | 7,753,975 | |||||
Compensation to officer for shares issued for past services | 90,000 | 90,000 | ||||
Shares issued for vesting of employment agreement awards | $ 11 | 11 | ||||
Shares issued for vesting of employment agreement awards, shares | 105,000 | |||||
Vesting of Common Shares | 36,000 | 36,000 | ||||
Non-controlling interest of original investment in subsidiaries | 24,054 | 24,054 | ||||
Net loss attributable to noncontrolling interest | (8,172) | (8,172) | ||||
Net loss | (563,329) | (563,329) | ||||
Ending balance at Nov. 30, 2019 | $ 786 | 11,034,952 | 15,882 | (4,421,528) | 6,630,092 | |
Ending balance, shares at Nov. 30, 2019 | 7,858,975 | |||||
Net loss attributable to noncontrolling interest | (2,883) | (2,883) | ||||
Net loss | (404,202) | (404,202) | ||||
Ending balance at Feb. 29, 2020 | $ 786 | $ 11,034,952 | $ 12,999 | $ (4,825,730) | $ 6,223,007 | |
Ending balance, shares at Feb. 29, 2020 | 7,858,975 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 9 Months Ended | |
Feb. 29, 2020 | Feb. 28, 2019 | |
Cash flows from operating activities: | ||
Net loss | $ (1,261,979) | $ (3,095,960) |
Adjustments to reconcile net (loss) to net cash used in operating activities: | ||
Interest earned on marketable securities held in trust account | (401,582) | |
Impairment of cost method investment | 150,000 | |
Depreciation expense | 37,240 | |
Amortization expense | 154,218 | |
Debt forgiveness income | (93,761) | (300,000) |
Issuance of shares for services | 153,011 | 2,169,143 |
Changes in operating assets and liabilities: | ||
Accounts receivable | (95,645) | |
Inventory | (22,822) | |
Prepaid expenses | (10,133) | 3,114 |
Security deposits | (2,568) | |
Deferred brokerage fees | (59,051) | |
Deferred revenues | 126,080 | |
Accounts payable | 65,474 | |
Deferred legal fees | (100,000) | |
Accrued expenses | (143,632) | 751,438 |
Due from related party | (12,699) | |
Net cash used in operating activities | (1,166,267) | (823,847) |
Cash flows from investing activities: | ||
Cash purchased in acquisition | 26,180 | 75,930 |
Investment at cost | (150,000) | |
Lease liability net of lease asset | (776) | |
Purchase of property and equipment | (163,472) | (51,350) |
Net cash used in investing activities | (138,068) | (125,420) |
Cash flows from financing activities: | ||
Proceeds from note payable - related party, net | 3,620 | |
Settlement of redeemable common stock | (46,291,685) | |
Cash held in trust account used to settle common stock redemption obligation | (7,620,432) | |
Cash in trust | 54,645,364 | |
Deferred financing costs | (74,198) | |
Non-controlling interest of original investment in subsidiaries | 24,054 | |
Private placement funds received | 50,000 | 1,000,003 |
Net cash used in financing activities | (144) | 1,736,870 |
Net change in cash | (1,304,479) | 787,603 |
Cash - beginning of period | 1,540,158 | 458,063 |
Cash - end of period | 235,679 | 1,245,666 |
Supplemental Disclosures of Cash Flow Information: | ||
Cash paid for interest | ||
Cash paid for income taxes |
Organization and Description of
Organization and Description of Business | 9 Months Ended |
Feb. 29, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization and Description of Business | NOTE 1 — ORGANIZATION AND DESCRIPTION OF BUSINESS Simplicity Esports and Gaming Company F/K/A Smaaash Entertainment Inc. (the “Company,” “we,” or “our”), was a blank check company organized under the laws of the State of Delaware on April 17, 2017. The Company was formed under the name I-AM Capital Acquisition Company for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses (“Business Combination”). On November 20, 2018, the Company changed its name from I-AM Capital Acquisition Company to Smaaash Entertainment Inc. On January 2, 2019, the Company changed its name from Smaaash Entertainment Inc. to Simplicity Esports and Gaming Company. The Company is a global esports organization, with an established brand, that is capitalizing on the growth in esports through three business units, Simplicity One Brasil Ltda (“Simplicity One”), Simplicity Esports, LLC (“Simplicity Esports LLC”) and PLAYlive Nation, Inc. (“PLAYlive”). The Company owns and manages numerous professional esports teams domestically and internationally. Revenue is generated from prize winnings, corporate sponsorships, advertising, league subsidy payments and potential league revenue sharing payments from the publishers of video games. Through a wholly owned subsidiary Simplicity Esports LLC, the Company owns and manages numerous professional esports teams competing in games such as Overwatch, Apex Legends, PUBG and more. We are committed to growing and enhancing the esports industry, fostering the development of amateurs to compete professionally and signing established professional gamers to support their paths to greater success. Through a 90% owned subsidiary Simplicity One, the Company manages Flamengo eSports, one of the leading Brazilian League of Legends® teams. Flamengo eSports was established in 2017 as the Esports division of Clube de Regatas do Flamengo, a successful Brazilian sports organization, known for its world-famous soccer team. Flamengo eSports’ League of Legends® team won the CBLoL Championship in September 2019, which qualified the team to compete at the 2019 League of Legends® World Championship in Europe as one of 24 teams from 13 different regions around the world. The Company owns and operates corporate and franchise esports gaming centers, through wholly owned subsidiaries, Simplicity Esports LLC and PLAYlive, throughout the U.S. giving casual gamers the opportunity to play in a social setting with other members of the gaming community. In addition, aspiring and established professional gamers can compete in local and national esports tournaments held in the Company’s gaming centers for prizes, notoriety, and potential contracts to play for one of our professional esports teams. In this business unit, revenue is generated from the sale of game time, memberships, tournament entry fees, birthday party events, corporate party events, concessions and gaming-related merchandise. The Company’s business plan encompasses a brick and click physical and digital approach to further recognize revenue from all verticals, which we believe to be unique in the industry. The physical centers, together with the Company’s esports teams, lifestyle brand and marketing campaigns offer opportunities for additional revenue via strategic partnerships with both endemic and non-endemic brands. The Company’s goal is to further engage a diverse fan base with a 360-degree approach driving traffic to both our digital platform and physical real estate to maximize the monetization opportunities with these relationships. In addition, we have proprietary intellectual capital, fan engagement strategies and brand development blueprints which complement our publicly available information. Simplicity Esports LLC has already opened and is operating four corporate-owned retail Simplicity Esports Gaming Centers. The first Simplicity Esports Gaming Center was opened on May 3, 2019. Furthermore, the Company has engaged a national tenant representation real estate broker to assist in the strategic planning and negotiations for our future Simplicity Esports Gaming Center locations. The Company contemplates that new Simplicity Esports Gaming Centers will be funded by the Company as well as a combination of tenant improvement allowances from landlords and sponsorships. Due to unsolicited interest from potential franchisees, the Company has launched a franchising program to accelerate the expansion of planned nationwide footprint. The Company sells specific franchise territories, through a wholly owned subsidiary PLAYlive, and assists with the establishment and buildout of esports gaming centers to potential business owners that desire to use the Company’s branding, infrastructure and process to open and operate gaming centers. Franchise revenue is generated from the sale of franchise territories, supplying furniture, equipment and merchandise to the franchisees for buildout of their centers, a gross sales royalty fee and a national marketing fee. We license the use of our branding, assist in identifying and negotiating commercial locations, assist in overseeing the buildout and development, provide access to proprietary software for point of sale, inventory management, employee training and other HR functions. Franchisees also can participate in our national esports tournament events, and benefit from the growing profile of our professional esports teams. Once an esports gaming center is opened, the Company provides operational guidance, support and use of branding elements in exchange for a monthly royalty fee calculated as 6% of gross sales and a national marketing fee of 1% of gross sales. To date, the Company has sold five of these franchises. The combination of the esports gaming centers, owned or franchised by wholly owned subsidiaries Simplicity Esports LLC or PLAYlive, provides the Company with what it believes will be the largest footprint of esports gaming centers in North America. Over the next 12 months, existing PLAYlive esports gaming centers will be rebranded to Simplicity Esports gaming centers. All newly opened franchise esports gaming centers will be branded as Simplicity Esports gaming centers. All gaming centers in our footprint will be participating venues in the Company’s national esports tournaments. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 9 Months Ended |
Feb. 29, 2020 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | 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 (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X promulgated by the Securities and Exchange Commission (the “SEC”). Certain information or footnote disclosures normally included in consolidated financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a comprehensive presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited consolidated financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the consolidated financial position, operating results and cash flows for the periods presented. The accompanying unaudited consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K as filed with the SEC on August 29, 2019. The interim results for the three and nine months ended February 29, 2020 are not necessarily indicative of the results to be expected for the year ending May 31, 2020 or for any future interim periods. Emerging Growth Company Section 102(b)(1) of the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a registration statement under the Securities Act of 1933, as amended (the “Securities Act”), declared effective or do not have a class of securities registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. Basis of Consolidation The consolidated financial statements include the operations of the Company and its wholly owned subsidiaries, Simplicity Esports, LLC, PLAYlive Nation, Inc., and PLAYlive Nation Holdings, LLC, its 90% owned subsidiary Simplicity One Brasil Ltd, and its 79% owned subsidiaries Simplicity Happy Valley, LLC and Simplicity Redmond, LLC. In November 2019, the Company organized Simplicity Happy Valley, LLC and Simplicity Redmond, LLC for the purpose of converting a franchised store into a Company owned store. All significant intercompany accounts and transactions have been eliminated in consolidation. Reclassification Certain amounts in the prior period consolidated financial statements have been reclassified to conform to the presentation of the current period financial statements. These reclassifications had no effect on the previously reported net loss. Cash and cash equivalents The Company considers short-term interest-bearing investments with initial maturities of three months or less to be cash equivalents. The Company has no cash equivalents. Concentration of Credit Risk Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which at times, may exceed the Federal depository insurance coverage of $250,000. The Company has not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts. Financial Instruments The fair value of the Company’s assets and liabilities, which qualify as financial instruments under the Financial Accounting Standards Board (the “FASB”) Accounting Standards Codification (“ASC”) 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the consolidated balance sheet. Use of Estimates The preparation of consolidated financial statements in conformity with GAAP requires the Company’s 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. Actual results could differ from those estimates. Revenue Recognition As of January 1, 2018, the Company adopted Revenue from Contracts with Customers (Topic 606) (“ASC 606”). The new guidance sets forth a new five-step revenue recognition model which replaces the prior revenue recognition guidance in its entirety and is intended to eliminate numerous industry-specific pieces of revenue recognition guidance that have historically existed in GAAP. The underlying principle of the new standard is that a business or other organization will recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects what it expects to receive in exchange for the goods or services. The standard also requires more detailed disclosures and provides additional guidance for transactions that were not addressed completely in the prior accounting guidance. The Company adopted the standard using the modified retrospective method and the adoption did not have a material impact on its financial statements. The Company recognizes revenue when performance obligations under the terms of a contract with the customer are satisfied. Product sales occur once control is transferred upon delivery to the customer. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods and services. Our revenue is derived from the three sources listed below. The following describes principal activities, separated by major product or service, from which the Company generates its revenues: Company-owned Stores Sales The Company-owned stores principally generate revenue from retail esports gaming centers. Revenues from Company-owned stores are recognized when the products are delivered, or the service is provided. Franchise Royalties and Fees Franchise royalties are based on six percent of franchise store sales after a minimum level of sales occur and are recognized as sales occur. Any royalty reductions, including waivers or those offered as part of a new store development incentive or as incentive for other behaviors, are recognized at the same time as the related royalty, as they are not separately distinguishable from the full royalty rate. Franchise royalties are billed on a monthly basis. The Company recognizes initial franchise license fee revenue when the Company has performed substantially all the services required in the franchise agreement. Fees received that do not meet these criteria are recorded as deferred revenues until earned. The pre-opening services provided to franchisees do not contain separate and distinct performance obligations from the franchise right; thus, the fees collected will be amortized on a straight-line basis beginning at the store opening date through the term of the franchise agreement, which is typically 10 years. Franchise license renewal fees, which generally occur every 10 years, are billed before the renewal date. Fees received for future license renewal periods are amortized over the life of the renewal period. The Company offers various incentive programs for franchisees including royalty incentives, new store opening incentives (i.e. development incentives) and other support initiatives. Royalties and franchise fees sales are reduced to reflect any royalty incentives earned or granted under these programs that are in the form of discounts. Commissary sales are comprised of gaming equipment and supplies sold to franchised stores and are recognized as revenue upon shipment or delivery of the related products to the franchisees. Payments are generally due within 30 days. Fees for information services, including software maintenance fees, marketing fees and website maintenance, graphic and promotion fees are recognized as revenue as such services are provided. Esports revenue Esports is a form of competition using video games. Most commonly, esports takes the form of organized, single player and multiplayer video game tournaments or leagues, particularly between professional players, individually or as teams. Revenues from Esports revenues are recognized when the competition is completed, and prize money is awarded. Revenues earned from team sponsorships, prize winnings, league sponsorships, and from the Company’s share of league revenues are included in esports revenue. Deferred Revenues Deferred revenues are classified as current or long-term based on when management estimates the revenues will be recognized. The Company receives payments from franchisees in advance of all performance obligations having been met, including but not limited to franchise locations being opened. As certain conditions agreed to in these franchise agreements are performed, revenues are recognized. Deferred costs include commissions paid to brokers related to the sale of specific new franchises which have not met revenue recognition criteria as of February 29, 2020. These costs are recognized in the same period as the initial franchise fee revenue is recognized. Accounts Receivable The Company estimates the allowance for doubtful accounts based on an analysis of specific customers (i.e. franchisees), taking into consideration the age of past due accounts and an assessment of the customer’s ability to pay. Accounts receivable are written off against the allowance when management determines it is probable the receivable is worthless. Customer account balances with invoices dated over 90 days old are considered delinquent and considered in the allowance assessment. The Company performs credit evaluations of its customers and, generally, requires no collateral. Management has assessed accounts receivable and an allowance for doubtful accounts of approximately $11,000 has been recorded. Property and Equipment Property and equipment and leasehold improvements are recorded at its historical cost. The cost of property and equipment is depreciated over the estimated useful lives, when placed in service (ranging from 3 -5 years), of the related assets utilizing the straight-line method of depreciation. The cost of leasehold improvements is depreciated (amortized) over the lesser of the length of the related leases or the estimated useful lives of the assets. Ordinary repairs and maintenance are expensed when incurred and major repairs will be capitalized and expensed if they benefit future periods. Intangible Assets and Impairment Intangible assets that are subject to amortization are reviewed for potential impairment whenever events or circumstances indicate that carrying amounts may not be recoverable. Assets not subject to amortization are tested for impairment at least annually. The Company has intangible assets subject to amortization related to its acquisition of Simplicity Esports, LLC and PLAYlive Nation, Inc. These costs are included in intangible assets on our consolidated balance sheet and amortized on a straight-line basis when placed into service over their estimated useful lives of the costs, which is 3 to 5 years. The Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less that the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s estimated fair value and its book value. Goodwill Goodwill is the excess of our purchase cost over the fair value of the net assets of acquired businesses. We do not amortize goodwill, but we assess our goodwill for impairment at least annually. We have assessed goodwill and qualitative considerations indicated no impairment. Franchise Locations Through PLAYlive, the Company’s wholly owned subsidiary, the Company has entered into franchise agreements with third parties. As of February 29, 2020, 43 locations were open and operating, in various states including Arizona, California, Idaho, Florida, Maryland, Michigan, Mississippi, Montana, Oregon, South Carolina, Texas, Utah and Washington, in addition we have five additional franchise locations that are currently in the final stages of preparation for opening. Stock-based Compensation The Company records stock-based compensation in accordance with ASC 718, Compensation – Stock Compensation Equity-Based Payments to Non-Employees Leases In February 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-02-Leases (Topic 842), which significantly amends the way companies are required to account for leases. Under the updated leasing guidance, some leases that did not have to be reported previously are now required to be presented as an asset and liability on the balance sheet. In addition, for certain leases, what was previously classified as an operating expense must now be allocated between amortization expense and interest expense. The Company elected to adopt this update early as of January l, 2019 using the modified retrospective transition method and prior periods have not been restated. Upon implementation, the Company recognized an initial operating lease right-of-use asset of $110,003 and operating lease liability of $107,678. Due to the simplistic nature of the Company’s leases, no retained earnings adjustment was required. See Note 7 for further details. Basic Loss Per Share The Company complies with accounting and disclosure requirements ASC Topic 260, “Earnings Per Share.” Basic loss per share is calculated by dividing the Company’s net loss by the weighted average number of common shares outstanding during the period. Diluted loss per share is calculated by dividing the Company’s net loss by the diluted weighted average number of shares outstanding during the period. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. At February 29, 2020, the Company had a convertible note in the principal amount of $1,000,000 and common stock warrants that could be converted into approximately 6,924,000 common shares. These shares are not presented in the consolidated statements of operations as the effect of these shares is anti-dilutive. Income Taxes The Company complies with the accounting and reporting requirements of ASC Topic 740, “ Income Taxes ASC Topic 740 prescribes a recognition threshold and a measurement attribute for the consolidated financial statements recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. On December 22, 2017, the U.S. Tax Cuts and Jobs Act of 2017 (“Tax Reform”) was signed into law. As a result of Tax Reform, the U.S. statutory tax rate was lowered from 35% to 21% effective January 1, 2018, among other changes. ASC Topic 740 requires companies to recognize the effect of tax law changes in the period of enactment; therefore, the Company was required to revalue its deferred tax assets and liabilities at the new rate. The SEC issued Staff Accounting Bulletin No. 118 (“SAB 118”) to address the application of GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain tax effects of Tax Reform. The ultimate impact may differ from this provisional amount, possibly materially, as a result of additional analysis, changes in interpretations and assumptions the Company has made, additional regulatory guidance that may be issued, and actions the Company may take as a result of Tax Reform. Recently Issued and Recently Adopted Accounting Pronouncements Accounting standards promulgated by the FASB are subject to change. Changes in such standards may have an impact on the Company’s future financial statements. The following are a summary of recent accounting developments. In June 2018, the FASB issued ASU 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting Subtopic 505-50, Equity—Equity-Based Payments to Non-Employees. The Company periodically reviews new accounting standards that are issued. Although some of these accounting standards may be applicable to the Company, the Company has not identified any other new standards that it believes merit further discussion, and the Company expects that none would have a significant impact on its financial statements. Going Concern, Liquidity and Management’s Plan The Company’s consolidated financial statements have been prepared assuming that it will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business. As reflected in the consolidated financial statements, the Company has an accumulated deficit at February 29, 2020, a net loss and net cash used in operating activities for the reporting period then ended. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year from the of the date that the financial statements are issued. The Company has commenced operations and has begun to generate revenue; however, the Company’s cash position may not be sufficient to support the Company’s daily operations. Management intends to raise additional funds by way of a private or public offering. While the Company believes in the viability of its strategy and its ability to generate sufficient revenue and to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan, to generate sufficient revenue and to raise additional funds by way of public and/or private offerings. The consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. In December 2019, a novel strain of coronavirus (COVID-19) emerged in Wuhan, Hubei Province, China. While initially the outbreak was largely concentrated in China and caused significant disruptions to its economy, it has now spread to several other countries and infections have been reported globally. Because COVID-19 infections have been reported throughout the United States, certain federal, state and local governmental authorities have issued stay-at-home orders, proclamations and/or directives aimed at minimizing the spread of COVID-19. Additional, more restrictive proclamations and/or directives may be issued in the future. As a result, all of our corporate and franchised Simplicity Gaming Centers have been closed effective April 1, 2020. Although our franchise agreements with franchisees of Simplicity Gaming Centers require a minimum monthly royalty payment to us from the franchisees regardless of whether the franchised Simplicity Gaming Centers are operating, there is a potential risk that franchisees of Simplicity Gaming Centers will default in their obligations to pay their minimum monthly royalty payment to us. 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, reduced customer traffic and reduced operations. Any resulting financial impact cannot be reasonably estimated at this time but is anticipated to have a material adverse impact on our business, financial condition and results of operations. The measures taken to date will impact the Company’s business for the fiscal fourth quarter and potentially beyond. Management expects that all of its business segments, across all of its geographies, will be impacted to some degree, but the significance of the impact of the COVID-19 outbreak on the Company’s business and the duration for which it may have an impact cannot be determined at this time. |
Property, Plant and Equipment
Property, Plant and Equipment | 9 Months Ended |
Feb. 29, 2020 | |
Property, Plant and Equipment [Abstract] | |
Property, Plant and Equipment | NOTE 3 — PROPERTY, PLANT AND EQUIPMENT The following is a summary of property, plant, and equipment—at cost, less accumulated depreciation: February 29, 2020 Leasehold improvements $ 52,189 Property and equipment 243,314 Total cost 295,503 Less accumulated depreciation (42,537 ) Net, property plant and equipment $ 252,966 Depreciation expense for the nine months ended February 29, 2020 and February 28, 2019 was $37,240 and $0, respectively. |
Intangible Assets
Intangible Assets | 9 Months Ended |
Feb. 29, 2020 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Intangible Assets | NOTE 4 — INTANGIBLE ASSETS The following table sets forth the intangible assets, including accumulated amortization as of February 29, 2020: February 29, 2020 Remaining Accumulated Net Carrying Useful Life Cost Amortization Value Non-Competes 4 years $ 1,023,118 $ 238,728 $ 784,390 Trademarks Indefinite 866,000 - 866,000 Customer contracts 10 years 594,000 - 594,000 Internet domain 2 years 3,000 1,167 1,833 $ 2,486,118 $ 239,895 $ 2,246,223 Amortization expense for the nine months ended February 29, 2020 and February 28, 2019 was $154,218 and $0, respectively. |
Acquisitions
Acquisitions | 9 Months Ended |
Feb. 29, 2020 | |
Business Combinations [Abstract] | |
Acquisitions | NOTE 5 — ACQUISITIONS The Simplicity Esports, LLC Acquisition On January 4, 2019, the Company consummated the transactions contemplated by the share exchange agreement, dated December 21, 2018 (as amended by Amendment No. 1 to Share Exchange Agreement, dated December 28, 2018 and by Amendment No. 2 to Share Exchange Agreement, dated December 30, 2018, the “Share Exchange Agreement”) by and among the Company, Smaaash Entertainment, Inc. (“Smaaash”), each of the equity holders of Simplicity (“Simplicity Owners”) and Jed Kaplan, in the capacity as the representative of the Simplicity Owners (the “Representative”). Pursuant to the Share Exchange Agreement, the Simplicity Owners transferred all the issued and outstanding equity interests of Simplicity to the Company in exchange for newly issued shares of common stock of the Company (the “Acquisition”). The Simplicity Owners received an aggregate of 300,000 shares of Company common stock at the closing of the Acquisition, an additional 700,000 shares of common stock on January 7, 2019 and the remaining 2,000,000 shares in March 2019. The acquisition of Simplicity, in an all-stock deal, created a pure play esports team and entertainment platform opportunity, which we believe will increase shareholder value and boost our growth strategy as we endeavor to build out our brick and mortar esports centers. The acquisition was accounted for by the Company using the acquisition method under business combination accounting. Under this method, the purchase price paid by the acquirer is allocated to the assets acquired and liabilities assumed as of the acquisition date based on the fair value. Determining the fair value of certain assets and liabilities assumed is judgmental in nature and often involves the use of significant estimates and assumptions. All fair value measurements of acquired assets and liabilities assumed are non-recurring in nature and classified as level 3 on the fair value hierarchy. The aggregate purchase price consisted of the following: Restricted stock consideration 6,090,000 Total $ 6,090,000 As noted in the table above, the Company issued 3,000,000 restricted shares of common stock as consideration. The fair value of the shares on the closing date was approximately $6,090,000. The following table summarizes the estimated fair value of the Simplicity Esports, LLC assets acquired and liabilities assumed at the date of acquisition: Cash $ 76,000 Internet Domain 3,000 Trade names and trademarks 588,000 Non-Competes 1,023,118 Accounts payable and accrued liabilities (56,000 ) Goodwill 4,455,882 Total $ 6,090,000 Revenue and net loss included in unaudited consolidated financial statements for the nine months ended February 29, 2020 attributable to Simplicity Esports, LLC is approximately $173,000 and $554,000, respectively. The following unaudited pro forma information presents the consolidated results of operations data as if the acquisition of Simplicity Esports, LLC took place on June 1, 2018: Nine Months Ended Total Revenue $ 24,000 Net Loss $ (3,482,692 ) Basic Net Loss Per Share $ (0.97 ) PLAYlive Nation Acquisition On July 29, 2019, the Company entered into a definitive agreement to acquire PLAYlive for total consideration of 750,000 shares of Company common stock. The PLAYlive acquisition closed on July 30, 2019. Founded in 2009, PLAYlive has a network of 44 franchised gaming centers across 11 states, serving over 150,000 unique gamers annually. The PLAYlive Centers offer customers a specialized entertainment gaming experience within a social setting. Customers are provided the opportunity to play and compete across an array of gaming titles on both consoles and high-performance gaming PCs. The acquisition was accounted for by the Company using the acquisition method under business combination accounting. Under this method, the purchase price paid by the acquirer is allocated to the assets acquired and liabilities assumed as of the acquisition date based on the fair value. Determining the fair value of certain assets and liabilities assumed is judgmental in nature and often involves the use of significant estimates and assumptions. Certain amounts below are provisional based on our best estimates using information available as of the reporting date. The Company is waiting for information to become available to finalize its valuation of certain elements of this transaction. Specifically, the assigned values for intellectual property, net deferred revenues, customer relationships, and goodwill are provisional in nature and subject to change upon the completion of the final valuation of such elements. All fair value measurements of acquired assets and liabilities assumed are non-recurring in nature and classified as level 3 on the fair value hierarchy. The aggregate purchase price consisted of the following: Restricted stock consideration $ 1,440,000 Total $ 1,440,000 As noted in the table above, the Company issued 750,000 restricted shares of common stock as consideration. The fair value of the shares on the closing date was approximately $1,440,000. The following table summarizes the estimated fair value of the PLAYlive assets acquired and liabilities assumed at the date of acquisition: Cash $ 26,000 Property, plant and equipment (provisional) 10,000 Net deferred revenue (provisional) (115,000 ) Customer relationships (provisional) - Accounts payable and accrued liabilities (4,000 ) Goodwill (provisional) 651,000 Trademarks 278,000 Customer contracts 594,000 Total $ 1,440,000 Revenue and net loss included in the consolidated financial statements nine months ended February 29, 2020 attributable to PLAYlive is approximately $432,000 and $38,000, respectively. The following unaudited pro forma information presents the consolidated results of operations data as if the acquisition of PLAYlive took place on June 1, 2018: Nine Months Ended Nine Months Ended Total Revenue $ 705,000 $ 526,000 Net Loss $ (1,270,000 ) $ (3,026,000 ) Basic Net Loss Per Share $ (0.17 ) $ (0.85 ) The Simplicity One Acquisition On January 14, 2020 the Company acquired a 90% interest in Simplicity One Brasil Ltda for approximately $2,000. |
Related Party Transactions
Related Party Transactions | 9 Months Ended |
Feb. 29, 2020 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | NOTE 6 — RELATED PARTY TRANSACTIONS I-AM Capital Partners, LLC the Company’s sponsor (the “Sponsor”), loaned the Company $201,707 in the aggregate, to be used for a portion of the expenses of the Company’s initial public offering and working capital purposes. The loan is non-interest bearing, unsecured and due at the earlier of December 31, 2017 or the closing of the initial public offering. At November 30, 2018, $120,089 of the Sponsor’s loan was repaid. As of May 31, 2019, the balance of the Sponsor loan was $93,761, including imputed interest of $8,523. In August 2019, the Sponsor forgave this remaining balance and the Company recorded it as debt forgiveness income. The Company maintains its cash balance at a financial services company that is owned by an officer of the Company. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Feb. 29, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | NOTE 7 — COMMITMENTS AND CONTINGENCIES Registration Rights Pursuant to a registration rights agreement the Company entered into with its initial stockholders and initial purchasers of the private units (and constituent securities) at the closing of the initial public offering, the Company is required to register certain securities for sale under the Securities Act. These holders are entitled under the registration rights agreement to make up to three demands that the Company register certain of its securities held by them for sale under the Securities Act and to have the securities covered thereby registered for resale pursuant to Rule 415 under the Securities Act. In addition, these holders have the right to include their securities in other registration statements filed by the Company. The Company will bear the costs and expenses of filing any such registration statements. Unit Purchase Option The Company sold to the underwriters (and/or their designees), for $100, an option to purchase up to a total of 250,000 Units (which increased to 260,000 Units upon the partial exercise of the underwriters’ over-allotment option), exercisable at $11.50 per Unit (or an aggregate exercise price of $2,990,000) upon the closing of the initial public offering. The unit purchase option may be exercised for cash or on a cashless basis, at the holder’s option, at any time during the period commencing on the later of the first anniversary of the effective date of the registration statement relating to the initial public offering and the closing of the Company’s initial Business Combination and terminating on the fifth anniversary of such effectiveness date. The Units issuable upon exercise of this unit purchase option are identical to those offered in the initial public offering, except that the exercise price of the warrants underlying the Units sold to the underwriters is $13.00 per share. Note Payable On November 20, 2018, the Company paid its underwriter $20,000 and issued Maxim Group, LLC, its underwriter (“Maxim”) a secured demand promissory note (the “Note”) in the amount of $1,800,000. The Note accrued interest at 8% per annum from the date of the Note through and including May 20, 2019, 12% per annum from and including May 21, 2019 through and including August 20, 2019, and 15% per annum and from and including August 21, 2019, through and including November 20, 2019. If a late payment had occurred and continued, the interest rate would have increased to 12% per annum from the date of the Note through and including August 20, 2019 and 18% per annum from and after August 21, 2019. If a late payment had remained outstanding for over 48 hours, Maxim could have required the Company to redeem all or any part of the Note at a redemption price equal to 125% of the Alternate Payment Amount. The principal and interest of the Note was payable upon demand by Maxim or from time to time, in accordance the following schedule: (i) one third of the principal, accrued and unpaid interest and any late charges on May 20, 2019; (ii) one third of the principal, accrued and unpaid interest and any late charges on August 20, 2019; and (iii) one third of the principal, accrued and unpaid interest and any late charges on November 20, 2019. The Note was secured by a first priority security interest in all personal property and assets of the Company excluding the assets held in escrow with respect to (i) that certain stock purchase agreement with Polar Asset Management Partners Inc. (“Polar”), pursuant to which Polar agreed to sell up to 490,000 shares of the Company’s common stock to the Company thirty days after the consummation of the Business Combination and (ii) that certain stock purchase agreement with K2 Principal Fund L.P. (“K2”), pursuant to which K2 agreed to sell up to 220,000 shares of the Company’s common stock to the Company thirty days after the consummation of the Business Combination. The amount payable under the Note could also have been paid in shares of common stock of the Company or securities convertible or exercisable into shares of common stock of the Company (the “Alternate Equity Payment”) if and only if the Company and Maxim mutually agree on both the purchase price and, if applicable, the conversion and/or exercise price of each security of the Company issued in such Alternative Equity Payment. Otherwise, the payment should be made in cash only. So long as any amount under the Note remained outstanding, all cash proceeds received by the Company from any sales of its securities was to be used to repay this Note. Convertible Note Payable On December 20, 2018, the Company entered into a securities exchange agreement (“Exchange Agreement”) with Maxim. Pursuant to the terms of the Exchange Agreement, Maxim agreed to surrender and exchange the Note. In exchange, the Company issued to Maxim a Series A-1 Exchange Convertible Note in the principal amount of $500,000 (the “Series A-1 Note”) and a Series A-2 Exchange Convertible Note in the principal amount of $1,000,000 (the “Series A-2 Note,” and collectively with Series A-1 Note, the “Exchange Notes”). The original amount of the promissory note was $1,800,000, the total amount of the two exchange notes is $1,500,000, and the difference of $300,000 has been recorded as debt forgiveness income. The Series A-1 Note bears interest at 2.67% per annum, payable quarterly and has a maturity date of the earlier of the closing date of the Acquisition (as defined below) or June 20, 2020 (the “Maturity Date”). The Company may pay the interest in cash or at its sole discretion, in shares of its common stock or a combination of cash and common stock. However, the Company may only pay the interest in shares of its common stock if (i) all the equity conditions specified in the note (“Equity Conditions”) have been met (unless waived by Maxim in writing) during the 20 trading days immediately prior to the interest payment date (“Interest Notice Period”), (ii) the Company has provided proper notice pursuant to the terms of the note and (iii) the Company has delivered to Maxims’ account certain number of shares of its common stock to be applied against such interest payment prior to (but no more than five trading days before) the Interest Notice Period. The Series A-1 Note is convertible into shares of the Company’s common stock (“Conversion Shares”) at an initial conversion price of $1.93 per share, subject to adjustment for any stock dividends and splits, rights offerings, distributions, combinations or similar transactions. Upon the closing of the Acquisition, the conversion price will be automatically adjusted to equal the arithmetic average of the volume weighted average price (“VWAP”) of the Company’s common stock in the five trading days prior to the closing date of the Acquisition. Maxim may convert the Series A-1 Note at any time, in whole or in part, provided that upon receipt of a notice of conversion Maxim, the Company has the right to repay all or any portion of the Series A-1 Note included in the notice of conversion. Additionally, the Series A-1 Note will automatically convert into shares of the Company’s common stock on the earlier of the Maturity Date or the closing date of the Acquisition provided that (i) no event of default then exists, and (ii) solely if such automatic conversion date is also the Maturity Date, each of the Equity Conditions have been met (unless waived in writing by Maxim) on each trading day during the 20 trading day period ending on the trading day immediately prior to the automatic conversation date. At any time prior to the Maturity Date, the Company may also elect to redeem some or all of the outstanding principal amount for cash in an amount (the “Optional Redemption Amount”) equal to the sum of (a) 100% of the then outstanding principal amount of the note, (b) accrued but unpaid interest and (c) all liquidated damages and other amounts due in respect of the note (the “Optional Redemption”). The Company may only effect an Optional Redemption if each of the Equity Conditions have been met (unless waived in writing by Maxim) on each trading day during the period commencing on the date when the notice of the Optional Redemption is delivered to the date of the Optional Redemption and through and including the date payment of the Optional Redemption Amount is actually made in full. Except as otherwise provided in the Series A-1 Note, including, without limitation, an Option Redemption, the Company may not prepay any portion of the principal amount of the note without the prior written consent of Maxim. The Company is not permitted to convert any portion of the Series A-1 Note if doing so results in Maxim beneficially owning more than 4.99% of the outstanding common stock of the Company after giving effect to such conversion, provided that on 61 days’ prior written notice from Maxim to the Company, that percentage may increase to 9.99%. However, if there is an automatic conversion, and the conversion would result in the Company issuing a number of shares in excess of the beneficial ownership limitation, then any such shares in excess of the beneficial ownership limitation will be held in abeyance for the benefit of Maxim until such time or times, if ever, as its right thereto would not result in Maxim exceeding the beneficial ownership limitation, at which time or times Maxim will be issued such shares to the same extent as if there had been no such limitation. The Series A-1 Note contains restrictive covenants which, among other things, restrict the Company’s ability to repay or repurchase any indebtedness, make distributions on or repurchase its common stock or enter into transactions with its affiliates. The Series A-2 Note has terms substantially similar to those of the Series A-1 Note except that the Series A-2 Note has a maturity date of June 20, 2020 and an initial conversion price of $1.93 which will be automatically adjusted to the lower of (i) the conversion price then in effect and (ii) the greater of the arithmetic average of the VWAP of the Company’s common stock in the five trading days prior to the notice of conversion and $0.50. As of December 31, 2018, upon the closing of the Acquisition, the Series A-1 Note automatically converted into 193,648 shares of the Company’s common stock. Right of Use Asset, Operating Lease The Company adopted Topic 842 on January 1, 2019. The Company elected to adopt this standard using the optional modified retrospective transition method and recognized a cumulative-effect adjustment to the consolidated balance sheet on the date of adoption. Comparative periods have not been restated. With the adoption of Topic 842, the Company’s consolidated balance sheet now contains the following line items: Right of use asset operating lease, Operating lease obligation, current Operating lease obligation, net of current portion. As all the existing leases subject to the new lease standard were previously classified as operating leases by the Company, they were similarly classified as operating leases under the new standard. The Company has determined that the identified operating leases did not contain non-lease components and require no further allocation of the total lease cost. Additionally, the agreements in place did not contain information to determine the rate implicit in the leases, so we used our incremental borrowing rate as the discount rate. Our weighted average discount rate is 10.67% and the weighted average remaining lease term is 50 months. As of February 29, 2020, operating lease right-of-use assets and liabilities arising from operating leases was $210,602 and $210,601, respectively. During the nine months ended February 29, 2020, cash paid for amounts included for the measurement of lease liabilities was approximately $85,000 and the Company recorded operating lease expense of approximately $34,000. |
Stockholders' Equity
Stockholders' Equity | 9 Months Ended |
Feb. 29, 2020 | |
Equity [Abstract] | |
Stockholders' Equity | NOTE 8 — STOCKHOLDERS’ EQUITY Common Stock The Company is authorized to issue 20,000,000 shares of common stock with a par value of $0.0001 per share. Holders of the shares of the Company’s common stock are entitled to one vote for each share. At February 29, 2020, there were 7,858,975 shares of common stock issued and outstanding. Preferred Stock The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per share. At February 29, 2020, there were no shares of preferred stock issued or outstanding. Private Placement Beginning in February 2019, the Company sold units in connection with a private offering by the Company to raise working capital of up to $2,000,000 (the “Offering Amount” ) through the sale to accredited investors only of up to up to 1,000,000 “Units” of the Company’s securities, at a purchase price of $2.00 per Unit, with each Unit consisting of (i) one share of common stock, par value $0.0001 per share of the Company (the “Common Stock”) and (ii) a warrant to purchase one share of common stock, exercisable at a price of $4.00 per share, exercisable at any time within five years of issuance (each, a “Warrant”) as provided for in the Company’s Term Sheet for Unit Offering dated February 6, 2019 (the “Term Sheet”). For the year ended May 31, 2019, the Company sold 962,500 units for gross proceeds of $1,925,000. During the nine months ended February 29, 2020, the Company sold 25,000 units for gross proceeds of $50,000. The common shares underlying the units have not been issued yet and the $50,000 is included on the balance sheet with current liabilities. During the nine months ended February 29, 2020, the Company issued 750,000 shares of common stock for the acquisition of PLAYlive. The shares were valued at $1,440,000, the fair value at the time of issuance. Stock - Based Compensation On March 27, 2019, the Company issued 180,000 shares of common stock to 3 employees. The shares were issued in conjunction with their employment agreements and vested ratably through December 31, 2019. As of February 29, 2020, 180,000 shares have vested, and for the year ended May 31, 2019 and the nine months ended February 29, 2020, the Company recognized $27,000 and $63,000 of stock-based compensation, respectively, based on the trading price on March 27, 2019 (measurement date) of $0.60 per share. As of February 29, 2020, there is no further unrecognized compensation cost related to these shares. In November 2019, the Company recorded $90,000 of stock-based compensation for shares issued to an officer for past services provided. Warrants For the year ended May 31, 2018, the Company issued 5,461,500 warrants in conjunction with its initial public offering. These warrants are exercisable for five years from November 20, 2018, the date of the initial business combination and have an exercise price equal to $11.50. For the year ended May 31, 2019, the Company issued 962,500 warrants in conjunction with the above-mentioned private placement. These warrants are exercisable for 5 years and have an exercise price of $4.00 A summary of the status of the Company’s outstanding stock warrants for the nine months ended February 29, 2020 is as follows: Number of Average Expiration Outstanding – May 31, 2019 6,424,000 $ 10.38 Granted – February 29, 2020 - Outstanding – February 29, 2020 6,424.000 $ 10.38 May 2024 Warrants exercisable at February 29, 2020 6,424,000 |
Segment and Related Information
Segment and Related Information | 9 Months Ended |
Feb. 29, 2020 | |
Segment Reporting [Abstract] | |
Segment and Related Information | NOTE 9 — SEGMENT AND RELATED INFORMATION Historically, the Company had one operating segment. However, with the acquisition of PLAYlive and the opening of Company-owned retail stores, the Company’s operations are now managed through three operating segments: Franchise royalties and license fees, Company-owned stores and Esports revenue. These three operating segments and corporate are presented below as its reportable segments. Summarized financial information concerning our reportable segments for the nine months ended February 29, 2020 is shown in the following table: Revenues Net Depreciation Capital Goodwill Total Franchise royalties and fees $ 432,000 $ (91,000 ) $ 3,000 $ - $ 651,000 $ 1,713,000 Company-owned stores 155,000 (209,000 ) 34,000 153,000 - 623,000 Esports revenue 114,000 (213,000 ) 154,000 8,000 4,456,000 5,981,000 Corporate - (738,000 ) - - - 156,000 Total $ 701,000 $ (1,251,000 ) $ 191,000 $ 161,000 $ 5,107,000 $ 8,473,000 |
Subsequent Events
Subsequent Events | 9 Months Ended |
Feb. 29, 2020 | |
Subsequent Events [Abstract] | |
Subsequent Events | NOTE 10 — SUBSEQUENT EVENTS On March 12, 2020 (the “Execution Date”), the Company entered into a Common Stock Purchase Agreement (the “Common Stock Purchase Agreement”) with Triton Funds LP (“Selling Stockholder”), dated as of March 11, 2020, pursuant to which, upon the terms and subject to the conditions thereof, the Selling Stockholder is committed to purchase shares of the Company’s Common Stock (the “Put Shares”) at an aggregate price of up to $500,000 (the “Maximum Commitment Amount”) over the course of the commitment period (the “Equity Line”). In connection with the execution of the Common Stock Purchase Agreement, the Company agreed to issue, and issued on March 11, 2020, 5,000 shares of the Company’s Common Stock (the “Donation Shares”) to Selling Stockholder as a donation. Pursuant to the terms of the Common Stock Purchase Agreement, the commitment period will commence upon the effective date of the Common Stock Purchase Agreement and will end on the earlier of (i) the date on which the Selling Stockholder has purchased Common Stock from us pursuant to the Common Stock Purchase Agreement (“Put Shares”) equal to the Maximum Commitment Amount and (ii) December 31, 2020. Subject to the terms and conditions set forth in the Common Stock Purchase Agreement, the Company has the option to sell to the Selling Stockholder, and the Selling Stockholder is obligated to purchase from the Company, a number of Shares having an aggregate purchase price of $500,000. From time to time over the term of the Common Stock Purchase Agreement, commencing on the date on which a registration statement registering the Put Shares (the “Registration Statement”) becomes effective, subject to the limitations discussed below and contained in the Common Stock Purchase Agreement, the Company is obligated to provide the Selling Stockholder with a put notice (each a “Put Notice”) to purchase a specified number of the Put Shares (each a “Put Amount Requested”). Upon delivery of a Put Notice, the Company must deliver the Put Amount Requested as Deposit Withdrawal at Custodian (DWAC) shares to Selling Stockholder within two trading days following the date of the Put Notice. On the third business day (“Closing Date”) following notification by the Selling Stockholder that the Put Shares have been received in its custodial account following the delivery of a Put Notice to the Selling stockholder, the Selling Stockholder will deliver the Put Amount to the Company via wire transfer (“Closing”). The actual amount of proceeds the Company receives pursuant to each Put Notice (each, the “Put Amount”) is to be determined by multiplying the Put Amount Requested by the applicable purchase price as determined on the Closing Date. The purchase price for each of the Put Shares equals In order to deliver a Put Notice, certain conditions set forth in the Common Stock Purchase Agreement must be met, as provided therein. Under the terms of the Common Stock Purchase Agreement, the Company may not deliver a Put Notice to the Selling Stockholder until the Closing pursuant to any prior Put Notice has been completed. In addition, the Selling Stockholder is not entitled to purchase that number of Shares, which when added to the sum of the number of shares of Common Stock beneficially owned by the Selling Stockholder, would exceed 9.99% of the number of shares of Common Stock outstanding on the Closing. On the Execution Date, the Company also entered into a registration rights agreement (the “Registration Rights Agreement”) with Selling Stockholder pursuant to which the Company is obligated to file the Registration Statement to register the resale of the Put Shares. Pursuant to the Registration Rights Agreement, the Company must (i) file the Registration Statement within 30 calendar days from the Execution Date, (ii) use reasonable best efforts to cause the Registration Statement to be declared effective under the Securities Act of 1933, as amended, within thirty (30) calendar days, but no more than ninety (90) calendar days after the Company has filed the Registration Statement, and (iii) use its reasonable best efforts to keep such Registration Statement continuously effective under the Securities Act until all of the Put Shares have been sold thereunder or On March 22, 2020, the Company announced it would be holding weekly online esports tournaments, due to increased demand from COVID-19 related social distancing. Through the acquisition of PLAYlive Nation, Inc. the Company acquired a database of over 400,000 paying PLAYlive Nation esports gaming center customers. The Company will be promoting its new online esports tournaments directly to this existing customer base via text message announcements and promotions. The Company sees this as a new and sustainable business unit that can create revenues during stay at home orders and into the future. See further discussion elsewhere herein. On March 30, 2020 the SEC declared a registration statement on Form S-1 effective, that was filed to register the resale of up to 725,000 shares of common stock issuable under a $500,000 equity line between the Company and Triton Funds LP. The Company can put shares to Triton Funds LP in multiple tranches and has until December 31, 2020 to exercise the line. Triton Funds LP’s purchase price is a 10% discount to the lowest five-day trailing volume weighted average price (VWAP). On April 1, 2020, the Company released multiple players and staff members from Simplicity One Brasil Ltd as part of a restructuring to make the Flamengo Esports project profitable. The Company will be applying for ownership of a franchise spot in League of Legends Brazil (CBLoL) once applications are opened by Riot in early summer 2020. Management expects to receive approval for franchise ownership by the end of calendar year 2020. On April 3, 2020 the Company furloughed multiple members of the PLAYlive staff as a cost cutting measure during this temporary period of esports gaming center closures due to COVID-19. During the quarter ended February 29, 2020, PLAYlive was cash flow positive. Agreements with franchisees require a minimum monthly royalty payment that will be billed by the Company. Most landlords have already been contacted and have begun making rent concessions. On April 10, 2020, the Company filed a registration statement on Form S-1 with the SEC relating to the offer by the Company of units of the Company, each of which consists of one share of common stock and one warrant to purchase one share of our common stock. No sales of units will be made prior to effectiveness of the registration statement on Form S-1. There can be no assurance that the registration statement on Form S-1 will be declared effective by the SEC. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Feb. 29, 2020 | |
Accounting Policies [Abstract] | |
Basis of Presentation | 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 (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X promulgated by the Securities and Exchange Commission (the “SEC”). Certain information or footnote disclosures normally included in consolidated financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a comprehensive presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited consolidated financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the consolidated financial position, operating results and cash flows for the periods presented. The accompanying unaudited consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K as filed with the SEC on August 29, 2019. The interim results for the three and nine months ended February 29, 2020 are not necessarily indicative of the results to be expected for the year ending May 31, 2020 or for any future interim periods. |
Emerging Growth Company | Emerging Growth Company Section 102(b)(1) of the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a registration statement under the Securities Act of 1933, as amended (the “Securities Act”), declared effective or do not have a class of securities registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. |
Basis of Consolidation | Basis of Consolidation The consolidated financial statements include the operations of the Company and its wholly owned subsidiaries, Simplicity Esports, LLC, PLAYlive Nation, Inc., and PLAYlive Nation Holdings, LLC, its 90% owned subsidiary Simplicity One Brasil Ltd, and its 79% owned subsidiaries Simplicity Happy Valley, LLC and Simplicity Redmond, LLC. In November 2019, the Company organized Simplicity Happy Valley, LLC and Simplicity Redmond, LLC for the purpose of converting a franchised store into a Company owned store. All significant intercompany accounts and transactions have been eliminated in consolidation. |
Reclassification | Reclassification Certain amounts in the prior period consolidated financial statements have been reclassified to conform to the presentation of the current period financial statements. These reclassifications had no effect on the previously reported net loss. |
Cash and Cash Equivalents | Cash and cash equivalents The Company considers short-term interest-bearing investments with initial maturities of three months or less to be cash equivalents. The Company has no cash equivalents. |
Concentration of Credit Risk | Concentration of Credit Risk Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which at times, may exceed the Federal depository insurance coverage of $250,000. The Company has not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts. |
Financial Instruments | Financial Instruments The fair value of the Company’s assets and liabilities, which qualify as financial instruments under the Financial Accounting Standards Board (the “FASB”) Accounting Standards Codification (“ASC”) 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the consolidated balance sheet. |
Use of Estimates | Use of Estimates The preparation of consolidated financial statements in conformity with GAAP requires the Company’s 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. Actual results could differ from those estimates. |
Revenue Recognition | Revenue Recognition As of January 1, 2018, the Company adopted Revenue from Contracts with Customers (Topic 606) (“ASC 606”). The new guidance sets forth a new five-step revenue recognition model which replaces the prior revenue recognition guidance in its entirety and is intended to eliminate numerous industry-specific pieces of revenue recognition guidance that have historically existed in GAAP. The underlying principle of the new standard is that a business or other organization will recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects what it expects to receive in exchange for the goods or services. The standard also requires more detailed disclosures and provides additional guidance for transactions that were not addressed completely in the prior accounting guidance. The Company adopted the standard using the modified retrospective method and the adoption did not have a material impact on its financial statements. The Company recognizes revenue when performance obligations under the terms of a contract with the customer are satisfied. Product sales occur once control is transferred upon delivery to the customer. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods and services. Our revenue is derived from the three sources listed below. The following describes principal activities, separated by major product or service, from which the Company generates its revenues: Company-owned Stores Sales The Company-owned stores principally generate revenue from retail esports gaming centers. Revenues from Company-owned stores are recognized when the products are delivered, or the service is provided. Franchise Royalties and Fees Franchise royalties are based on six percent of franchise store sales after a minimum level of sales occur and are recognized as sales occur. Any royalty reductions, including waivers or those offered as part of a new store development incentive or as incentive for other behaviors, are recognized at the same time as the related royalty, as they are not separately distinguishable from the full royalty rate. Franchise royalties are billed on a monthly basis. The Company recognizes initial franchise license fee revenue when the Company has performed substantially all the services required in the franchise agreement. Fees received that do not meet these criteria are recorded as deferred revenues until earned. The pre-opening services provided to franchisees do not contain separate and distinct performance obligations from the franchise right; thus, the fees collected will be amortized on a straight-line basis beginning at the store opening date through the term of the franchise agreement, which is typically 10 years. Franchise license renewal fees, which generally occur every 10 years, are billed before the renewal date. Fees received for future license renewal periods are amortized over the life of the renewal period. The Company offers various incentive programs for franchisees including royalty incentives, new store opening incentives (i.e. development incentives) and other support initiatives. Royalties and franchise fees sales are reduced to reflect any royalty incentives earned or granted under these programs that are in the form of discounts. Commissary sales are comprised of gaming equipment and supplies sold to franchised stores and are recognized as revenue upon shipment or delivery of the related products to the franchisees. Payments are generally due within 30 days. Fees for information services, including software maintenance fees, marketing fees and website maintenance, graphic and promotion fees are recognized as revenue as such services are provided. Esports revenue Esports is a form of competition using video games. Most commonly, esports takes the form of organized, single player and multiplayer video game tournaments or leagues, particularly between professional players, individually or as teams. Revenues from Esports revenues are recognized when the competition is completed, and prize money is awarded. Revenues earned from team sponsorships, prize winnings, league sponsorships, and from the Company’s share of league revenues are included in esports revenue. |
Deferred Revenues | Deferred Revenues Deferred revenues are classified as current or long-term based on when management estimates the revenues will be recognized. The Company receives payments from franchisees in advance of all performance obligations having been met, including but not limited to franchise locations being opened. As certain conditions agreed to in these franchise agreements are performed, revenues are recognized. Deferred costs include commissions paid to brokers related to the sale of specific new franchises which have not met revenue recognition criteria as of February 29, 2020. These costs are recognized in the same period as the initial franchise fee revenue is recognized. |
Accounts Receivable | Accounts Receivable The Company estimates the allowance for doubtful accounts based on an analysis of specific customers (i.e. franchisees), taking into consideration the age of past due accounts and an assessment of the customer’s ability to pay. Accounts receivable are written off against the allowance when management determines it is probable the receivable is worthless. Customer account balances with invoices dated over 90 days old are considered delinquent and considered in the allowance assessment. The Company performs credit evaluations of its customers and, generally, requires no collateral. Management has assessed accounts receivable and an allowance for doubtful accounts of approximately $11,000 has been recorded. |
Property and Equipment | Property and Equipment Property and equipment and leasehold improvements are recorded at its historical cost. The cost of property and equipment is depreciated over the estimated useful lives, when placed in service (ranging from 3 -5 years), of the related assets utilizing the straight-line method of depreciation. The cost of leasehold improvements is depreciated (amortized) over the lesser of the length of the related leases or the estimated useful lives of the assets. Ordinary repairs and maintenance are expensed when incurred and major repairs will be capitalized and expensed if they benefit future periods. |
Intangible Assets and Impairment | Intangible Assets and Impairment Intangible assets that are subject to amortization are reviewed for potential impairment whenever events or circumstances indicate that carrying amounts may not be recoverable. Assets not subject to amortization are tested for impairment at least annually. The Company has intangible assets subject to amortization related to its acquisition of Simplicity Esports, LLC and PLAYlive Nation, Inc. These costs are included in intangible assets on our consolidated balance sheet and amortized on a straight-line basis when placed into service over their estimated useful lives of the costs, which is 3 to 5 years. The Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less that the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s estimated fair value and its book value. |
Goodwill | Goodwill Goodwill is the excess of our purchase cost over the fair value of the net assets of acquired businesses. We do not amortize goodwill, but we assess our goodwill for impairment at least annually. We have assessed goodwill and qualitative considerations indicated no impairment. |
Franchise Locations | Franchise Locations Through PLAYlive, the Company’s wholly owned subsidiary, the Company has entered into franchise agreements with third parties. As of February 29, 2020, 43 locations were open and operating, in various states including Arizona, California, Idaho, Florida, Maryland, Michigan, Mississippi, Montana, Oregon, South Carolina, Texas, Utah and Washington, in addition we have five additional franchise locations that are currently in the final stages of preparation for opening. |
Stock-based Compensation | Stock-based Compensation The Company records stock-based compensation in accordance with ASC 718, Compensation – Stock Compensation Equity-Based Payments to Non-Employees |
Leases | Leases In February 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-02-Leases (Topic 842), which significantly amends the way companies are required to account for leases. Under the updated leasing guidance, some leases that did not have to be reported previously are now required to be presented as an asset and liability on the balance sheet. In addition, for certain leases, what was previously classified as an operating expense must now be allocated between amortization expense and interest expense. The Company elected to adopt this update early as of January l, 2019 using the modified retrospective transition method and prior periods have not been restated. Upon implementation, the Company recognized an initial operating lease right-of-use asset of $110,003 and operating lease liability of $107,678. Due to the simplistic nature of the Company’s leases, no retained earnings adjustment was required. See Note 7 for further details. |
Basic Loss Per Share | Basic Loss Per Share The Company complies with accounting and disclosure requirements ASC Topic 260, “Earnings Per Share.” Basic loss per share is calculated by dividing the Company’s net loss by the weighted average number of common shares outstanding during the period. Diluted loss per share is calculated by dividing the Company’s net loss by the diluted weighted average number of shares outstanding during the period. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. At February 29, 2020, the Company had a convertible note in the principal amount of $1,000,000 and common stock warrants that could be converted into approximately 6,924,000 common shares. These shares are not presented in the consolidated statements of operations as the effect of these shares is anti-dilutive. |
Income Taxes | Income Taxes The Company complies with the accounting and reporting requirements of ASC Topic 740, “ Income Taxes ASC Topic 740 prescribes a recognition threshold and a measurement attribute for the consolidated financial statements recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. On December 22, 2017, the U.S. Tax Cuts and Jobs Act of 2017 (“Tax Reform”) was signed into law. As a result of Tax Reform, the U.S. statutory tax rate was lowered from 35% to 21% effective January 1, 2018, among other changes. ASC Topic 740 requires companies to recognize the effect of tax law changes in the period of enactment; therefore, the Company was required to revalue its deferred tax assets and liabilities at the new rate. The SEC issued Staff Accounting Bulletin No. 118 (“SAB 118”) to address the application of GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain tax effects of Tax Reform. The ultimate impact may differ from this provisional amount, possibly materially, as a result of additional analysis, changes in interpretations and assumptions the Company has made, additional regulatory guidance that may be issued, and actions the Company may take as a result of Tax Reform. |
Recently Issued and Recently Adopted Accounting Pronouncements | Recently Issued and Recently Adopted Accounting Pronouncements Accounting standards promulgated by the FASB are subject to change. Changes in such standards may have an impact on the Company’s future financial statements. The following are a summary of recent accounting developments. In June 2018, the FASB issued ASU 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting Subtopic 505-50, Equity—Equity-Based Payments to Non-Employees. The Company periodically reviews new accounting standards that are issued. Although some of these accounting standards may be applicable to the Company, the Company has not identified any other new standards that it believes merit further discussion, and the Company expects that none would have a significant impact on its financial statements. |
Going Concern, Liquidity and Management's Plan | Going Concern, Liquidity and Management’s Plan The Company’s consolidated financial statements have been prepared assuming that it will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business. As reflected in the consolidated financial statements, the Company has an accumulated deficit at February 29, 2020, a net loss and net cash used in operating activities for the reporting period then ended. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year from the of the date that the financial statements are issued. The Company has commenced operations and has begun to generate revenue; however, the Company’s cash position may not be sufficient to support the Company’s daily operations. Management intends to raise additional funds by way of a private or public offering. While the Company believes in the viability of its strategy and its ability to generate sufficient revenue and to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan, to generate sufficient revenue and to raise additional funds by way of public and/or private offerings. The consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. In December 2019, a novel strain of coronavirus (COVID-19) emerged in Wuhan, Hubei Province, China. While initially the outbreak was largely concentrated in China and caused significant disruptions to its economy, it has now spread to several other countries and infections have been reported globally. Because COVID-19 infections have been reported throughout the United States, certain federal, state and local governmental authorities have issued stay-at-home orders, proclamations and/or directives aimed at minimizing the spread of COVID-19. Additional, more restrictive proclamations and/or directives may be issued in the future. As a result, all of our corporate and franchised Simplicity Gaming Centers have been closed effective April 1, 2020. Although our franchise agreements with franchisees of Simplicity Gaming Centers require a minimum monthly royalty payment to us from the franchisees regardless of whether the franchised Simplicity Gaming Centers are operating, there is a potential risk that franchisees of Simplicity Gaming Centers will default in their obligations to pay their minimum monthly royalty payment to us. 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, reduced customer traffic and reduced operations. Any resulting financial impact cannot be reasonably estimated at this time but is anticipated to have a material adverse impact on our business, financial condition and results of operations. The measures taken to date will impact the Company’s business for the fiscal fourth quarter and potentially beyond. Management expects that all of its business segments, across all of its geographies, will be impacted to some degree, but the significance of the impact of the COVID-19 outbreak on the Company’s business and the duration for which it may have an impact cannot be determined at this time. |
Property, Plant and Equipment (
Property, Plant and Equipment (Tables) | 9 Months Ended |
Feb. 29, 2020 | |
Property, Plant and Equipment [Abstract] | |
Schedule of Property, Plant and Equipment | The following is a summary of property, plant, and equipment—at cost, less accumulated depreciation: February 29, 2020 Leasehold improvements $ 52,189 Property and equipment 243,314 Total cost 295,503 Less accumulated depreciation (42,537 ) Net, property plant and equipment $ 252,966 |
Intangible Assets (Tables)
Intangible Assets (Tables) | 9 Months Ended |
Feb. 29, 2020 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Intangible Assets | The following table sets forth the intangible assets, including accumulated amortization as of February 29, 2020: February 29, 2020 Remaining Accumulated Net Carrying Useful Life Cost Amortization Value Non-Competes 4 years $ 1,023,118 $ 238,728 $ 784,390 Trademarks Indefinite 866,000 - 866,000 Customer contracts 10 years 594,000 - 594,000 Internet domain 2 years 3,000 1,167 1,833 $ 2,486,118 $ 239,895 $ 2,246,223 |
Acquisitions (Tables)
Acquisitions (Tables) | 9 Months Ended |
Feb. 29, 2020 | |
Simplicity Esports, LLC Acquisition [Member] | |
Business Acquisition [Line Items] | |
Schedule of Aggregate Purchase Price | The aggregate purchase price consisted of the following: Restricted stock consideration 6,090,000 Total $ 6,090,000 |
Schedule of Estimated Fair Value of Assets Acquired and Liabilities | The following table summarizes the estimated fair value of the Simplicity Esports, LLC assets acquired and liabilities assumed at the date of acquisition: Cash $ 76,000 Internet Domain 3,000 Trade names and trademarks 588,000 Non-Competes 1,023,118 Accounts payable and accrued liabilities (56,000 ) Goodwill 4,455,882 Total $ 6,090,000 |
Schedule of Unaudited Pro Forma Information Below Presents the Consolidated Results Operations | The following unaudited pro forma information presents the consolidated results of operations data as if the acquisition of Simplicity Esports, LLC took place on June 1, 2018: Nine Months Ended Total Revenue $ 24,000 Net Loss $ (3,482,692 ) Basic Net Loss Per Share $ (0.97 ) |
PLAYlive Nations, Acquisition [Member] | |
Business Acquisition [Line Items] | |
Schedule of Aggregate Purchase Price | The aggregate purchase price consisted of the following: Restricted stock consideration $ 1,440,000 Total $ 1,440,000 |
Schedule of Estimated Fair Value of Assets Acquired and Liabilities | The following table summarizes the estimated fair value of the PLAYlive assets acquired and liabilities assumed at the date of acquisition: Cash $ 26,000 Property, plant and equipment (provisional) 10,000 Net deferred revenue (provisional) (115,000 ) Customer relationships (provisional) - Accounts payable and accrued liabilities (4,000 ) Goodwill (provisional) 651,000 Trademarks 278,000 Customer contracts 594,000 Total $ 1,440,000 |
Schedule of Unaudited Pro Forma Information Below Presents the Consolidated Results Operations | The following unaudited pro forma information presents the consolidated results of operations data as if the acquisition of PLAYlive took place on June 1, 2018: Nine Months Ended Nine Months Ended Total Revenue $ 705,000 $ 526,000 Net Loss $ (1,270,000 ) $ (3,026,000 ) Basic Net Loss Per Share $ (0.17 ) $ (0.85 ) |
Stockholders' Equity (Tables)
Stockholders' Equity (Tables) | 9 Months Ended |
Feb. 29, 2020 | |
Equity [Abstract] | |
Schedule of Outstanding Stock Warrants | A summary of the status of the Company’s outstanding stock warrants for the nine months ended February 29, 2020 is as follows: Number of Average Expiration Outstanding – May 31, 2019 6,424,000 $ 10.38 Granted – February 29, 2020 - Outstanding – February 29, 2020 6,424.000 $ 10.38 May 2024 Warrants exercisable at February 29, 2020 6,424,000 |
Segment and Related Informati_2
Segment and Related Information (Tables) | 9 Months Ended |
Feb. 29, 2020 | |
Segment Reporting [Abstract] | |
Schedule of Segment Reporting Information | Summarized financial information concerning our reportable segments for the nine months ended February 29, 2020 is shown in the following table: Revenues Net Depreciation Capital Goodwill Total Franchise royalties and fees $ 432,000 $ (91,000 ) $ 3,000 $ - $ 651,000 $ 1,713,000 Company-owned stores 155,000 (209,000 ) 34,000 153,000 - 623,000 Esports revenue 114,000 (213,000 ) 154,000 8,000 4,456,000 5,981,000 Corporate - (738,000 ) - - - 156,000 Total $ 701,000 $ (1,251,000 ) $ 191,000 $ 161,000 $ 5,107,000 $ 8,473,000 |
Organization and Description _2
Organization and Description of Business (Details Narrative) | 9 Months Ended |
Feb. 29, 2020 | |
Royalty fee gross sales rate | 0.06 |
National marketing fee rate | 0.01 |
Simplicity One Brasil Ltd [Member] | |
Equity method investment, ownership percentage | 90.00% |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Details Narrative) - USD ($) | Feb. 29, 2020 | Dec. 22, 2017 | Feb. 29, 2020 | May 31, 2019 | Jan. 02, 2019 |
AccountingPoliciesLineItems [Line Items] | |||||
Federal depository insurance coverage | $ 250,000 | $ 250,000 | |||
Franchise royalties and fees, description | The pre-opening services provided to franchisees do not contain separate and distinct performance obligations from the franchise right; thus, the fees collected will be amortized on a straight-line basis beginning at the store opening date through the term of the franchise agreement, which is typically 10 years. Franchise license renewal fees, which generally occur every 10 years, are billed before the renewal date. Fees received for future license renewal periods are amortized over the life of the renewal period. Commissary sales are comprised of food and supplies sold to franchised stores and are recognized as revenue upon shipment or delivery of the related products to the franchisees. Payments are generally due within 30 days. | ||||
Allowance for doubtful accounts | 11,000 | $ 11,000 | |||
Operating lease right-of-use asset | 210,602 | 210,602 | $ 100,146 | ||
Operating lease liability | 210,601 | 210,601 | |||
Convertible note, principal amount | $ 1,000,000 | $ 1,000,000 | |||
Statutory tax rate description | The U.S. Tax Cuts and Jobs Act of 2017 ("Tax Reform") was signed into law. As a result of Tax Reform, the U.S. statutory tax rate was lowered from 35% to 21%. | ||||
Statutory tax rate | 35.00% | 21.00% | |||
Common Stock Warrant [Member] | Common Shares [Member] | |||||
AccountingPoliciesLineItems [Line Items] | |||||
Number of shares issuable on conversion | 6,924,000 | ||||
Accounting Standards Update 2016-02 [Member] | |||||
AccountingPoliciesLineItems [Line Items] | |||||
Operating lease right-of-use asset | $ 110,003 | ||||
Operating lease liability | $ 107,678 | ||||
Minimum [Member] | |||||
AccountingPoliciesLineItems [Line Items] | |||||
Property, plant and equipment, useful life | 3 years | ||||
Finite lived intangible asset, useful life | 3 years | ||||
Maximum [Member] | |||||
AccountingPoliciesLineItems [Line Items] | |||||
Property, plant and equipment, useful life | 5 years | ||||
Finite lived intangible asset, useful life | 5 years | ||||
Simplicity One Brasil Ltd [Member] | |||||
AccountingPoliciesLineItems [Line Items] | |||||
Equity method investment, ownership percentage | 90.00% | 90.00% | |||
Simplicity Happy Valley, LLC and Simplicity Redmond, LLC [Member] | |||||
AccountingPoliciesLineItems [Line Items] | |||||
Equity method investment, ownership percentage | 79.00% | 79.00% |
Property, Plant and Equipment_2
Property, Plant and Equipment (Details Narrative) - USD ($) | 9 Months Ended | |
Feb. 29, 2020 | Feb. 28, 2019 | |
Property, Plant and Equipment [Abstract] | ||
Depreciation expense | $ 37,240 |
Property, Plant and Equipment -
Property, Plant and Equipment - Schedule of Property, Plant and Equipment (Details) - USD ($) | Feb. 29, 2020 | May 31, 2019 |
Property, Plant and Equipment [Line Items] | ||
Total cost | $ 295,503 | |
Less accumulated depreciation | (42,537) | |
Net, property plant and equipment | 252,966 | $ 117,231 |
Leasehold Improvements [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Total cost | 52,189 | |
Property and Equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Total cost | $ 243,314 |
Intangible Assets (Details Narr
Intangible Assets (Details Narrative) - USD ($) | 9 Months Ended | |
Feb. 29, 2020 | Feb. 28, 2019 | |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Amortization expense | $ 154,218 |
Intangible Assets - Schedule of
Intangible Assets - Schedule of Intangible Assets (Details) - USD ($) | 9 Months Ended | |
Feb. 29, 2020 | May 31, 2019 | |
Finite-Lived Intangible Assets [Line Items] | ||
Finite lived intangible assets, Cost | $ 2,486,118 | |
Accumulated Amortization | 239,895 | |
Intangible assets, Net Carrying Value | $ 2,246,223 | $ 1,528,441 |
Non-Competes [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Intangible assets, useful life | 4 years | |
Finite lived intangible assets, Cost | $ 1,023,118 | |
Accumulated Amortization | 238,728 | |
Intangible assets, Net Carrying Value | $ 784,390 | |
Trademarks [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Intangible assets, useful life, description | Indefinite | |
Finite lived intangible assets, Cost | $ 866,000 | |
Accumulated Amortization | ||
Intangible assets, Net Carrying Value | $ 866,000 | |
Customer Contracts [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Intangible assets, useful life | 10 years | |
Finite lived intangible assets, Cost | $ 594,000 | |
Accumulated Amortization | ||
Intangible assets, Net Carrying Value | $ 594,000 | |
Internet Domain [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Intangible assets, useful life | 2 years | |
Finite lived intangible assets, Cost | $ 3,000 | |
Accumulated Amortization | 1,167 | |
Intangible assets, Net Carrying Value | $ 1,833 |
Acquisitions (Details Narrative
Acquisitions (Details Narrative) - USD ($) | Jan. 14, 2020 | Jul. 29, 2019 | Jan. 07, 2019 | Jan. 04, 2019 | Mar. 31, 2019 | Feb. 29, 2020 |
The Simplicity Esports, LLC [Member] | ||||||
Business Acquisition [Line Items] | ||||||
Number of share issued | 700,000 | 300,000 | 2,000,000 | |||
Business combination, consideration | $ 6,090,000 | |||||
Revenue | 173,000 | |||||
Net income (loss) | $ 554,000 | |||||
The Simplicity Esports, LLC [Member] | Restricted Stock [Member] | ||||||
Business Acquisition [Line Items] | ||||||
Number of share issued | 3,000,000 | |||||
Business combination, consideration | $ 6,090,000 | |||||
PLAYLive Nation, Inc [Member] | ||||||
Business Acquisition [Line Items] | ||||||
Number of share issued | 750,000 | |||||
Business combination, consideration | 1,440,000 | |||||
Revenue | 432,000 | |||||
Net income (loss) | $ 38,000 | |||||
PLAYLive Nation, Inc [Member] | Restricted Stock [Member] | ||||||
Business Acquisition [Line Items] | ||||||
Number of share issued | 750,000 | |||||
Business combination, consideration | $ 1,440,000 | |||||
Simplicity One Brasil Ltd [Member] | ||||||
Business Acquisition [Line Items] | ||||||
Business combination, consideration | $ 2,000 | |||||
Percentage interest acquired | 90.00% |
Acquisitions - Schedule of Aggr
Acquisitions - Schedule of Aggregate Purchase Price (Details) | 9 Months Ended |
Feb. 29, 2020USD ($) | |
The Simplicity Esports, LLC [Member] | |
Business Acquisition [Line Items] | |
Total | $ 6,090,000 |
PLAYLive Nation, Inc [Member] | |
Business Acquisition [Line Items] | |
Total | 1,440,000 |
Restricted Stock [Member] | The Simplicity Esports, LLC [Member] | |
Business Acquisition [Line Items] | |
Total | 6,090,000 |
Restricted Stock [Member] | PLAYLive Nation, Inc [Member] | |
Business Acquisition [Line Items] | |
Total | $ 1,440,000 |
Acquisitions - Schedule of Esti
Acquisitions - Schedule of Estimated Fair Value of Assets Acquired and Liabilities (Details) - USD ($) | Feb. 29, 2020 | May 31, 2019 |
Business Acquisition [Line Items] | ||
Goodwill (provisional) | $ 5,107,141 | $ 4,456,250 |
The Simplicity Esports, LLC [Member] | ||
Business Acquisition [Line Items] | ||
Cash | 76,000 | |
Trade names and trademarks | 588,000 | |
Accounts payable and accrued liabilities | (56,000) | |
Goodwill (provisional) | 4,455,882 | |
Total | 6,090,000 | |
The Simplicity Esports, LLC [Member] | Internet Domain [Member] | ||
Business Acquisition [Line Items] | ||
Finite lived intangible assets | 3,000 | |
The Simplicity Esports, LLC [Member] | Non-Competes [Member] | ||
Business Acquisition [Line Items] | ||
Finite lived intangible assets | 1,023,118 | |
PLAYLive Nation, Inc [Member] | ||
Business Acquisition [Line Items] | ||
Cash | 26,000 | |
Property, plant and equipment (provisional) | 10,000 | |
Net deferred revenue (provisional) | (115,000) | |
Customer relationships (provisional) | ||
Accounts payable and accrued liabilities | (4,000) | |
Goodwill (provisional) | 651,000 | |
Total | 1,440,000 | |
PLAYLive Nation, Inc [Member] | Trademarks [Member] | ||
Business Acquisition [Line Items] | ||
Trade names and trademarks | 278,000 | |
PLAYLive Nation, Inc [Member] | Customer Contracts [Member] | ||
Business Acquisition [Line Items] | ||
Trade names and trademarks | $ 594,000 |
Acquisitions - Schedule of Unau
Acquisitions - Schedule of Unaudited Pro Forma Information Below Presents the Consolidated Results Operations (Details) - USD ($) | 9 Months Ended | |
Feb. 29, 2020 | Feb. 28, 2019 | |
The Simplicity Esports, LLC [Member] | ||
Business Acquisition [Line Items] | ||
Total Revenue | $ 24,000 | |
Net Loss | $ (3,482,692) | |
Basic Net Loss Per Share | $ (0.97) | |
PLAYLive Nation, Inc [Member] | ||
Business Acquisition [Line Items] | ||
Total Revenue | $ 705,000 | $ 526,000 |
Net Loss | $ (1,270,000) | $ (3,026,000) |
Basic Net Loss Per Share | $ (0.17) | $ (0.85) |
Related Party Transactions (Det
Related Party Transactions (Details Narrative) - USD ($) | Nov. 30, 2018 | Feb. 29, 2020 | May 31, 2019 |
Related Party Transaction [Line Items] | |||
Loan payable - Related party | $ 93,761 | ||
Imputed interest | $ 8,523 | ||
Sponsor [Member] | |||
Related Party Transaction [Line Items] | |||
Amount of loan for Initial Public Offering and working capital purposes | $ 201,707 | ||
Debt maturity date | Dec. 31, 2017 | ||
Repayment of loan | $ 120,089 |
Commitments and Contingencies (
Commitments and Contingencies (Details Narrative) | Dec. 31, 2018shares | Dec. 20, 2018USD ($)Integer$ / shares | Nov. 20, 2018USD ($) | Feb. 28, 2019USD ($) | Feb. 29, 2020USD ($)$ / sharesshares | May 31, 2019USD ($) |
Other Commitments [Line Items] | ||||||
Description of debt instrument priority terms | The Note was secured by a first priority security interest in all personal property and assets of the Company excluding the assets held in escrow with respect to (i) that certain stock purchase agreement with Polar Asset Management Partners Inc. ("Polar"), pursuant to which Polar agreed to sell up to 490,000 shares of the Company's common stock to the Company thirty days after the consummation of the Business Combination and (ii) that certain stock purchase agreement with K2 Principal Fund L.P. ("K2"), pursuant to which K2 agreed to sell up to 220,000 shares of the Company's common stock to the Company thirty days after the consummation of the Business Combination. | |||||
Principal amount of convertible securities | $ 500,000 | |||||
Weighted average discount rate | 10.67% | |||||
Weighted average remaining lease term | 50 months | |||||
Operating lease right-of-use assets | $ 210,602 | $ 100,146 | ||||
Operating lease liabilities | 210,601 | |||||
Cash paid for measurement of lease liabilities | 85,000 | |||||
Operating lease expense | $ 34,000 | |||||
Polar Asset Management Partners Inc. [Member] | ||||||
Other Commitments [Line Items] | ||||||
Number of shares agreed to sell | shares | 490,000 | |||||
K2 Principal Fund L.P. [Member] | ||||||
Other Commitments [Line Items] | ||||||
Number of shares agreed to sell | shares | 220,000 | |||||
Maxim Group LLC [Member] | Securities Exchange Agreement [Member] | ||||||
Other Commitments [Line Items] | ||||||
Debt forgiveness income | $ 300,000 | |||||
Secured Demand Promissory Note [Member] | ||||||
Other Commitments [Line Items] | ||||||
Underwriter fees | $ 20,000 | |||||
Principal amount of debt instrument | $ 1,800,000 | |||||
Accrued interest rate of debt instrument | 125.00% | |||||
Secured Demand Promissory Note [Member] | May 20, 2019 [Member] | ||||||
Other Commitments [Line Items] | ||||||
Accrued interest rate of debt instrument | 8.00% | |||||
Secured Demand Promissory Note [Member] | May 21, 2019 Through August 20, 2019 [Member] | ||||||
Other Commitments [Line Items] | ||||||
Accrued interest rate of debt instrument | 12.00% | |||||
Secured Demand Promissory Note [Member] | August 21, 2019, through November 20, 2019 [Member] | ||||||
Other Commitments [Line Items] | ||||||
Accrued interest rate of debt instrument | 15.00% | |||||
Secured Demand Promissory Note [Member] | August 20, 2019 [Member] | ||||||
Other Commitments [Line Items] | ||||||
Interest rate for debt default | 12.00% | |||||
Secured Demand Promissory Note [Member] | After August 21, 2019 [Member] | ||||||
Other Commitments [Line Items] | ||||||
Accrued interest rate of debt instrument | 18.00% | |||||
Series A-1 Exchange Convertible Note [Member] | ||||||
Other Commitments [Line Items] | ||||||
Number of conversion of shares | shares | 193,648 | |||||
Series A-1 Exchange Convertible Note [Member] | Maxim Group LLC [Member] | Securities Exchange Agreement [Member] | ||||||
Other Commitments [Line Items] | ||||||
Principal amount of convertible securities | $ 500,000 | |||||
Interest rate of convertible securities | 2.67% | |||||
Maturity date of convertible securities | Jun. 20, 2020 | |||||
Frequency of periodic payment | Payable quarterly | |||||
Description of payment terms | The Company may pay the interest in cash or at its sole discretion, in shares of its common stock or a combination of cash and common stock. However, the Company may only pay the interest in shares of its common stock if (i) all the equity conditions specified in the note ("Equity Conditions") have been met (unless waived by Maxim in writing) during the 20 trading days immediately prior to the interest payment date ("Interest Notice Period"), (ii) the Company has provided proper notice pursuant to the terms of the note and (iii) the Company has delivered to Maxims' account certain number of shares of its common stock to be applied against such interest payment prior to (but no more than five trading days before) the Interest Notice Period. | |||||
Threshold trading days | Integer | 20 | |||||
Conversion price | $ / shares | $ 1.93 | |||||
Description of restrictive conversion terms | The Company is not permitted to convert any portion of the Series A-1 Note if doing so results in Maxim beneficially owning more than 4.99% of the outstanding common stock of the Company after giving effect to such conversion, provided that on 61 days' prior written notice from Maxim to the Company, that percentage may increase to 9.99%. | |||||
Series A-2 Exchange Convertible Note [Member] | Maxim Group LLC [Member] | Securities Exchange Agreement [Member] | ||||||
Other Commitments [Line Items] | ||||||
Principal amount of convertible securities | $ 1,000,000 | |||||
Maturity date of convertible securities | Jun. 20, 2020 | |||||
Threshold trading days | Integer | 5 | |||||
Conversion price | $ / shares | $ 1.93 | |||||
Description of conversion terms | Automatically adjusted to the lower of (i) the conversion price then in effect and (ii) the greater of the arithmetic average of the VWAP of the Company's common stock in the five trading days prior to the notice of conversion and $0.50. | |||||
Promissory Note [Member] | Maxim Group LLC [Member] | Securities Exchange Agreement [Member] | ||||||
Other Commitments [Line Items] | ||||||
Principal amount of debt instrument | 1,800,000 | |||||
Two Exchange Notes [Member] | Maxim Group LLC [Member] | Securities Exchange Agreement [Member] | ||||||
Other Commitments [Line Items] | ||||||
Debt forgiveness income | $ 1,500,000 | |||||
Underwriter [Member] | ||||||
Other Commitments [Line Items] | ||||||
Sale of stock, price per share | $ / shares | $ 13 | |||||
Initial Public Offering [Member] | ||||||
Other Commitments [Line Items] | ||||||
Aggregate exercise price of unit sold to underwriters | $ 100 | |||||
Number of shares issued under purchase option | shares | 250,000 | |||||
Options exercisable, per unit | 11.50 | |||||
Weighted average discount rate | 12.00% | |||||
Over-Allotment Option [Member] | Underwriters [Member] | ||||||
Other Commitments [Line Items] | ||||||
Aggregate exercise price of unit sold to underwriters | $ 2,990,000 | |||||
Number of shares issued under purchase option | shares | 260,000 |
Stockholders' Equity (Details N
Stockholders' Equity (Details Narrative) - USD ($) | Mar. 27, 2019 | Nov. 30, 2019 | Feb. 28, 2019 | Nov. 30, 2019 | Feb. 28, 2019 | Feb. 29, 2020 | May 31, 2019 | May 31, 2018 |
Class of Stock [Line Items] | ||||||||
Common stock, authorized | 20,000,000 | 20,000,000 | ||||||
Common stock, par value | $ 0.0001 | $ 0.0001 | ||||||
Common stock holders rights | One vote for each share. | |||||||
Common stock, issued | 7,858,975 | 7,003,975 | ||||||
Common stock, outstanding | 7,858,975 | 7,003,975 | ||||||
Preferred stock, authorized | 1,000,000 | 1,000,000 | ||||||
Preferred stock, par value | $ 0.0001 | $ 0.0001 | ||||||
Preferred stock, issued | ||||||||
Preferred stock, outstanding | ||||||||
Number of common stock not issued yet | $ 50,000 | |||||||
Stock issued during period, value, acquisitions | $ 6,090,000 | 1,440,000 | ||||||
Stock-based compensation | $ 90,000 | $ 90,000 | ||||||
Employment Agreements [Member] | ||||||||
Class of Stock [Line Items] | ||||||||
Share price | $ 0.60 | |||||||
Vesting maturity date | Dec. 31, 2019 | |||||||
Number of shares vested | 180,000 | |||||||
Stock-based compensation | $ 63,000 | $ 27,000 | ||||||
Unrecognized compensation cost | ||||||||
Three Employees [Member] | ||||||||
Class of Stock [Line Items] | ||||||||
Number of common stock shares issued | 180,000 | |||||||
Officer [Member] | For Past Service Provided [Member] | ||||||||
Class of Stock [Line Items] | ||||||||
Stock-based compensation | $ 90,000 | |||||||
PLAYLive Nation, Inc [Member] | ||||||||
Class of Stock [Line Items] | ||||||||
Stock issued during period, shares, acquisitions | 750,000 | |||||||
Stock issued during period, value, acquisitions | $ 1,440,000 | |||||||
Private Placement [Member] | ||||||||
Class of Stock [Line Items] | ||||||||
Warrants exercise price per share | $ 4 | |||||||
Warrant term | 5 years | |||||||
Warrants issued | 962,500 | |||||||
Private Placement [Member] | Accredited Investors [Member] | ||||||||
Class of Stock [Line Items] | ||||||||
Value of units sold | $ 50,000 | $ 1,925,000 | ||||||
Number of units sold | 25,000 | 962,500 | ||||||
Number of common stock not issued yet | $ 50,000 | $ 50,000 | ||||||
Common stock exchanged for warrants description | (i) one share of common stock, par value $0.0001 per share of the Company (the "Common Stock") and (ii) a warrant to purchase one share of common Stock, exercisable at a price of $4.00 per share, exercisable at any time within five years of issuance (each, a "Warrant") as provided for in the Company's Term Sheet for Unit Offering dated February 6, 2019 (the "Term Sheet"). | |||||||
Warrants exercise price per share | $ 4 | $ 4 | ||||||
Warrant term | 5 years | 5 years | ||||||
Private Placement [Member] | Maximum [Member] | Accredited Investors [Member] | ||||||||
Class of Stock [Line Items] | ||||||||
Value of units sold | $ 2,000,000 | |||||||
Number of units sold | 1,000,000 | |||||||
Share price | $ 2 | $ 2 | ||||||
Initial Public Offering [Member] | ||||||||
Class of Stock [Line Items] | ||||||||
Value of units sold | $ 100 | |||||||
Number of units sold | 250,000 | |||||||
Warrants exercise price per share | $ 11.50 | |||||||
Warrant term | 5 years | |||||||
Warrants issued | 5,461,500 |
Stockholders' Equity - Schedule
Stockholders' Equity - Schedule of Outstanding Stock Warrants (Details) - Warrant [Member] | 9 Months Ended |
Feb. 29, 2020$ / sharesshares | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Number of shares stock warrants outstanding, Beginning balance | 6,424,000 |
Number of shares stock warrants, Granted | |
Number of shares stock warrants outstanding, Ending balance | 6,424,000 |
Warrants exercisable, Ending | 6,424,000 |
Average exercise price stock warrants, Beginning balance | $ / shares | $ 10.38 |
Average exercise price stock warrants, Ending balance | $ / shares | $ 10.38 |
Stock warrants granted shares, Expiration Date | May 2024 |
Segment and Related Informati_3
Segment and Related Information (Details Narrative) | 9 Months Ended |
Feb. 29, 2020Integer | |
Segment Reporting [Abstract] | |
Number of operating segments | 1 |
Segment and Related Informati_4
Segment and Related Information - Schedule of Segment Reporting Information (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Feb. 29, 2020 | Feb. 28, 2019 | Feb. 29, 2020 | Feb. 28, 2019 | May 31, 2019 | |
Segment Reporting Information [Line Items] | |||||
Revenues | $ 380,801 | $ 14,070 | $ 700,792 | $ 14,070 | |
Net Loss | (1,251,000) | ||||
Depreciation and Amortization | 191,000 | ||||
Capital Expenditures | 161,000 | ||||
Goodwill | 5,107,141 | 5,107,141 | $ 4,456,250 | ||
Total Assets | 8,472,674 | 8,472,674 | $ 7,754,543 | ||
Franchise Royalties and License Fees [Member] | |||||
Segment Reporting Information [Line Items] | |||||
Revenues | 432,000 | ||||
Net Loss | (91,000) | ||||
Depreciation and Amortization | 3,000 | ||||
Capital Expenditures | |||||
Goodwill | 651,000 | 651,000 | |||
Total Assets | 1,713,000 | 1,713,000 | |||
Company Owned Stores [Member] | |||||
Segment Reporting Information [Line Items] | |||||
Revenues | 155,000 | ||||
Net Loss | (209,000) | ||||
Depreciation and Amortization | 34,000 | ||||
Capital Expenditures | 153,000 | ||||
Goodwill | |||||
Total Assets | 623,000 | 623,000 | |||
Esports Revenue [Member] | |||||
Segment Reporting Information [Line Items] | |||||
Revenues | 114,000 | ||||
Net Loss | (213,000) | ||||
Depreciation and Amortization | 154,000 | ||||
Capital Expenditures | 8,000 | ||||
Goodwill | 4,456,000 | 4,456,000 | |||
Total Assets | 5,981,000 | 5,981,000 | |||
Corporate [Member] | |||||
Segment Reporting Information [Line Items] | |||||
Revenues | |||||
Net Loss | (738,000) | ||||
Depreciation and Amortization | |||||
Capital Expenditures | |||||
Goodwill | |||||
Total Assets | $ 156,000 | $ 156,000 |
Subsequent Events (Details Narr
Subsequent Events (Details Narrative) - Subsequent Event [Member] | Mar. 30, 2020USD ($)shares | Mar. 12, 2020USD ($)Integershares |
Purchase price of common stock weighted average price rate | 90.00% | |
Trading days | Integer | 5 | |
Maximum [Member] | ||
Resale of common stock shares | shares | 725,000 | |
Triton Funds LP [Member] | ||
Purchase price of common stock weighted average price rate | 10.00% | |
Number of common stock shares issued, value | $ 500,000 | |
Common Stock Purchase Agreement [Member] | ||
Aggregate price on purchase of common stock | $ 500,000 | |
Number of stock issued during period donation of shares | shares | 5,000 | |
Agreement description | Pursuant to the terms of the Common Stock Purchase Agreement, the commitment period will commence upon the effective date of the Common Stock Purchase Agreement and will end on the earlier of (i) the date on which the Selling Stockholder has purchased Common Stock from us pursuant to the Common Stock Purchase Agreement ("Put Shares") equal to the Maximum Commitment Amount and (ii) December 31, 2020. | |
Common stock voting rights | 0.0999 | |
Common Stock Purchase Agreement [Member] | Triton Funds LP [Member] | Maximum [Member] | ||
Aggregate price on purchase of common stock | $ 500,000 |