Cover
Cover - shares | 3 Months Ended | |
Aug. 31, 2021 | Oct. 11, 2021 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Document Period End Date | Aug. 31, 2021 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2022 | |
Current Fiscal Year End Date | --05-31 | |
Entity File Number | 001-38188 | |
Entity Registrant Name | SIMPLICITY ESPORTS AND GAMING COMPANY | |
Entity Central Index Key | 0001708410 | |
Entity Tax Identification Number | 82-1231127 | |
Entity Incorporation, State or Country Code | DE | |
Entity Address, Address Line One | 7000 W. Palmetto Park Road | |
Entity Address, Address Line Two | Suite 505 | |
Entity Address, City or Town | Boca Raton | |
Entity Address, State or Province | FL | |
Entity Address, Postal Zip Code | 33433 | |
City Area Code | (855) | |
Local Phone Number | 345-9467 | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | true | |
Elected Not To Use the Extended Transition Period | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 1,594,803 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) | Aug. 31, 2021 | May 31, 2021 |
Current Assets | ||
Cash and cash equivalents | $ 673,693 | $ 414,257 |
Accounts receivable, net | 139,166 | 160,101 |
Inventory | 297,013 | 206,974 |
Other current assets | 41,250 | 52,643 |
Total Current Assets | 1,151,122 | 833,975 |
Non Current Assets | ||
Goodwill | 5,180,141 | 5,180,141 |
Intangible assets, net | 1,558,039 | 1,635,227 |
Deferred brokerage fees | 77,539 | 79,943 |
Property and equipment, net | 566,970 | 574,308 |
Right of use asset, operating leases, net | 1,562,617 | 1,533,010 |
Security deposits | 40,307 | 40,307 |
Due from franchisees | 3,037 | 23,007 |
Deferred financing costs | 320,399 | 307,494 |
Total Non Current Assets | 9,309,049 | 9,373,437 |
TOTAL ASSETS | 10,460,171 | 10,207,412 |
Current Liabilities | ||
Accounts payable | 209,594 | 438,466 |
Accrued expenses | 1,147,434 | 1,166,433 |
Current portion of convertible note payable, net of discount | 1,323,051 | 2,211,097 |
Loan payable | 82,235 | 82,235 |
Operating lease obligation, current | 311,116 | 307,013 |
Current portion of deferred revenues | 30,034 | 30,034 |
Total Current Liabilities | 3,103,464 | 4,235,278 |
Operating lease obligation, net of current portion | 1,245,699 | 1,199,748 |
Deferred revenues, less current portion | 176,127 | 182,342 |
Non current portion of convertible notes payable, net of discount | 235,030 | |
Total Non Current Liabilities | 1,656,856 | 1,382,090 |
Total Liabilities | 4,760,320 | 5,617,368 |
Commitments and Contingencies - Note 7 | ||
Stockholders’ Equity | ||
Preferred stock - $0.0001 par value, 1,000,000 shares authorized; no shares issued and outstanding | ||
Common stock - $0.0001 par value; 36,000,000 shares authorized; 1,492,595 and 1,427,124 shares issued and outstanding as of August 31, 2021 and May 31, 2021 respectively | 149 | 142 |
Common stock issuable | 850,775 | |
Additional paid-in capital | 21,233,531 | 16,708,762 |
Accumulated deficit | (16,502,806) | (12,291,899) |
Total Simplicity Esports and Gaming Company Stockholders’ Equity | 5,581,649 | 4,417,005 |
Non-Controlling Interest | 118,202 | 173,039 |
Total Stockholders’ Equity | 5,699,851 | 4,590,044 |
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ 10,460,171 | $ 10,207,412 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | Aug. 31, 2021 | May 31, 2021 |
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 | 0 | 0 |
Preferred stock, outstanding | 0 | 0 |
Common stock, par value | $ 0.0001 | $ 0.0001 |
Common stock, authorized | 36,000,000 | 36,000,000 |
Common stock, issued | 1,492,595 | 1,427,124 |
Common stock, outstanding | 1,492,595 | 1,427,124 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | |
Aug. 31, 2021 | Aug. 31, 2020 | |
Revenues: | ||
Total Revenues | $ 904,840 | $ 200,601 |
Cost of Goods Sold | 607,122 | 67,645 |
Gross Profit | 297,718 | 132,956 |
Operating Expenses: | ||
Compensation and related benefits | 1,303,126 | 302,568 |
Professional fees | 449,353 | 73,891 |
General and administrative expenses | 443,695 | 241,769 |
Total Operating Expenses | 2,196,174 | 618,228 |
Loss from Operations | (1,898,456) | (485,272) |
Other Income (Expense): | ||
Loss on extinguishment of debt | (1,759,969) | (12,135) |
Interest expense | (659,696) | (154,128) |
Interest income | 19 | 7 |
Other income | 52,358 | |
Foreign exchange gain/(loss) | (19,572) | |
Total Other Income (Expense) | (2,367,288) | (185,828) |
Loss Before Provision for Income Taxes | (4,265,744) | (671,100) |
Provision for Income Taxes | ||
Net Loss | (4,265,744) | (671,100) |
Net loss attributable to noncontrolling interest | 54,837 | 15,886 |
Net loss attributable to common shareholders | $ (4,210,907) | $ (655,214) |
Basic and Diluted Net Loss per share | $ (2.89) | $ (0.61) |
Basic and diluted Weighted Average Number of Common Shares Outstanding | 1,459,485 | 1,074,408 |
Franchise Revenues [Member] | ||
Revenues: | ||
Total Revenues | $ 62,358 | $ 87,283 |
Company Owned Stores Sales [Member] | ||
Revenues: | ||
Total Revenues | 673,501 | 76,938 |
Esports Revenue [Member] | ||
Revenues: | ||
Total Revenues | $ 168,981 | $ 36,380 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited) - USD ($) | Common Stock [Member] | Additional Paid-in Capital [Member] | Noncontrolling Interest [Member] | Retained Earnings [Member] | Total |
Balance - May 31, 2021 at May. 31, 2020 | $ 100 | $ 11,132,103 | $ (21,487) | $ (6,195,044) | $ 4,915,672 |
Balance, shares at May. 31, 2020 | 998,622 | ||||
Shares issued for cash | 25,000 | 25,000 | |||
Shares issued for cash, shares | 2,976 | ||||
Shares issued in connection with issuance and amendments of notes payable | $ 2 | 202,215 | 202,217 | ||
Shares issued in connection with issuance and amendments of notes payable, Shares | 23,030 | ||||
Shares issued for contracted services | 68,778 | 68,778 | |||
Shares issued for contracted services, Shares | 6,597 | ||||
Shares issued to directors, officers and employees as compensation | $ 12 | 819,297 | 819,309 | ||
Shares issued to directors, officers and employees as compensation, shares | 116,174 | ||||
Shares issued in connection with franchise acquisition | $ 2 | 164,998 | 165,000 | ||
Shares issued in connection with franchise acquisition, shares | 18,750 | ||||
Non-controlling interest of original investment in subsidiaries | 240,000 | 240,000 | |||
Net loss attributable to noncontrolling interest | (15,886) | (15,886) | |||
Net Loss | (655,214) | (655,214) | |||
Balance - August 31, 2021 at Aug. 31, 2020 | $ 116 | 12,412,391 | 202,627 | (6,850,258) | 5,764,876 |
Balance, shares at Aug. 31, 2020 | 1,166,149 | ||||
Balance - May 31, 2021 at May. 31, 2020 | $ 100 | 11,132,103 | (21,487) | (6,195,044) | 4,915,672 |
Balance, shares at May. 31, 2020 | 998,622 | ||||
Balance - August 31, 2021 at May. 31, 2021 | $ 142 | 16,708,762 | 173,039 | (12,291,899) | 4,590,044 |
Balance, shares at May. 31, 2021 | 1,427,124 | ||||
Shares issued in connection with issuance and amendments of notes payable | $ 4 | 4,136,895 | 4,136,899 | ||
Shares issued in connection with issuance and amendments of notes payable, Shares | 38,125 | ||||
Shares issued for contracted services | $ 2 | 224,875 | 224,877 | ||
Shares issued for contracted services, Shares | 21,346 | ||||
Sale of warrants | 100,000 | 100,000 | |||
Shares issued in connection with franchise acquisition | $ 1 | 62,999 | 63,000 | ||
Shares issued in connection with franchise acquisition, shares | 6,000 | ||||
Common stock issuable | 850,775 | ||||
Net loss attributable to noncontrolling interest | (54,837) | (54,837) | |||
Net Loss | (4,210,907) | (4,210,907) | |||
Balance - August 31, 2021 at Aug. 31, 2021 | $ 149 | $ 21,233,531 | $ 118,202 | $ (16,502,806) | $ 5,699,851 |
Balance, shares at Aug. 31, 2021 | 1,492,595 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 3 Months Ended | |
Aug. 31, 2021 | Aug. 31, 2020 | |
Cash flows from operating activities: | ||
Net loss | $ (4,265,744) | $ (671,100) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Non-cash interest expense | 620,178 | |
Deferred guaranteed interest | (116,000) | |
Depreciation expense | 81,737 | 27,135 |
Amortization expense | 77,188 | 66,614 |
Provision for uncollectible accounts | 14,137 | 52,549 |
Loss on extinguishment of debt | 1,759,969 | |
Stock-based compensation | 850,775 | |
Lease liability net of leased asset | 20,447 | |
Deferred financing costs | (12,905) | (30,416) |
Gain on acquisition | (2,357) | |
Issuance of shares for services | 224,877 | 150,095 |
Issuance of shares for interest payment | 81,508 | |
Issuance of shares for inventory purchases | 11,919 | |
Changes in operating assets and liabilities: | ||
Accounts receivable | 20,935 | 5,478 |
Inventory | (90,039) | 11,127 |
Prepaid expenses | 11,393 | (17,087) |
Deferred brokerage fees | 2,404 | 4,525 |
Deferred revenues | (6,215) | (7,414) |
Accounts payable | (228,872) | (10,538) |
Accrued expenses | (18,999) | 185,620 |
Due from franchisee | 19,970 | |
Net cash used in operating activities | (943,694) | (233,412) |
Cash flows from investing activities: | ||
Purchase of property and equipment | (20,961) | |
Net cash provided by (used in) investing activities | (20,961) | |
Cash flows from financing activities: | ||
Proceeds from sale of warrants | 100,000 | |
Repayment of note payable | (590,909) | (201,300) |
Proceeds from note payable | 1,715,000 | 748,150 |
Proceeds from sale of Private Units | 25,000 | |
Net cash provided by financing activities | 1,224,091 | 571,850 |
Net change in cash | 259,436 | 338,438 |
Cash - beginning of period | 414,257 | 160,208 |
Cash - end of period | 673,693 | 498,646 |
Supplemental Disclosures of Cash Flow Information: | ||
Cash paid for interest | 109,091 | 48,800 |
Cash paid for income taxes | ||
Supplemental Non-Cash Investing and Financing Information | ||
Common stock issued for consideration in an acquisition of fixed assets | 63,000 | 165,000 |
Common stock issued in connection with notes payable | 238,918 | |
Beneficial conversion feature with warrants issued for debt discount | $ 1,505,387 |
ORGANIZATION AND DESCRIPTION OF
ORGANIZATION AND DESCRIPTION OF BUSINESS | 3 Months Ended |
Aug. 31, 2021 | |
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 organized as 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. Through our wholly owned subsidiary, Simplicity Esports, LLC, acquired on January 2, 2019, the Company has begun to implement a unique approach to ensure the ultimate fan friendly esports experience. Our intention is to have gamers involved at the grassroots level and feel a sense of unity as we compete with top class talent. Our management and players are known within the esports community and we plan to use their skills to create a seamless content creation plan helping gamers feel closer to our brand than any other in the industry. Simplicity is an established brand in the Esports industry with an engaged fan base competing in popular games across different genres, including PUBG, Gears of War, Smite, Guns of Boom, and multiple EA Sports titles. Additionally, the Simplicity stream team encompasses a unique group of casters, influencers, and personalities, all of whom connect to Simplicity’s dedicated fan base. Simplicity also has begun to open and operate esports gaming centers that will provide the public an opportunity to experience and enjoy gaming and Esports in a social setting, regardless of skill or experience. Through our wholly owned subsidiary, PLAYlive Nation, Inc. (“PLAYlive”), acquired on July 29, 2019, the Company has a network of franchised Gaming Centers. As August 31, 2021 the company had 17 12 SIMPLICITY ESPORTS AND GAMING COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AUGUST 31, 2021 (UNAUDITED) |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended |
Aug. 31, 2021 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying unaudited condensed 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 condensed 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 condensed consolidated financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the condensed consolidated financial position, operating results and cash flows for the periods presented. The accompanying unaudited condensed 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 30, 2021. The interim results for the three months ended August 31, 2021 are not necessarily indicative of the results to be expected for the year ending May 31, 2022 or for any future interim periods. Correction of Previously Issued Financial Statements The accompanying condensed consolidated statement of operations for the three months ended August 31, 2020 has been corrected for a reclassification of depreciation expense of $ 27,134 The Company assessed the materiality of the misstatement quantitatively and qualitatively and has concluded that the correction of the classification error is immaterial to the consolidated financials taken as a whole. As a result of the correction, Cost of Goods Sold increased from $ 40,511 67,645 160,090 132,956 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. SIMPLICITY ESPORTS AND GAMING COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AUGUST 31, 2021 (UNAUDITED) Basis of Consolidation The condensed 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 76 79 51 All significant intercompany accounts and transactions have been eliminated in consolidation. 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 Concentration of Credit Risk Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash and cash equivalents and accounts receivable. Cash and cash equivalents in a financial institution, which at times, may exceed the Federal depository insurance coverage of $ 250,000 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 condensed consolidated balance sheet. Foreign Currencies Revenue and expenses are translated at average rates of exchange prevailing during the period. Use of Estimates The preparation of condensed 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 condensed 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 the Company’s consolidated financial statements. SIMPLICITY ESPORTS AND GAMING COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AUGUST 31, 2021 (UNAUDITED) 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 Store 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 Revenues Franchise revenues consist of royalties, fees and initial license fee income. 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 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. SIMPLICITY ESPORTS AND GAMING COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AUGUST 31, 2021 (UNAUDITED) Deferred costs include commissions paid to brokers related to the sale of specific new franchises which have not met revenue recognition criteria as of August 31, 2021. 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 $42,479 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 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. These costs are included in intangible assets on our condensed consolidated balance sheet and amortized on a straight-line basis when placed into service over their estimated useful lives of the costs, which is 2 10 The Company periodically reviews its intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. 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 August 31, 2021, 12 franchise locations were considered to be operational in various states including Arizona, California, Florida, Idaho, Maryland, Ohio, South Carolina, Texas and Washington. Stock-based Compensation The Company records stock-based compensation in accordance with ASC 718, Compensation – Stock Compensation Equity-Based Payments to Non-Employees Non employee stock-based payments The Company records stock based payments made to non-employees in accordance with ASU 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, SIMPLICITY ESPORTS AND GAMING COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AUGUST 31, 2021 (UNAUDITED) 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 $ 110,003 107,678 Basic Income (Loss) Per Share The Company complies with accounting and disclosure requirements ASC Topic 260, “Earnings Per Share.” Net income (loss) - per share is calculated by dividing the Company’s net income (loss) by the weighted average number of common shares outstanding during the period. Diluted earnings or loss per common share is calculated by dividing the Company’s net income or loss available to common stockholders by the diluted weighted average number of common 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. For this calculation potentially dilutive securities consist primarily of warrants, outstanding options and shares into which the company’s convertible notes payable are convertible. When the Company records a loss from operations, all potentially dilutive shares are anti-dilutive and are consequently excluded from the calculation of diluted net loss per common share. 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. SIMPLICITY ESPORTS AND GAMING COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AUGUST 31, 2021 (UNAUDITED) 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 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 unaudited condensed 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 unaudited condensed consolidated financial statements, the Company has an accumulated deficit of $ 16,502,806 , a working capital deficit of $ 1,952,342 as of August 31, 2021, and a net loss attributable to common shareholders of $ 4,210,907 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 unaudited 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 private and/or public offerings. 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. Should the Company fail to raise additional capital, it may be compelled to reduce the scope of its planned future business activities. 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 unaudited condensed 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. SIMPLICITY ESPORTS AND GAMING COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AUGUST 31, 2021 (UNAUDITED) 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 were closed effective April 1, 2020. We commenced reopening Simplicity Gaming Centers as of May 1, 2020 and have since reopened 16 company owned stores and 12 franchise locations. 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 impacted the Company’s business for the fiscal year ended May 31, 2021 as well as the fiscal quarter ended August 31, 2021 and will potentially continue to impact the Company’s business. 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 | 3 Months Ended |
Aug. 31, 2021 | |
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: SCHEDULE OF PROPERTY AND EQUIPMENT August 31, 2021 May 31, 2021 Leasehold improvements $ 110,849 $ 110,849 Property and equipment 830,141 755,741 Total cost 940,990 866,590 Less accumulated depreciation (374,020 ) (292,282 ) Net property plant and equipment $ 566,970 $ 574,308 Depreciation expense for the three months ended August 31, 2021 and 2020 was $ 81,737 and $ 27,135 , respectively. SIMPLICITY ESPORTS AND GAMING COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AUGUST 31, 2021 (UNAUDITED) |
INTANGIBLE ASSETS
INTANGIBLE ASSETS | 3 Months Ended |
Aug. 31, 2021 | |
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 August 31, 2021: SCHEDULE OF INTANGIBLE ASSETS Useful Life Cost Amortization Value August 31, 2021 Remaining Accumulated Net Carrying Useful Life Cost Amortization Value Non-Competes 4 $ 1,023,118 $ 548,642 $ 474,476 Trademarks Indefinite 866,000 - 866,000 Customer database 2 35,000 20,417 14,583 Restrictive covenant 2 115,000 67,083 47,917 Customer contracts 10 546,000 391,270 154,730 Internet domain 2 3,000 2,667 333 $ 2,588,118 $ 944,537 $ 1,558,039 The following tables set forth the intangible assets, including accumulated amortization as of May 31, 2021: Useful Life Cost Amortization Value May 31, 2021 Remaining Accumulated Net Carrying Useful Life Cost Amortization Value Non-Competes 4.50 $ 1,023,118 $ 498,799 $ 524,319 Trademarks Indefinite 866,000 - 866,000 Customer Contracts 10 546,000 301,675 244,325 Internet domain 2.50 3,000 2,417 583 $ 2,438,118 $ 802,891 $ 1,635,227 The following table sets forth the future amortization of the Company’s intangible assets as of August 31, 2021 for the fiscal years ending May 31: SCHEDULE OF FUTURE AMORTIZATION OF INTANGIBLE ASSETS 2022 2023 2024 2025 2026 Thereafter Total Non-Competes $ 153,468 $ 204,624 $ 116,384 $ - $ - $ - $ 474,476 Customer contracts 12,158 16,211 16,211 16,211 16,211 77,728 154,730 Restrictive covenant 43,125 4,792 - - - 47,917 Customer database 13,125 1,458 - - - 14,583 Internet domain 333 - - - - - 333 Total $ 222,209 $ 227,085 $ 132,595 $ 16,211 $ 16,211 $ 77,728 $ 692,039 Amortization expense for the three months ended August 31, 2021 and 2020 was $ 77,188 and $ 66,614 , respectively. SIMPLICITY ESPORTS AND GAMING COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AUGUST 31, 2021 (UNAUDITED) |
ACQUISITIONS
ACQUISITIONS | 3 Months Ended |
Aug. 31, 2021 | |
Business Combination and Asset Acquisition [Abstract] | |
ACQUISITIONS | NOTE 5 — ACQUISITIONS Simplicity Salinas, LLC On July 26, 2021 the Company through its wholly owned subsidiary, Simplicity Salinas, LLC acquired all of the inventory and property, plant and equipment assets of an existing franchise in exchange for 6,000 10.85 |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 3 Months Ended |
Aug. 31, 2021 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | NOTE 6 — RELATED PARTY TRANSACTIONS Contract Services On August 27, 2021 the Company entered into a contract with Laila Cavalcanti Loss, a board member, to provide legal services to its subsidiary Simplicity One Brasil, LTDA. The contract calls for monthly payments of $ 2,500 250 25,000 375 SIMPLICITY ESPORTS AND GAMING COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AUGUST 31, 2021 (UNAUDITED) The Company maintains a portion of its cash balance at a financial services company that is owned by an officer of the Company. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 3 Months Ended |
Aug. 31, 2021 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | NOTE 7 — COMMITMENTS AND CONTINGENCIES 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 pre-reverse split (or an aggregate exercise price of $ 2,990,000 ) upon the closing of the Initial Public Offering. The UPO 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 UPO 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 on a pre-reverse split basis. Operating Lease Right of Use Obligation 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 condensed consolidated balance sheet now contains the following line items: Operating lease right-of-use assets, Current portion of operating lease liabilities and Operating lease liabilities, net of current portion. As of August 31, 2021, operating lease right-of-use assets and liabilities arising from operating leases was $ 1,562,617 and $ 1,556,815 , respectively. During the quarter ended August 31, 2021 and 2020, the Company recorded operating lease expense of $ 140,516 and $ 20,623 . The following is a schedule showing the future minimum lease payments under operating leases by fiscal years and the present value of the minimum payments as of August 31, 2021. SCHEDULE SHOWING THE FUTURE MINIMUM LEASE PAYMENTS 2022 $ 370,370 2023 $ 468,377 2024 $ 470,511 2025 $ 423,795 2026 and thereafter $ 171,602 Total Operating Lease Obligations $ 1,904,655 Less: Amount representing interest $ (347,840 ) Present Value of minimum lease payments $ 1,556,815 SIMPLICITY ESPORTS AND GAMING COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AUGUST 31, 2021 (UNAUDITED) Employment Agreements, Board Compensation and Bonuses On July 29, 2020, the Company entered into a new employment agreement (the “Kaplan 2020 Agreement”) with Mr. Kaplan and 75,000 cash bonus and authorized the issuance of 250,000 shares of the Company’s common stock both related to his performance during the fiscal year ended May 31, 2020. As of August 31, 2021 the Company still owed Mr. Kaplan $ 35,000 of the 2020 bonus award. Effective March 29, 2021, the Company promoted Mr. Kaplan to be the Chairmen of the Board of Directors, and he ceased to be the Company’s Chief Executive Officer and Interim Chief Financial Officer. Upon this change, Mr. Kaplan’s new monthly salary became $ 4,000 per month and the Kaplan 2020 Agreement was terminated. On July 29, 2020, the Company entered into a new employment agreement (the “Franklin 2020 Agreement”) with Mr. Franklin and the Board of Directors approved for Mr. Franklin a $ 75,000 cash bonus and authorized the issuance of 250,000 fully vested shares of the Company’s common stock both related to his performance during the fiscal year ended May 31, 2020. As of August 31, 2021, the Company still owed Mr. Franklin $ 35,000 of the 2020 bonus award. On March 25, 2021, the Board of Directors appointed Mr. Franklin as the Company’s Chief Executive Officer, effective March 29, 2021. Mr. Franklin continues to be a member of our board of directors. In connection with Mr. Franklin’s appointment, on March 25, 2021, the Company entered into an employment agreement, dated as of March 29, 2021 by and between the Company and Mr. Franklin (the “2021 Franklin Employment Agreement”). Pursuant to the terms of the 2021 Franklin Employment Agreement, in exchange for Mr. Franklin’s services, the Company agreed to pay Mr. Franklin an annual base salary of $ 250,000 15,000 On May 11, 2021, the Board appointed Nancy Hennessey to serve as the Company’s Chief Financial Officer, effective May 17, 2021. In connection with Ms. Hennessey’s appointment as the Company’s Chief Financial officer, the Company entered into an employment agreement, dated as of May 17, 2021 by and between the Company and Ms. Hennessey (the “Hennessey Employment Agreement”). Pursuant to the terms of the Hennessey Employment Agreement, in exchange for Ms. Hennessey’s services, the Company agreed to pay Ms. Hennessey an annual base salary of $ 140,000 5,000 12,500 Ms. Hennessey will also receive (i) 5,000 shares of common stock upon filing of the 2021 Annual Report on Form 10-K, if completed before July 31, 2021, and (ii) 5,000 shares of common stock upon completion of an uplisting to a national exchange, such as The Nasdaq Stock Market or the NYSE American. On August 31, 2021, the Company has accrued $ 5,000 On August 20, 2021, the Board of Directors approved 82,500 833,250 SIMPLICITY ESPORTS AND GAMING COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AUGUST 31, 2021 (UNAUDITED) |
DEBT
DEBT | 3 Months Ended |
Aug. 31, 2021 | |
Debt Disclosure [Abstract] | |
DEBT | NOTE 8 - DEBT The table below presents outstanding debt instruments as of August 31, and May 31, 2021 SCHEDULE OF OUTSTANDING DEBT INSTRUMENT AUGUST 31, 2021 MAY 31, 2021 Convertible Promissory Notes $ 3,952,424 $ 3,157,970 Related Debt Discount (2,394,343 ) (947,873 ) Total $ 1,558,081 $ 2,211,097 Current portion of Convertible Promissory Notes, net $ 1,323,051 $ 2,211,097 Non current portion of Convertible Promissory Notes, net 235,030 - Amendments to the Series A-2 Exchange Convertible Note On or about December 20, 2018, the Company issued that certain Series A-2 exchange convertible note in the original principal amount of $ 1,000,000 (the “Series A-2 Note”) to Maxim. 1.93 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 On June 4, 2020, $ 100,000 in principal was converted into 85,905 shares of common stock in accordance with the terms of the Maxim Note. On June 18, 2020, the Company and Maxim entered into that certain first amendment to the Series A-2 Note (the “First Amendment”), pursuant to which such parties agreed to the following: (i) Maxim’s resale of the Company’s common stock (the “Common Stock”) underlying the Series A-2 Note shall be limited to 10 % of the daily volume of the Common Stock on each respective trading day, (ii) the maturity date of the Series A-2 Note was extended to December 31, 2020, (iii) the principal amount of the Series A-2 Note was increased by $ 100,000 and (iv) the conversion price was reduced from $ 15.44 to $ 9.20 . On December 31, 2020, the Company and Maxim entered into a second amendment to the Series A-2 Note to extend the maturity date of Series A-2 Note to February 15, 2021. SIMPLICITY ESPORTS AND GAMING COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AUGUST 31, 2021 (UNAUDITED) On April 14, 2021, the Company and Maxim entered into the third amendment to the Series A-2 Note with Maxim pursuant to which the Company and Maxim agreed to the following: (i) The maturity date of the Series A-2 Note is extended to October 15, 2021. (ii) The principal balance of the Series A-2 Note is increased by $ 50,000 as of April 14, 2021. (iii) The Series A-2 Note was not repaid in its entirety (in cash and/or shares of the Company’s common stock pursuant to conversion(s) of the Series A-2 Note) on or before April 30, 2021, and accordingly, the principal balance of the Series A-2 Note increased by an additional $ 50,000 . (iv) The Series A-2 Note was not repaid in its entirety (in cash and/or shares of the Company’s common stock pursuant to conversion(s) of the Series A-2 Note) on or before May 15, 2021, and accordingly, the principal balance of the Series A-2 Note increased by an additional $ 50,000 . (v) If the Series A-2 Note is not repaid in its entirety (in cash and/or shares of the Company’s common stock pursuant to conversion(s) of the Series A-2 Note) on or before July 15, 2021, the principal balance of the Series A-2 Note will increase by an additional $ 100,000 . (vi) If the Series A-2 Note is not repaid in its entirety (in cash and/or shares of the Company’s common stock pursuant to conversion(s) of the Series A-2 Note) on or before September 15, 2021, the principal balance of the Series A-2 Note will increase by an additional $ 100,000 , representing a total cumulative increase in the principal balance of $ 350,000 if the Series A-2 Note is not repaid in its entirety on or before September 15, 2021. (vii) The Company will, within five business days after the Company’s receipt of the Second Tranche Purchase Price of $999,996, pay $500,000 to Maxim, which will reduce the principal owed under the Series A-2 Note by $500,000. While any portion of the Series A-2 Note is outstanding, if the Company receives cash proceeds from public offerings or private placements of the Company’s common stock to investors (except with respect to proceeds from officers and directors of the Company), the Company will, within five business days of the Company’s receipt of such proceeds, inform Maxim or such receipt, following which Maxim will have the right in its sole discretion to require the Company to immediately apply up to 25% of such proceeds received by the Company to repay the outstanding amounts owed under the Series A-2 Note. The parties understand that (a) each dollar applied toward repayment pursuant to this clause (viii) will reduce the balance owed under the Series A-2 Note by one dollar, and (b) this clause (viii) will not apply to the Tiger Trout transaction. On August 19, 2021, the Company and Maxim entered into the fourth amendment (the “Fourth Amendment”) to the Series A-2 Maxim Note, as amended, pursuant to which the Company and Maxim agreed that all obligations under the Series A-2 Maxim Note, as amended, shall be extinguished, and the Series A-2 Maxim Note, as amended, shall be deemed repaid in its entirety, upon the satisfaction of the following obligations: (i) the Company’s payment of $ 500,000 to Maxim within three business days of August 19, 2021, (ii) the Company’s issuance of 20,000 restricted shares of the Company’s common stock to Maxim within seven business days of August 19, 2021, and (iii) the Company’s issuance of a common stock purchase warrant to Maxim on August 19, 2021 for the purchase of 365,000 shares of the Company’s common stock As a result of the Fourth Amendment, the Company issued to Maxim a common stock purchase warrant (the “Warrant”) for the purchase of 365,000 13.00 500,000 1,759,969 20,000 February 19, 2021 12% Promissory Note and Securities Purchase Agreement On February 19, 2021, the Company entered into a securities purchase agreement (the “SPA”) dated as of February 19, 2021, with an accredited investor (the “Holder”), pursuant to which the Company issued a 12 February 19, 2022 1,650,000 10,000 1,650,000 165,000 1,485,000 4.99 11.50 The Company may prepay the Note at any time prior to the date that an Event of Default (as defined in the Note) (each an “Event of Default”) occurs at an amount equal to 100% of the Principal Sum then outstanding plus accrued and unpaid interest (no prepayment premium). The Note contains customary events of default relating to, among other things, payment defaults, breach of representations and warranties, and breach of provisions of the Note or SPA. The Company is required to make an interim payment to the Holder in the amount of $ 363,000 , on or before August 19, 2021, towards the repayment of the balance of the Note. 100,000 100,000 163,000 During the quarter ended August 31, 2021 the Company paid interim payments to the Holder in the amount of $ 225,000 90,909 109,091 25,000 903,588 Upon the Holder’s provision of notice to the Company of the occurrence of any Event of Default, which has not been cured within five (5) calendar days (provided, however, that this five (5) calendar day cure period shall not apply to any event of default under Sections 3.1, 3.2, and 3.19 of the Note), the Note shall become immediately due and payable and the Company shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to the Principal Sum then outstanding plus accrued interest multiplied by 125 March 2021 FirstFire Global 12% Promissory Note and Securities Purchase Agreement On March 10, 2021, the Company, entered into a securities purchase agreement (the “March 10 FirstFire SPA”) dated as of March 10, 2021, with FirstFire Global Opportunities Fund, LLC, a Delaware limited liability company (the “FirstFire”), pursuant to which the Company issued a 12 March 10, 2022 560,000 130,606 56,000 8,394 365,000 3,394 560,000 12 56,000 504,000 4.99 11.50 SIMPLICITY ESPORTS AND GAMING COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AUGUST 31, 2021 (UNAUDITED) The Company may prepay the March 10 FirstFire Note at any time prior to the date that an Event of Default (as defined in the Note) (each an “Event of Default”) occurs at an amount equal to 100% of the Principal Sum then outstanding plus accrued and unpaid interest (no prepayment premium). The March 10 FirstFire Note contains customary events of default relating to, among other things, payment defaults, breach of representations and warranties, and breach of provisions of the March 10 FirstFire Note or March 10 FirstFire SPA. The Company is required to make an interim payment to FirstFire in the amount of $ 123,200 , on or before September 10, 2021, towards the repayment of the balance of the March 10 FirstFire Note. 40,000 On October 1, 2021, the Company issued a common stock purchase warrant for the purchase of an additional 40,000 Upon FirstFire’s provision of notice to the Company of the occurrence of any Event of Default, which has not been cured within five (5) calendar days (provided, however, that this five (5) calendar day cure period shall not apply to any event of default under Sections 3.1, 3.2, and 3.19 of the March 10 FirstFire Note), the March 10 FirstFire Note shall become immediately due and payable and the Company shall pay to FirstFire, in full satisfaction of its obligations hereunder, an amount equal to the Principal Sum then outstanding plus accrued interest multiplied by 125 During the quarter ended August 31, 2021, the Company recognized $ 65,533 419,468 June 2021 FirstFire Global 12% Promissory Note and Securities Purchase Agreement On June 11, 2021, the Company entered into a securities purchase agreement (the “June 11 FirstFire SPA”) dated as of June 10, 2021, with FirstFire Global Opportunities Fund, LLC (“FirstFire”), pursuant to which the Company issued a 12% June 10, 2023 1,266,666 11,875 1,266,666 126,666 1,140,000 4.99% 11.50 The Company may prepay the June 11 FirstFire Note at any time prior to maturity in accordance with the terms of the June 11 FirstFire Note. The June 11 FirstFire Note contains customary events of default relating to, among other things, payment defaults, breach of representations and warranties, and breach of provisions of the June 11 FirstFire Note or the June 11 FirstFire SPA. Upon the occurrence of any Event of Default (as defined in the June 11 FirstFire Note), which has not been cured within three calendar days, the June 11 FirstFire Note shall become immediately due and payable and the Company shall pay to FirstFire, in full satisfaction of its obligations hereunder, an amount equal to the FirstFire Principal Sum then outstanding plus accrued interest multiplied by 125% Pursuant to the terms of the June 11 FirstFire SPA, the Company also issued to FirstFire a three 593,750 10.73 The Company also agreed to prepare and file with the Securities and Exchange Commission a registration statement covering the resale of all shares issued or issuable pursuant to the June 11 FirstFire SPA, including shares issued upon conversion of the June 11 FirstFire Note or exercise of the June 11 FirstFire Warrant. The Company agreed to use its commercially reasonable efforts to have the registration statement filed with the SEC within 90 days following June 10, 2021 and to have the registration statement declared effective by the SEC within 120 days following June 10, 2021. The Company recorded the June 11 FirstFire Note in the amount of $ 1,266,667 1,266,667 76,000 1,053,999 140,548 140,548 SIMPLICITY ESPORTS AND GAMING COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AUGUST 31, 2021 (UNAUDITED) GS Capital Securities Purchase Agreement & Note On June 16, 2021, the Company entered into a securities purchase agreement (the “GS SPA”) dated as of June 10, 2021, with GS Capital Partners, LLC (“GS Capital”), pursuant to which the Company issued a 12% June 10, 2023 333,333 3,125 300,000 33,333 300,000 4.99% 11.50 The Company may prepay the GS Note at any time prior to maturity in accordance with the terms of the GS Note. The GS Note contains customary events of default relating to, among other things, payment defaults, breach of representations and warranties, and breach of provisions of the GS Note or the GS SPA. Upon the occurrence of any Event of Default (as defined in the GS Note), which has not been cured within three calendar days, the GS Note shall become immediately due and payable and the Company shall pay to GS, in full satisfaction of its obligations hereunder, an amount equal to the principal amount then outstanding plus accrued interest multiplied by 125% Pursuant to the terms of the GS SPA, the Company also issued to GS a three 156,250 10.73 The Company also agreed to prepare and file with the SEC a registration statement covering the resale of all shares issued or issuable pursuant to the GS SPA, including shares issued upon conversion of the GS Note or exercise of the GS Warrant. The Company agreed to use its commercially reasonable efforts to have the registration statement filed with the SEC within 90 days following June 10, 2021 and to have the registration statement declared effective by the SEC within 120 days following June 10, 2021. The Company recorded the GS Note in the amount of $ 333,333 333,333 20,000 280,000 34,703 34,703 Jefferson Street Capital Stock Purchase Agreement & Note On August 23, 2021, the Company entered into a securities purchase agreement (the “Jefferson SPA”) dated as of August 23, 2021, with Jefferson Street Capital, LLC (“Jefferson”), pursuant to which the Company issued a 12% August 23, 2023 333,333 3,125 300,000 33,333 300,000 4.99% 11.50 The Company may prepay the Jefferson Note at any time prior to maturity in accordance with the terms of the Jefferson Note. The Jefferson Note contains customary events of default relating to, among other things, payment defaults, breach of representations and warranties, and breach of provisions of the Jefferson Note or the Jefferson SPA. Upon the occurrence of any Event of Default (as defined in the Jefferson Note), which has not been cured within three calendar days, the Jefferson Note shall become immediately due and payable and the Company shall pay to Jefferson, in full satisfaction of its obligations hereunder, an amount equal to the principal amount then outstanding plus accrued interest multiplied by 125% Pursuant to the terms of the Jefferson SPA, the Company also issued to Jefferson a three 156,250 10.73 The Company also agreed to prepare and file with the SEC a registration statement covering the resale of all shares issued or issuable pursuant to the Jefferson SPA, including shares issued upon conversion of the Jefferson Note or exercise of the Jefferson Warrant. The Company agreed to use its commercially reasonable efforts to have the registration statement filed with the SEC within 90 days following August 23, 2021 and to have the registration statement declared effective by the SEC within 120 days following August 23, 2021. The Company recorded the Jefferson Note in the amount of $ 333,333 274,239 20,000 685 59,779 SIMPLICITY ESPORTS AND GAMING COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AUGUST 31, 2021 (UNAUDITED) |
STOCKHOLDERS_ EQUITY
STOCKHOLDERS’ EQUITY | 3 Months Ended |
Aug. 31, 2021 | |
Equity [Abstract] | |
STOCKHOLDERS’ EQUITY | NOTE 9 - STOCKHOLDERS’ EQUITY Preferred Stock The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $ 0.0001 per share. As of August 31, 2021 there were no shares of preferred stock issued or outstanding. Common Stock On August 17, 2020, the Company amended its certificate of incorporation to increase the total number of authorized shares of the Company’s common stock from 20,000,000 36,000,000 1,492,595 1,427,124 Stock - Based Compensation During the quarter ended August 31, 2021, the company approved stock-based compensation to its officers or directors and share based compensation for the three months ended August 31, 2021 and August 31, 2020 was approximately $ 838,250 and $ 150,095 , respectively. Warrants The Company issued warrants related to the convertible notes payable that were issued during the quarter ended August 31, 2021.Additinally, the Company sold 100,000 warrants for the purchase of 100,000 shares of common stock at an exercise price of $20.00 per share to a private investor for $100,000. A summary of the status of the Company’s outstanding stock warrants as of August 31, 2021 is as follows: SCHEDULE OF OUTSTANDING STOCK WARRANTS Number of Average Outstanding – May 31, 2020 803,001 $ 83.01 Granted during the year ended May 31, 2021 17,063 $ 20.66 Outstanding – May 31, 2021 820,064 $ 10.38 Warrants granted during the quarter ended August 31, 2021 1,257,312 $ 11.26 Sale of warrants during the quarter 100,000 $ 20.00 Warrants exercisable – August 31, 2021 2,177,376 $ 38.08 SIMPLICITY ESPORTS AND GAMING COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AUGUST 31, 2021 (UNAUDITED) |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 3 Months Ended |
Aug. 31, 2021 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | NOTE 10 — SUBSEQUENT EVENTS On September 1, 2021, the Company issued an aggregate of 82,500 On August 31, 2021 pursuant to the terms of that certain Securities Purchase Agreement between the Company and Lucas Ventures, LLC, the Company issued a convertible promissory note in the principal amount of $ 200,000 with an effective date of September 2, 2021 . In addition, the Company issued 3,749 shares of its common stock to the investor as a commitment fee pursuant to the Securities Purchase Agreement. Furthermore, the Company issued a common stock purchase warrant for the purchase of 187,400 shares of the Company’s common stock. On August 31, 2021 pursuant to the terms of that certain Securities Purchase Agreement between the Company and LGH Investments, LLC, the Company issued a convertible promissory note in the principal amount of $ 200,000 effective September 2, 2021. On September 17, 2021, the Company issued a common stock purchase warrant for the purchase of 40,000 On September 28, 2021, the Company entered into a securities purchase agreement (the “Ionic SPA”) dated as of September 28, 2021, with Ionic Ventures, LLC (“Ionic”), pursuant to which the Company issued a 12% promissory note (the “Ionic Note”) with a maturity date of September 28, 2023 (the “Ionic Maturity Date”), in the principal sum of $ 1,555,555.56 . In addition, the Company issued 14,584 shares of its common stock to Ionic as a commitment fee pursuant to the Ionic SPA. Pursuant to the terms of the Ionic Note, the Company agreed to pay to $ 1,400,000 .00 (the “Ionic Principal Sum”) to Ionic and to pay interest on the principal balance at the rate of 12% per annum (provided that the first six months of interest shall be guaranteed and the remaining 18 months of interest shall be deemed earned in full if any amount is outstanding under the Ionic Note after 180 days from September 28, 2021). The Ionic Note carries an original issue discount (“OID”) of $ 155,555.56 . Accordingly, Ionic paid the purchase price of $ 1,400,000 .00 in exchange for the Ionic Note. The Company intends to use the proceeds for working capital. Ionic may convert the Ionic Note into the Company’s common stock (subject to the beneficial ownership limitations of 4.99% in the Ionic Note; provided however, that the limitation on conversion may be waived (up to 9.99%) by Ionic upon, at the election of Ionic, not less than 61 days’ prior notice to the Company) at any time at a conversion price equal to $ 11.50 per share, as the same may be adjusted as provided in the Ionic Note. The Company may prepay the Ionic Note at any time prior to maturity in accordance with the terms of the Ionic Note. The Ionic Note contains customary events of default relating to, among other things, payment defaults, breach of representations and warranties, and breach of provisions of the Ionic Note or the Ionic SPA. Upon the occurrence of any Event of Default (as defined in the Ionic Note), which has not been cured within three calendar days, the Ionic Note shall become immediately due and payable and the Company shall pay to Ionic, in full satisfaction of its obligations hereunder, an amount equal to the principal amount then outstanding plus accrued interest multiplied by 125% Pursuant to the terms of the Ionic SPA, the Company also issued to Ionic a three 729,167 (i) 110% of the per share offering price of the offering made in connection with any uplisting of the Company’s common stock; or (ii) prior to the determination of the per share offering price of the offering made in connection with any uplisting of the common stock and following such time if the uplisting contemplated in clause (i) is not completed by November 1, 2021, $ 10.73 The Company also agreed to prepare and file with the SEC a registration statement covering the resale of all shares issued or issuable pursuant to the Ionic SPA, including shares issued upon conversion of the Ionic Note or exercise of the Ionic Warrant. The Company agreed to use its commercially reasonable efforts to have the registration statement filed with the SEC within 90 days following September 28, 2021 and to have the registration statement declared effective by the SEC within 120 days following September 28, 2021. On September 28, 2021 the Company received notice that the original Paycheck Protection Plan (“PPP”) loan was forgiven in the amount of $ 40,500 On September 30, 2021, the Company paid $ 500,000 On October 1, 2021, the Company issued a common stock purchase warrant for the purchase of an additional 40,000 shares of the Company’s common stock to FirstFire as consideration for FirstFire entering into a second amendment to the March 10 FirstFire Note in order to remove the capital raising ceiling in such note. On October 7, 2021, the Company’s wholly owned subsidiary Simplicity Tracy, LLC entered into an Asset Purchase agreement company with a former franchisee to acquire the assets of the former franchisee in exchange for 4,500 The above issuances/sales were made pursuant to an exemption from registration as set forth in Section 4(a)(2) of the Securities Act and/or Rule 506 of Regulation D promulgated under the Securities Act. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended |
Aug. 31, 2021 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying unaudited condensed 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 condensed 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 condensed consolidated financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the condensed consolidated financial position, operating results and cash flows for the periods presented. The accompanying unaudited condensed 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 30, 2021. The interim results for the three months ended August 31, 2021 are not necessarily indicative of the results to be expected for the year ending May 31, 2022 or for any future interim periods. Correction of Previously Issued Financial Statements The accompanying condensed consolidated statement of operations for the three months ended August 31, 2020 has been corrected for a reclassification of depreciation expense of $ 27,134 The Company assessed the materiality of the misstatement quantitatively and qualitatively and has concluded that the correction of the classification error is immaterial to the consolidated financials taken as a whole. As a result of the correction, Cost of Goods Sold increased from $ 40,511 67,645 160,090 132,956 |
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. SIMPLICITY ESPORTS AND GAMING COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AUGUST 31, 2021 (UNAUDITED) |
Basis of Consolidation | Basis of Consolidation The condensed 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 76 79 51 All significant intercompany accounts and transactions have been eliminated in consolidation. |
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 |
Concentration of Credit Risk | Concentration of Credit Risk Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash and cash equivalents and accounts receivable. Cash and cash equivalents in a financial institution, which at times, may exceed the Federal depository insurance coverage of $ 250,000 |
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 condensed consolidated balance sheet. |
Foreign Currencies | Foreign Currencies Revenue and expenses are translated at average rates of exchange prevailing during the period. |
Use of Estimates | Use of Estimates The preparation of condensed 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 condensed 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 the Company’s consolidated financial statements. SIMPLICITY ESPORTS AND GAMING COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AUGUST 31, 2021 (UNAUDITED) 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 Store Sales | Company-owned Store 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 Revenues | Franchise Revenues Franchise revenues consist of royalties, fees and initial license fee income. 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 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 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. SIMPLICITY ESPORTS AND GAMING COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AUGUST 31, 2021 (UNAUDITED) Deferred costs include commissions paid to brokers related to the sale of specific new franchises which have not met revenue recognition criteria as of August 31, 2021. 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 $42,479 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 |
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. These costs are included in intangible assets on our condensed consolidated balance sheet and amortized on a straight-line basis when placed into service over their estimated useful lives of the costs, which is 2 10 The Company periodically reviews its intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. 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 August 31, 2021, 12 franchise locations were considered to be operational in various states including Arizona, California, Florida, Idaho, Maryland, Ohio, South Carolina, Texas and Washington. |
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 |
Non employee stock-based payments | Non employee stock-based payments The Company records stock based payments made to non-employees in accordance with ASU 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, SIMPLICITY ESPORTS AND GAMING COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AUGUST 31, 2021 (UNAUDITED) |
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 $ 110,003 107,678 |
Basic Income (Loss) Per Share | Basic Income (Loss) Per Share The Company complies with accounting and disclosure requirements ASC Topic 260, “Earnings Per Share.” Net income (loss) - per share is calculated by dividing the Company’s net income (loss) by the weighted average number of common shares outstanding during the period. Diluted earnings or loss per common share is calculated by dividing the Company’s net income or loss available to common stockholders by the diluted weighted average number of common 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. For this calculation potentially dilutive securities consist primarily of warrants, outstanding options and shares into which the company’s convertible notes payable are convertible. When the Company records a loss from operations, all potentially dilutive shares are anti-dilutive and are consequently excluded from the calculation of diluted net loss per common share. |
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. SIMPLICITY ESPORTS AND GAMING COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AUGUST 31, 2021 (UNAUDITED) |
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 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 unaudited condensed 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 unaudited condensed consolidated financial statements, the Company has an accumulated deficit of $ 16,502,806 , a working capital deficit of $ 1,952,342 as of August 31, 2021, and a net loss attributable to common shareholders of $ 4,210,907 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 unaudited 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 private and/or public offerings. 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. Should the Company fail to raise additional capital, it may be compelled to reduce the scope of its planned future business activities. 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 unaudited condensed 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. SIMPLICITY ESPORTS AND GAMING COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AUGUST 31, 2021 (UNAUDITED) 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 were closed effective April 1, 2020. We commenced reopening Simplicity Gaming Centers as of May 1, 2020 and have since reopened 16 company owned stores and 12 franchise locations. 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 impacted the Company’s business for the fiscal year ended May 31, 2021 as well as the fiscal quarter ended August 31, 2021 and will potentially continue to impact the Company’s business. 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) | 3 Months Ended |
Aug. 31, 2021 | |
Property, Plant and Equipment [Abstract] | |
SCHEDULE OF PROPERTY AND EQUIPMENT | The following is a summary of property, plant, and equipment—at cost, less accumulated depreciation: SCHEDULE OF PROPERTY AND EQUIPMENT August 31, 2021 May 31, 2021 Leasehold improvements $ 110,849 $ 110,849 Property and equipment 830,141 755,741 Total cost 940,990 866,590 Less accumulated depreciation (374,020 ) (292,282 ) Net property plant and equipment $ 566,970 $ 574,308 |
INTANGIBLE ASSETS (Tables)
INTANGIBLE ASSETS (Tables) | 3 Months Ended |
Aug. 31, 2021 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
SCHEDULE OF INTANGIBLE ASSETS | The following table sets forth the intangible assets, including accumulated amortization as of August 31, 2021: SCHEDULE OF INTANGIBLE ASSETS Useful Life Cost Amortization Value August 31, 2021 Remaining Accumulated Net Carrying Useful Life Cost Amortization Value Non-Competes 4 $ 1,023,118 $ 548,642 $ 474,476 Trademarks Indefinite 866,000 - 866,000 Customer database 2 35,000 20,417 14,583 Restrictive covenant 2 115,000 67,083 47,917 Customer contracts 10 546,000 391,270 154,730 Internet domain 2 3,000 2,667 333 $ 2,588,118 $ 944,537 $ 1,558,039 The following tables set forth the intangible assets, including accumulated amortization as of May 31, 2021: Useful Life Cost Amortization Value May 31, 2021 Remaining Accumulated Net Carrying Useful Life Cost Amortization Value Non-Competes 4.50 $ 1,023,118 $ 498,799 $ 524,319 Trademarks Indefinite 866,000 - 866,000 Customer Contracts 10 546,000 301,675 244,325 Internet domain 2.50 3,000 2,417 583 $ 2,438,118 $ 802,891 $ 1,635,227 |
SCHEDULE OF FUTURE AMORTIZATION OF INTANGIBLE ASSETS | The following table sets forth the future amortization of the Company’s intangible assets as of August 31, 2021 for the fiscal years ending May 31: SCHEDULE OF FUTURE AMORTIZATION OF INTANGIBLE ASSETS 2022 2023 2024 2025 2026 Thereafter Total Non-Competes $ 153,468 $ 204,624 $ 116,384 $ - $ - $ - $ 474,476 Customer contracts 12,158 16,211 16,211 16,211 16,211 77,728 154,730 Restrictive covenant 43,125 4,792 - - - 47,917 Customer database 13,125 1,458 - - - 14,583 Internet domain 333 - - - - - 333 Total $ 222,209 $ 227,085 $ 132,595 $ 16,211 $ 16,211 $ 77,728 $ 692,039 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Tables) | 3 Months Ended |
Aug. 31, 2021 | |
Commitments and Contingencies Disclosure [Abstract] | |
SCHEDULE SHOWING THE FUTURE MINIMUM LEASE PAYMENTS | The following is a schedule showing the future minimum lease payments under operating leases by fiscal years and the present value of the minimum payments as of August 31, 2021. SCHEDULE SHOWING THE FUTURE MINIMUM LEASE PAYMENTS 2022 $ 370,370 2023 $ 468,377 2024 $ 470,511 2025 $ 423,795 2026 and thereafter $ 171,602 Total Operating Lease Obligations $ 1,904,655 Less: Amount representing interest $ (347,840 ) Present Value of minimum lease payments $ 1,556,815 |
DEBT (Tables)
DEBT (Tables) | 3 Months Ended |
Aug. 31, 2021 | |
Debt Disclosure [Abstract] | |
SCHEDULE OF OUTSTANDING DEBT INSTRUMENT | The table below presents outstanding debt instruments as of August 31, and May 31, 2021 SCHEDULE OF OUTSTANDING DEBT INSTRUMENT AUGUST 31, 2021 MAY 31, 2021 Convertible Promissory Notes $ 3,952,424 $ 3,157,970 Related Debt Discount (2,394,343 ) (947,873 ) Total $ 1,558,081 $ 2,211,097 Current portion of Convertible Promissory Notes, net $ 1,323,051 $ 2,211,097 Non current portion of Convertible Promissory Notes, net 235,030 - |
STOCKHOLDERS_ EQUITY (Tables)
STOCKHOLDERS’ EQUITY (Tables) | 3 Months Ended |
Aug. 31, 2021 | |
Equity [Abstract] | |
SCHEDULE OF OUTSTANDING STOCK WARRANTS | A summary of the status of the Company’s outstanding stock warrants as of August 31, 2021 is as follows: SCHEDULE OF OUTSTANDING STOCK WARRANTS Number of Average Outstanding – May 31, 2020 803,001 $ 83.01 Granted during the year ended May 31, 2021 17,063 $ 20.66 Outstanding – May 31, 2021 820,064 $ 10.38 Warrants granted during the quarter ended August 31, 2021 1,257,312 $ 11.26 Sale of warrants during the quarter 100,000 $ 20.00 Warrants exercisable – August 31, 2021 2,177,376 $ 38.08 |
ORGANIZATION AND DESCRIPTION _2
ORGANIZATION AND DESCRIPTION OF BUSINESS (Details Narrative) | Aug. 31, 2021storesfranchise |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Companies owned | stores | 17 |
Franchise locations | franchise | 12 |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | 3 Months Ended | ||||
Aug. 31, 2021 | Aug. 30, 2021 | Aug. 31, 2020 | May 31, 2021 | Jan. 01, 2019 | |
Property, Plant and Equipment [Line Items] | |||||
Cost of goods and services sold depreciation | $ 27,134 | ||||
Gross profit | $ 297,718 | 132,956 | |||
Cash equivalents | 0 | ||||
Federal depository insurance coverage | 250,000 | ||||
Operating lease right-of-use asset | 1,562,617 | $ 1,533,010 | |||
Operating lease liability | 311,116 | 307,013 | |||
Retained Earnings (Accumulated Deficit) | 16,502,806 | $ 12,291,899 | |||
[custom:WorkingCapitalDefiict-0] | 1,952,342 | ||||
Net Income (Loss) Attributable to Parent | $ 4,210,907 | $ 4,210,907 | 655,214 | ||
Companies owned and franchise reopened | As a result, all of our corporate and franchised Simplicity Gaming Centers were closed effective April 1, 2020. We commenced reopening Simplicity Gaming Centers as of May 1, 2020 and have since reopened 16 company owned stores and 12 franchise locations. | ||||
Accounting Standards Update 2016-02 [Member] | |||||
Property, Plant and Equipment [Line Items] | |||||
Operating lease right-of-use asset | $ 110,003 | ||||
Operating lease liability | $ 107,678 | ||||
Franchise [Member] | |||||
Property, Plant and Equipment [Line Items] | |||||
Finite lived intangible asset, useful life | 10 years | ||||
Simplicity One Brasil Ltd [Member] | |||||
Property, Plant and Equipment [Line Items] | |||||
Equity method investment, ownership percentage | 76.00% | ||||
Simplicity Happy Valley, LLC and Simplicity Redmond, LLC [Member] | |||||
Property, Plant and Equipment [Line Items] | |||||
Equity method investment, ownership percentage | 79.00% | ||||
Simplicity ElPaso LLC [Member] | |||||
Property, Plant and Equipment [Line Items] | |||||
Equity method investment, ownership percentage | 51.00% | ||||
Maximum [Member] | |||||
Property, Plant and Equipment [Line Items] | |||||
Cost of goods and services sold depreciation | 40,511 | ||||
Gross profit | 160,090 | ||||
Finite lived intangible asset, useful life | 10 years | ||||
Property, plant and equipment, useful life | 5 years | ||||
Minimum [Member] | |||||
Property, Plant and Equipment [Line Items] | |||||
Cost of goods and services sold depreciation | 67,645 | ||||
Gross profit | $ 132,956 | ||||
Finite lived intangible asset, useful life | 2 years | ||||
Property, plant and equipment, useful life | 3 years |
SCHEDULE OF PROPERTY AND EQUIPM
SCHEDULE OF PROPERTY AND EQUIPMENT (Details) - USD ($) | Aug. 31, 2021 | May 31, 2021 |
Property, Plant and Equipment [Line Items] | ||
Total cost | $ 940,990 | $ 866,590 |
Less accumulated depreciation | (374,020) | (292,282) |
Net property plant and equipment | 566,970 | 574,308 |
Leasehold Improvements [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Total cost | 110,849 | 110,849 |
Property, Plant and Equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Total cost | $ 830,141 | $ 755,741 |
PROPERTY, PLANT AND EQUIPMENT_2
PROPERTY, PLANT AND EQUIPMENT (Details Narrative) - USD ($) | 3 Months Ended | |
Aug. 31, 2021 | Aug. 31, 2020 | |
Property, Plant and Equipment [Abstract] | ||
Depreciation | $ 81,737 | $ 27,135 |
SCHEDULE OF INTANGIBLE ASSETS (
SCHEDULE OF INTANGIBLE ASSETS (Details) - USD ($) | 3 Months Ended | 12 Months Ended | ||
Aug. 31, 2021 | May 31, 2021 | Aug. 31, 2020 | May 31, 2020 | |
Finite-Lived Intangible Assets [Line Items] | ||||
Finite-Lived Intangible Assets, Gross | $ 2,588,118 | $ 2,438,118 | ||
Finite-Lived Intangible Assets, Accumulated Amortization | 944,537 | 802,891 | ||
Intangible Assets, Net (Excluding Goodwill) | $ 1,558,039 | $ 1,635,227 | $ 1,558,039 | $ 1,635,227 |
Noncompete Agreements [Member] | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Finite-Lived Intangible Assets, Gross | 1,023,118 | 1,023,118 | ||
Finite-Lived Intangible Assets, Accumulated Amortization | 548,642 | 498,799 | ||
Intangible Assets, Net (Excluding Goodwill) | $ 474,476 | $ 524,319 | ||
Intangible assets, useful life | 4 years | 4 years 6 months | ||
Trademarks [Member] | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Finite-Lived Intangible Assets, Gross | $ 866,000 | $ 866,000 | ||
Finite-Lived Intangible Assets, Accumulated Amortization | ||||
Intangible Assets, Net (Excluding Goodwill) | $ 866,000 | $ 866,000 | ||
Intangible assets, useful life, description | Indefinite | Indefinite | ||
Customer Database [Member] | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Finite-Lived Intangible Assets, Gross | $ 35,000 | |||
Finite-Lived Intangible Assets, Accumulated Amortization | 20,417 | |||
Intangible Assets, Net (Excluding Goodwill) | $ 14,583 | |||
Intangible assets, useful life | 2 years | |||
Restrictive Covenant [Member] | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Finite-Lived Intangible Assets, Gross | $ 115,000 | |||
Finite-Lived Intangible Assets, Accumulated Amortization | 67,083 | |||
Intangible Assets, Net (Excluding Goodwill) | $ 47,917 | |||
Intangible assets, useful life | 2 years | |||
Customer Contracts [Member] | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Finite-Lived Intangible Assets, Gross | $ 546,000 | $ 546,000 | ||
Finite-Lived Intangible Assets, Accumulated Amortization | 391,270 | 301,675 | ||
Intangible Assets, Net (Excluding Goodwill) | $ 154,730 | $ 244,325 | ||
Intangible assets, useful life | 10 years | 10 years | ||
Internet Domain Names [Member] | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Finite-Lived Intangible Assets, Gross | $ 3,000 | $ 3,000 | ||
Finite-Lived Intangible Assets, Accumulated Amortization | 2,667 | 2,417 | ||
Intangible Assets, Net (Excluding Goodwill) | $ 333 | $ 583 | ||
Intangible assets, useful life | 2 years | 2 years 6 months |
SCHEDULE OF FUTURE AMORTIZATION
SCHEDULE OF FUTURE AMORTIZATION OF INTANGIBLE ASSETS (Details) | Aug. 31, 2021USD ($) |
Finite-Lived Intangible Assets [Line Items] | |
2022 | $ 222,209 |
2023 | 227,085 |
2024 | 132,595 |
2025 | 16,211 |
2026 | 16,211 |
Thereafter | 77,728 |
Total | 692,039 |
Noncompete Agreements [Member] | |
Finite-Lived Intangible Assets [Line Items] | |
2022 | 153,468 |
2023 | 204,624 |
2024 | 116,384 |
2025 | |
2026 | |
Thereafter | |
Total | 474,476 |
Customer Contracts [Member] | |
Finite-Lived Intangible Assets [Line Items] | |
2022 | 12,158 |
2023 | 16,211 |
2024 | 16,211 |
2025 | 16,211 |
2026 | 16,211 |
Thereafter | 77,728 |
Total | 154,730 |
Restrictive Covenant [Member] | |
Finite-Lived Intangible Assets [Line Items] | |
2022 | 43,125 |
2023 | 4,792 |
2025 | |
2026 | |
Thereafter | |
Total | 47,917 |
Customer Database [Member] | |
Finite-Lived Intangible Assets [Line Items] | |
2022 | 13,125 |
2023 | 1,458 |
2025 | |
2026 | |
Thereafter | |
Total | 14,583 |
Internet Domain Names [Member] | |
Finite-Lived Intangible Assets [Line Items] | |
2022 | 333 |
2023 | |
2024 | |
2025 | |
2026 | |
Thereafter | |
Total | $ 333 |
INTANGIBLE ASSETS (Details Narr
INTANGIBLE ASSETS (Details Narrative) - USD ($) | 3 Months Ended | |
Aug. 31, 2021 | Aug. 31, 2020 | |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Amortization of Intangible Assets | $ 77,188 | $ 66,614 |
ACQUISITIONS (Details Narrative
ACQUISITIONS (Details Narrative) - Existing Franchisee [Member] | Jul. 26, 2021$ / sharesshares |
Business Acquisition [Line Items] | |
Asset acquired in exchange of shares | shares | 6,000 |
Share issued price per share | $ / shares | $ 10.85 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details Narrative) - Laila Cavalcanti Loss [Member] | Aug. 27, 2021USD ($)shares |
Deferred Compensation Arrangement with Individual, Excluding Share-based Payments and Postretirement Benefits [Line Items] | |
Stock issued during period values stock award gross | $ | $ 2,500 |
Stock issued during period shares stock award gross | shares | 250 |
Accrued amount for stock payment | $ | $ 25,000 |
Accrued shares for stock payment | shares | 375 |
SCHEDULE SHOWING THE FUTURE MIN
SCHEDULE SHOWING THE FUTURE MINIMUM LEASE PAYMENTS (Details) | Aug. 31, 2021USD ($) |
Loss Contingencies [Line Items] | |
Present Value of minimum lease payments | $ 1,556,815 |
Operating Lease Liabilities [Member] | |
Loss Contingencies [Line Items] | |
2022 | 370,370 |
2023 | 468,377 |
2024 | 470,511 |
2025 | 423,795 |
2026 and thereafter | 171,602 |
Total Operating Lease Obligations | 1,904,655 |
Less: Amount representing interest | (347,840) |
Present Value of minimum lease payments | $ 1,556,815 |
COMMITMENTS AND CONTINGENCIES_2
COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($) | Aug. 20, 2021 | May 17, 2021 | Mar. 29, 2021 | Mar. 29, 2020 | Aug. 31, 2021 | Aug. 31, 2020 | May 31, 2021 | Jul. 29, 2020 |
Subsidiary, Sale of Stock [Line Items] | ||||||||
Operating Lease, Right-of-Use Asset | $ 1,562,617 | $ 1,533,010 | ||||||
Operating Lease, Liability | 1,556,815 | |||||||
Operating Lease, Expense | 140,516 | $ 20,623 | ||||||
Equity grants as compensation for employment agreement | $ 819,309 | |||||||
Stock Issued During Period, Shares, New Issues | 82,500 | |||||||
Accrued Liabilities | $ 833,250 | |||||||
Underwriter [Member] | ||||||||
Subsidiary, Sale of Stock [Line Items] | ||||||||
Sale of Stock, Price Per Share | $ 13 | |||||||
Jed Kaplan [Member] | ||||||||
Subsidiary, Sale of Stock [Line Items] | ||||||||
Cash bonus | $ 75,000 | |||||||
Salary and Wage, NonOfficer, Excluding Cost of Good and Service Sold | $ 4,000 | |||||||
Board of Directors [Member] | ||||||||
Subsidiary, Sale of Stock [Line Items] | ||||||||
Shares Issued, Shares, Share-based Payment Arrangement, after Forfeiture | 250,000 | |||||||
MrKaplan [Member] | ||||||||
Subsidiary, Sale of Stock [Line Items] | ||||||||
Due to Related Parties, Current | $ 35,000 | |||||||
Mr. Franklin [Member] | ||||||||
Subsidiary, Sale of Stock [Line Items] | ||||||||
Cash bonus | $ 75,000 | |||||||
Due to Related Parties, Current | 35,000 | |||||||
Impairment of cost method investment | 250,000 | |||||||
Chief Executive Officer [Member] | Franklin Employment Agreement [Member] | ||||||||
Subsidiary, Sale of Stock [Line Items] | ||||||||
Annual base salary | $ 250,000 | |||||||
Maximum quarterly bonus amount | $ 15,000 | |||||||
Chief Financial Officer [Member] | Hennessey Employment Agreement [Member] | ||||||||
Subsidiary, Sale of Stock [Line Items] | ||||||||
Annual base salary | $ 140,000 | |||||||
Maximum quarterly bonus amount | 12,500 | |||||||
Equity grants as compensation for employment agreement | $ 5,000 | |||||||
Employment agreement description | Ms. Hennessey will also receive (i) 5,000 shares of common stock upon filing of the 2021 Annual Report on Form 10-K, if completed before July 31, 2021, and (ii) 5,000 shares of common stock upon completion of an uplisting to a national exchange, such as The Nasdaq Stock Market or the NYSE American. | |||||||
Ms Hennessey [Member] | ||||||||
Subsidiary, Sale of Stock [Line Items] | ||||||||
Accrued equity grant | 5,000 | |||||||
IPO [Member] | ||||||||
Subsidiary, Sale of Stock [Line Items] | ||||||||
Sale of Stock, Consideration Received on Transaction | $ 100 | |||||||
Sale of Stock, Number of Shares Issued in Transaction | 250,000 | |||||||
Options exercisable share price | 1150.00% | |||||||
Over-Allotment Option [Member] | Underwriters [Member] | ||||||||
Subsidiary, Sale of Stock [Line Items] | ||||||||
Sale of Stock, Consideration Received on Transaction | $ 2,990,000 | |||||||
Sale of Stock, Number of Shares Issued in Transaction | 260,000 |
SCHEDULE OF OUTSTANDING DEBT IN
SCHEDULE OF OUTSTANDING DEBT INSTRUMENT (Details) - USD ($) | Aug. 31, 2021 | May 31, 2020 |
Short-term Debt [Line Items] | ||
Related Debt Discount | $ (2,394,343) | $ (947,873) |
Total | 1,558,081 | 2,211,097 |
Current portion of Convertible Promissory Notes, net | 1,323,051 | 2,211,097 |
Non current portion of Convertible Promissory Notes, net | 235,030 | |
Convertible Promissory Note [Member] | ||
Short-term Debt [Line Items] | ||
Long term debt gross | $ 3,952,424 | $ 3,157,970 |
DEBT (Details Narrative)
DEBT (Details Narrative) - USD ($) | Aug. 30, 2021 | Aug. 25, 2021 | Aug. 23, 2021 | Aug. 20, 2021 | Aug. 19, 2021 | Jun. 16, 2021 | Jun. 11, 2021 | Apr. 14, 2021 | Mar. 10, 2021 | Mar. 10, 2021 | Feb. 19, 2021 | Jun. 18, 2020 | Jun. 18, 2020 | Jun. 07, 2020 | Jun. 04, 2020 | Dec. 20, 2018 | Sep. 30, 2021 | Aug. 31, 2021 | Aug. 31, 2020 | Oct. 01, 2021 | Sep. 17, 2021 | Sep. 15, 2021 | Jul. 15, 2021 | May 31, 2021 | May 15, 2021 | Apr. 30, 2021 | May 31, 2020 |
Short-term Debt [Line Items] | |||||||||||||||||||||||||||
Stock Issued During Period, Value, Conversion of Convertible Securities | $ 100,000 | ||||||||||||||||||||||||||
Number of common stock issued | 82,500 | ||||||||||||||||||||||||||
Gain (loss) on extinguishment of debt | $ (1,759,969) | ||||||||||||||||||||||||||
Original issue discount | 2,394,343 | $ 947,873 | |||||||||||||||||||||||||
Additional Paid in Capital | 21,233,531 | $ 16,708,762 | |||||||||||||||||||||||||
Interest Expense | 659,696 | $ 154,128 | |||||||||||||||||||||||||
Holder [Member] | |||||||||||||||||||||||||||
Short-term Debt [Line Items] | |||||||||||||||||||||||||||
Principal amount of debt instrument | 90,909 | ||||||||||||||||||||||||||
Repayment of debt | 225,000 | ||||||||||||||||||||||||||
Original issue discount | 903,588 | ||||||||||||||||||||||||||
Guaranteed Interest Contracts | 109,091 | ||||||||||||||||||||||||||
Amendment fee | 25,000 | ||||||||||||||||||||||||||
Common Stock [Member] | |||||||||||||||||||||||||||
Short-term Debt [Line Items] | |||||||||||||||||||||||||||
Number of common stock issued | 2,976 | ||||||||||||||||||||||||||
Maxim Note [Member] | |||||||||||||||||||||||||||
Short-term Debt [Line Items] | |||||||||||||||||||||||||||
Debt instrument, default interest rate | 10.00% | 10.00% | |||||||||||||||||||||||||
Series A-2 Note [Member] | |||||||||||||||||||||||||||
Short-term Debt [Line Items] | |||||||||||||||||||||||||||
Principal amount of debt instrument | $ 50,000 | ||||||||||||||||||||||||||
Cumulative increase principal | $ 350,000 | ||||||||||||||||||||||||||
Tranches description | The Company will, within five business days after the Company’s receipt of the Second Tranche Purchase Price of $999,996, pay $500,000 to Maxim, which will reduce the principal owed under the Series A-2 Note by $500,000. | ||||||||||||||||||||||||||
Series A-2 Note [Member] | Common Stock [Member] | |||||||||||||||||||||||||||
Short-term Debt [Line Items] | |||||||||||||||||||||||||||
Principal amount of debt instrument | $ 100,000 | $ 50,000 | $ 50,000 | ||||||||||||||||||||||||
Series A-2 Note [Member] | Common Stock [Member] | Subsequent Event [Member] | |||||||||||||||||||||||||||
Short-term Debt [Line Items] | |||||||||||||||||||||||||||
Principal amount of debt instrument | $ 100,000 | ||||||||||||||||||||||||||
Secured Demand Promissory Note [Member] | |||||||||||||||||||||||||||
Short-term Debt [Line Items] | |||||||||||||||||||||||||||
Accrued interest rate of debt instrument | 125.00% | ||||||||||||||||||||||||||
FirstFire Note[Member] | |||||||||||||||||||||||||||
Short-term Debt [Line Items] | |||||||||||||||||||||||||||
Principal amount of debt instrument | $ 1,266,667 | ||||||||||||||||||||||||||
Original issue discount | 1,266,667 | 419,468 | |||||||||||||||||||||||||
Recognized debt discount | 65,533 | ||||||||||||||||||||||||||
Interest Payable | 76,000 | ||||||||||||||||||||||||||
Additional Paid in Capital | $ 1,053,999 | ||||||||||||||||||||||||||
Interest Expense | 140,548 | ||||||||||||||||||||||||||
Debt instruments unamortized discount | 140,548 | ||||||||||||||||||||||||||
GS Note [Member] | |||||||||||||||||||||||||||
Short-term Debt [Line Items] | |||||||||||||||||||||||||||
Principal amount of debt instrument | $ 333,333 | ||||||||||||||||||||||||||
Original issue discount | 333,333 | ||||||||||||||||||||||||||
Interest Payable | 20,000 | ||||||||||||||||||||||||||
Additional Paid in Capital | $ 280,000 | ||||||||||||||||||||||||||
Interest Expense | 34,703 | ||||||||||||||||||||||||||
Debt instruments unamortized discount | 34,703 | ||||||||||||||||||||||||||
Jefferson Note [Member] | |||||||||||||||||||||||||||
Short-term Debt [Line Items] | |||||||||||||||||||||||||||
Principal amount of debt instrument | $ 333,333 | ||||||||||||||||||||||||||
Original issue discount | 274,239 | ||||||||||||||||||||||||||
Interest Payable | $ 20,000 | ||||||||||||||||||||||||||
Interest Expense | 685 | ||||||||||||||||||||||||||
Debt instruments unamortized discount | $ 59,779 | ||||||||||||||||||||||||||
Securities Purchase Agreement [Member] | Febraury 2021 Convertible Note [Member] | Accredited Investor [Member] | |||||||||||||||||||||||||||
Short-term Debt [Line Items] | |||||||||||||||||||||||||||
Debt conversion price | $ 11.50 | ||||||||||||||||||||||||||
Number of common stock issued | 10,000 | ||||||||||||||||||||||||||
Debt instrument, default interest rate | 12.00% | ||||||||||||||||||||||||||
Principal amount of debt instrument | $ 1,650,000 | ||||||||||||||||||||||||||
Repayment of debt | $ 1,650,000 | ||||||||||||||||||||||||||
Debt maturity date | Feb. 19, 2022 | ||||||||||||||||||||||||||
Original issue discount | $ 165,000 | ||||||||||||||||||||||||||
Proceeds from issuance of debt | $ 1,485,000 | ||||||||||||||||||||||||||
Equity method investment, ownership percentage | 4.99% | ||||||||||||||||||||||||||
Partial repayment of longterm debt principal and interest | $ 363,000 | ||||||||||||||||||||||||||
Securities Purchase Agreement [Member] | Febraury 2021 Convertible Note [Member] | Subsequent Event [Member] | Accredited Investor [Member] | |||||||||||||||||||||||||||
Short-term Debt [Line Items] | |||||||||||||||||||||||||||
Partial repayment of longterm debt principal and interest | $ 100,000 | ||||||||||||||||||||||||||
Additional repayment of long term debt principal and interest | 100,000 | ||||||||||||||||||||||||||
Securities Purchase Agreement [Member] | Febraury 2021 Convertible Note [Member] | Subsequent Event [Member] | Holder [Member] | |||||||||||||||||||||||||||
Short-term Debt [Line Items] | |||||||||||||||||||||||||||
Partial repayment of longterm debt principal and interest | $ 163,000 | ||||||||||||||||||||||||||
Maxim Group LLC [Member] | |||||||||||||||||||||||||||
Short-term Debt [Line Items] | |||||||||||||||||||||||||||
Number of common stock issued | 20,000 | ||||||||||||||||||||||||||
Repayment of debt | $ 500,000 | ||||||||||||||||||||||||||
Gain (loss) on extinguishment of debt | $ 1,759,969 | ||||||||||||||||||||||||||
Maxim Group LLC [Member] | Series A-2 Exchange Convertible Note [Member] | |||||||||||||||||||||||||||
Short-term Debt [Line Items] | |||||||||||||||||||||||||||
Debt Instrument, Convertible, Terms of Conversion Feature | upon the satisfaction of the following obligations: (i) the Company’s payment of $ | ||||||||||||||||||||||||||
Repayment of debt | $ 500,000 | ||||||||||||||||||||||||||
Warrants issued | 365,000 | ||||||||||||||||||||||||||
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ 13 | ||||||||||||||||||||||||||
Maxim Group LLC [Member] | Series A-2 Exchange Convertible Note [Member] | Restricted Stock [Member] | |||||||||||||||||||||||||||
Short-term Debt [Line Items] | |||||||||||||||||||||||||||
Number of common stock issued | 20,000 | ||||||||||||||||||||||||||
Maxim Group LLC [Member] | Securities Exchange Agreement [Member] | Series A-2 Exchange Convertible Note [Member] | |||||||||||||||||||||||||||
Short-term Debt [Line Items] | |||||||||||||||||||||||||||
Stock Issued During Period, Value, Conversion of Convertible Securities | $ 100,000 | $ 1,000,000 | |||||||||||||||||||||||||
Debt conversion price | $ 1.93 | ||||||||||||||||||||||||||
Debt Instrument, Convertible, Terms of Conversion Feature | 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 | ||||||||||||||||||||||||||
Number of common stock issued | 85,905 | ||||||||||||||||||||||||||
Maxim Group LLC [Member] | Securities Exchange Agreement [Member] | Series A-1 Exchange Convertible Note [Member] | Maximum [Member] | |||||||||||||||||||||||||||
Short-term Debt [Line Items] | |||||||||||||||||||||||||||
Debt conversion price | $ 15.44 | $ 15.44 | |||||||||||||||||||||||||
Maxim Group LLC [Member] | Securities Exchange Agreement [Member] | Series A-1 Exchange Convertible Note [Member] | Minimum [Member] | |||||||||||||||||||||||||||
Short-term Debt [Line Items] | |||||||||||||||||||||||||||
Debt conversion price | $ 9.20 | $ 9.20 | |||||||||||||||||||||||||
Maxim Note [Member] | Series A-2 Exchange Convertible Note [Member] | |||||||||||||||||||||||||||
Short-term Debt [Line Items] | |||||||||||||||||||||||||||
Debt Instrument, Description | parties agreed to the following: (i) Maxim’s resale of the Company’s common stock (the “Common Stock”) underlying the Series A-2 Note shall be limited to | ||||||||||||||||||||||||||
FirstFire Global Oppurtunities Fund, LLC [Member] | Warrant [Member] | Subsequent Event [Member] | |||||||||||||||||||||||||||
Short-term Debt [Line Items] | |||||||||||||||||||||||||||
Warrants issued | 40,000 | 40,000 | |||||||||||||||||||||||||
FirstFire Global Oppurtunities Fund, LLC [Member] | FirstFire SPA [Member] | |||||||||||||||||||||||||||
Short-term Debt [Line Items] | |||||||||||||||||||||||||||
Debt conversion price | $ 11.50 | $ 11.50 | |||||||||||||||||||||||||
Original issue discount | $ 56,000 | $ 56,000 | |||||||||||||||||||||||||
Proceeds from issuance of debt | 504,000 | ||||||||||||||||||||||||||
FirstFire Global Oppurtunities Fund, LLC [Member] | FirstFire SPA [Member] | Febraury 2021 Convertible Note [Member] | |||||||||||||||||||||||||||
Short-term Debt [Line Items] | |||||||||||||||||||||||||||
Principal amount of debt instrument | $ 560,000 | $ 560,000 | |||||||||||||||||||||||||
FirstFire Global Oppurtunities Fund, LLC [Member] | FirstFire SPA [Member] | Secured Demand Promissory Note [Member] | |||||||||||||||||||||||||||
Short-term Debt [Line Items] | |||||||||||||||||||||||||||
Accrued interest rate of debt instrument | 125.00% | ||||||||||||||||||||||||||
FirstFire Global Oppurtunities Fund, LLC [Member] | FirstFire SPA [Member] | 03/02/2021 [Member] | |||||||||||||||||||||||||||
Short-term Debt [Line Items] | |||||||||||||||||||||||||||
Debt instrument, default interest rate | 12.00% | 12.00% | |||||||||||||||||||||||||
Principal amount of debt instrument | $ 560,000 | $ 560,000 | |||||||||||||||||||||||||
Repayment of debt | $ 365,000 | ||||||||||||||||||||||||||
Debt maturity date | Mar. 10, 2022 | ||||||||||||||||||||||||||
Original issue discount | $ 56,000 | $ 56,000 | |||||||||||||||||||||||||
Proceeds from issuance of debt | $ 130,606 | ||||||||||||||||||||||||||
Equity method investment, ownership percentage | 499.00% | 499.00% | |||||||||||||||||||||||||
Partial repayment of longterm debt principal and interest | $ 123,200 | ||||||||||||||||||||||||||
Origination fees | $ 8,394 | ||||||||||||||||||||||||||
FirstFire Global Oppurtunities Fund, LLC [Member] | June FirstFire SPA [Member] | June FirstFire Warrant [Member] | |||||||||||||||||||||||||||
Short-term Debt [Line Items] | |||||||||||||||||||||||||||
Warrants issued | 593,750 | ||||||||||||||||||||||||||
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ 10.73 | ||||||||||||||||||||||||||
Warrants and Rights Outstanding, Term | 3 years | ||||||||||||||||||||||||||
FirstFire Global Oppurtunities Fund, LLC [Member] | June FirstFire SPA [Member] | June FirstFire Promissory Note [Member] | |||||||||||||||||||||||||||
Short-term Debt [Line Items] | |||||||||||||||||||||||||||
Debt conversion price | $ 11.50 | ||||||||||||||||||||||||||
Number of common stock issued | 11,875 | ||||||||||||||||||||||||||
Debt instrument, default interest rate | 12.00% | ||||||||||||||||||||||||||
Principal amount of debt instrument | $ 1,266,666 | ||||||||||||||||||||||||||
Repayment of debt | $ 1,266,666 | ||||||||||||||||||||||||||
Debt maturity date | Jun. 10, 2023 | ||||||||||||||||||||||||||
Original issue discount | $ 126,666 | ||||||||||||||||||||||||||
Proceeds from issuance of debt | $ 1,140,000 | ||||||||||||||||||||||||||
Equity method investment, ownership percentage | 4.99% | ||||||||||||||||||||||||||
Accrued interest rate of debt instrument | 125.00% | ||||||||||||||||||||||||||
03/02/2021 [Member] | FirstFire SPA [Member] | Febraury 2021 Convertible Note [Member] | |||||||||||||||||||||||||||
Short-term Debt [Line Items] | |||||||||||||||||||||||||||
Number of common stock issued | 3,394 | ||||||||||||||||||||||||||
GS Capital Partners, LLC [Member] | GS SPA [Member] | GS Warrant [Member] | |||||||||||||||||||||||||||
Short-term Debt [Line Items] | |||||||||||||||||||||||||||
Warrants issued | 156,250 | ||||||||||||||||||||||||||
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ 10.73 | ||||||||||||||||||||||||||
Warrants and Rights Outstanding, Term | 3 years | ||||||||||||||||||||||||||
GS Capital Partners, LLC [Member] | GS SPA [Member] | GS Promissory Note [Member] | |||||||||||||||||||||||||||
Short-term Debt [Line Items] | |||||||||||||||||||||||||||
Debt conversion price | $ 11.50 | ||||||||||||||||||||||||||
Number of common stock issued | 3,125 | ||||||||||||||||||||||||||
Debt instrument, default interest rate | 12.00% | ||||||||||||||||||||||||||
Principal amount of debt instrument | $ 333,333 | ||||||||||||||||||||||||||
Repayment of debt | $ 300,000 | ||||||||||||||||||||||||||
Debt maturity date | Jun. 10, 2023 | ||||||||||||||||||||||||||
Original issue discount | $ 33,333 | ||||||||||||||||||||||||||
Proceeds from issuance of debt | $ 300,000 | ||||||||||||||||||||||||||
Equity method investment, ownership percentage | 4.99% | ||||||||||||||||||||||||||
Accrued interest rate of debt instrument | 125.00% | ||||||||||||||||||||||||||
Jefferson Street Capital, LLC [Member] | Jefferson SPA [Member] | Jefferson Warrant [Member] | |||||||||||||||||||||||||||
Short-term Debt [Line Items] | |||||||||||||||||||||||||||
Warrants issued | 156,250 | ||||||||||||||||||||||||||
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ 10.73 | ||||||||||||||||||||||||||
Warrants and Rights Outstanding, Term | 3 years | ||||||||||||||||||||||||||
Jefferson Street Capital, LLC [Member] | Jefferson SPA [Member] | Jefferson Promissory Note [Member] | |||||||||||||||||||||||||||
Short-term Debt [Line Items] | |||||||||||||||||||||||||||
Debt conversion price | $ 11.50 | ||||||||||||||||||||||||||
Number of common stock issued | 3,125 | ||||||||||||||||||||||||||
Debt instrument, default interest rate | 12.00% | ||||||||||||||||||||||||||
Principal amount of debt instrument | $ 333,333 | ||||||||||||||||||||||||||
Repayment of debt | $ 300,000 | ||||||||||||||||||||||||||
Debt maturity date | Aug. 23, 2023 | ||||||||||||||||||||||||||
Original issue discount | $ 33,333 | ||||||||||||||||||||||||||
Proceeds from issuance of debt | $ 300,000 | ||||||||||||||||||||||||||
Equity method investment, ownership percentage | 4.99% | ||||||||||||||||||||||||||
Accrued interest rate of debt instrument | 125.00% |
SCHEDULE OF OUTSTANDING STOCK W
SCHEDULE OF OUTSTANDING STOCK WARRANTS (Details) - Warrant [Member] - $ / shares | 3 Months Ended | 12 Months Ended |
Aug. 31, 2021 | May 31, 2021 | |
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||
Number of Warrants, Outstanding, Beginning balance | 820,064 | 803,001 |
Weighted Average Exercise Price, Outstanding, Beginning balance | $ 10.38 | $ 83.01 |
Number of shares stock warrants, Granted | 1,257,312 | 17,063 |
Average exercise price stock warrants, Granted | $ 11.26 | $ 20.66 |
Number of Warrants, Outstanding, Ending balance | 2,177,376 | 820,064 |
Weighted Average Exercise Price, Outstanding, Ending balance | $ 38.08 | $ 10.38 |
[custom:ShareBasedCompensationArrangementByShareBasedPaymentAwardNonOptionEquityInstrumentsSaleOfWarrants] | 100,000 | |
[custom:ShareBasedCompensationArrangementByShareBasedPaymentAwardNonOptionsGrantedSaleOfWarrantsWeightedAverageExercisePrice1] | $ 20 |
STOCKHOLDERS_ EQUITY (Details N
STOCKHOLDERS’ EQUITY (Details Narrative) - USD ($) | 3 Months Ended | |||
Aug. 31, 2021 | Aug. 31, 2020 | May 31, 2021 | Aug. 17, 2020 | |
Preferred Stock, Shares Authorized | 1,000,000 | 1,000,000 | 1,000,000 | |
Preferred Stock, Par or Stated Value Per Share | $ 0.0001 | $ 0.0001 | $ 0.0001 | |
Preferred Stock, Shares Outstanding | 0 | 0 | ||
Common stock, authorized | 36,000,000 | 36,000,000 | ||
Common stock, shares issued | 1,492,595 | 1,427,124 | ||
Common stock, outstanding | 1,492,595 | 1,427,124 | ||
Share based compensation expenses | $ 838,250 | $ 150,095 | ||
Minimum [Member] | ||||
Common stock, authorized | 20,000,000 | |||
Maximum [Member] | ||||
Common stock, authorized | 36,000,000 |
SUBSEQUENT EVENTS (Details Narr
SUBSEQUENT EVENTS (Details Narrative) - USD ($) | Oct. 07, 2021 | Sep. 28, 2021 | Sep. 01, 2021 | Aug. 20, 2021 | Sep. 30, 2021 | Sep. 28, 2021 | Aug. 31, 2021 | Oct. 01, 2021 | Sep. 17, 2021 | May 31, 2020 |
Subsequent Event [Line Items] | ||||||||||
Stock Issued During Period, Shares, New Issues | 82,500 | |||||||||
Debt Instrument, Unamortized Discount | $ 2,394,343 | $ 947,873 | ||||||||
Asset Purchase Agreement [Member] | Ventures LLC [Member] | ||||||||||
Subsequent Event [Line Items] | ||||||||||
Debt Instrument, Face Amount | $ 200,000 | |||||||||
Stock Issued During Period, Shares, Acquisitions | 3,749 | |||||||||
Warrants to purchase stock | 187,400 | |||||||||
Asset Purchase Agreement [Member] | LGH Investments LLC [Member] | ||||||||||
Subsequent Event [Line Items] | ||||||||||
Debt Instrument, Face Amount | $ 200,000 | |||||||||
Subsequent Event [Member] | Holder [Member] | ||||||||||
Subsequent Event [Line Items] | ||||||||||
Repayments of Related Party Debt | $ 500,000 | |||||||||
Subsequent Event [Member] | Paycheck Protection Plan [Member] | ||||||||||
Subsequent Event [Line Items] | ||||||||||
Debt forgiveness income | $ 40,500 | |||||||||
Subsequent Event [Member] | Asset Purchase Agreement [Member] | Simplicity Tracy LLC [Member] | ||||||||||
Subsequent Event [Line Items] | ||||||||||
Business Acquisition, Equity Interest Issued or Issuable, Number of Shares | 4,500 | |||||||||
Subsequent Event [Member] | Maxim [Member] | ||||||||||
Subsequent Event [Line Items] | ||||||||||
Stock Issued During Period, Shares, Restricted Stock Award, Gross | 82,500 | |||||||||
Subsequent Event [Member] | FirstFire Global Oppurtunities Fund, LLC [Member] | Warrant [Member] | ||||||||||
Subsequent Event [Line Items] | ||||||||||
Warrants to purchase stock | 40,000 | 40,000 | ||||||||
Subsequent Event [Member] | Ionic Ventures, LLC [Member] | Ionic SPA [Member] | Ionic Promissory Note [Member] | ||||||||||
Subsequent Event [Line Items] | ||||||||||
Debt Instrument, Face Amount | $ 1,555,555.56 | $ 1,555,555.56 | ||||||||
Debt Instrument, Interest Rate, Stated Percentage | 12.00% | 12.00% | ||||||||
Debt Instrument, Maturity Date | Sep. 28, 2023 | |||||||||
Stock Issued During Period, Shares, New Issues | 14,584 | |||||||||
Repayments of Debt | $ 1,400,000 | |||||||||
Debt Instrument, Unamortized Discount | 155,555.56 | $ 155,555.56 | ||||||||
Proceeds from Issuance of Debt | $ 1,400,000 | |||||||||
Equity Method Investment, Ownership Percentage | 4.99% | 4.99% | ||||||||
Debt Instrument, Convertible, Conversion Price | $ 11.50 | $ 11.50 | ||||||||
Accrued interest rate of debt instrument | 125.00% | |||||||||
Subsequent Event [Member] | Ionic Ventures, LLC [Member] | Ionic SPA [Member] | Ionic Warrant [Member] | ||||||||||
Subsequent Event [Line Items] | ||||||||||
Warrants to purchase stock | 729,167 | 729,167 | ||||||||
Warrant term | 3 years | 3 years | ||||||||
Warrant exersice price | $ 10.73 | $ 10.73 |