Cover
Cover - shares | 6 Months Ended | |
Nov. 30, 2021 | Jan. 13, 2022 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Document Period End Date | Nov. 30, 2021 | |
Document Fiscal Period Focus | Q2 | |
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 | 1,616,022 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets (Unaudited) - USD ($) | Nov. 30, 2021 | May 31, 2021 |
Current Assets | ||
Cash and cash equivalents | $ 832,423 | $ 414,257 |
Accounts receivable, net | 104,502 | 160,101 |
Inventory | 364,610 | 206,974 |
Prepaid expenses | 157,163 | 52,643 |
Total Current Assets | 1,458,698 | 833,975 |
Other Assets | ||
Goodwill | 5,180,141 | 5,180,141 |
Intangible assets, net | 1,479,131 | 1,635,227 |
Deferred brokerage fees | 75,135 | 79,943 |
Property and equipment, net | 518,103 | 574,308 |
Right of use asset, operating leases, net | 1,606,884 | 1,533,010 |
Security deposits | 40,307 | 40,307 |
Due from franchisees’ | 7,640 | 23,007 |
Deferred equity financing costs | 427,699 | 307,494 |
Total Other Assets | 9,335,040 | 9,373,437 |
TOTAL ASSETS | 10,793,738 | 10,207,412 |
Current Liabilities | ||
Accounts payable | 167,380 | 438,466 |
Accrued expenses | 839,361 | 1,166,433 |
Current portion of convertible notes payable, net | 1,121,334 | 2,211,097 |
Notes payable | 41,735 | 82,235 |
Operating lease obligation, current | 332,519 | 307,013 |
Current portion of deferred revenues | 30,034 | 30,034 |
Total Current Liabilities | 2,532,363 | 4,235,278 |
Operating lease obligation, net of current portion | 1,262,098 | 1,199,748 |
Non current portion of convertible notes payable, net | 620,007 | |
Secured notes payable, net | 264,773 | |
Deferred revenues, less current portion | 169,913 | 182,342 |
Total Liabilities | 4,849,154 | 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; 1,616,022 and 1,427,124 shares issued and outstanding as of November 30, 2021, and May 31, 2021, respectively | 159 | 142 |
Common Stock Issuable | 50,625 | |
Additional paid-in capital | 24,444,130 | 16,708,762 |
Accumulated deficit | (18,632,103) | (12,291,899) |
Total Simplicity Esports and Gaming Company Stockholders’ Equity | 5,862,811 | 4,417,005 |
Non-Controlling Interest | 81,773 | 173,039 |
Total Stockholders’ Equity | 5,944,584 | 4,590,044 |
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ 10,793,738 | $ 10,207,412 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares | Nov. 30, 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, Shares, Outstanding | 1,616,022 | 1,427,124 |
Common stock, issued | 1,616,022 | 1,427,124 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Nov. 30, 2021 | Nov. 30, 2020 | Nov. 30, 2021 | Nov. 30, 2020 | |
Revenues | ||||
Total Revenues | $ 843,815 | $ 296,546 | $ 1,748,655 | $ 497,147 |
Cost of Goods Sold | (485,394) | (113,771) | (1,092,516) | (181,416) |
Gross Margin | 358,421 | 182,775 | 656,139 | 315,731 |
Operating Expenses Compensation and related benefits | 845,886 | 366,257 | 2,149,012 | 668,825 |
Professional Fees | 129,723 | 186,898 | 579,076 | 260,789 |
General and administrative expenses | 432,127 | 212,631 | 875,822 | 454,400 |
Impairment Expense | 201,277 | 201,277 | ||
Total Operating Expenses | 1,407,736 | 967,063 | 3,603,910 | 1,585,291 |
Loss from Operations | (1,049,315) | (784,288) | (2,947,771) | (1,269,560) |
Other Income / (Expense) | ||||
Gain/(loss) on extinguishment of debt | 29,168 | 15,250 | (1,730,801) | 3,115 |
Interest and financing expense | (1,145,794) | (244,660) | (1,805,490) | (398,788) |
Interest income | 9 | 5 | 28 | 12 |
Other Income | 206 | 52,564 | ||
Foreign exchange (loss) | (19,572) | |||
Total Other Income / (Expense) | (1,116,411) | (229,405) | (3,483,699) | (415,233) |
Loss Before Provision for Income Taxes | (2,165,726) | (1,013,693) | (6,431,470) | (1,684,793) |
Provision for Income Taxes | ||||
Net Loss | (2,165,726) | (1,013,693) | (6,431,470) | (1,684,793) |
Net loss attributable to noncontrolling interest | 36,429 | 8,533 | 91,266 | 24,419 |
Net loss attributable to common shareholders | $ (2,129,297) | $ (1,005,160) | $ (6,340,204) | $ (1,660,374) |
Basic and Diluted Net Loss per share | $ (1.39) | $ (0.84) | $ (4.15) | $ (1.42) |
Basic and diluted Weighted Average Number of Common Shares Outstanding | 1,527,908 | 1,192,945 | 1,526,066 | 1,166,150 |
Franchise Royalties Fees And Other [Member] | ||||
Revenues | ||||
Total Revenues | $ 96,953 | $ 91,793 | $ 159,311 | $ 179,076 |
Company Owned Stores Sales [Member] | ||||
Revenues | ||||
Total Revenues | 681,732 | 167,791 | 1,355,233 | 244,729 |
Esports Revenue [Member] | ||||
Revenues | ||||
Total Revenues | $ 65,130 | $ 36,962 | $ 234,111 | $ 73,342 |
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] | Common Stock Issuable [Member] | Retained Earnings [Member] | Total |
Balance - August 31, 2020 at May. 31, 2020 | $ 100 | $ 11,132,103 | $ (21,487) | $ (6,195,044) | $ 4,915,672 | |
Shares, Outstanding, Beginning Balance 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 to directors, officers and employees as compensation | $ 12 | 819,297 | 819,309 | |||
Shares issued to directors, officers and employees as compensation, shares | 116,175 | |||||
Shares issued for contracted services | $ 1 | 68,777 | 68,778 | |||
Stock Issued During Period, Shares, Issued for Services | 6,597 | |||||
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 | (15,866) | (15,866) | ||||
Net Loss | (655,214) | (655,214) | ||||
Balance at Aug. 31, 2020 | $ 117 | 12,412,390 | 202,647 | (6,850,258) | 5,764,896 | |
Shares, Outstanding, Ending Balance at Aug. 31, 2020 | 1,166,150 | |||||
Balance - August 31, 2020 at May. 31, 2020 | $ 100 | 11,132,103 | (21,487) | (6,195,044) | 4,915,672 | |
Shares, Outstanding, Beginning Balance at May. 31, 2020 | 998,622 | |||||
Net Loss | (1,660,374) | |||||
Balance at Nov. 30, 2020 | $ 122 | 13,128,420 | 194,093 | (7,855,418) | 5,467,217 | |
Shares, Outstanding, Ending Balance at Nov. 30, 2020 | 1,217,376 | |||||
Balance - August 31, 2020 at Aug. 31, 2020 | $ 117 | 12,412,390 | 202,647 | (6,850,258) | 5,764,896 | |
Shares, Outstanding, Beginning Balance at Aug. 31, 2020 | 1,166,150 | |||||
Shares issued to directors, officers and employees as compensation | $ 1 | 119,632 | 119,633 | |||
Shares issued to directors, officers and employees as compensation, shares | 9,844 | |||||
Shares issued for contracted services | 25,420 | 25,420 | ||||
Stock Issued During Period, Shares, Issued for Services | 2,813 | |||||
Shares issued in connection with franchise acquisition | $ 4 | 413,540 | 413,544 | |||
Shares issued in connection with franchise acquisition, shares | 37,941 | |||||
Rounding related to reverse split | ||||||
Rounding related to reverse split, shares | 628 | |||||
Warrants issued in connection with debt | 157,438 | 157,438 | ||||
Net loss attributable to noncontrolling interest | (8,554) | (8,554) | ||||
Net Loss | (1,005,160) | (1,005,160) | ||||
Balance at Nov. 30, 2020 | $ 122 | 13,128,420 | 194,093 | (7,855,418) | 5,467,217 | |
Shares, Outstanding, Ending Balance at Nov. 30, 2020 | 1,217,376 | |||||
Balance - August 31, 2020 at May. 31, 2021 | $ 142 | 16,708,762 | 173,039 | (12,291,899) | 4,590,044 | |
Shares, Outstanding, Beginning Balance 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 to directors, officers and employees as compensation | 838,250 | 838,250 | ||||
Shares issued to directors, officers and employees as compensation, shares | ||||||
Shares issued for contracted services | $ 2 | 224,875 | 12,525 | 237,402 | ||
Stock Issued During Period, Shares, Issued for Services | 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 | |||||
Warrants issued in connection with amendments of notes payable | ||||||
Net loss attributable to noncontrolling interest | (54,837) | (54,837) | ||||
Net Loss | (4,210,907) | (4,210,907) | ||||
Balance at Aug. 31, 2021 | $ 149 | 21,233,531 | 118,202 | 850,775 | (16,502,806) | 5,699,851 |
Shares, Outstanding, Ending Balance at Aug. 31, 2021 | 1,492,595 | |||||
Balance - August 31, 2020 at May. 31, 2021 | $ 142 | 16,708,762 | 173,039 | (12,291,899) | 4,590,044 | |
Shares, Outstanding, Beginning Balance at May. 31, 2021 | 1,427,124 | |||||
Net Loss | (6,340,204) | |||||
Balance at Nov. 30, 2021 | $ 159 | 24,444,130 | 81,773 | 50,625 | (18,632,103) | 5,944,584 |
Shares, Outstanding, Ending Balance at Nov. 30, 2021 | 1,616,022 | |||||
Balance - August 31, 2020 at Aug. 31, 2021 | $ 149 | 21,233,531 | 118,202 | 850,775 | (16,502,806) | 5,699,851 |
Shares, Outstanding, Beginning Balance at Aug. 31, 2021 | 1,492,595 | |||||
Shares issued in connection with issuance and amendments of notes payable | $ 1 | 1,817,563 | 1,817,564 | |||
Shares issued in connection with issuance and amendments of notes payable, shares | 18,333 | |||||
Shares issued to directors, officers and employees as compensation | $ 8 | 852,085 | (838,250) | 13,843 | ||
Shares issued to directors, officers and employees as compensation, shares | 84,656 | |||||
Shares issued for contracted services | $ 1 | 174,230 | (3,750) | 170,481 | ||
Stock Issued During Period, Shares, Issued for Services | 20,438 | |||||
Shares issued in connection with franchise acquisition | 41,850 | 41,850 | ||||
Shares issued in connection with franchise acquisition, shares | ||||||
Stock Options issued | 366,721 | 366,721 | ||||
Net loss attributable to noncontrolling interest | (36,429) | (36,429) | ||||
Net Loss | (2,129,297) | (2,129,297) | ||||
Balance at Nov. 30, 2021 | $ 159 | $ 24,444,130 | $ 81,773 | $ 50,625 | $ (18,632,103) | $ 5,944,584 |
Shares, Outstanding, Ending Balance at Nov. 30, 2021 | 1,616,022 |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 6 Months Ended | |
Nov. 30, 2021 | Nov. 30, 2020 | |
Cash flows from operating activities: | ||
Net loss | $ (6,431,470) | $ (1,684,793) |
Adjustments to reconcile net loss to net cash (used in) operating activities: | ||
Non-cash interest expense | 1,696,395 | 241,557 |
Deferred guaranteed interest | (247,400) | |
Depreciation expense | 165,653 | 73,249 |
Amortization expense | 156,096 | 133,229 |
Provision for uncollectible accounts | 12,943 | |
Impairment loss | 202,586 | |
Lease liability net of leased asset | 13,982 | 2,499 |
Loss on extinguishment of debt | 1,730,801 | |
Stock based compensation | 1,218,814 | |
Gain on Asset Acquisition | (2,357) | |
Deferred equity financing costs | (120,205) | (137,561) |
Issuance of shares for services | 407,883 | 1,033,140 |
Issuance of shares for interest payment | 81,508 | |
Issuance of shares for inventory | 8,703 | |
Changes in operating assets and liabilities: | ||
Accounts receivable | 55,599 | (3,668) |
Inventory | (157,636) | (20,676) |
Prepaid expenses | (104,520) | (15,122) |
Deferred brokerage fees | 4,808 | 25,884 |
Deferred revenues | (12,429) | (63,279) |
Accounts payable | (271,086) | 110,595 |
Accrued expenses | (327,072) | (194,223) |
Due from franchisees’ | 15,367 | (45,516) |
Net cash used in operating activities | (2,105,623) | (342,099) |
Cash flows from investing activities: | ||
Purchase of property and equipment | (13,302) | (1,949) |
Net cash provided by (used in) investing activities | (13,302) | (1,949) |
Cash flows from financing activities: | ||
Repayment of notes payable | (1,324,409) | (319,477) |
Proceeds from note payable | 3,761,500 | 1,046,756 |
Proceeds from sale of warrants | 100,000 | |
Private placement funds received | 25,000 | |
Net cash provided by financing activities | 2,537,091 | 752,279 |
Net change in cash | 418,166 | 408,231 |
Cash - beginning of period | 414,257 | 160,208 |
Cash - end of period | 832,423 | 568,439 |
Supplemental Disclosures of Cash Flow Information: | ||
Cash paid for interest | 180,950 | |
Cash paid for income taxes | ||
Supplemental Non-Cash Investing and Financing Information | ||
Common stock issued for consideration in an acquisition of assets | 104,850 | 728,544 |
Common stock issued in connection with notes payable | 269,539 | 100,000 |
Warrants issued for debt extinguishment | 2,392,593 | |
Beneficial conversion feature with warrants issued for debt discount | $ 3,534,556 | $ 102,217 |
ORGANIZATION AND DESCRIPTION OF
ORGANIZATION AND DESCRIPTION OF BUSINESS | 6 Months Ended |
Nov. 30, 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 (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 22019, 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 League of Legends, 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 of November 30, 2021 the company had 17 company owned stores and 12 franchise locations operating in various states including Arizona, California, Florida, Idaho, Maryland, Ohio, South Carolina, Texas and Washington. PLAYlive offers a video gaming lounge concept to qualified franchisees. PLAYlive currently offers single-unit location franchises, as well as agreements to develop multiple locations. This PLAYlive model is being interlaced with the esports gaming centers mentioned above to create the ultimate gaming center. The Company’s common stock and warrants are quoted on the OTCQB under the symbols “WINR” and “WINRW,” respectively. The Company has applied for an uplist to the Nasdaq Stock Exchange and currently has an open application, which the Company . There is no assurance that our listing application will be approved by the Nasdaq Capital Market. SIMPLICITY ESPORTS AND GAMING COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 6 Months Ended |
Nov. 30, 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 for the year ended May 31, 2021, as filed with the SEC on August 31, 2021. The interim results for the six months ended November 30, 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 and six months ended November 30, 2020 have been corrected for a reclassification of depreciation expense of $ 46,114 and $ 73,248 , respectively to cost of goods sold related to assets utilized in the production of inventory. 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 for the three months ended November 30, 2020 increased from $ 67,657 to $ 113,771 with a corresponding decrease of General and administrative expenses, resulting in a decrease to Gross Profit from $ 228,889 to $ 182,775 . For the six months ended November 30, 2020, Cost of Goods Sold increased from $ 108,168 to $ 181,416 with a corresponding decrease of General and administrative expenses, resulting in a decrease to Gross Profit from $ 388,979 to $ 315,731 . The correction had no impact on Loss from Operations and Net loss. Emerging Growth Company Section 102(b)(1) of the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a registration statement under the Securities Act of 1933, as amended (the “Securities Act”), declared effective or do not have a class of securities registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. Basis of Consolidation The condensed consolidated financial statements include the operations of the Company and its wholly owned subsidiaries, 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 year. SIMPLICITY ESPORTS AND GAMING COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 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. 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. Deferred costs include commissions paid to brokers related to the sale of specific new franchises which have not met revenue recognition criteria as of November 30, 2021. These costs are recognized in the same period as the initial franchise fee revenue is recognized. SIMPLICITY ESPORTS AND GAMING COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 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. As of November 30, 2021, management has recorded an allowance for doubtful accounts of $ 12,943 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 November 30, 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 SIMPLICITY ESPORTS AND GAMING COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 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, Related parties Parties are related to the Company if the parties, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal with if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. 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 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 (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 following is summary of recent accounting developments. 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 $ 18,632,103 , a working capital deficit of $ 1,073,665 and a net loss of $ 6,431,470 November 30, 2021. Management believes that these matters raise substantial doubt about the Company’s ability to continue as a going concern for twelve months from the issuance date of this report. 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 debt offerings and/or public equity 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. 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 17 corporate and 12 franchised locations. Although our franchise agreements with franchisees of Simplicity Gaming Centers require a minimum monthly royalty payment to us from the franchisees regardless of whether the franchised Simplicity Gaming Centers are operating, there is a potential risk that franchisees of Simplicity Gaming Centers will default in their obligations to pay their minimum monthly royalty payment to us resulting in either an increase in accounts receivables or a bad debt expense where account receivables are no longer collectible due to franchisee’s inability to pay the minimum monthly royalty payments owed by the franchisee. 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 have negatively impacted the Company’s business during the six months ended November 30, 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. SIMPLICITY ESPORTS AND GAMING COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) |
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT | 6 Months Ended |
Nov. 30, 2021 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY AND EQUIPMENT | NOTE 3 — PROPERTY AND EQUIPMENT The following is a summary of property and equipment—at cost, less accumulated depreciation: SCHEDULE OF PROPERTY AND EQUIPMENT November 30, 2021 May 31, 2021 Leasehold improvements $ 110,849 110,849 Property and equipment 865,190 755,741 Total cost 976,069 866,590 Less accumulated depreciation (458,936 ) (292,282 ) Net property and equipment $ 518,103 574,308 During the six months ended November 30, 2021 and 2020, the Company recorded depreciation expense of $ 165,653 and $ 73,249 respectively |
INTANGIBLE ASSETS
INTANGIBLE ASSETS | 6 Months Ended |
Nov. 30, 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 November 30, 2020: SCHEDULE OF INTANGIBLE ASSETS November 30, 2021 Remaining Accumulated Net Carrying Useful Life Cost Amortization Value Non-Competes 4 years $ 1,023,118 $ 596,819 $ 426,299 Trademarks Indefinite 866,000 - 866,000 Customer database 2 years 35,000 24,792 10,208 Restrictive covenant 2 years 115,000 81,458 33,542 Customer contracts 10 years 546,000 403,001 142,999 Internet domain 2 years 3,000 2,917 83 $ 2,588,118 $ 1,108,987 $ 1,479,131 The following tables set forth the intangible assets, including accumulated amortization as of May 31, 2021: 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 years 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 November 30, 2021 for the fiscal years ending May 31: SCHEDULE OF FUTURE AMORTIZATION OF INTANGIBLE ASSETS 2022 2023 2024 2025 2026 Thereafter Total Non-Competes $ 102,312 $ 204,624 $ 119,363 $ - $ - $ - $ 426,299 Customer contracts 8,105 16,211 16,211 16,211 16,211 70,051 142,999 Restrictive covenant 28,750 4,792 - - - - 33,542 Customer database 8,750 1,458 - - - - 10,208 Internet domain 83 - - - - - 83 Total $ 148,000 $ 227,085 $ 135,574 $ 16,211 $ 16,211 $ 70,051 $ 613,131 Amortization expense for the six months ended November 30, 2021 and 2020 was $ 148,416 133,229 |
ACQUISITIONS
ACQUISITIONS | 6 Months Ended |
Nov. 30, 2021 | |
Business Combination and Asset Acquisition [Abstract] | |
ACQUISITIONS | NOTE 5 — ACQUISITIONS Simplicity Tracy, LLC: On October 7, 2021, the Company’s wholly owned subsidiary, Simplicity Tracy, LLC (“Simplicity Tracy”) entered into an Asset Purchase agreement (“APA”) with an existing franchisee (“Franchisee”), to acquire the Franchisee’s assets in exchange for 4,500 shares of the Company’s common stock with fair value of $ 41,850 or $ 9.30 per share based on the fair value of assets acquired. Pursuant to ASU 2017-01 and ASC 805, the Company analyzed the APA to determine if the Company acquired a business or acquired assets. As of November 30, 2021 the shares for the acquisition are included in Common Stock Issuable. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 6 Months Ended |
Nov. 30, 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 and monthly equity awards of 250 shares of its common stock. The terms of the contract were retroactive to July 1, 2020 and at November 30, 2021, the Company has accrued $ 5,625 375 shares of stock for the payments of this contract. The Company maintains a portion of its cash balance at a financial services company that is owned by an officer of the Company. SIMPLICITY ESPORTS AND GAMING COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 6 Months Ended |
Nov. 30, 2021 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | NOTE 7 COMMITMENTS AND CONTINGENCIES Unit Purchase Option On November 20, 2018 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 Unit Purchase Option (“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 November 30, 2021, operating lease right-of-use assets and liabilities arising from operating leases was $ 1,581,863 and $ 1,590,380 , respectively. During the six months ended November 30, 2021 and 2020, the Company recorded operating lease expense of approximately $ 280,613 and $ 31,453 . 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 November 30, 2021. SCHEDULE SHOWING THE FUTURE MINIMUM LEASE PAYMENTS 2022 $ 264,351 2023 498,377 2024 500,511 2025 453,795 2026 and thereafter 225,100 Total Operating Lease Obligations 1,942,135 Less: Amount representing interest $ (351,755 ) Present Value of minimum lease payments $ 1,590,380 SIMPLICITY ESPORTS AND GAMING COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) |
DEBT
DEBT | 6 Months Ended |
Nov. 30, 2021 | |
Debt Disclosure [Abstract] | |
DEBT | NOTE 8- DEBT The table below presents outstanding debt instruments as of November 30, 2021, and May 31, 2021 SCHEDULE OF OUTSTANDING DEBT INSTRUMENT NOVEMBER 30, MAY 31, Convertible Promissory Notes $ 5,174,480 $ 3,157,970 Secured Promissory Notes 420,000 - Related Debt Discount (3,588,366 ) (947,873 ) Total promissory notes, net $ 2,006,114 $ 2,211,097 Current portion of Promissory Notes, net $ 1,121,334 $ 2,211,097 SIMPLICITY ESPORTS AND GAMING COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 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 12 165,000 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. 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, 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% Upon the occurrence of an Event of Default, additional interest will accrue from the date of the Event of Default at the rate equal to the lower of 15% per annum or the highest rate permitted by law. During the six months ended November 30, 2021 the Company paid the Holder a total of $ 855,000 225,000 towards the repayment of the balance of the Note in the amount of $ 90,909 , towards the repayment of guaranteed interest in the amount of $ 109,091 and $ 25,000 as an amendment fee. In addition the Company paid $ 130,000 58,500 71,500 363,000 500,000 During the quarter ended November 30, 2021, the Company incurred $ 290,522 635,605 all of which is included in the current portion of convertible notes payable, net of debt discount. SIMPLICITY ESPORTS AND GAMING COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 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 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. On September 17, 2021, the Company issued a common stock purchase warrant for the purchase of 40,000 shares of the Company’s common stock to FirstFire as consideration for FirstFire entering into a first amendment to the March 10 FirstFire Note in order to delay an interim payment of OID and interest due under the March 10 FirstFire Note to the maturity date of such note. For the quarter ended November 30, 2021, the Company recorded the fair value of the warrants in the amount of $ 248,547 248,547 On October 1, 2021, the Company issued a three-year warrant to purchase 40,000 shares of the Company’s common stock at an exercise price of $ 10.73 per share 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. For the quarter ended November 30, 2021, the Company recorded the fair value of the warrants in the amount of $ 201,351 201,351 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 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 six months ended November 30, 2021, the Company recognized $131,794 $485,729 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 12 126,666 1,140,000 4.99 11.50 SIMPLICITY ESPORTS AND GAMING COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 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 and a related debt discount of $ 1,266,667 , interest payable of $ 76,000 and additional paid in capital of $ 1,053,999 . On September 16, 2021, the Company made an interim payment to the FirstFire Note in the amount of $ 175,000 298,448 . On November 30, 2021, the balance of the June 11 FirstFire Note, net of the related debt discount is $ 123,448 all of which is included in the long-term portion of convertible notes payable, net of related debt discount. 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 12 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 SIMPLICITY ESPORTS AND GAMING COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 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 and a related debt discount of $ 333,333 , interest payable of $ 20,000 and additional paid in capital of $ 280,000 . During the six months ended November 30, 2021, the Company recorded interest expense of $ 76,255 . On November 30, 2021, the balance of the GS Note, net of the related debt discount is $ 76,255 all of which is included in the long-term portion of convertible notes payable, net of related debt discount. 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 12 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. SIMPLICITY ESPORTS AND GAMING COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) The Company recorded the Jefferson Note in the amount of $ 333,333 274,239 20,000 205,605 36,277 95,372 Lucas Ventures Capital Stock Purchase Agreement & Note On August 31, 2021, pursuant to the terms of that certain Securities Purchase Agreement between the Company and Lucas Ventures, LLC (“LV SPA”), the Company issued a 12 % convertible promissory note (“the LV Note”) in the principal amount of $ 200,000 with an effective date of September 2, 2021, guaranteed interest of $ 12,000 September 2, 2023 . In addition, the Company issued 3,749 shares of its common stock to LV 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). Accordingly, Lucas Ventures Capital paid the purchase price of $ 200,000 .00 in exchange for the LV Note. The Company may prepay the LV Note at any time prior to maturity in accordance with the terms of the LV Note. The LV Note contains customary events of default relating to, among other things, payment defaults, breach of representations and warranties, and breach of provisions of the LV Note or the LV SPA. Upon the occurrence of any Event of Default (as defined in the LV Note), which has not been cured within three calendar days, the LV Note shall become immediately due and payable and the Company shall pay to LV, 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 LV SPA, the Company also issued to LV a three 187,480 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 LV SPA, including shares issued upon conversion of the LV Note or exercise of the LV Warrant. The Company agreed to use its commercially reasonable efforts to have the registration statement filed with the SEC within 90 days following September 2, 2021 and to have the registration statement declared effective by the SEC within 120 days following September 2, 2021. The Company recorded the LV Note in the amount of $ 200,000 and a related debt discount of $ 200,000 , additional paid in capital of $ 158,999 and guaranteed interest of $ 12,000 . During the quarter ended November 30, 2021, the Company recorded interest expense of $ 24,384 . On November 30, 2021, the balance of the LV Note, net of the related debt discount is $ 24,384 all of which is included in the long-term portion of convertible notes payable, net of related debt discount. LGH Investments, LLC Note Payable On August 31, 2021 the Company and LGH Investments, LLC, (“LGH”) issued a 12 200,000 September 2, 2023 The Company may prepay the LGH Note at any time prior to maturity in accordance with the terms of the LGH Note. The LGH Note contains customary events of default relating to, among other things, payment defaults, breach of representations and warranties, and breach of provisions of the LGH Note. Upon the occurrence of any Event of Default (as defined in the LGH Note), which has not been cured within three calendar days, the LGH Note shall become immediately due and payable and the Company shall pay to LGH, in full satisfaction of its obligations hereunder, an amount equal to the principal amount then outstanding plus accrued interest multiplied by 125 SIMPLICITY ESPORTS AND GAMING COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) The Company recorded the LGH Note in the amount of $ 200,000 , interest payable of $ 12,000 along with total debt discount of $ 38,500 20,000 and origination fees of $ 6,500 . During the quarter, the Company recorded interest expense of $ 4,800 . On November 30, 2021, the balance of the LGH Note, net of the related debt discount is $ 166,299 all of which is included in the long-term portion of convertible notes payable, net of related debt discount. Ionic Ventures, LLC Capital Stock Purchase Agreement & Note 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 with guaranteed interest of $ 93,333.34 . 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 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. The Company recorded the Ionic Note in the amount of $ 1,555,555 and a related debt discount of $ 1,555,555 , and additional paid in capital of $ 1,306,665 and guaranteed interest of $ 93,333 During the quarter, the Company recorded interest expense of $ 134,246 . On November 30, 2021, the balance of the LV Note, net of the related debt discount is $ 134,246 all of which is included in the long-term portion of convertible notes payable, net of related debt discount. Secured Promissory Note One On November 15, 2021, the Company entered into a 10 262,500 30,000 10.73 60 monthly payments 5,577 The Company recorded the Secured Note One in the amount of $ 262,500 12,500 250,000 165,483 Secured Promissory Note Two On November 18, 2021, the Company entered into a 10 157,500 18,000 10.73 60 monthly payments 3,346 The Company recorded the Secured Note Two in the amount of $ 157,500 7,500 150,000 99,290 SIMPLICITY ESPORTS AND GAMING COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) |
STOCKHOLDERS_ EQUITY
STOCKHOLDERS’ EQUITY | 6 Months Ended |
Nov. 30, 2021 | |
Equity [Abstract] | |
STOCKHOLDERS’ EQUITY | NOTE 9 - STOCKHOLDERS’ EQUITY Preferred Stock The Company is authorized to issue 1,000,000 0.0001 no 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 to 36,000,000 . Holders of the shares of the Company’s common stock are entitled to one vote for each share. At November 30, 2021 and May 31, 2021, there were 1,616,022 and 1,427,124 shares of common stock issued and outstanding respectively. Warrants The Company issued warrants related to the convertible notes payable that were issued during the six months ended November 30, 2021. A summary of the status of the Company’s outstanding stock warrants as of November 30, 2021 is as follows: SCHEDULE OF OUTSTANDING STOCK WARRANTS Number of Average Outstanding – May 31, 2020 789,063 $ 83.01 Granted during the year ended May 31, 2021 17,063 $ 20.66 Outstanding – May 31, 2021 806,126 $ 10.38 Activity during the six months ended November 30, 2021: Warrants granted related to debt 2,315,897 $ 11.05 Warrants sold to a private investor 100,000 $ 20.00 Warrants outstanding – November 30, 2021 3,222,023 $ 29.05 |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 6 Months Ended |
Nov. 30, 2021 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | NOTE 10 — SUBSEQUENT EVENTS On December 10, 2022, the Company entered into a related party transaction with Jed Kaplan, the Chairman of the Company and a more than 5 247,818 , bearing interest at a rate of 5 % and the principal is due on June 10, 2022 . The loan may be repaid by the Company, without penalty, at any time. Should the Company fail to make the principal payment due, the loan will convert to a 17% equity stake in our subsidiary, Simplicity One Brazil, of which Jed Kaplan is already a 20% stakeholder. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 6 Months Ended |
Nov. 30, 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 for the year ended May 31, 2021, as filed with the SEC on August 31, 2021. The interim results for the six months ended November 30, 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 and six months ended November 30, 2020 have been corrected for a reclassification of depreciation expense of $ 46,114 and $ 73,248 , respectively to cost of goods sold related to assets utilized in the production of inventory. 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 for the three months ended November 30, 2020 increased from $ 67,657 to $ 113,771 with a corresponding decrease of General and administrative expenses, resulting in a decrease to Gross Profit from $ 228,889 to $ 182,775 . For the six months ended November 30, 2020, Cost of Goods Sold increased from $ 108,168 to $ 181,416 with a corresponding decrease of General and administrative expenses, resulting in a decrease to Gross Profit from $ 388,979 to $ 315,731 . The correction had no impact on Loss from Operations and Net loss. |
Emerging Growth Company | Emerging Growth Company Section 102(b)(1) of the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a registration statement under the Securities Act of 1933, as amended (the “Securities Act”), declared effective or do not have a class of securities registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. |
Basis of Consolidation | Basis of Consolidation The condensed consolidated financial statements include the operations of the Company and its wholly owned subsidiaries, 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 year. SIMPLICITY ESPORTS AND GAMING COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) |
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. 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. Deferred costs include commissions paid to brokers related to the sale of specific new franchises which have not met revenue recognition criteria as of November 30, 2021. These costs are recognized in the same period as the initial franchise fee revenue is recognized. SIMPLICITY ESPORTS AND GAMING COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) |
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. As of November 30, 2021, management has recorded an allowance for doubtful accounts of $ 12,943 |
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 November 30, 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 SIMPLICITY ESPORTS AND GAMING COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) |
Non-employee | 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, |
Related parties | Related parties Parties are related to the Company if the parties, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal with if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. |
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 Loss Per Share | Basic 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 (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 following is summary of recent accounting developments. 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 $ 18,632,103 , a working capital deficit of $ 1,073,665 and a net loss of $ 6,431,470 November 30, 2021. Management believes that these matters raise substantial doubt about the Company’s ability to continue as a going concern for twelve months from the issuance date of this report. 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 debt offerings and/or public equity 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. 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 17 corporate and 12 franchised locations. Although our franchise agreements with franchisees of Simplicity Gaming Centers require a minimum monthly royalty payment to us from the franchisees regardless of whether the franchised Simplicity Gaming Centers are operating, there is a potential risk that franchisees of Simplicity Gaming Centers will default in their obligations to pay their minimum monthly royalty payment to us resulting in either an increase in accounts receivables or a bad debt expense where account receivables are no longer collectible due to franchisee’s inability to pay the minimum monthly royalty payments owed by the franchisee. 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 have negatively impacted the Company’s business during the six months ended November 30, 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 AND EQUIPMENT (Tables)
PROPERTY AND EQUIPMENT (Tables) | 6 Months Ended |
Nov. 30, 2021 | |
Property, Plant and Equipment [Abstract] | |
SCHEDULE OF PROPERTY AND EQUIPMENT | The following is a summary of property and equipment—at cost, less accumulated depreciation: SCHEDULE OF PROPERTY AND EQUIPMENT November 30, 2021 May 31, 2021 Leasehold improvements $ 110,849 110,849 Property and equipment 865,190 755,741 Total cost 976,069 866,590 Less accumulated depreciation (458,936 ) (292,282 ) Net property and equipment $ 518,103 574,308 |
INTANGIBLE ASSETS (Tables)
INTANGIBLE ASSETS (Tables) | 6 Months Ended |
Nov. 30, 2021 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
SCHEDULE OF INTANGIBLE ASSETS | The following table sets forth the intangible assets, including accumulated amortization as of November 30, 2020: SCHEDULE OF INTANGIBLE ASSETS November 30, 2021 Remaining Accumulated Net Carrying Useful Life Cost Amortization Value Non-Competes 4 years $ 1,023,118 $ 596,819 $ 426,299 Trademarks Indefinite 866,000 - 866,000 Customer database 2 years 35,000 24,792 10,208 Restrictive covenant 2 years 115,000 81,458 33,542 Customer contracts 10 years 546,000 403,001 142,999 Internet domain 2 years 3,000 2,917 83 $ 2,588,118 $ 1,108,987 $ 1,479,131 The following tables set forth the intangible assets, including accumulated amortization as of May 31, 2021: 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 years 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 November 30, 2021 for the fiscal years ending May 31: SCHEDULE OF FUTURE AMORTIZATION OF INTANGIBLE ASSETS 2022 2023 2024 2025 2026 Thereafter Total Non-Competes $ 102,312 $ 204,624 $ 119,363 $ - $ - $ - $ 426,299 Customer contracts 8,105 16,211 16,211 16,211 16,211 70,051 142,999 Restrictive covenant 28,750 4,792 - - - - 33,542 Customer database 8,750 1,458 - - - - 10,208 Internet domain 83 - - - - - 83 Total $ 148,000 $ 227,085 $ 135,574 $ 16,211 $ 16,211 $ 70,051 $ 613,131 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Tables) | 6 Months Ended |
Nov. 30, 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 November 30, 2021. SCHEDULE SHOWING THE FUTURE MINIMUM LEASE PAYMENTS 2022 $ 264,351 2023 498,377 2024 500,511 2025 453,795 2026 and thereafter 225,100 Total Operating Lease Obligations 1,942,135 Less: Amount representing interest $ (351,755 ) Present Value of minimum lease payments $ 1,590,380 |
DEBT (Tables)
DEBT (Tables) | 6 Months Ended |
Nov. 30, 2021 | |
Debt Disclosure [Abstract] | |
SCHEDULE OF OUTSTANDING DEBT INSTRUMENT | The table below presents outstanding debt instruments as of November 30, 2021, and May 31, 2021 SCHEDULE OF OUTSTANDING DEBT INSTRUMENT NOVEMBER 30, MAY 31, Convertible Promissory Notes $ 5,174,480 $ 3,157,970 Secured Promissory Notes 420,000 - Related Debt Discount (3,588,366 ) (947,873 ) Total promissory notes, net $ 2,006,114 $ 2,211,097 Current portion of Promissory Notes, net $ 1,121,334 $ 2,211,097 |
STOCKHOLDERS_ EQUITY (Tables)
STOCKHOLDERS’ EQUITY (Tables) | 6 Months Ended |
Nov. 30, 2021 | |
Equity [Abstract] | |
SCHEDULE OF OUTSTANDING STOCK WARRANTS | A summary of the status of the Company’s outstanding stock warrants as of November 30, 2021 is as follows: SCHEDULE OF OUTSTANDING STOCK WARRANTS Number of Average Outstanding – May 31, 2020 789,063 $ 83.01 Granted during the year ended May 31, 2021 17,063 $ 20.66 Outstanding – May 31, 2021 806,126 $ 10.38 Activity during the six months ended November 30, 2021: Warrants granted related to debt 2,315,897 $ 11.05 Warrants sold to a private investor 100,000 $ 20.00 Warrants outstanding – November 30, 2021 3,222,023 $ 29.05 |
ORGANIZATION AND DESCRIPTION _2
ORGANIZATION AND DESCRIPTION OF BUSINESS (Details Narrative) | Nov. 30, 2021storesfranchise |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Number of stores owned | stores | 17 |
Number of franchise | franchise | 12 |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | ||||
Nov. 30, 2021 | Nov. 30, 2020 | Nov. 30, 2021 | Nov. 30, 2020 | May 31, 2021 | Jan. 01, 2019 | |
Property, Plant and Equipment [Line Items] | ||||||
Cost, Depreciation | $ 46,114 | $ 73,248 | ||||
Gross Profit | $ 358,421 | 182,775 | $ 656,139 | 315,731 | ||
Cash equivalents | 0 | 0 | $ 0 | |||
Federal depository insurance coverage | 250,000 | 250,000 | ||||
Allowance for doubtful accounts | 12,943 | 12,943 | ||||
Operating lease right-of-use asset | 1,606,884 | 1,606,884 | 1,533,010 | |||
Operating lease liability | 332,519 | 332,519 | 307,013 | |||
Retained Earnings (Accumulated Deficit) | 18,632,103 | 18,632,103 | $ 12,291,899 | |||
Working capital | 1,073,665 | 1,073,665 | ||||
Net Income (Loss), Including Portion Attributable to Noncontrolling Interest | 2,165,726 | 1,013,693 | 6,431,470 | 1,684,793 | ||
Accounting Standards Update 2016-02 [Member] | ||||||
Property, Plant and Equipment [Line Items] | ||||||
Operating lease right-of-use asset | $ 1,581,863 | $ 1,581,863 | $ 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% | 76.00% | ||||
Simplicity Happy Valley, LLC and Simplicity Redmond, LLC [Member] | ||||||
Property, Plant and Equipment [Line Items] | ||||||
Equity method investment, ownership percentage | 79.00% | 79.00% | ||||
Simplicity ElPaso LLC [Member] | ||||||
Property, Plant and Equipment [Line Items] | ||||||
Equity method investment, ownership percentage | 51.00% | 51.00% | ||||
Maximum [Member] | ||||||
Property, Plant and Equipment [Line Items] | ||||||
Cost, Depreciation | 67,657 | 108,168 | ||||
Gross Profit | 228,889 | 388,979 | ||||
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, Depreciation | 113,771 | 181,416 | ||||
Gross Profit | $ 182,775 | $ 315,731 | ||||
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 ($) | Nov. 30, 2021 | May 31, 2021 |
Property, Plant and Equipment [Line Items] | ||
Total cost | $ 976,069 | $ 866,590 |
Less accumulated depreciation | (458,936) | (292,282) |
Net property and equipment | 518,103 | 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 | $ 865,190 | $ 755,741 |
PROPERTY AND EQUIPMENT (Details
PROPERTY AND EQUIPMENT (Details Narrative) - USD ($) | 6 Months Ended | |
Nov. 30, 2021 | Nov. 30, 2020 | |
Property, Plant and Equipment [Abstract] | ||
Depreciation | $ 165,653 | $ 73,249 |
SCHEDULE OF INTANGIBLE ASSETS (
SCHEDULE OF INTANGIBLE ASSETS (Details) - USD ($) | 6 Months Ended | 12 Months Ended | ||
Nov. 30, 2021 | May 31, 2021 | Nov. 30, 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 | 1,108,987 | 802,891 | ||
Intangible Assets, Net (Excluding Goodwill) | $ 1,479,131 | $ 1,635,227 | $ 1,479,131 | $ 1,635,227 |
Noncompete Agreements [Member] | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Intangible assets, useful life | 4 years | 4 years 6 months | ||
Finite-Lived Intangible Assets, Gross | $ 1,023,118 | $ 1,023,118 | ||
Finite-Lived Intangible Assets, Accumulated Amortization | 596,819 | 498,799 | ||
Intangible Assets, Net (Excluding Goodwill) | 426,299 | 524,319 | ||
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] | ||||
Intangible assets, useful life | 2 years | |||
Finite-Lived Intangible Assets, Gross | $ 35,000 | |||
Finite-Lived Intangible Assets, Accumulated Amortization | 24,792 | |||
Intangible Assets, Net (Excluding Goodwill) | $ 10,208 | |||
Restrictive Covenant [Member] | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Intangible assets, useful life | 2 years | |||
Finite-Lived Intangible Assets, Gross | $ 115,000 | |||
Finite-Lived Intangible Assets, Accumulated Amortization | 81,458 | |||
Intangible Assets, Net (Excluding Goodwill) | $ 33,542 | |||
Customer Contracts [Member] | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Intangible assets, useful life | 10 years | 10 years | ||
Finite-Lived Intangible Assets, Gross | $ 546,000 | $ 546,000 | ||
Finite-Lived Intangible Assets, Accumulated Amortization | 403,001 | 301,675 | ||
Intangible Assets, Net (Excluding Goodwill) | $ 142,999 | $ 244,325 | ||
Internet Domain Names [Member] | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Intangible assets, useful life | 2 years | 2 years 6 months | ||
Finite-Lived Intangible Assets, Gross | $ 3,000 | $ 3,000 | ||
Finite-Lived Intangible Assets, Accumulated Amortization | 2,917 | 2,417 | ||
Intangible Assets, Net (Excluding Goodwill) | $ 83 | $ 583 |
SCHEDULE OF FUTURE AMORTIZATION
SCHEDULE OF FUTURE AMORTIZATION OF INTANGIBLE ASSETS (Details) | Nov. 30, 2021USD ($) |
Finite-Lived Intangible Assets [Line Items] | |
2022 | $ 148,000 |
2023 | 227,085 |
2024 | 135,574 |
2025 | 16,211 |
2026 | 16,211 |
Thereafter | 70,051 |
Total | 613,131 |
Noncompete Agreements [Member] | |
Finite-Lived Intangible Assets [Line Items] | |
2022 | 102,312 |
2023 | 204,624 |
2024 | 119,363 |
2025 | |
2026 | |
Thereafter | |
Total | 426,299 |
Customer Contracts [Member] | |
Finite-Lived Intangible Assets [Line Items] | |
2022 | 8,105 |
2023 | 16,211 |
2024 | 16,211 |
2025 | 16,211 |
2026 | 16,211 |
Thereafter | 70,051 |
Total | 142,999 |
Restrictive Covenant [Member] | |
Finite-Lived Intangible Assets [Line Items] | |
2022 | 28,750 |
2023 | 4,792 |
2024 | |
2025 | |
2026 | |
Thereafter | |
Total | 33,542 |
Customer Database [Member] | |
Finite-Lived Intangible Assets [Line Items] | |
2022 | 8,750 |
2023 | 1,458 |
2024 | |
2025 | |
2026 | |
Thereafter | |
Total | 10,208 |
Internet Domain Names [Member] | |
Finite-Lived Intangible Assets [Line Items] | |
2022 | 83 |
2023 | |
2024 | |
2025 | |
Thereafter | |
Total | $ 83 |
INTANGIBLE ASSETS (Details Narr
INTANGIBLE ASSETS (Details Narrative) - USD ($) | 6 Months Ended | |
Nov. 30, 2021 | Nov. 30, 2020 | |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Amortization of Intangible Assets | $ 148,416 | $ 133,229 |
ACQUISITIONS (Details Narrative
ACQUISITIONS (Details Narrative) - Simplicity Tracy LLC [Member] - Asset Purchase Agreement [Member] | Oct. 07, 2021USD ($)$ / sharesshares |
Business Acquisition [Line Items] | |
Business Acquisition, Equity Interest Issued or Issuable, Number of Shares | shares | 4,500 |
Business Acquisition, Equity Interest Issued or Issuable, Value Assigned | $ | $ 41,850 |
Business Acquisition, Share Price | $ / shares | $ 9.30 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details Narrative) - Laila Cavalcanti Loss [Member] - USD ($) | Aug. 27, 2021 | Jul. 01, 2020 | Nov. 30, 2021 |
Deferred Compensation Arrangement with Individual, Excluding Share-based Payments and Postretirement Benefits [Line Items] | |||
Monthly payments | $ 2,500 | ||
Monthly equity awards | 250 | ||
Accurued shares | 5,625 | 375 |
SCHEDULE SHOWING THE FUTURE MIN
SCHEDULE SHOWING THE FUTURE MINIMUM LEASE PAYMENTS (Details) | Nov. 30, 2021USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
2022 | $ 264,351 |
2023 | 498,377 |
2024 | 500,511 |
2025 | 453,795 |
2026 and thereafter | 225,100 |
Total Operating Lease Obligations | 1,942,135 |
Less: Amount representing interest | (351,755) |
Present Value of minimum lease payments | $ 1,590,380 |
COMMITMENTS AND CONTINGENCIES_2
COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($) | Nov. 20, 2018 | Nov. 30, 2021 | Nov. 30, 2020 | Nov. 20, 2018 | May 31, 2021 | Jan. 01, 2019 |
Subsidiary, Sale of Stock [Line Items] | ||||||
Operating Lease, Right-of-Use Asset | $ 1,606,884 | $ 1,533,010 | ||||
Operating Lease, Liability | 1,590,380 | |||||
Operating Lease, Expense | 280,613 | $ 31,453 | ||||
Accounting Standards Update 2016-02 [Member] | ||||||
Subsidiary, Sale of Stock [Line Items] | ||||||
Operating Lease, Right-of-Use Asset | 1,581,863 | $ 110,003 | ||||
Operating Lease, Liability | $ 1,590,380 | |||||
Underwriter [Member] | ||||||
Subsidiary, Sale of Stock [Line Items] | ||||||
Sale of Stock, Price Per Share | $ 13 | $ 13 | ||||
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 | |||||
Exercisable per share | $ 11.50 | $ 11.50 | ||||
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 ($) | Nov. 30, 2021 | May 31, 2021 |
Short-term Debt [Line Items] | ||
Secured Promissory Notes | $ 264,773 | |
Related Debt Discount | (3,588,366) | $ (947,873) |
Total promissory notes, net | 2,006,114 | 2,211,097 |
Current portion of Convertible Promissory Notes, net | 1,121,334 | 2,211,097 |
Convertible Promissory Note [Member] | ||
Short-term Debt [Line Items] | ||
Convertible Promissory Notes | 5,174,480 | 3,157,970 |
Secured Promissory Notes [Member] | ||
Short-term Debt [Line Items] | ||
Secured Promissory Notes | $ 420,000 |
DEBT (Details Narrative)
DEBT (Details Narrative) - USD ($) | Nov. 18, 2021 | Nov. 15, 2021 | Sep. 28, 2021 | Sep. 16, 2021 | Aug. 31, 2021 | Aug. 23, 2021 | Aug. 19, 2021 | Aug. 07, 2021 | Jun. 16, 2021 | Jun. 11, 2021 | Mar. 10, 2021 | Mar. 10, 2021 | Feb. 19, 2021 | Aug. 07, 2020 | Sep. 30, 2021 | Nov. 30, 2021 | Nov. 30, 2020 | Nov. 30, 2021 | Nov. 30, 2020 | Oct. 01, 2021 | Sep. 17, 2021 | Sep. 02, 2021 | May 31, 2021 |
Short-term Debt [Line Items] | |||||||||||||||||||||||
Debt original issue discount | $ 3,588,366 | $ 3,588,366 | $ 947,873 | ||||||||||||||||||||
Payment for notes exchange | 1,324,409 | $ 319,477 | |||||||||||||||||||||
Interest Expense, Debt | 290,522 | ||||||||||||||||||||||
Additional Paid in Capital | 24,444,130 | 24,444,130 | 16,708,762 | ||||||||||||||||||||
Interest Expense | 1,145,794 | $ 244,660 | 1,805,490 | $ 398,788 | |||||||||||||||||||
Long-term portion of convertible notes payable | 620,007 | 620,007 | |||||||||||||||||||||
LGH Investments LLC [Member] | |||||||||||||||||||||||
Short-term Debt [Line Items] | |||||||||||||||||||||||
Debt original issue discount | $ 38,500 | ||||||||||||||||||||||
FirstFire Global Oppurtunities Fund, LLC [Member] | Warrant [Member] | |||||||||||||||||||||||
Short-term Debt [Line Items] | |||||||||||||||||||||||
Warrant to purchase common stock | 40,000 | 40,000 | |||||||||||||||||||||
Fair Value Adjustment of Warrants | 201,351 | ||||||||||||||||||||||
Interest expense charge | 201,351 | ||||||||||||||||||||||
Warrant exercise price | $ 10.73 | ||||||||||||||||||||||
Holder [Member] | |||||||||||||||||||||||
Short-term Debt [Line Items] | |||||||||||||||||||||||
Debt Instrument, Face Amount | 90,909 | 90,909 | |||||||||||||||||||||
Principal amount | 855,000 | ||||||||||||||||||||||
Payment for notes exchange | 225,000 | ||||||||||||||||||||||
Guaranteed interest | 109,091 | 109,091 | |||||||||||||||||||||
[custom:AmendmentFee-0] | 25,000 | 25,000 | |||||||||||||||||||||
Secured Demand Promissory Note [Member] | |||||||||||||||||||||||
Short-term Debt [Line Items] | |||||||||||||||||||||||
Accrued interest rate of debt instrument | 125.00% | ||||||||||||||||||||||
Event of Default description | Upon the occurrence of an Event of Default, additional interest will accrue from the date of the Event of Default at the rate equal to the lower of 15% per annum or the highest rate permitted by law. | ||||||||||||||||||||||
Note [Member] | |||||||||||||||||||||||
Short-term Debt [Line Items] | |||||||||||||||||||||||
Debt Instrument, Face Amount | 58,500 | 58,500 | |||||||||||||||||||||
Payment for notes exchange | $ 363,000 | $ 500,000 | |||||||||||||||||||||
Guaranteed interest | 71,500 | 71,500 | |||||||||||||||||||||
Note [Member] | Holder [Member] | |||||||||||||||||||||||
Short-term Debt [Line Items] | |||||||||||||||||||||||
Payment for notes exchange | 130,000 | ||||||||||||||||||||||
FirstFire Note[Member] | |||||||||||||||||||||||
Short-term Debt [Line Items] | |||||||||||||||||||||||
Debt Instrument, Face Amount | $ 1,266,667 | ||||||||||||||||||||||
Debt original issue discount | 1,266,667 | 485,729 | 485,729 | ||||||||||||||||||||
Payment for notes exchange | $ 175,000 | ||||||||||||||||||||||
[custom:InterestExpenseOfAmortizationDebtDiscount] | 131,794 | ||||||||||||||||||||||
Interest Payable | 76,000 | ||||||||||||||||||||||
Additional Paid in Capital | $ 1,053,999 | ||||||||||||||||||||||
Interest Expense | 298,448 | ||||||||||||||||||||||
Debt discount | 123,448 | 123,448 | |||||||||||||||||||||
GS Note [Member] | |||||||||||||||||||||||
Short-term Debt [Line Items] | |||||||||||||||||||||||
Debt Instrument, Face Amount | $ 333,333 | ||||||||||||||||||||||
Debt original issue discount | 333,333 | ||||||||||||||||||||||
Interest Payable | 20,000 | ||||||||||||||||||||||
Additional Paid in Capital | $ 280,000 | ||||||||||||||||||||||
Interest Expense | 76,255 | ||||||||||||||||||||||
Debt discount | 76,255 | 76,255 | |||||||||||||||||||||
LGH Promissory Note [Member] | LGH Investments LLC [Member] | |||||||||||||||||||||||
Short-term Debt [Line Items] | |||||||||||||||||||||||
Debt instrument, default interest rate | 12.00% | ||||||||||||||||||||||
Debt maturity date | Sep. 2, 2023 | ||||||||||||||||||||||
Debt Instrument, Face Amount | $ 200,000 | ||||||||||||||||||||||
Debt original issue discount | $ 20,000 | ||||||||||||||||||||||
Accrued interest rate of debt instrument | 125.00% | ||||||||||||||||||||||
Origination fees | $ 6,500 | ||||||||||||||||||||||
Interest Payable | 12,000 | ||||||||||||||||||||||
Interest Expense | 4,800 | ||||||||||||||||||||||
Debt discount | 166,299 | 166,299 | |||||||||||||||||||||
Secured Note One [Member] | |||||||||||||||||||||||
Short-term Debt [Line Items] | |||||||||||||||||||||||
Debt Instrument, Face Amount | $ 262,500 | ||||||||||||||||||||||
Debt original issue discount | 12,500 | ||||||||||||||||||||||
Payment for notes exchange | $ 250,000 | ||||||||||||||||||||||
Long-term portion of convertible notes payable | 165,483 | 165,483 | |||||||||||||||||||||
Secured Note Two [Member] | |||||||||||||||||||||||
Short-term Debt [Line Items] | |||||||||||||||||||||||
Debt Instrument, Face Amount | $ 157,500 | ||||||||||||||||||||||
Debt original issue discount | 7,500 | ||||||||||||||||||||||
Payment for notes exchange | $ 150,000 | ||||||||||||||||||||||
Long-term portion of convertible notes payable | 99,290 | 99,290 | |||||||||||||||||||||
Accredited Investor [Member] | Secured Note One [Member] | |||||||||||||||||||||||
Short-term Debt [Line Items] | |||||||||||||||||||||||
Debt instrument, default interest rate | 10.00% | ||||||||||||||||||||||
Debt Instrument, Face Amount | $ 262,500 | ||||||||||||||||||||||
Warrant to purchase common stock | 30,000 | ||||||||||||||||||||||
Warrant exercise price | $ 10.73 | ||||||||||||||||||||||
Payment terms | 60 monthly payments | ||||||||||||||||||||||
Principal and interest | $ 5,577 | ||||||||||||||||||||||
Accredited Investor [Member] | Secured Note Two [Member] | |||||||||||||||||||||||
Short-term Debt [Line Items] | |||||||||||||||||||||||
Debt instrument, default interest rate | 10.00% | ||||||||||||||||||||||
Debt Instrument, Face Amount | $ 157,500 | ||||||||||||||||||||||
Warrant to purchase common stock | 18,000 | ||||||||||||||||||||||
Warrant exercise price | $ 10.73 | ||||||||||||||||||||||
Payment terms | 60 monthly payments | ||||||||||||||||||||||
Principal and interest | $ 3,346 | ||||||||||||||||||||||
Holder [Member] | |||||||||||||||||||||||
Short-term Debt [Line Items] | |||||||||||||||||||||||
Convertible Notes Payable, Current | 635,605 | 635,605 | |||||||||||||||||||||
Securities Purchase Agreement [Member] | Lucas Ventures LLC [Member] | |||||||||||||||||||||||
Short-term Debt [Line Items] | |||||||||||||||||||||||
Additional Paid in Capital | $ 158,999 | ||||||||||||||||||||||
Securities Purchase Agreement [Member] | LV Promissory Note [Member] | Lucas Ventures LLC [Member] | |||||||||||||||||||||||
Short-term Debt [Line Items] | |||||||||||||||||||||||
Debt instrument, default interest rate | 12.00% | ||||||||||||||||||||||
Debt maturity date | Sep. 2, 2023 | ||||||||||||||||||||||
Debt Instrument, Face Amount | $ 200,000 | ||||||||||||||||||||||
Debt original issue discount | 200,000 | ||||||||||||||||||||||
Proceeds from issuance of debt | $ 200,000 | ||||||||||||||||||||||
Accrued interest rate of debt instrument | 125.00% | ||||||||||||||||||||||
Guaranteed interest | $ 12,000 | $ 12,000 | |||||||||||||||||||||
Warrant to purchase common stock | 187,480 | ||||||||||||||||||||||
Warrant exercise price | $ 10.73 | ||||||||||||||||||||||
Warrant term | 3 years | ||||||||||||||||||||||
Interest Expense | 24,384 | ||||||||||||||||||||||
Debt discount | 24,384 | 24,384 | |||||||||||||||||||||
Stock Issued During Period, Shares, Acquisitions | 3,749 | ||||||||||||||||||||||
Stock Issued During Period, Shares, Conversion of Convertible Securities | 187,400 | ||||||||||||||||||||||
Securities Purchase Agreement [Member] | Accredited Investor [Member] | Febraury 2021 Convertible Note [Member] | |||||||||||||||||||||||
Short-term Debt [Line Items] | |||||||||||||||||||||||
Debt instrument, default interest rate | 12.00% | ||||||||||||||||||||||
Debt maturity date | Feb. 19, 2022 | ||||||||||||||||||||||
Debt Instrument, Face Amount | $ 1,650,000 | ||||||||||||||||||||||
Number of common stock issued | 10,000 | ||||||||||||||||||||||
Repayment of debt | $ 1,650,000 | ||||||||||||||||||||||
Debt original issue discount | 165,000 | ||||||||||||||||||||||
Proceeds from issuance of debt | $ 1,485,000 | ||||||||||||||||||||||
Equity method investment, ownership percentage | 4.99% | ||||||||||||||||||||||
Debt conversion price | $ 11.50 | ||||||||||||||||||||||
FirstFire SPA [Member] | FirstFire Global Oppurtunities Fund, LLC [Member] | |||||||||||||||||||||||
Short-term Debt [Line Items] | |||||||||||||||||||||||
Debt original issue discount | $ 56,000 | $ 56,000 | |||||||||||||||||||||
Proceeds from issuance of debt | $ 504,000 | ||||||||||||||||||||||
Debt conversion price | $ 11.50 | $ 11.50 | |||||||||||||||||||||
FirstFire SPA [Member] | Febraury 2021 Convertible Note [Member] | 03/02/2021 [Member] | |||||||||||||||||||||||
Short-term Debt [Line Items] | |||||||||||||||||||||||
Number of common stock issued | 3,394 | ||||||||||||||||||||||
FirstFire SPA [Member] | Secured Demand Promissory Note [Member] | FirstFire Global Oppurtunities Fund, LLC [Member] | |||||||||||||||||||||||
Short-term Debt [Line Items] | |||||||||||||||||||||||
Accrued interest rate of debt instrument | 125.00% | ||||||||||||||||||||||
FirstFire SPA [Member] | 03/02/2021 [Member] | FirstFire Global Oppurtunities Fund, LLC [Member] | |||||||||||||||||||||||
Short-term Debt [Line Items] | |||||||||||||||||||||||
Debt instrument, default interest rate | 12.00% | 12.00% | |||||||||||||||||||||
Debt maturity date | Mar. 10, 2022 | ||||||||||||||||||||||
Debt Instrument, Face Amount | $ 560,000 | $ 560,000 | |||||||||||||||||||||
Repayment of debt | $ 365,000 | ||||||||||||||||||||||
Debt original issue discount | $ 56,000 | 56,000 | |||||||||||||||||||||
Proceeds from issuance of debt | $ 130,606 | ||||||||||||||||||||||
Equity method investment, ownership percentage | 4.99% | 4.99% | |||||||||||||||||||||
Origination fees | $ 8,394 | ||||||||||||||||||||||
[custom:PartialRepaymentOfLongTermDebtPrincipalAndInterest] | $ 123,200 | ||||||||||||||||||||||
Fair Value Adjustment of Warrants | 248,547 | ||||||||||||||||||||||
Interest expense charge | 248,547 | ||||||||||||||||||||||
June FirstFire SPA [Member] | FirstFire Global Oppurtunities Fund, LLC [Member] | June FirstFire Warrant [Member] | |||||||||||||||||||||||
Short-term Debt [Line Items] | |||||||||||||||||||||||
Warrant to purchase common stock | 593,750 | ||||||||||||||||||||||
Warrant exercise price | $ 10.73 | ||||||||||||||||||||||
Warrant term | 3 years | ||||||||||||||||||||||
June FirstFire SPA [Member] | June FirstFire Promissory Note [Member] | FirstFire Global Oppurtunities Fund, LLC [Member] | |||||||||||||||||||||||
Short-term Debt [Line Items] | |||||||||||||||||||||||
Debt instrument, default interest rate | 12.00% | ||||||||||||||||||||||
Debt maturity date | Jun. 10, 2023 | ||||||||||||||||||||||
Debt Instrument, Face Amount | $ 1,266,666 | ||||||||||||||||||||||
Number of common stock issued | 11,875 | ||||||||||||||||||||||
Repayment of debt | $ 1,266,666 | ||||||||||||||||||||||
Debt original issue discount | 126,666 | ||||||||||||||||||||||
Proceeds from issuance of debt | $ 1,140,000 | ||||||||||||||||||||||
Equity method investment, ownership percentage | 4.99% | ||||||||||||||||||||||
Debt conversion price | $ 11.50 | ||||||||||||||||||||||
Accrued interest rate of debt instrument | 125.00% | ||||||||||||||||||||||
GS SPA [Member] | GS Capital Partners, LLC [Member] | GS Warrant [Member] | |||||||||||||||||||||||
Short-term Debt [Line Items] | |||||||||||||||||||||||
Warrant to purchase common stock | 156,250 | ||||||||||||||||||||||
Warrant exercise price | $ 10.73 | ||||||||||||||||||||||
Warrant term | 3 years | ||||||||||||||||||||||
GS SPA [Member] | GS Promissory Note [Member] | GS Capital Partners, LLC [Member] | |||||||||||||||||||||||
Short-term Debt [Line Items] | |||||||||||||||||||||||
Debt instrument, default interest rate | 12.00% | ||||||||||||||||||||||
Debt maturity date | Jun. 10, 2023 | ||||||||||||||||||||||
Debt Instrument, Face Amount | $ 333,333 | ||||||||||||||||||||||
Number of common stock issued | 3,125 | ||||||||||||||||||||||
Repayment of debt | $ 300,000 | ||||||||||||||||||||||
Debt original issue discount | 33,333 | ||||||||||||||||||||||
Proceeds from issuance of debt | $ 300,000 | ||||||||||||||||||||||
Equity method investment, ownership percentage | 4.99% | ||||||||||||||||||||||
Debt conversion price | $ 11.50 | ||||||||||||||||||||||
Accrued interest rate of debt instrument | 125.00% | ||||||||||||||||||||||
Jefferson SPA [Member] | Jefferson Street Capital, LLC [Member] | Jefferson Warrant [Member] | |||||||||||||||||||||||
Short-term Debt [Line Items] | |||||||||||||||||||||||
Debt Instrument, Face Amount | $ 333,333 | ||||||||||||||||||||||
Debt original issue discount | $ 274,239 | 95,372 | 95,372 | ||||||||||||||||||||
Warrant to purchase common stock | 156,250 | ||||||||||||||||||||||
Warrant exercise price | $ 10.73 | ||||||||||||||||||||||
Warrant term | 3 years | ||||||||||||||||||||||
Interest Payable | $ 20,000 | ||||||||||||||||||||||
Additional Paid in Capital | $ 205,605 | ||||||||||||||||||||||
Interest Expense | 36,277 | ||||||||||||||||||||||
Jefferson SPA [Member] | Jefferson Promissory Note [Member] | Jefferson Street Capital, LLC [Member] | |||||||||||||||||||||||
Short-term Debt [Line Items] | |||||||||||||||||||||||
Debt instrument, default interest rate | 12.00% | ||||||||||||||||||||||
Debt maturity date | Aug. 23, 2023 | ||||||||||||||||||||||
Debt Instrument, Face Amount | $ 333,333 | ||||||||||||||||||||||
Number of common stock issued | 3,125 | ||||||||||||||||||||||
Repayment of debt | $ 300,000 | ||||||||||||||||||||||
Debt original issue discount | 33,333 | ||||||||||||||||||||||
Proceeds from issuance of debt | $ 300,000 | ||||||||||||||||||||||
Equity method investment, ownership percentage | 4.99% | ||||||||||||||||||||||
Debt conversion price | $ 11.50 | ||||||||||||||||||||||
Accrued interest rate of debt instrument | 125.00% | ||||||||||||||||||||||
Ionic SPA [Member] | Ionic Ventures, LLC [Member] | Ionic Warrant [Member] | |||||||||||||||||||||||
Short-term Debt [Line Items] | |||||||||||||||||||||||
Debt Instrument, Face Amount | $ 1,555,555 | ||||||||||||||||||||||
Debt original issue discount | 1,555,555 | ||||||||||||||||||||||
Guaranteed interest | $ 93,333 | ||||||||||||||||||||||
Warrant to purchase common stock | 729,167 | ||||||||||||||||||||||
Warrant exercise price | $ 10.73 | ||||||||||||||||||||||
Warrant term | 3 years | ||||||||||||||||||||||
Additional Paid in Capital | $ 1,306,665 | ||||||||||||||||||||||
Interest Expense | 134,246 | ||||||||||||||||||||||
Debt discount | $ 134,246 | $ 134,246 | |||||||||||||||||||||
Ionic SPA [Member] | Ionic Promissory Note [Member] | Ionic Ventures, LLC [Member] | |||||||||||||||||||||||
Short-term Debt [Line Items] | |||||||||||||||||||||||
Debt instrument, default interest rate | 12.00% | ||||||||||||||||||||||
Debt maturity date | Sep. 28, 2023 | ||||||||||||||||||||||
Debt Instrument, Face Amount | $ 1,555,555.56 | ||||||||||||||||||||||
Number of common stock issued | 14,584 | ||||||||||||||||||||||
Repayment of debt | $ 1,400,000 | ||||||||||||||||||||||
Debt original issue discount | 155,555.56 | ||||||||||||||||||||||
Proceeds from issuance of debt | $ 1,400,000 | ||||||||||||||||||||||
Equity method investment, ownership percentage | 4.99% | ||||||||||||||||||||||
Debt conversion price | $ 11.50 | ||||||||||||||||||||||
Accrued interest rate of debt instrument | 125.00% | ||||||||||||||||||||||
Guaranteed interest | $ 93,333.34 |
SCHEDULE OF OUTSTANDING STOCK W
SCHEDULE OF OUTSTANDING STOCK WARRANTS (Details) - Warrant [Member] - $ / shares | 6 Months Ended | 12 Months Ended |
Nov. 30, 2021 | May 31, 2021 | |
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||
Number of Warrants, Outstanding, Beginning balance | 806,126 | 789,063 |
Weighted Average Exercise Price, Outstanding, Beginning balance | $ 10.38 | $ 83.01 |
Share-based Compensation Arrangement by Share-based Payment Award, Non-Option Equity Instruments, Granted | 2,315,897 | 17,063 |
Weighted Average Exercise Price, Granted | $ 11.05 | $ 20.66 |
Number of Warrants, Outstanding, Ending balance | 3,222,023 | 806,126 |
Weighted Average Exercise Price, Outstanding,Ending balance | $ 29.05 | $ 10.38 |
Warrants sold to a private investor | 100,000 | |
Average exercise price warrants sold to a private investor | $ 20 |
STOCKHOLDERS_ EQUITY (Details N
STOCKHOLDERS’ EQUITY (Details Narrative) - $ / shares | Nov. 30, 2021 | May 31, 2021 | Aug. 17, 2020 |
Preferred Stock, Shares Authorized | 1,000,000 | 1,000,000 | |
Preferred Stock, Par or Stated Value Per Share | $ 0.0001 | $ 0.0001 | |
Preferred Stock, Shares Outstanding | 0 | 0 | |
Preferred Stock, Shares Issued | 0 | 0 | |
Common Stock, Shares Authorized | 36,000,000 | 36,000,000 | |
Common Stock, Shares, Issued | 1,616,022 | 1,427,124 | |
Common Stock, Shares, Outstanding | 1,616,022 | 1,427,124 | |
Minimum [Member] | |||
Common Stock, Shares Authorized | 20,000,000 | ||
Maximum [Member] | |||
Common Stock, Shares Authorized | 36,000,000 |
SUBSEQUENT EVENTS (Details Narr
SUBSEQUENT EVENTS (Details Narrative) - Forecast [Member] - Jed Kaplan [Member] | Dec. 10, 2022USD ($) |
Percentage of shareholder | 5.00% |
Debt Instrument, Face Amount | $ 247,818 |
Debt Instrument, Interest Rate, Stated Percentage | 5.00% |
Debt Instrument, Maturity Date | Jun. 10, 2022 |
Debt Instrument, Payment Terms | The loan may be repaid by the Company, without penalty, at any time. Should the Company fail to make the principal payment due, the loan will convert to a 17% equity stake in our subsidiary, Simplicity One Brazil, of which Jed Kaplan is already a 20% stakeholder. |