We were incorporated under the laws of the State of Delaware, August 18, 1992.
Prior to the Acquisition (as defined below), we were a "shell company" (as such
term is defined in Rule 12b-2 under the Securities Exchange Act of 1934, as
amended). As a result of the Acquisition, we have ceased to be a "shell company"
and will continue as a publicly traded company under the name StemGen, Inc. The
existing business operations of D3esports, Inc. will continue as our wholly
subsidiary.
On January 29, 2019 (the "Closing Date"), we completed and closed the
acquisition (the "Acquisition") under an Agreement and Plan of Reorganization
(the "Reorganization Agreement"), entered into by and among (i) StemGen,
Inc.("StemGen"); (ii) D3esports, Inc., a Wyoming corporation ("D3esports"); and
(iii) the shareholders of D3esports ("Sellers") pursuant to which D3esports
became a wholly owned subsidiary of ours. Pursuant to the Reorganization
Agreement, we acquired from the Sellers all of the issued and outstanding equity
interests of D3esports in exchange for 39,631,587 shares of our common stock,
par value $0.001 per share and 7,000,000 shares of Preferred Stock, par value
$0.001 per share. As a result of the Acquisition, the Sellers, as the former
shareholders of D3esports, became the controlling shareholders of the Company.
The Acquisition was accounted for as a reverse merger notwithstanding it is
legally a reverse acquisition. For accounting purposes, D3esports is the
acquiring entity. Current and comparative consolidated financial statements
include the accounts of D3esports since inception (May 1, 2018) and StemGen from
the date of acquisition (January 29, 2019) (collectively, the "Company").
Critical Accounting Policies
We prepare our consolidated financial statements in conformity with GAAP, which
requires management to make certain estimates and apply judgments. We base our
estimates and judgments on historical experience, current trends, and other
factors that management believes to be important at the time the consolidated
financial statements are prepared. On a regular basis, we review our accounting
policies and how they are applied and disclosed in our consolidated financial
statements.
While we believe that the historical experience, current trends and other
factors considered support the preparation of our consolidated financial
statements in conformity with GAAP, actual results could differ from our
estimates and such differences could be material.
For a full description of our critical accounting policies, please refer to Item
7, "Management's Discussion and Analysis of Financial Condition and Results of
Operations" in our Annual Report for the year ended June 30, 2021 on Form 10-K.
Results of Operations
Nine months ended March 31, 2022 and 2021
Revenue
We recognized revenue of $20,000 for the nine months ended March 31, 2022
compared to revenue of $39,000 during the comparable period of 2021. We expect
our revenue to be intermittent in the near term.
Cost of Revenue
We incurred cost of revenue of $17,080 for the nine months ended March 31, 2022
compared to costs of $35,454 during the comparable period of 2021.
Depreciation
We incurred depreciation expense of $55,111 and $51,527 for the nine months
ended March 31, 2022 and 2021.
General and Administrative Expenses
We recognized general and administrative expenses in the amount of $255,587 for
the nine months ended March 31, 2022 compared to $103,481 for the comparable
period of 2021, related to higher equipment, professional and marketing
expenses.
Interest Expense
We incurred interest expense of $105,600 for both the nine months ended March
31, 2022 and 2021 related to statutory interest on convertible notes payable.
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Loss on sale of property and equipment
We recognized a gain on sale of property and equipment of $27,378 for the nine
months ended March 31, 2022 related to the sale of three race cars compared to
compared to a loss of 25,500 in March of 2021 related to the sale of one race
car.
Loss on fair value of derivative
We recognized a loss on fair value of derivative of $17,190 for the nine months
ended March 31, 2022 compared to a loss of $17,189 during the comparable period
of 2021 based on the valuation of the derivatives.
Net Loss
We incurred a net loss $403,190 for the nine months ended March 31, 2022
compared to a loss of $299,751 for the comparable period of 2021 related to the
items discussed above.
Three months ended March 31, 2022 and 2021
Revenue
We recognized no revenue for the three months ended March 31, 2021 and 2020. We
expect our revenue to be intermittent in the near term.
Cost of Revenue
We incurred cost of revenue of $4,201 for the three months ended March 31, 2022,
compared to $5,128 for the comparable period of 2021.
Depreciation
We incurred depreciation expense of $18,133 and $18,845 for the three months
ended March 31, 2022 and 2021.
General and Administrative Expenses
We recognized general and administrative expenses in the amount of $149,888 for
the three months ended March 31, 2022 compared to $33,335 for the comparable
period of 2021, related to higher equipment, professional and marketing
expenses.
Interest Expense
We incurred interest expense of $35,200 for both the three months ended March
31, 2022 and 2021, related to statutory interest on convertible notes payable.
Loss on fair value of derivative
We recognized a loss on fair value of derivative of $5,730 for the three months
ended March 31, 2022 compared to a loss of $5,729 during the comparable period
of 2021 based on the valuation of the derivatives.
Net Loss
We incurred a net loss $185,774 for the three months ended March 31, 2022
compared to a loss of $98,237 for the comparable period of 2021 related to the
items discussed above.
Liquidity and Capital Resources
At March 31, 2022, we had cash on hand of $22,869 and negative working capital
of $1,853,771. We do not expect to achieve positive cash flow from operating
activities in the near future. We will require additional cash in order to
implement our business plan. There is no guarantee that we will be able to
obtain funds when we need them or that funds will be available on terms that are
acceptable to the Company.
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Additional Financing
Additional financing is required to continue operations. Although actively
searching for available capital, the Company does not have any current
arrangements for additional outside sources of financing and cannot provide any
assurance that such financing will be available.
Off Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably
likely to have a current or future effect on our financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources that is material to investors.
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