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
Three months ended September 30, 2021 and 2020
Revenue
We recognized no revenue for the three months ended September 30, 2021 compared
to revenue of $24,000 for the three months ended September 30, 2020. We expect
our revenue to intermittent in the near term.
Cost of Revenue
We incurred cost of revenue of $24,675 for the three months ended September 30,
2020 related to the revenue generated in the period. There was no cost of
revenue for the three months ended September 30, 2021.
Depreciation
We incurred depreciation expense of $18,133 and $13,837for the three months
ended September 30, 2021 and 2020, respectively. The increase in depreciation
was related to the acquisition of the race cars in the prior year.
General and Administrative Expenses
We recognized general and administrative expenses in the amount of $76,964 for
the three months ended September 30, 2021 compared to $31,232 for the comparable
period of 2020, related to higher professional and marketing expenses.
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Interest Expense
We incurred interest expense of $35,200 and $35,200 for the three months ended
September 30, 2021 and 2020, respectively, 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 September 30, 2021 compared to a loss of $5,730 during the comparable
period of 2020 based on the valuation of the derivatives.
Net Loss
We incurred a net loss $136,027 for the three months ended September 30, 2021
compared to a loss of $86,674 for the comparable period of 2020 related to the
items discussed above.
Liquidity and Capital Resources
At September 30, 2021, we had cash on hand of $39,379 and negative working
capital of $1,752,208. 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.
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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