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
Six months ended December 31, 2021 and 2020
Revenue
We recognized $20,000 in revenue for the six months ended December 31, 2021
compared to revenue of $39,000 for the six months ended December 31, 2020.
Cost of Revenue
We incurred cost of revenue of $12,879 for the six months ended December 31,
2021 and $30,326 for the six months ended December 31, 2020.
Depreciation
We incurred depreciation expense of $36,978 and $32,682for the six months ended
December 31, 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 Six months ended December 31, 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 $70,400 and $70,400 for the six months ended
December 31, 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 $11,460 for the six months
ended December 31, 2021 compared to a loss of $11,460 during the comparable
period of 2020 based on the valuation of the derivatives.
Net Loss
We incurred a net loss $217,416 for the six months ended December 31, 2021
compared to a loss of $201,514 for the comparable period of 2020 related to the
items discussed above.
Three months ended December 31, 2021 and 2020
Revenue
We recognized revenue of $20,000 for the three months ended December 31, 2021
compared to revenue of $15,000 during the comparable period of 2020. We expect
our revenue to be intermittent in the near term.
Cost of Revenue
We incurred cost of revenue of $12,841 for the three months ended December 31,
2021 related to the revenue generated in the period.
Depreciation
We incurred depreciation expense of $18,845 for the three months ended December
31, 2021 and 2020.
General and Administrative Expenses
We recognized general and administrative expenses in the amount of $28,773 for
the three months ended December 31, 2021 compared to $38,914 for the comparable
period of 2020, related to higher equipment, professional and marketing
expenses.
Interest Expense
We incurred interest expense of $35,200 for both the three months ended December
31, 2021 and 2020, primarily related to statutory interest on convertible notes
payable.
Loss on sale of property and equipment
We recognized a loss on sale of property and equipment of $25,500 for the three
months ended December 31, 2020 related to the sale of one race car.
Loss on fair value of derivative
We recognized a loss on fair value of derivative of $5,730 for the three months
ended December 31, 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 $81,389 for the three months ended December 31, 2021
compared to a loss of $114,840 for the comparable period of 2020 related to the
items discussed above.
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Liquidity and Capital Resources
At December 31, 2021, we had cash on hand of $15 and negative working capital of
$1,813,752. 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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STEMGEN, INC. 
