THIS FILING CONTAINS FORWARD-LOOKING STATEMENTS. THE WORDS "ANTICIPATED," "BELIEVE," "EXPECT," "PLAN," "INTEND," "SEEK," "ESTIMATE," "PROJECT," "WILL," "COULD," "MAY," AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. THESE STATEMENTS INCLUDE, AMONG OTHERS, INFORMATION REGARDING FUTURE OPERATIONS, FUTURE CAPITAL EXPENDITURES, AND FUTURE NET CASH FLOW. SUCH STATEMENTS REFLECT THE COMPANY'S CURRENT VIEWS WITH RESPECT TO FUTURE EVENTS AND FINANCIAL PERFORMANCE AND INVOLVE RISKS AND UNCERTAINTIES, INCLUDING, WITHOUT LIMITATION, GENERAL ECONOMIC AND BUSINESS CONDITIONS, CHANGES IN FOREIGN, POLITICAL, SOCIAL, AND ECONOMIC CONDITIONS, REGULATORY INITIATIVES AND COMPLIANCE WITH GOVERNMENTAL REGULATIONS, THE ABILITY TO ACHIEVE FURTHER MARKET PENETRATION AND ADDITIONAL CUSTOMERS, AND VARIOUS OTHER MATTERS, MANY OF WHICH ARE BEYOND THE COMPANY'S CONTROL. SHOULD ONE OR MORE OF THESE RISKS OR UNCERTAINTIES OCCUR, OR SHOULD UNDERLYING ASSUMPTIONS PROVE TO BE INCORRECT, ACTUAL RESULTS MAY VARY MATERIALLY AND ADVERSELY FROM THOSE ANTICIPATED, BELIEVED, ESTIMATED, OR OTHERWISE INDICATED. CONSEQUENTLY, ALL OF THE FORWARD-LOOKING STATEMENTS MADE IN THIS FILING ARE QUALIFIED BY THESE CAUTIONARY STATEMENTS AND THERE CAN BE NO ASSURANCE OF THE ACTUAL RESULTS OR DEVELOPMENTS.

The following discussion and analysis of our financial condition and plan of operations should be read in conjunction with our financial statements and related notes appearing elsewhere herein. This discussion and analysis contains forward-looking statements including information about possible or assumed results of our financial conditions, operations, plans, objectives, and performance that involve risk, uncertainties, and assumptions. The actual results may differ materially from those anticipated in such forward-looking statements. For example, when we indicate that we expect to increase our product sales and potentially establish additional license relationships, these are forward-looking statements. The words expect, anticipate, estimate or similar expressions are also used to indicate forward-looking statements.


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Background of our Company

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-owned 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 by and among (i) StemGen, Inc.("StemGen"); (ii) D3esports, Inc., a Wyoming corporation ("D3esports"); (ii) and 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 6,000,000 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").

D3esports was formed on May 1, 2018 and is based in Angleton, TX. D3esports plans to hold monthly time trial format competitions through an eSports platform that allows professional race car drivers and eSport athletes (gamer enthusiasts) to compete for a real experience in a race car and points that can be used to purchase products and services through our partners.





Plan of Operations

Overview. Our plan of operation is the business plan of D3esports. D3esports intends to gain year-round visibility by using a reputable eSport events company with knowledge in the traditional sports and global education space to host ongoing virtual racing for corporate mentors and competitions with the top driver(s) at the end of the season earning the opportunity to compete against professional drivers and a chance to drive a real race car.

Our primary operation is to be the community offering and management of our online competitions in the motorsports arena but not confined to just one sport. We plan to expand to other sports in the future. The USP for D3esports is the Virtual to Real experience. We are negotiating agreements with third-party providers to manage our competition and Microsoft, currently the sole platform of competition to which we also plan to expand into other.

With growing partnerships from component providers in the gaming and eSport space we plan to build and sell professional simulators linking to a points/rewards platform.

Sales and Marketing. Our Marketing is through monthly press releases and social media on Facebook and Instagram coupled with our 24/7 time trial competition with online advertising for sponsors.

Research and Development. We do not currently develop electronic games. We are focused on forming agreements with the best games and virtual racing platforms in the world to optimize the experience but to familiarize the competitor. We are building the ultimate experience to our offering which is a connection to real drivers, engineers our partners technology by hosting eSports tournaments to connect the virtual to real and for the fastest to have the opportunity to passenger or drive a real race car on a real track. Through our partnership and internal research we are molding our competition to the gamer (gamer focused).

We are negotiating contracts for competition management with third-party providers and licensing agreements with Microsoft to run with Xbox and Forza 7 Motorsport to add to our intellectual properties. Additionally, we are in talks with app developers for ease of competition registration and entry.

Intellectual Property. We are negotiating agreements with third-party providers to offer the best experience from green to checkered flag. There shall be more agreements with component supplies for our Professional simulator and race team in the future.

Competition. The business of eSports is highly competitive and rapidly growing. Our ability to compete depends upon many factors within and outside our control, including the timely development and introduction of the racing competition which is based on a time-trial format played 24/7 with the Forza 7 Motorsports, played on Xbox and PC.





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As we expand and add more motorsports platforms (partnerships) and sports to D3esports we will publish and market results, and the related enhancements, functionality, performance, reliability, customer service and support and marketing efforts. Due to the relatively low barriers to entry in the eSports market, we expect additional competition from other emerging companies but we have structured a virtual to real offering which can be added to professional team, sim centre and other games companies, we are simply offering a path to pro and enhance the gamers experience to relate to the real world through virtual competition. Many of our existing and potential competitors are substantially larger than us and have significantly greater financial, technical and marketing resources that will compete for available users, developers and talent. With our partnerships, a large number of competitors are in house. As a result, they may be able to respond more quickly to new or emerging technologies and changes in customer requirements, or to devote greater resources to the publishing and promotion of their eSports competitions. There can be no assurance that we will be able to compete successfully against current or future competitors or that competitive pressure will not have a material adverse effect on our business, operating results and financial condition. We have taken our time to see what competitors are producing and letting them launch before us, so they are committed to a path. As they are larger companies their ability to change direction is not as fast as us with a tighter, smaller group.

We believe we do not have adequate funds to fully execute the D3esports business plan for the next twelve months unless we obtain additional funding. However, should we not raise this capital, we will allocate our funding to first assure that all state, federal and SEC requirements are met.

As of June 30, 2021, we had cash on hand of $1,343.

We intend to pursue capital through public or private financing, as well as borrowing and other sources in order to finance our business activities. We cannot guarantee that additional funding will be available on favorable terms, if at all. If adequate funds are not available, then our ability to continue our operations may be significantly hindered.





Results of Operations

For the fiscal year ended June 30, 2021, the Company had a net loss of $433,143 and negative cash flow from operations of $141,196. As of June 30, 2021, the Company has negative working capital of $1,734,314.

We continue to rely on advances from shareholders to fund operating shortfalls and do not foresee a change in this situation in the immediate future. There can be no assurance that we will continue to have such advances available. We will not be able to continue operations without them. We are pursuing alternate sources of financing, but there is no assurance that additional capital will be available to the Company when needed or on acceptable terms.

Fiscal year ended June 30, 2021 compared to the year ended June 30, 2020





Revenue

For the year ended June 30, 2021, we recognized revenue of $39,000 compared to $19,350 for the comparable period of 2020. The Company is continuing to try to build a steady and predicable revenue stream.





Cost of Revenue

For the year ended June 30, 2021, we recognized costs of revenue of $30,454 compared to $8,572 for the comparable period of 2020.

General and Administrative Expenses

We recognized general and administrative expenses of $139,993 and $58,475 for the year ended June 30, 2021 and 2020, respectively. The increase in general and administrative expense was primarily the result of increased consulting, and advertising and marketing expenses.





Depreciation

We recognized depreciation of $112,477 and $19,373 during the years ended June 30, 2021 and 2020 related to placing our race cars in service.


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Interest Expense

We recognized interest expense $140,800 and $140,800 for the year ended June 30, 2021 and 2020, respectively. Interest expense represents the stated interest on the outstanding convertible notes payable.

Change in Fair Value of Derivative Instruments

Change in fair value of derivative instruments was a loss of $22,919 and $22,902 for the year ended June 30, 2021 and 2020, respectively, as a result of increased accrued interest.





Net Loss

We incurred a net loss of $433,143 for the year ended June 30, 2021 as compared to a net loss of $230,772 for the year ended June 30, 2020.

Liquidity and Capital Resources

We anticipate needing approximately of $425,000 to fund our operations and to effectively execute our business plan over the next eighteen months. Currently available cash is not sufficient to allow us to commence full execution of our business plan. Our business expansion will require significant capital resources that may be funded through the issuance of common stock or of notes payable or other debt arrangements that may affect our debt structure. Despite our current financial status, we believe that we may be able to issue notes payable or debt instruments in order to start executing our business plan. However, there can be no assurance that we will be able to raise money in this fashion and have not entered into any agreements that would obligate a third party to provide us with capital.

We raised the cash amounts to be used in these activities from the sale of common stock and from advances. We currently have negative working capital of $1,734,314.

As of June 30, 2021, we had cash on hand of $1,343. We do not have an adequate amount of cash on hand to fund our future operations.

We have no known demands or commitments and are not aware of any events or uncertainties as of June 30, 2021 that will result in or that are reasonably likely to materially increase or decrease our current liquidity.





Capital Resources

We had no material commitments for capital expenditures as of June 30, 2021. However, should we execute our business plan as anticipated, we would incur substantial capital expenditures and require financing in addition to what is required to fund our present operation.





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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Critical Accounting Policies and Estimates

We prepare our financial statements in conformity with GAAP, which requires management to make certain estimates and assumptions 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 financial statements are prepared; actual results could differ from our estimates and such differences could be material. We have identified below the critical accounting policies, which are assumptions made by management about matters that are highly uncertain and that are of critical importance in the presentation of our financial position, results of operations and cash flows. Due to the need to make estimates about the effect of matters that are inherently uncertain, materially different amounts could be reported under different conditions or using different assumptions. On a regular basis, we review our critical accounting policies and how they are applied in the preparation our financial statements.

USE OF ESTIMATES - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires 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 financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

GOING CONCERN - The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. For the year ended June 30, 2021, the Company had a net loss of $433,143 and we had negative cash flow from operations of $141,196. In view of these matters, the Company's ability to continue as a going concern is dependent upon its ability to achieve a level of profitability or to obtain additional capital to finance its operations. The Company intends on financing its future activities and its working capital needs largely from the sale of public equity securities with some additional funding from other traditional financing sources, including term notes until such time that funds provided by operations are sufficient to fund working capital requirements. The financial statements of the Company do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.





Derivative Instruments

Our debt or equity instruments may contain embedded derivative instruments, such as conversion options, which in certain circumstances may be required to be bifurcated from the associated host instrument and accounted for separately as a derivative instrument liability.

Our derivative instrument liabilities are re-valued at the end of each reporting period, with changes in the fair value of the derivative liability recorded as charges or credits to income, in the period in which the changes occur. For bifurcated conversion options that are accounted for as derivative instrument liabilities, we determine the fair value of these instruments using the Black-Scholes option pricing model. This model requires assumptions related to the remaining term of the instrument and risk-free rates of return, our current Common Stock price and expected dividend yield, and the expected volatility of our Common Stock price over the life of the option.

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